20110429Answer to Petition for Clarification.pdf

RECEIVED
lOI, APR 29 PH 2: 57~r&?Ql(,E~Y
ATTORNEYS AT LAW
Tel: [phone] Fax: [phone]
P.O. Box 7118 Boise, ID 83707 - 515 N. 27th St. Boise, ID 83702
April 29, 2011
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
RE: IPC-E-IO-27
Dear Ms. Jewell:
We are enclosing for fiing in the above-referenced docket an original and seven (7)
copies the INDUSTRIAL CUSTOMERS OF IDAHO POWER'S ANSWER TO
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION.
An additional copy is enclosed for you to stap for our records.
erely,~
e ryM. Adams
Ric ardson & O'Leary PLLC
encL.
Peter J. Richardson (lSB # 3195)
Gregory M. Adams (lSB # 7454)
Richardson & O'Lear, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(frichardsonandoleary.com
greg(frichardsonandoleary.com
RECEIVED
2011 APR 29 PM 2: 57
Attorneys for the Industrial Customers of Idaho Power
BEFORE THE IDAHO
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S REQUEST TO MODIFY
RECOVERY OF INCENTIVES PAID TO
SECURE DEMAND-SIDE RESOURCES
) CASE NO. IPC-E-10-27
)
) ANSWER TO IDAHO POWER
) COMPANY'S PETITION FOR
) CLARIFICATION OF ORDER NO.
) 32217
)
)
)
COMES NOW, the Industrial Customers ofIdaho Power ("ICIP"), and pursuant to the
Idaho Public Utilities Commission's ("Commission's") Rile of Procedure 331.05 hereby files its
Answer to Idaho Power Company's Petition for Clarfication of Order No. 32217. For the
reasons set forth below, ICIP respectfully requests that the Commission deny Idaho Power's
petition.
BACKGROUND
In its application, Idaho Power sought to achieve two goals: (l) to forward a new
business and regulatory model whereby its demand side management activities would be treated
like supply side resources, and (2) to reduce the growing negative balance in its Energy
Efficiency Rider ("EE Rider") account. See Order No. 32217, at p. 1. The EE Rider curently
allows the Company to collect 4.75% of base rates for use on its DSM programs, which amounts
to $38 milion per year. This amount will increase as biled revenue increases. The Company,
however, has been spending in excess of the amounts collected and, without an adjustment to
cost recovery, it projected in its filing that the negative balance in its EE Rider account wil be
$17 milion at the end of2011 and $29 milion by the end of2012. ¡d.
The Company proposed to collect approximately $14 milion per year for three demand
response programs through the power cost adjustment ("PCA") mechansm and eventually base
rates as normalized power supply expenses after the next general rate case. ¡d. at pp. 1-2. The
Company also proposed to change the method for recovering approximately $5 milion anually
in incentive payments for the Custom Efficiency program from collection through the EE Rider
to collection as a rate-based investment with an accelerated amortization period. ¡d. at p. 2. The
Company proposed that these incentive payments would be accounted for in a regulatory asset
account from Januar 1,2011 until the next general rate case, when the Company would place
the payments in rate base and earn a retu on them. ¡d. The Company also proposed to
continue collecting 4.75% of base rates though the EE Rider. Thus, the Company's proposal to
overcome its negative balance was to increase DSM fuding from $38 millon anually to
approximately $58 milion anually.l Several parties entered into a stipulation which slightly
extended the amortization period for the incentive payments made under the Custom Efficiency
program from 4 to 7 years, and mitigated the disproportionate cost-allocation impact of moving
The Company also proposed that the Commission allow it to ear its authorized rate of
retur (8.18%) on the negative balance in the EE Rider account, but that request does not appear
to be at issue in the Company's Petition for Clarfication.
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-10-27
PAGE 2
$14 milion into the PCA for only one year. ¡d. at pp. 3-4.
ICIP opposed the stipulation because, relevant to this pleading, ICIP believes that 4.75%
of base rates, constituting $38 milion anually, should be adequate to fud the Company's DSM
programs. ¡d. at pp. 3-4; Oral Argument Transcript ("Tr."), pp. 22-25 (March 30, 2011). ICIP
also believes that adoption of the stipulation would have had far-reaching cost allocation impacts
that the stipu1ation failed to address. Order No. 32217, at p. 4; Tr. pp. 28-30. ICIP proposed
that determination regarding Idaho Power's fiing be deferred until the Company's next general
rate case, where all relevant issues can be vetted before the Commission decides whether to
authorize the major policy shift proposed by the Company. Tr. at p. 32.
In Order No. 32217, the Commission rejected the stipulation. The Commission stated,
"The gain in energy conservation programs has not come without cost." Order No. 32217, at p.
5. The Commission noted, "In recent years expenditures have outpaced Rider fuds." ¡d. The
Commission stated that the "fuding adjustments" requested may be appropriate to adequately
fud DSM programs. ¡d. "The specific proposals, however, raise issues and concerns that are
more properly vetted in a rate case." ¡d. The Commission stated that "including costs for
recovery in the PCA affects cost allocations among customer classes. These and other issues are
best considered in a general rate proceeding." ¡d. (emphasis added). The Commission
authorized Idaho Power to recover through the 2011 PCA rates only the amount of existing
negative balance in the EE Rider account associated with DSM expenditures which the
Commission has already determined to be prudent in prior cases - approximately $10 milion.
¡d. at pp. 5-6. The Commission also required that the Company allocate that recovery "to each
customer class based on the amount that would have been recovered from each class though the
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-1O-27
PAGE 3
Rider." Id. at p. 6.
Idaho Power fied a Petition for Clarfication, requesting that the Commission "clarfy"
three different aspects of its order. First, Idaho Power sought clarification on whether the
Commission intended that Idaho Power stop spending in excess of 4.75% of base rates, or $38
milion anually, on DSM programs. Idaho Power's Petitonfor Clarifcation, at pp. 1-3.
Second, Idaho Power states that it seeks clarification on whether the Commission is
philosophically opposed to the recovery of Idaho Power's demand response incentive payments
through rates related to its power supply expense recovery mechanisms. Id. at p. 3. Third, Idaho
Power requests that the Commission "clarify Order No. 32217 to allow Idaho Power to account
for incentives paid through the Custom Effciency program as a regulatory asset beginning
Januar 1, 2011, with an amortization period to be determined by the Commission, based upon
the information submitted by the paries in this case." Id. at p. 5. Idaho Power also now states-
in direct contradiction to its prior position at the scheduling meeting in this case2 - that it has no
objection to an evidentiar hearng being held on the testimony already fied in this case. Id. at
p.6.
ARGUMENT
ICIP opposes Idaho Power's Petition for Clarfication - which is in fact a Petition for
Reconsideration - and requests that if the Commission is inclined to grant any of Idao Power's
2 ICIP notes for the record that it argued at the scheduling meeting in this case, on Januar
12, 2011, that the issues in this case merited an evidentiary hearing. All other paries present,
including Idaho Power, took the position that an evidentiar hearing was unnecessary. At the
settlement meeting on Febru 7, 2011, ICIP agreed to oral argument instead at the insistence of
the other paries. See Order No. 32178. It is ironic that Idaho Power argues an evidentiary
hearing is now necessar afer the Commission did not grant the relief Idaho Power requested.
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARFICATION
IPC-E-1O-27
PAGE 4
requests that the Commission first hold an evidentiary-hearing where all of the relevant issues
can be fully vetted.
I
The Commission does not need to clarify the amount of spending authoried for Idaho
Power because Order No. 32217 clearly stated that the Company may recover 4.75% of
base rates plus the additional $10 milion for Rider funds already deemed to have been
prudently incurred.
The stipulating paries have proceeded under the assumption that the Commission has
mandated that Idaho Power pursue all cost-effective DSM, without any spending limit, or even
any spending goal. The stipulating paries have only cited a single Commission order in support
of that proposition. See Direct Testimony of Commission Staff Witness Randy Lobb, p. 8
(March 4,2011) (citing Order No. 30201). That order granted Idaho Power's Certificate of
Public Convenience and Necessity ("CPCN") for the Evander Andrews gas peaking plant.
Although the Commission stated in that order that the Company should pursue all cost-effective
DSM, the EE Rider was set at 1.5% of base rates at that time. Order No. 30201, at pp. 10-12.3
Now, Idaho Power and the other stipulating paries appear to argue that the order approving the
gas plant authorized spending on DSM expenditures above the $38 milion per year amount the
3 Notably, in finding that the Company should pursue all cost-effective DSM in that order,
the Commission stated it was "paricu1arly interested in the 'virtual peakng plant' program being
conducted by Portland General Electric" and it directed the Company to investigate that
program. Id. at p. 12. To date, the Company has stil not implemented that distributed
generation program, and appears in its curent Integrated Resource Plan process to favor another
peaking gas plant rather than implementation of the virtual peakng program using existing
backup generators. The Company also appears to be placing limits on its projected DSM savings
in its planing processes where it evaluates the need for futue gas peakng plants. See Direct
Testimony ofICIP Witness Don Reading, pp. 15-17. If those limits used in the planng process
are real, they should be used in evaluating the cost-effectiveness of the individual DSM
programs in dockets like this one, which may help identify programs that should be scaled back
to keep the budget within $38 milion anually.
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-10-27
PAGE 5
Company is curently authorized to collect as 4.75% of base rates on the EE Rider. ICIP submits
that Order No. 30201 should not be read in that maner. There should be some reasonable limit,
or least a goal, within which the Company shou1d operate its DSM programs.
In the case approving the increase in the rider to 4.75% in May 2009, one pary requested
that the Commission increase rider fuding above 4.75%, in par, to "allow for additional
fuding for NEEA." See Order No. 30814, at p. 3. But the Commission did not approve a rider
rate above 4.75%, or otherwise provide a mechanism to recover costs above that leveL. Id.
The Commission has subsequently stated that the amounts it will authorize for DSM spending
"are not unimited." See Order No. 31080, p. 6. Idaho Power has placed itself and the
Commission in a difficult position by spending far in excess the amount that it is authorized to
recover through the EE Rider. The Commission, in Order No. 32217, authorized the Company
to recover amounts already deemed to be prudently incured expenses in past cases, and in the
upcoming year, that authorization will allow for combined recovery of$38 milion through the
EE Rider and $10 milion through the 2011 PCA. Order No. 32217, at p. 6. That is
approximately $10 milion less than the $58 milion the Company would have eventually
recovered for DSM expenditures under its fiing. To the extent that the Company continues to
spend in excess of 4.75% it is curently allowed to collect, the Company should recognize that it
stil has no authorized recovery mechanism for that spending. The Company is free to propose
another cost recovery mechanism in its general rate case if it wishes to continue spending in
excess of 4.75% of base rates without raising the EE Rider. Or the Company could begin
reducing its spending to a level that is within $38 milion per year amount. No fuher
clarfication is needed at this time.
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-10-27
PAGE 6
II
The Commission should reject Idaho Power's request for clarifcation ofthe Commission's
philosophical position with regard to recovering DSM expenses as power supply expenses.
The Commission, in Order No. 32217, clearly stated that the Company's proposal to treat
the DSM programs as power supply expenses would have cost-allocation effects more
appropriately determined in a general rate case. Idaho Power itself "agrees that the allocation of
costs between classes is a complicated matter best suited for a general rate case." Idaho Power's
Petitionfor Reconsideration, at p. 3; see also Reply Testimony ofIdaho Power Witness John R.
Gale, p. 14 (March 21, 2011). The Commission refused to provide pre-approval of Idaho
Power's approach without addressing the cost-allocation issues, see Order No. 32217, at p. 5,
and it shou1d not now provide a "philosophical" approval of the Company's approach. If the
cost-allocation issues canot be adequately addressed, then the Company's proposal to treat
demand side resources the same as supply side resources may well prove unworkable. By
granting the clarification sought by the Company, the Commission may handcuff itself from
being able to undo this far-reaching impact in a future case. This is but another attempt by the
Company to approach DSM issues in a piecemeal fashion where all relevant issues are not
adequately addressed, and ICIP continues to oppose that approach. See Tr. at p. 32.
III
The Commission should reject the Company's request for clarifcation regarding treatment
of the Custom Efficiency incentive payments.
The Commission clearly rejected Idaho Power's attempt to capitalize the Custom
Efficiency incentive payments, and instead required that the Company make that request in a
general rate case where all relevant issues may be adequately addressed. Order No. 32217, at p.
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-1O-27
PAGE 7
5. Now, the Company seeks clarification that the Commission actually meant that it would allow
the Company to do precisely what the Company requested in its application, and in support of
that request the Company asserts that the "sole disagreement between the paries was with regard
to the length of the amortization period." Idaho Power's Petition for Reconsideration, at p. 5.
Idaho Power is incorrect. ICIP also asserted - and continues to believe - that if these $5 milion
in anual incentive payments are rate-based they must be treated as a system resource in a cost-
of-service study. See Direct Testimony of ICIP Witness Don Reading, at p. 22; Tr. at pp. 28-30.
To treat them otherwise would be to treat them inconsistently with other supply side resources,
and to grant the Company's requested relief without addressing the issue would be a failure to
address all of the relevant issues regarding whether the Company's proposal can be workable.
As noted above, the other paries refused to address the cost-allocation issues, and ICIP refused
to sign the stipulation without those issues being addressed.
Tellngly, the Commission addressed a nearly identical issue in Rocky Mountain Power's
latest general rate case and required that the DSM resource moved from that Company's EE
Rider to base rates be treated as a system-wide resource. See Order No. 32196, at p. 26. In a
prior stand-alone EE Rider docket, the Commission decided not to increase Rocky Mountain
Power's EE Rider fuding to the 5.85% level that would be necessar to pay for the same DSM
program and an accrued negative balance, and stated that it would address the fuding and its
cost-allocation implications in the general rate case. Order No. 32023, at p. 5.
Idaho Power's request for clarification is in fact a deceptive request for reconsideration of
its prior filings, and should be rejected. The Commission's determination in Order No. 32217
that this issue would be better addressed in a general rate case was reasonable, and indeed was
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-10-27
PAGE 8
consistent with the Commission's recent orders in the Rocky Mountain Power cases. If the
Commission is inclined to grant Idaho Power's request, ICIP again respectfully requests that the
Commission not break from its existing precedent and use a 12-year amortization period, see
Order No. 27660, p. 4, Tr. pp. 28-29, Direct Testimony ofICIP Witness Don Reading at p. 21,
and that it state that these payments wil be treated as a system-wide resource in a cost of service
study, see Order No. 32196, at p. 26. To do otherwise without holding a full evidentiar hearing
would be unair.
CONCLUSION
For the reasons set forth above, ICIP respectfully requests that the Commission deny
Idaho Power's Petition for Clarification. In the alternative, if the Commission is inclined to
grantany of the relief requested in Idaho Power's petition, ICIP respectfully requests that the
Commission hold an evidentiar hearng on the matter.
DATED ths 29th day of April, 2011.
RICHARDSON AND O'LEARY, PLLC
By:~
r J. Richardson
Gregory M. Adams
Attorneys for the Industrial
Customers of Idaho Power
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARFICATION
IPC-E-10-27
PAGE 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 29th day of April, 2011, I caused a true and
correct copy of the foregoing document to be served by the method indicated below, and
addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street (83702)
Post Office Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
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Lisa Nordstrom
Donovan Walker
Idaho Power Company
PO Box 70
Boise, Idaho 83707
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John R. Gale
Darlene Nemnich
Idaho Power Company
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Boise,ID 83707
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Eric L Olsen
Idaho Irrigation Pumpers Assoc. Inc
Racine, Olsen, Nye, Budge & Bailey
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Pocatello, ID 83704
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NW Energy Coalition
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ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARIFICATION
IPC-E-1O-27
PAGE 10
Benjamin J Otto
Idaho Conservation League
710 N 6th Street
Boise, ID 83702
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Snake Rive Alliance
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Brad Purdy
Community Action Parnership Association
Of Idaho
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Signed
M.Adams
ICIP'S ANSWER TO IDAHO POWER'S PETITION OF CLARFICATION
IPC-E-10-27
PAGE 11