20130510Elam DIRECT.pdf

BEFORE THE
201 MAY n !
IDAHO PUBLIC UTILITIES COMMISION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR ) CASE NO. IPC-E-12-27
AUTHORITY TO MODIFY ITS NET )
METERING SERVICE AND TO INCREASE )
THE GENERATION CAPACITY LIMIT. )
DIRECT TESTIMONY OF MATT ELAM
IDAHO PUBLIC UTILITIES COMMISSION
MAY 10, 2013
1
Q. Please state your name and business address for
2 the record.
3 A. My name is Matt Elam. My business address is 472
4 West Washington Street, Boise, Idaho.
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Q. By whom are you employed and in what capacity?
6 A. I am employed by the Idaho Public Utilities
7 Commission (Commission) as a Utilities Analyst.
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Q. What is your education and experience?
9 A. I received a Bachelor of Arts degree in Economics
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from Boise State University in 2003. I began work at the
11 Idaho Public Utilities Commission in May of 2008. In
12 addition to my formal education, I have attended the
13 Michigan State University Institute of Public Utilities
14 Demand Forecasting course. I also serve on the National
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Association of Regulatory Utility Commissioners (NARUC)
16 committees, and have attended various educational,
17 professional, and energy industry-related seminars.
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Q. Please describe your duties at the Commission.
19 A. As a Utilities Analyst in the Engineering Section
20 at the Commission, I work primarily on natural gas and
21 electric cases. I analyze utility rate applications, rate
22
design, and tariff proposals. I have testified in
23 proceedings before the Commission on cases dealing with rate
24
design, and have written position papers on numerous
25 regulatory policy issues.
CASE NO. IPC-E-12-27 ELAN, M. (Di) 1
05/10/13 STAFF
Q. What is the purpose of your testimony?
A. The purpose of my testimony is to describe Staff's
analysis of the Company's current Net Metering Service and
its proposed changes.
Q. Please summarize your testimony in this case.
A. Staff supports the Company's proposal to double
the Program Cap from 2.9 MW to 5.8 MW. But Staff does not
support the Company's proposals to: 1) change base rates; 2)
calculate Excess Net Energy as a kWh credit instead of a
financial credit; 3) have a forfeit period for Excess Net
Energy; and 4) exclude net metering customers from the Fixed
Cost Adjustment (FCA) mechanism.
Q. How will your testimony be organized?
A. My testimony is subdivided under the following
headings:
Table of Contents Page No.
I. Base Rate Change Page 2
II. Singling Out Net Metering Page 5
III. Basic Load Capacity(BLC) Charge Page 14
IV. Shifting Between Schedules Page 15
V. Cost-of-Service Page 17
VI. Program Cap Page 20
VII. Excess Net Energy Page 24
I. Base Rate Change
Q. Please explain how the Company proposes to change
current base rates for residential and small general service
net metering customers.
CASE NO. IPC-E-12-27 ELAIvI, M. (Di) 2
05/10/13 STAFF
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A. The Company proposes increasing the current
2 monthly Service Charge to collect the customer-related
3 revenue requirement. This would increase the current
4 monthly Service Charge for residential net metering
5 customers from $5.00 to $20.92, and the current monthly
6 Service Charge for small general service net metering
7 customers from $5.00 to $22.49. The Company also proposes a
8 Basic Load Capacity charge that collects the demand-related
9 revenue requirement associated with the distribution system.
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The Company proposes Basic Load Capacity charges of $1.48
11 per kW for residential net metering customers and $1.37 per
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kW for small general service net metering customers.
13 The Company proposes to offset the additional
14 revenue collected from the higher monthly Service Charge and
15 Basic Load Capacity Charge by proportionally lowering the
16 energy charges to collect the same annual revenue from the
17 net metering customer group as it does under the current
18 rate structure. The proposed changes are as follows:
19 Residential:
20 Summer Current Rates Proposed Rates
0-800 kWh $0.078428 $0.052583
21 801-2000 kWh $0.095788 $0.064223
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Over 2000 kWh $0.115166 $0.077215
23 Non-Summer
0-800 kWh $0.072355 $0.048512
24 801-2000 kWh $0.080519 $0.053985
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Over 2000 kWh $0.089960 $0.060315
CASE NO. IPC-E-12-27 ELAM, M. (Di) 3
05/10/13 STAFF
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Small General Service:
3 Summer Current Rates Proposed Rates
0-300 kWh $0.090436 $0.043148
4 Over 300 kWh $0.109108 $0.052057
5 Non-Summer
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0-300 kWh $0.090436 $0.043148
Over 300 kWh $0.095245 $0.045442
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8 Q. Does Staff support the Company's proposal to
9 change base rates as part of this filing?
10 A. No. Staff does not support the Company's proposal
11 to change base rates for several reasons. First, the
12 proposal singles out one small group of customers within the
13 residential class when other similarly situated customers
14 exist within the class. Second, the proposal implements a
15 Basic Load Capacity Charge, which has never been introduced
16 to the residential or small general service class. Third,
17 the Company's proposal incents high usage residential
18 customers to install small generation facilities simply to
19 qualify for the more favorable net metering rate. Fourth,
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the proposal uses the results of a cost-of-service study
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that was never intended to be used for changing the design
22 of base rates for a small group of customers within a class.
23 Finally, despite any concerns about the likelihood that some
24 of the costs of serving net metering customers will be
25 subsidized by other customers, the overall dollar impact of
CASE NO. IPC-E-12-27 ELAM, M. (Di) 4
05/10/13 STAFF
1 net metering is small.
2 II. Singling Out Net Metering
3 Q. Please explain why the Company believes net
4 metering customers should pay the full customer-related and
5 demand-related revenue requirement in a monthly Service
6 Charge and Basic Load Capacity Charge.
7 A. The Company says the current net metering program
8 creates a "potential inequity between net metering customers
9 and standard service customers, as net metering customers
10 are provided the opportunity to unduly reduce collection of
11 revenue requirement by receiving credit for generation at
12 the full retail rate while standard service customers are
13 left to compensate for revenue shortfall." P. 18, Larkin
14 testimony.
15 Q. Does a net metering customer who receives credit
16 for generation at the full retail rate pay their fixed
17 costs?
18 A. Some do not. According to the Company's most
19 recent cost-of-service study, if a residential net metering
20 customer generates enough excess net energy to completely
21 offset their usage during the year, their service charge
22 covers only 8t of their fixed costs. So if a residential
23 net metering customer achieves net zero consumption, their
24 distribution-related costs and most customer service-related
25 costs will need to be recovered from other standard service
CASE NO. IPC-E-12-27 ELAN, M. (Di) 5
05/10/13 STAFF
customers within the residential class. On the other hand,
if the net metering customer has enough net annual energy
consumption, fixed costs may be adequately recovered through
the energy rate component.
Q. How does the current percentage of fixed costs
collected outside of the Schedule 1 energy rate compare to
the other schedules and the Company's proposal?
A. In response to Staff Production Request No. 29,
the Company provided the following table illustrating the
percentage of fixed costs collected outside of the energy
rate for all Schedules since its most recent cost-of-service
study in Case No. IPC-E-11-08:
Rate Schedule % Fixed Cost Recovery
Excluded from Energy Rates
Schedule 1 8%
Schedule 6 (Proposed) 53%
Schedule 7 14 06
Schedule 8 (Proposed) 75 06
Schedule 9 38%
Schedule 19 60%
Schedule 24 35 9t
Q. Did Staff analyze the impact each residential and
small general service net metering customer may have on
standard service customers given the distribution and
customer related costs that may go uncollected?
A. Yes. Based on the average usage of a residential
customer and the Company's cost-of-service results from the
last general rate case, Staff looked at the distribution and
CASE NO. IPC-E-12-27 ELAIS4, M. (Di) 6
05/10/13 STAFF
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1 customer-related costs that go uncollected if a net metering
2 customer achieves net zero consumption. The annual impact
3 on non-participating customers from one residential net
4 metering customer with net zero consumption is approximately
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$320. The annual impact on non-participating customers from
6 one small general service net metering customer with net
7 zero consumption is approximately $253. So given the number
8 of customers actively taking service as of December 31,
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2012, Idaho Power's unrecovered distribution and customer-
10 related costs have the potential of costing non-
11 participating residential customers approximately $81,920 on
12 an annual basis (256 customers x $320 per customer), and
13 non-participating small general service customers
14 approximately $5,313 on an annual basis (21 customers x $253
15 per customer). If the program cap were increased to 5.8 MW
16 as Idaho Power proposes, the additional potential inequity
17 caused by unrecovered distribution and customer related
18 costs may double, or be approximately $163,840 for the
19 residential class on an annual basis. This small identified
MM inequity caused by the residential net metering customers is
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insignificant when compared to annual residential revenue of
22 over $409 million.
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Q. Is it realistic to assume a net metering customer
24 will offset their entire usage during the year?
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CASE NO. IPC-E-12-27 ELAM, M. (Di) 7
05/10/13 STAFF
1 A. No, not for most residential customers. Based on
2 the data provided by Idaho Power, it appears about 14% of
3 residential net metering customers generated enough annual
4 excess net energy to entirely offset their consumption for
5 the year. For the small general service net metering
6 customers, about 57% of customers generated annual excess
7 net energy.
8 Q. Please explain how a customer achieves net zero
9 consumption on an annual basis?
10 A. The current program allows net metering customers
11 to roll over their Excess Net Energy credits from month to
12 month, so customers can essentially treat Idaho Power's
13 system as a battery for storing energy they generate beyond
14 what they use in any given month. For example, a net
15 metering customer with Photovoltaic (PV) generation (and
16 without their own battery storage) will more than likely
17 need the utility to provide energy at night or when
18 conditions are not optimal for solar generation. But if the
19 customer generates enough excess net energy when solar
20 generation is optimal, they will accrue Excess Net Energy
21 credits. Thus, the Excess Net Energy credits may accumulate
22 to the point of completely offsetting what the customer uses
23 during the night or whenever self-generation is not
24 adequate. Therefore, on an annual basis, the customer may
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CASE NO. IPC-E-12-27 ELAN, M. (Di) 8 05/10/13 STAFF
1 pay nothing for their nightly usage or whenever they cannot
2 generate enough to offset what is used.
3
Q. Even if a customer achieves net zero consumption
4 for the year, won't they pay their share of fixed costs
5 through the annual FCA mechanism?
6 A. No. First, the FCA is a per kWh charge, so if a
7 net metering customer achieves net zero annual consumption,
8 they will only pay the rate during months they actually use
9 energy. They will not pay the FCA rate during months they
10 generate excess net energy. In addition, the FCA is
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intended to ensure that the Company collects appropriate
12 fixed costs from an entire customer class as a whole. It
13 does not ensure that individual customers within a class pay
14 their fair share of fixed costs compared to other customers
15 in the class.
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Q. Does a customer who participates in demand-side
17 management (DSM) programs and consequently has low usage
18 cover their full fixed costs?
19 A. No. Customers who have made energy efficiency
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improvements and thus have low energy usage will cover some
21 of their fixed costs, but may not cover all their fixed
22 costs.
23
Q. On pages 14 and 15 of Mr. Larkin's testimony, he
24 states, the Company's pricing proposal limits "the potential
25 for inequity by applying charges to net metering customers
CASE NO. IPC-E-12-27 ELAM, M. (Di) 9
05/10/13 STAFF
1 that accurately reflect the cost to serve them." Does the
2 affect of the Company's pricing proposal address an inequity
3 between net metering customers and standard service
4 customers?
5 A. No, not outside of a rate case. The Company's
6 rate design proposal only impacts net metering customers,
7 not standard service customers. Rates do not change for
8 standard service customers, so the Company's proposal has no
9 effect on them as a result of this case.
10 Q. Does Staff support the Company's proposal that
11 customers taking service under Schedule 6 or Schedule 8 not
12 be subject to FCA rates contained in Schedule 54?
13 A. No. Staff does not propose changes to base rates,
14 so the Company is still vulnerable to much of the same fixed
15 cost recovery concerns that may be addressed by the FCA.
16 Q. Are there customers within the residential and
17 small general service classes who are similar to net
18 metering customers?
19 A. Yes. Consider, for example, a residential
20 customer who has a vacation home, or a small general service
21 customer who has a workshop. If the vacation home or
22 workshop is used very little during the year, the customer
23 would pay little more than the $5.00 monthly service charge.
24 Based on the Company's most recent cost-of-service study,
25 the customer service charge only covers 8 of the Company's
CASE NO. IPC-E-12-27 ELAM, M. (Di) 10
05/10/13 STAFF
1 fixed costs of providing service. Similar to a net metering
2 customer who achieves net zero annual consumption, Idaho
3 Power could collect insufficient revenue from the sale of
4 kWhs to cover remaining fixed costs. However, both customer
5 types still require service when they want to use it. To
6 provide service, Idaho Power must still have distribution
7 (poles, wires, transformers, etc.), transmission, and
8 generation plant in place.
9 Q. Can the Company install fewer facilities because
10 net metering customers generate electricity, or someone with
11 a vacation home or workshop rarely uses them?
12 A. No. The energy offered to customers by Idaho
13 Power is firm, meaning that it is available whenever
14 customers want to use it. Net generation, on the other
15 hand, is provided by customers to Idaho Power on & non-firm
16 basis. There is no obligation or contracted delivery for
17 net metering participants, and the characteristics of net
18 metering change with the addition of participants, weather
19 trends, and new technologies. The Company must design its
20 system to meet a net metering customer's peak demand when
21 power is not being generated, such as at night, on cloudy
22 days, or when the wind is not blowing. Similarly, the
23 Company must design its system to meet the peak demand when
24 a customer's vacation home is occupied or the workshop is
25 being used.
CASE NO. IPC-E-12-27 ELAN, M. (Di) 11
05/10/13 STAFF
1
Q. Does net metering provide capacity value during
2 the system peak?
3 A. It depends on the types of resources being used
4 for generation, the configuration of the resources, and the
5 usage characteristics of the net metering customers during
6 the system peak. Consider, for example, a customer who
7 generates using a flat plate PV solar installation. Their
8 system's orientation might be southwest to offset their
9 personal peak and possibly the Company's system peak, or it
10 might be directly south to maximize the amount of energy
11 generated throughout the day. Not only will the
12 configuration of the resource impact the capacity value of
13 flat plate PV solar, it also varies depending on when the
14 utility peaks during the day. For example, historically the
15 utility's summer peak sometimes occurs as early as three or
16 four o'clock in the afternoon; other times it occurs as late
17 as eight o'clock in the evening. According to the capacity
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factors used for Idaho Power's 2011 Integrated Resource
19 Plan, the on-peak capacity factor for 1 MW of distributed
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flat plate PV solar was 26. The on-peak capacity factor
21 established by the Commission for evaluating PURPA projects
22 with flat plate PV solar is 35. In other words, only 26-
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35% of the nameplate capacity of flat plate PV solar
24 contributes towards reducing the utility's peak because the
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CASE NO. IPC-E-12-27 EI.JAM, M. (Di) 12
05/10/13 STAFF
1 utility's peak load typically occurs several hours after the
2 solar system peaks.
3
Q. If net metering customers still require the
4 Company to install facilities to serve load and may not
5 cover their full fixed costs, why does Staff oppose the
6 Company's base rate change at this time?
7 A. Even though net metering customers may not pay
8 their full fixed costs, Staff does not support the Company's
9 proposed base rate change outside of a general rate case.
10 If the Company is going to propose adjusting base rates for
11 this small group of customers, Staff believes it should be
12 done in a general rate case when the costs of serving every
13 customer within the class are fully vetted out.
14
Q. How does net metering potentially benefit non-
15 participating customers and the Company?
16 A. Aside from potentially providing a capacity
17 benefit during the utility's peak, net metering potentially
18 allows the Company to meet growing load with current
19 resources. Consider, for comparison purposes, non-
20 participants funding the DSM Rider through a kWh charge.
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Standard service customers pay the Company for
22 administrative overhead to run the programs and pay
23 participants rebates or incentive payments to permanently or
24 temporarily reduce load. Like net metering, this may allow
25 the Company to use current resources to meet growing load,
CASE NO. IPC-E-12-27 ELAI, M. (Di) 13
05/10/13 STAFF
1 potentially delaying the need for additional resources.
2 According to Idaho Power's 2012 Demand-Side Management
3 report, the Company paid $2,143,235 in energy efficiency
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incentives to residential customers in Oregon and Idaho.
5 P. 14, DSM 2012 Report. Furthermore, net metering customers
6 pay for and maintain their own systems, reduce power supply
7 costs, and support the continuing development of renewable
8 energy generation that may offer environmental benefits.
9 III. Basic Load Capacity (BLC) Charge
10
Q. Please explain how the Basic Load Capacity (BLC)
11 is calculated.
12 A. The Basic Load Capacity is the average of the two
13 greatest non-zero billing demands (kW) during the 12-month
14 period, which includes and ends with the current billing
15 period.
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Q. Please explain why the Company proposes to
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implement a Basic Load Capacity Charge for residential and
18 small general service net metering customers.
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A. According to the Company, "the basic load capacity
20 charge more accurately reflects the cost of serving these
21 customers while avoiding many of the incremental costs that
22 have existed prior to the installation of AI'1I." P. 16-17,
23 Larkin testimony.
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CASE NO. IPC-E-12-27 ELAM, M. (Di) 14
05/10/13 STAFF
1 Q. Before Advanced Metering Infrastructure (AMI)
2 meters, what would the Company have to do to implement
3 demand-related rates for net metering customers?
4 A. The Company would have had to replace residential
5 and small general service net metering customers' standard
6 mechanical meters with more expensive demand meters.
7 Q. Has the Company proposed a Basic Load Capacity
8 Charge for the entire residential or small general service
9 class?
10 A. No. However, Basic Load Capacity charges have
11 been standard for other customer classes for many years.
12 Q. Is it reasonable that net metering customers have
13 a Basic Load Capacity Charge when other customers in the
14 class do not?
15 A. No. Even though I agree with the general concept
16 of a Basic Load Capacity Charge given how costs are
17 assigned, I disagree with the Company's proposal to
18 implement one solely for net metering customers at this
19 time.
20 IV. Shifting Between Schedules
21 Q. Please explain how the Company's proposal might
22 cause standard service customers to switch to net metering.
23 A. The Company's proposal shifts the customer-related
24 and demand-related revenue requirement associated with the
25 distribution system from the per kWh energy charges into the
CASE NO. IPC-E-12-27 ELAN, M. (Di) 15
05/10/13 STAFF
1 proposed monthly Service Charge and Basic Load Capacity
2 Charge. Consequently, if a customer can save enough on the
3 energy portion of their bill to offset the increase to the
4 Service Charge and Basic Load Capacity Charge, the customer
5 will switch from standard service to net metering.
6 Q. Do you believe the Company's proposal could
7 benefit high-usage customers who install a small amount of
8 generation and switch to net metering for the favorable
9 rate?
10 A. Yes. The Company's proposal benefits high-usage
11 customers who install a small amount of generation for two
12 reasons. First, the base rate proposal shifts the customer-
13 related and demand-related revenue requirement from the per
14 kWh energy charges into the proposed monthly Service Charge
15 and Basic Load Capacity Charge. Thus, the customers who
16 benefit most have high enough usage that the savings from
17 the favorable energy rates offset the increase to the
18 Service Charge and Basic Load Capacity Charge. Second, the
19 Company proposes that excess net energy be forfeited each
20 December. Consequently, the customers who benefit most
21 either do not generate excess net energy, or have very
22 little remaining at the end of December. For example, if a
23 Schedule 1 customer with average demand uses 4000 kWh per
24 month, but installs a single 255 watt PV panel to qualify
25 for net metering, I estimate they would save approximately
CASE NO. IPC-E-12-27 ELAM, M. (Di) 16
05/10/13 STAFF
1 $1,100 per year. It is impossible to determine how many of
2 these high-usage customers will realize that by purchasing
3 one solar panel and paying the $100 application fee, they
4 will save on their energy bill by becoming a net metering
5 customer.
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Q. Did the Company include tariff language that would
7 prevent high-usage customers from installing a minimal
8 amount of generation to simply qualify for lower energy
9 rates as a net metering customer?
10 A. No. The Company could have included language
11 specifying that customers install a certain amount of
12 generation relative to historical average annual demand or
13 usage, but it did not.
14 V. Cost-of-Service
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Q. Please explain how the Company used its cost-of-
16 service study to design its proposed net metering rates.
17 A. The rate design was determined using the cost-of-
18 service study results from Case No. IPC-E-11-08, but because
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the general rate case settlement stipulation resulted in a
20 uniform percentage increase to all rate classes, the class
21 cost-of-service totals did not sum to the Commission's final
22 approved revenue requirement amount. To reconcile the
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difference, the Company adjusted its study to match the
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final approved revenue requirement from Order No. 32426, and
25 then developed rates given the additional revenue
CASE NO. IPC-E-12-27 ELAN, M. (Di) 17
05/10/13 STAFF
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requirement from the Langley Gulch generation plant. Order
No. 32585.
Q. Does Staff agree with the Company using the cost-
of-service study from Case No. IPC-E-11-08 to adjust base
rates?
A. No. Even though it is the best information the
Company currently has, it is not reasonable to use the cost-
of-service study for an entire class to adjust base rates
for a small subset of customers within that rate class.
Further, on page 4 of Order No. 32426, the signing
parties agreed that the annual revenue requirement be
recovered by increasing the rates "by a uniform percentage
instead of using the Company's originally-proposed cost-of-
service study." The signing parties further agreed only
that "Idaho Power's proposed cost-of-service study will be
used to determine fixed costs for purposes of the fixed-cost
adjustment (FCA) mechanism until such time as the Commission
approves a different cost-of-service study." P. 4, Order
No. 32426. Nothing suggests that the signing parties
intended that the Company use the cost-of-service study to
redesign base rates for any Idaho Power customers before the
next general rate case.
Q. Does Staff believe the Company's class cost-of-
service study accurately reflects the costs to serve net
metering customers?
CASE NO. IPC-E-12-27 ELAM, M. (Di) 18
05/10/13 STAFF
1 A. No. By using the class cost-of-service study to
2 develop its base rate proposal, the Company assumes its
3 costs to serve net metering customers and standard service
4 customers are the same. In reality, the cost to serve net
5 metering customers depends on weather conditions, the type
6 of generation customers have, and their overall usage
7 characteristics. So, net metering customers may use less
8 energy during high priced periods and may contribute less to
9 peak than the Company's standard service customers. The
10 Company cannot adequately justify net metering customers
11 having different rates from the rest of the class unless the
12 Company more specifically evaluates the costs to serve net
13 metering customers. The Company cannot simply use the cost-
14 of-service study for the entire residential class.
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Q. Please summarize Staff's opposition to the
16 Company's proposed base rate change for net metering
17 customers.
18 A. Staff opposes the base rate change for the
19 following reasons:
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• The proposal singles out a small group of
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customers when the same problem exists for a much
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larger group within the class.
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• The potential impact of net metering on the rest
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of customers within the class is de minimis, and
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CASE NO. IPC-E-12-27 ELAM, M. (Di) 19
05/10/13 STAFF
1 may be less than a rounding error given the $409
2 million revenue requirement of the residential
3 class.
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• Contrary to Matt Larkin's testimony, the proposal
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does not impact standard service customers, and
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consequently does nothing to address the potential
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inequity between net metering customers and
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standard service customers.
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• The proposal improperly causes large standard
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service customers to inappropriately migrate to
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the new net metering schedules.
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• The cost-of-service study used to develop rates
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was not approved and does not represent the net
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metering group whose rates the Company proposes to
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change.
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17 VI. Program Cap
18 Q. Why does the Company still believe it needs a
19 program cap for its net metering program?
20 A. The Company believes "it is important to maintain
21 a capacity limit to allow the Company and other stakeholders
22 to evaluate this service as it expands." P. 13, Larkin
23 testimony.
24 Q. Does Staff believe it is necessary to have a
25 Program Cap?
A. Yes. Even though the Company is free to file an
CASE NO. IPC-E-12-27
05/10/13
ELAN, M. (Di) 20
STAFF
1 application to change the program anytime, it is in
2 everyone's interest to establish a check point to reevaluate
3 the program.
4 Q. Why does Staff believe a cap is in the interest of
5 everyone involved with net metering?
6 A. Similar to the reason DSM Programs are regularly
7 evaluated, the cap simply allows the Company an opportunity
8 to evaluate impacts to its system, review rates, review
9 program costs and benefits, and provides an opportunity to
10 evaluate the impact of net metering generation on non-
11 participants. Both the Company and the Commission are
12 interested in ensuring that utility programs do not harm
13 non-participating customers; therefore Staff supports the
14 Company's proposed 5.8 MW cap. Staff believes a reasonable
15 cap is even more important given the program's exponential
16 growth shown on the graph below:
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CASE NO. IPC-E-12-27 ELJ'1, M. (Di) 21
05/10/13 STAFF
Cumulative Installed Net Metering Capacity
% 0
It is impossible to predict how quickly the program will
grow moving forward, but Staff believes the proposed cap
allows room for growth. Assuming all new net metering
customers were 7 kW in size, which is the average generation
capacity of current residential and small general service
customers, the Company's proposed 5.8 MW cap would allow an
extra 414 customers to participate. If new customers under
Schedule 84 were 100 kW in size, the cap would allow an
extra 29 customers to participate.
Q. Has Staff looked into the program caps offered by
utilities in other states?
A. Yes. But it is difficult to compare the program
caps for utilities in other states to Idaho Power's program.
Each utility may have unique eligibility requirements, ways
of defining "avoided cost," approaches to determining cost-
CASE NO. IPC-E-12--27 ELAN, M. (Di) 22
05/10/13 STAFF
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2500
2000
1500
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0
Installed Capacity
—Expon. (Installed Capacity)
3. of-service, and goals for designing rates. In addition,
2 some states may not have options other than net metering to
3 allow customer-owned generation to be sold to the utility.
4 Idaho, for example, has other options such as PURPA and
5 Schedule 86 (energy sales at market-based tariff rates) that
6 may not exist in other states.
7
Q. Did Staff consider the impact of a cap on future
8 net metering customers, and the installers of self-
9 generation equipment?
10 A. Yes. Staff understands that certainty is
11 something net metering customers' value when evaluating the
12 economics of their installation, and Staff also understands
13 that it is important to process cases associated with the
14 program cap quickly to eliminate uncertainty around
15
installers' businesses. However, a cap would not
16 necessarily limit the demand for new net metering
17
installations, or cause uncertainty around installers'
18
businesses. Potential net metering customers will evaluate
19 the economics of their investments given the best
20
information available at the time, similar to someone
21 deciding whether to upgrade their furnace or install a
22
tankless water heater. It is also unlikely the cap creates
23 a level of uncertainty that will halt the number of
24
installations. For example, in this case, the Company took
25
into account "pending applications and the level of growth
CASE NO. IPC-E-12-27 ELM, M. (Di) 23
05/10/13 STAFF
the Company has experienced over the last two years," and
filed its Application six months before it expected to reach
the 2.9 MW capacity limit. P. 12, Larkin testimony.
Furthermore, in order to prevent refusal of new applications
for net metering service while this case is processed, the
Commission issued a temporary waiver on the limit of the net
metering capacity until a final Order is issued in the
proceeding. P. 4-5, Order No. 32715.
VII. Excess Net Energy
Q. Please explain how the Excess Net Energy credit is
currently calculated.
A. Excess net energy is credited the same way as
consumption, according to the seasonal tiered billing
structure of the rate schedule. Consider, for example, a
residential customer who generates 2500 kWh more than what
they consume in July. The financial credit would be based
on the following calculation:
800 kWh at $.078428 = $ 62.74
1200 kWh at $.095788 = $114.95
500 kWh at $.115166 = $ 57.58
Total Financial Credit = $235.27
Q. Does Staff support the Company's proposed
treatment of excess net energy?
A. No. The Company proposes two major changes.
First, it proposes making the excess net energy dollar
credit a kWh carryover instead of a financial carryover
CASE NO. IPC-E-12-27 ELIAM, M. (Di) 24
05/10/13 STAFF
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based on retail rates. Second, the Company proposes that
the accrued kWh excess net energy be forfeited each
December.
Q. Why does the Company propose making the Excess Net
Energy credit a kWh credit instead of a financial credit?
A. According to the Company, its proposed treatment
of excess net energy resolves a FERC compliance issue
associated with issuing financial payments.
Q. Does Staff believe there is another way to address
the Company's concerns?
A. Yes. Staff believes the Company can continue
crediting customers on a financial basis without ever
issuing checks. It appears that utilities in other states
have a similar approach.
Q. Does Staff believe it would be administratively
burdensome for the Company to keep track of financial
credits instead of kWh credits?
A. No. The Company already calculates a financial
credit under its current practice. The Company only issues
a check if the customer requests it and the credit is over
$20; otherwise the Company calculates a financial credit to
carry forward. Therefore, from an administrative
standpoint, it is reasonable for the Company to continue
tracking financial credits, the only difference being that
CASE NO. IPC-E-12-27 ELAN, M. (Di) 25
05/10/13 STAFF
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it will no longer issue checks upon a customer's request if
2 the credit is over $20.
3 Q. Does the Company's proposal to make excess net
4 energy a kWh carryover instead of a financial carryover
5
differentiate the seasonal value of excess net energy?
6 A. No. The Company's proposal treats every kWh
7 generated the same, regardless of the season when it was
8 generated. Even though the summer rates for residential
9 customers are higher than the non-summer rates, all excess
10 net energy is treated equally.
11
Q. Does the Company design its retail rates to
12 reflect the seasonal differences in providing service?
13 A. Yes. when the Company designed its rates in the
14
last general rate case, Case No. IPC-E-11-08, it clearly
15
identified the seasonal differences in providing service.
16
The same principles should be applied when assigning value
17 to excess net energy for net metering customers.
18
Q. Does a financial carryover based on retail rates
19 capture the seasonal differences in the value of excess net
20 energy?
21 A. Yes. For example, customers who generate excess
22 net energy during the summer will receive a larger financial
23 credit than those who generate an equal amount of excess net
24 energy during the non-summer.
25
CASE NO. IPC-E-12-27 ELLAM, M. (Di) 26
05/10/13 STAFF
1 Q. Are there important objectives achieved by
2 capturing the seasonal differences in the rate paid for
3 excess net energy?
4 A. Yes. Two important price signals are sent if the
5 value of excess net energy reflects the seasonal differences
6
in rates. First, it improves the economics for facilities
7 that generate during the summer months when rates are
8
higher, consequently encouraging new net metering customers
9
to invest in resources that generate when it costs the
10 utility more to provide service. Second, it encourages
11 customers to reduce usage during the summer months when
12 excess net energy is valued at the higher price,
13 consequently increasing the potential credit used to offset
14 consumption during periods of low generation. Both of these
15 objectives allow the Company to use more of its current
16 resources to meet future summer load growth.
17
Q. How does Staff propose the Company treat excess
18 generation moving forward?
19 A. Similar to the current program, Staff proposes
20 customers be credited at the retail rate and allowed to
21
accumulate the credits from excess net energy indefinitely.
22 But Idaho Power should never reconcile the excess net energy
23 balance with payments.
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CASE NO. IPC-E-12--27 ELAM, M. (Di) 27
05/10/13 STAFF
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Q. When the customer discontinues service, does Staff
propose any remaining balance of excess net energy be
forfeited?
A. Yes.
Q. Please explain Schedule 84 and how Staff proposes
to value net excess energy?
A. Schedule 84, Customer Energy Production Net
Metering, is designed for net metering customers who are not
served under Schedules 1, 4, 5 and 7. Similar to Schedules
1 and 7, Staff proposes excess net energy be credited at the
retail energy rates and that the credit be allowed to
accumulate indefinitely. This approach is easy for
customers to understand, and is reasonable for the Company
since it will never reconcile the excess net energy credits
with payments.
Q. Does Staff believe it is necessary to limit the
benefits of the accrued credits to a certain timeframe from
the date it was generated?
A. No. Because the purpose of net metering is to
allow customers to offset their usage, net metering
customers should theoretically not accrue substantial
credits over the long term. Customers who do accumulate
substantial credits should arguably not be on the net
metering tariff but should instead be on Schedule 86,
Cogeneration and Small Power Production Non-Firm Energy,
CASE NO. IPC-E-12-27 ELAN, M. (Di) 28
05/10/13 STAFF
1 which is the tariff established for non-firm generation.
2 Under Schedule 86, customers are paid for all of their
3 generation on a monthly basis.
4 Q. Does the Company's proposal that excess net energy
5 be forfeited each December accommodate all types of
6 generation?
7 A. No. Depending on the type of self-generation, the
8 amount of excess net energy available from season to season
9 varies by generation type. For example, customers with
10 solar generation may be impacted the most by the Company's
11 proposal since excess net energy is typically generated in
12 the summer and the credits used in the late fall and winter
13 when solar generation is lower.
14 Q. Are there other potential benefits to customers by
15 allowing credits to be rolled over from year to year?
16 A. Yes. Customers are better able to use their
17 credits to accommodate variations in usage and changes in
18 weather conditions or maintenance that might impact their
19 generation from year to year.
20 Q. Does Staff believe there are reasonable approaches
21 using a forfeit period, but still allowing customers
22 flexibility in the way Excess Net Energy credits are used
23 from year to year?
24 A. Yes. But regardless of how many years a customer
25 has before their credits might be forfeited, each customer
CASE NO. IPC-E-12-27 ELAN, M. (Di) 29
05/10/13 STAFF
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should have the opportunity to select their anniversary
period given their generation type and usage
characteristics.
Q. Does Staff believe the Company needs to encourage
customers to right-size net metering systems?
A. Yes. After reviewing net metering customers'
generation data, it appears as though there are a handful of
customers who may be using the net metering tariff as an
avenue to receive more favorable rates for their generation
when compared to Schedule 86, Cogeneration and Small Power
Production Non-Firm Energy. Looking at the residential net
metering customers who generated enough annual excess net
energy to offset their consumption for the year, I
discovered one customer who made up 54% of the remaining
excess net energy for the year, and five customers who made
up 76% of the annual excess net energy remaining for the
year. Similarly, I discovered three net metering customers
who made up 86% of the small general service excess net
energy remaining at the end of the year.
Q. Do you believe Staff's proposal encourages
customers to right-size their net metering systems?
A. Yes. Since the Company never reconciles the
excess net energy balance with payments and any balance of
excess net energy is forfeited when the customer
CASE NO. IPC-E-12-27 ELNt, M. (Di) 30
05/10/13 STAFF
1 discontinues service, Staff's proposal discourages customers
2 from generating more than what they may use.
3 Q. Does Staff's proposal impact net metering
4 customers who select Idaho Power's Budget Pay option?
5 A. Yes. If net metering customers on Budget Pay have
6 a credit remaining at the end of their anniversary period,
7 they will no longer be able to request a check. Instead the
8 Company would re-estimate the customer's monthly bill and
9 the credit would be carried forward.
10 Q. How many net metering customers have currently
11 selected the Budget Pay option?
12 A. According to the Company's response to Staff's
13 Production Request No. 14, there are currently six
14 residential net metering customers enrolled. Two of these
15 customers have been enrolled for less than 12 months and
16 there are no non-residential customers currently enrolled.
17 Q. Does this conclude your direct testimony in this
18 proceeding?
19 A. Yes, it does.
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CASE NO. IPC-E-12-27 ELPM, M. (Di) 31
05/10/13 STAFF
AMENDED CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1ØTH DAY OF MAY 2013,
SERVED THE FOREGOING DIRECT TESTIMONY OF MATT ELAM, IN CASE
NO. IPC-E-12-27, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
LISA NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
P0 BOX 70
BOISE ID 83707-0070
EMAIL: [e-mail]
[e-mail]
BENJAMIN J. OTTO
IDAHO CONSERVATION LEAGUE
710 N. 6TH ST.
BOISE ID 83702
EMAIL: bottoidahoconservation.org
PETER J RICHARDSON
MATT LARKIN
GREG SAID
IDAHO POWER COMPANY
P0 BOX 70
BOISE ID 83707-0070
EMAIL: [e-mail]
gsaid(idahopower.com
PAPER WORKS LLC
CHRIS AEPELBACHER
PROJECT ENGINEER
5420 W WICHER RD
GLENNS FERRY ID 83623
EMAIL: [e-mail]
RICHARSON & O'LEARY JOHN STEINER
P0 BOX 7218 24597 COLLETT ROAD
BOISE ID 83702 OREANA ID 83650-5070
EMAIL: [e-mail] EMAIL: [e-mail]
R. STEPHEN RUTHERFORD
CITY OF BOISE CITY, ID
P0 BOX 500
BOISE ID 83701-0500
EMAIL: BoiseCityAttorney(cityothoise.org
JOHN R. HAMMOND JR
BATT FISHER PUSCH
& ALDERMAN LLP
P0 BOX 1308
BOISE ID 83701
EMAIL: [e-mail]
KEN MILLER DR
CLEAN ENERGY PROGRAM
SNAKE RIVER ALLIANCE
P0 BOX 1731
BOISE ID 83701
EMAIL: [e-mail]
DEAN J MILLER
McDEVITT & MILLER LLP
P0 BOX 2564
BOISE ID 83701
EMAIL: [e-mail]
CERTIFICATE OF SERVICE
BOARD OF DIRECTORS
ID CLEAN ENERGY ASSOC INC
P0 BOX 1212
BOISE ID 83701
SECRETAR
CERTIFICATE OF SERVICE