20111007Hirsh Direct.pdf

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Benjamin Otto (ISB No. 8292)
710 N 6th Street
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
botto~idahoconservation.org
2n! I OCT - 7 Pil 3: 08
Attorney for the Idaho Conservation League, the NW Energy Coalition, and the Snake River
Aliance
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF IDAHO POWER )
COMPANY FOR AUTHORITY TO )
INCRESE ITS RATES AND CHARGES )
FOR ELECTRIC SERVICE TO ITS
CUSTOMERS IN THE STATE OF
IDAHO.
CASE NO. IPC-E-ll-08
DIRECT TESTIMONY
NANCY HIRSH
October 7, 2011
1 Q. Please state your name, affation, and highght some of your qualcations.
2 A. My name is Nancy Hirsh. Since 1996, I have been the policy director for the NW Energy
3 Coalition, coordinating the work of the policy team in advocating for investments in clean and
4 affordable energy servces. The NW Energy Coalition is an alliance of more than 110
5 environmental, civic and human servce organizations, progressive utilities and businesses from
6 Oregon, Washington, Idaho, Montana, Alaska and British Columbia. We promote energy
7 conservation and renewable energy resources, consumer and low-income protection and fish and
8 widlife restoration in the Columbia River Basin. The Coalition has 11 member organizations in
9 Idaho, including groups such as Advocates for the West, Idaho Rural Council, the Idaho
10 Conservation League, the League of Women Voters, the Snake River Alliance, and the South
11 Central Community Action Agency. In addition, I serve as Chair of the Board of the Renewable
12 Northwest Project and sit on Idaho Power's Energy Effciency Advisory Group.
13 Previously, I spent twelve years in Washington, D.C. working for the National Wildlife
14 Federation and Environmental Action Foundation on federal energy policy and electric utilty
15 issues, including providing assistance to state environmental and consumer organizations
16 working on utilty resource planning. I have made numerous presentations to national and state
17 audiences on the importance of least cost resource planning and the role of energy effciency and
18 renewable energy resource development in keeping utilty çustomer bils affordable.
19
20 Q. Have you prevously testified before the Idaho Public Utilty Commissions or Commissions
21 in other states?
22 A. I have presented testimony in the 2004 Idaho Power rate case and the 2010 Idaho Power DSR
23 Recovery docket. In addition, I have testified before the Public Utilty Commission of Oregon
24 and the Washington Utilties and Transportation Commission as well the District of Columbia
25 and Georgia Public Servce Commissions.
Hirsh, Di 1
Conservation Parties
1 Q. Please describe the purpose of your testimony in this case.
2 A. I offer this testimony on behalf of the NW Energy Coalition, the Idaho Conservation League,
3 and the Snake River Alliance - collectively the Conservation Parties - for two reasons. First, I
4 explain our support for the stipulation submitted by Idaho Power and signed by most parties to
5 this case. Second, I address two of the unresolved issues-funding for the low-income
6 Weatherization Assistance for Qualified Customers program and the adequacy of the Energy
7 Effciency Rider Tariff. The overriding purpose of my testimony is to demonstrate that in times
8 of rising electric rates good public policy and utilty management requires that ratepayers have
9 access to powerful tools to control their energy bils through programs that promote energy
10 effciency.
11
12 Q. Please explain the Conservation Pares.' position on the Stipulation.
13 A. We support the stipulation as a reasonable balance of the competing interests in this case. The
14 Conservation Parties reviewed Idaho Power's prefied direct testimony and participated in the
15 settlement negotiations in this case. The overall revenue requirement contained in the
16 stipulation is less than one half of Idaho Power's original request. This is a clear benefit to all
17 ratepayers. However, a sizeable portion of the revenue requirement not included in the
18 stipulation Idaho Power attributes to power purchases under the Public Utilty Regulatory and
19 Policy Act of 1978 C'PURP A"). Instead of collecting these costs prospectively through rates, they
20 will be collected through the Power Cost Adjustment (PCA). This balances reducing the
21 immediate impact to ratepayers with Idaho Power's need to timely recover the costs of this
22 largely carbon-free generation resource. But this resolution of the issue also sets up ratepayers for
23 potentially a large increase in future PCA adjustments. Consequently, now more than ever
24 customers need programs and incentives to reduce energy bils through effciency investments.
Hirsh, Di 2
Conservation Parties
1 In terms of the cost of servce methodology, the Conservation Parties agree with the
2 Company and Staff that the filed methodology is sound. The fied methodology demonstrates
3 that, all else being equal, residential rates should increase less than rates for the irrigation, large
4 commercial, industrial, and special contract customers. In the spirit of compromise, the
5 Conservation Parties agree to the stipulated increase being spread equally across all customer
6 classes for this specific filing. This shiftng of cost recovery onto residential customers provides a
7 significant benefit to these other customer groups but should not set a precedent for future cost
8 allocation. As stated earlier, any increase in rates should be coupled with aggressive energy
9 effciency opportunities. This cost allocation agreement highlights even more the immediate
10 impact on low-income customers and the fact that all non-residential classes could face even
11 higher rates in future rate proceedings. Maintaining strong energy effciency programs that
12 accelerate cost-effective savings will serve those customer groups well.
13 We also support the rate design changes proposed by Idaho Power and included in the
14 stipulation. While we continue to believe that low residential customer charges provide an
15 appropriate conservation price signal, raising the rate to $5.00 per month preserves this signal
16 and aligns the rate with other Idaho investor owned utilties. This level also recognizes the
17 differing perspective on which cost components properly belong in the customer charge.
18 Additionally, we appreciate Idaho Power's proposal to limit the application of the rate increase to
19 the wintertime third energy block. Until more refined data is available, we join the Company and
20 others in assuming this will mitigate rate impacts to electricaly heated homes during times when
21 the risks of reducing usage could be high. However, this points again to the need to target energy
22 effciency programs to increase energy and bil savings even when the costs of energy production
23 may be modest. Lastly, we support Idaho Power's proposal to expand the voluntary
Hirsh, Di 3
Conservation Parties
1 opportunities to use time variant pricing in the near future and look forward to the ((separate
2 filing prior to that time explaining the details of the proposed pilot."l
3
4 Q. The stipulation indicates Idaho Power wi initiate a separate proceeding to revew the Fixed
5 Cost Adjustment. Please explain the Conservation Partes position on this term.
6 A. We appreciate the Staff and Company agreeing to resolve the Fixed Cost Adjustment in a
7 focused and timely fashion. The Conservation Parties believe implementing a permanent
8 mechanism to decouple revenue from energy sales is sound policy and in the public interest.
9 While we believe the current pilot could be made permanent in this rate case, we recognize the
10 need of some parties to separate out this complex issue into a focused proceeding. Until Idaho
11 Power does not see a disincentive to reduce energy sales, we cannot expect them to pursue energy
12 effciency with the full vigor the public deserves. We look forward to addressing the precise
13 design of this mechanism in the separate proceeding.
14
15 Q. The stipulation indicates the pares could not resolve three issues including the level of
16 fuding for low-income weatherization and the level of the energy effciency rider. What is the
17 Conservation Parties' position on these issues?
18 A. We believe that as electric rates increase so must the funding for energy effciency. Of course,
19 this funding must only go towards cost effective energy effciency. But repeatedly Idaho Power's
20 own studies indicate that, despite strong gains in effciency over the years, substantial potential
21 remains yet to be realized. The Conservation Parties believe that the best method to determine
22 the appropriate level of funding for effciency is to compare the documented level of cost effective
23 potential with the funding necessary to acquire this potentiaL. For both low-income
l Direct Testimony of Mike Youngblood at 11, (June 1,2011).
Hirsh, Di 4
Conservation Partes
1 weatherization and energy effciency generally, the potential is large and customers deserve
2 continued access to these powerful tools to reduce energy bils.
3
4 Q. In regards to low-income weatheriation, do you have any specic recommendation on the
5 appropriate fudig level?
6 A. The Conservation Parties defer to the experience and expertise of the Community Action
7 Partnership Association of Idaho (CAP AI) on the specific level of funding. I believe that CAP AI
8 recommends increasing funding from approximately $1.2 milion annually to $2.7 milion
9 annually.
10 We believe this level of funding is appropriate given that Idaho Power's most recent cost
11 benefit analysis of its weatherization program proves it is cost effective and the CAP AI agencies
12 have a large and growing backlog of potential projects. The 2010 DSM Annual Report reveals
13 that Weatherization Assistance for Qualified Customers (WAQC) had a benefit/cost ratio greater
14 than 1 under each of three rate tests.2 While Idaho Power contributes some funding for this
15 program, the CAPAI agencies receive additional funding from the u.s. Department of Energy
16 (DOE). DOE requires the CAPAI agencies to audit each weatherized home pre- and post-
17 installation to verify that the projects are robust, properly installed, and result in verifiable energy
18 savings. Because the program passes all the benefit/cost tests Idaho ratepayers can rest assured
19 that funding low-income weatherization doesn't just help those folk on the margin, it results in
20 savigs for all utilty customers.
21 Moreover, the potential for cost effective energy effciency continues to rise and CAP AI
22 continues to see a growing backlog of eligible program participants all while federal stimulus
23 program funding declines. Given the increased customer need, the opportunity for increased
24 savings and the impending rate increase, Idaho Power should provide adequate funding to
2 Idaho Power 2010 DSM Annual Report Supplement 1 at 45.
Hirsh, Di 5
Conservation Parties
1 acquire this cost effective potentiaL. Faced with this reality the Conservation Parties urge the
2 Commission to adopt CAPAls recommended level of funding.
3
4 Q. Please expand on the underlyig policy reasons for your position.
5 A. Low-income weatherization is not a social program. It is a cost effective energy savings
6 program that provides economic and energy benefits to both the customer and the utilty.
7 Electricity is not an optional servce in today's society. Electricity powers refrigeration, heating,
8 cooling, lighting, and home medical equipment. Without lights to do their homework by,
9 children will strugge in schooL. Faced with increasing energy bils, low and fied income folks
10 may turn to alternative heating and lighting methods, such as candles, open oven, and space
11 heaters, which can pose serious health and safety problems. According to the National
12 Association of Regulatory Utilty Commissioners (NARUC), the average household pays 5% of
13 their income for energy bils; meanwhile low-income households pay 16% or more.3 Faced with
14 this heavy energy burden, these familes must chose between heating their home, purchasing
15 needed medicine, or putting food on the table.
16 Well-marketed and operated weatherization programs can significantly reduce the energy
17 burden on low and fied income familes. In particular, targeting weatherization servces to
18 customers with high usage and those receiving LIHEAP bil assistance funds will ensure that
19 weatherization services assist those with the greatest need. The same NARUC resolution goes on
20 to find weatherized homes can save between $300-400 each year, allowing these households a
21 better opportunity to pay future energy bils while meeting their other needs. But these savings
22 can only be realized if the program administrators have suffcient funding to meet the demand
23 for their essential, cost effective servces.
3 Resolution Supporting Adequate Funding/or the Weatherization Assistance Program,
Adopted by NARUC Board of Directors February 21, 2007.
Hirsh, Di 6
Conservation Parties
1 Q. What are the benefits to the utiity?
2 A. Idaho Power and al ratepayers save money from effective low-income weatherization
3 programs by reducing unpaid bils and avoiding the costs of disconnecting and reconnecting
4 customers. Weatherization measures that lower a customer's bil make it more likely that the
5 customer will make some payment on current and past due bils. In addition, low-income
6 weatherization provides the same benefits of other residential effciency programs-peak load
7 reduction and deferring or avoiding more costly new generating resources.4
8 In a 2002 report submitted to then-president George Bush, the Entergy Corporation in
9 Economics of Low-Income Electricity Effciency Investment concluded: ((Nationwide, a one mil per
10 kWh investment will conservatively return more than $26B over the average 16-year life of the
11 investment, a benefit:cost ratio of about 7."5 More specifically the report described some of the
12 utilty benefits as:
13 Arrearage reduction (cost of money, uncollectibles, collection costs). A review of studies
14 of arrearage reduction benefits conducted for the Boston Edison Settlement Board by the
15 Tellus Institute shows that energy effciency programs generate reductions in arrearages
16 ranging from $0 to $469 per participating household. An Oak Ridge National Laboratory
17 study, for example, found an average reduced arrearage value of $32 per weatherized low-
18 income household relative to program costs of $1,550. Similarly, a study of a Pacific Gas
19 and Electric low-income weatherization and education program found that reduced
20 carryng charges on arrearages range between $4 and $63 per weatherized household.
21
22 In Colorado, write-offs dropped 18 percent at weatherized homes. Further, arrearages
23 dropped 26 percent, emergency gas assistance calls dropped 74 percent, and bils were
24 reduced 22 percent. Total annual benefit to the utilty is estimated at $30.56 per
25 participating household on a $2417 per household cost, not counting reductions in
26 complaints and collection costs, increases in comfort and health, and increases in
27 discretionary income. Another study found that all benefits associated with reduced
28 uncollectibles range between $16 and $58 per weatherized household.
29
30
4 Economic Opportunity Studies, How Do Utility Residential Energy Effciency Programs for Low-
and Moderate-Income Consumers Work Now? What Makes Them Effectve? at 5-6, (October 3,
2008).
5 Jerrold Oppenheim & Theo MacGregor, Economics of Low-Income Electricity Effciency
Investment, at 5-6, (January 2002) available at
http://ww.democracyandregulation.com/detail.cfm ?artid = 14&row=0.
Hirsh, Di 7
Conservation Parties
1 Site visits for terminations, reconnections. At least two site visits are required each time a
2 customer is terminated for non-payment and then reconnected. Typicaly, such site visits
3 cost at least $35. Total savings, then, are the number of terminations avoided as a result
4 of the program times $35. Massachusetts Electric Co. assumes the incidence oflow-
5 income termination is twce that of other residential customers, which is 3 percent. Thus,
6 we compute this benefit (per average participant) as 6 percent times $35, or $2.10.
7
8 Interestingly, despite these documented benefits to all utilty ratepayers, when Idaho
9 Power calculates the cost/benefit ratio of their program, W AQC, it only includes direct costs and
10 energy savings.6 Accordingly, the W AQC program is cost effective from an energy saving
11 standpoint, and extremely cost effective when one factors in the total benefits to the utilty and al
12 ratepayers.
13
14 Q. How does the level of funding you propose for Idaho Power compare to similar programs
15 funded by investor owned utities in the region?
16 A. Idaho Power currently spends about $3.21 per residential customer for its low-income
17 program WAQC.7 In Washington, Avista serves about 238,050 electric customers and invests
18 over $1.3 milion in limited income weatherization, or $5.46 per customer.8 Puget Sound Energy
19 serves about 961,872 residential electric customers and invests $4.7 milion per year in low-
20 income weatherization, or $4.87 per customer. PacifiCorp's roughly 120,000 Washington
21 residential customers have access to almost $1 milion per year for low-income weatherization, or
22 $8.33 per customer. In Oregon, PacifiCorp and Portland General Electric customers pay a state
23 mandated Public Purpose Fund to the Energy Trust of Oregon and the Oregon Housing and
24 Community Servces agency. PacifiCorp serves 421,000 customers and contributes $3.4 milion.
6 Idaho Power Company, Weatherization Assistance for Qualified Customers 2010 Annual Report
(April 1, 2011).7 See Exhibit 801, Idaho Power Company's Response to CAPAI Discovery request No.5.
8 Avista 2011 IRP at 2-6; Avista DSM 2010 Annual Report at 19.
Hirsh, Di 8
Conservation Parties
1 Portand General Electric serves 717,719 residential customers and contributes $11.6 milion.9
2 Each PGE and PacifiCorp residential customer invests about $8.00 in low-income weatherization.
3 ECONorthwest evaluated the weatherization programs in Oregon and concluded customers in
4 weatherized houses saved over 3,000 kWh per year.lO In Montana, NorthWestern Energy invests
5 at least $1.8 milion per year and has 300,000 residential customers, an investment of $6.00 per
6 customer. For an example outside of the region, San Diego Gas and Electric doubled their low-
7 income energy effciency and weatherization program between 2007 and 2010. Funding went
8 from $11 milion to $20 milion while doubling the number of households served to 22,500.ll
9 This dramatic increase was driven by the growing need for weatherization servces among eligible
10 households.
11 Idaho Power has a strong WAQC program that is effectively and effciently administered
12 by local community action agencies. The need for servces is on the rise and Idaho Power's
13 investment in this successfu program is not keeping pace with the need in its servce territory as
14 the other investor owned utilties in the region are doing.
15
16 Q. Turning to the second unresolved issue the level of the energy effciency rider, did Idaho
17 Power propose any changes in their Application or prefied testimony?
18 A. No. The last time Idaho Power asked to adjust the rider level was in May of 2009, where it
19 requested an increase to the current 4.75%.l2
20
21 Q. Are the conservation partes requestig to increas the rider level in this case?
9 ECONortwest, Report to the Legislative Assembly on Public Purpose Expenditures January 2009-
December 2010, at 25, (March 20ll)(showing Total Low Income Weatherization funding).
10 Id., at 33.
II Gregg Lawless, San Diego Gas and Electric, Broadening Weatherization Programs and
Parterships, Affordable Comfort Conference, (June 12-14,2011).l2 See Order No 30184, IPC-E-09-05.
Hirsh, Di 9
Conservation Parties
1 A. No. The Conservation Parties merely ask the Commission to maintain the current rider leveL.
2
3 Q. Why does the stipulation leave the energy effciency rider as an unresolved issue?
4 A. The stipulation does include a term that moves demand response incentives out of the energy
5 effciency budget and tracks these payments through the power supply cost adjustment. The
6 Commission initially considered this accounting change in a prior case, IPC- E-l 0- 27. At the
7 conclusion of that case, the Commission authorized Idaho Power to collect $10,000,000 in
8 demand response incentives through the power cost adjustment in 201 1. In the current rate case,
9 Idaho Power asked to make this a permanent change, something the parties al agree to in the
10 stipulation. Going forward demand response incentives will be collected and tracked through the
11 power supply cost adjustment mechanism. The stipulation establishes a base level of incentive
12 payments of$1l,252,265. In the next PCA case, Idaho Power will report the actual incentive
13 payments and collect or return any difference through the 2012 PCA rate. In short, ratepayers
14 will pay no more and no less than actual demand response incentives.
15 While not included in this rate case, the prior case, IPC-E-1O-27, also included a change
16 in accounting for the Custom Effciency program incentives. Instead of collecting this expense
17 through the energy effciency rider, these incentives will accumulate as a regulatory asset to be
18 recovered through rates in a future proceeding.I3
19 The Conservation Parties join the Staff and Idaho Power in specifically endorsing the
20 treatment of demand response incentives as power supply costs. We believe this accurately
21 recognizes demand response as a power supply issue, not a long-term on going energy savings
22 investment. Up until now, recovering demand response incentive payments through the energy
23 effciency rider resulted in significant funding pressure on the rider balancing account, due to the
13 See Direct Testimony of Greg Said at 24 - 25, (June 1,2011).
Hirsh, Di 10
Conservation Parties
1 amount of the incentive payments. This change to a more accurate accounting of demand
2 response will reduce this pressure to some extent.
3 Other Parties to the settlement made the case that since the demand response incentives
4 will be recovered in the PCA, the rider should be reduced. The Conservation Parties did not
5 agree with this argument and as such, the level of the rider became an "unresolved issue."
6
7 Q. In Rocky Mountain Power's 2010 rate case the Commission made a similar change and
8 moved the Irrigation Load Control Program incentives out of RMP's energy effciency rider and
9 into power costs as a system resource. Along with this change, the Commission reduced the
10 energy effciency rider leveL. Why shouldn't the Commission do the same thing in this case?
11 A. Because, as I will explain below, the facts in this case are different and they support expanding
12 the total funding for energy effciency at Idaho Power. While I was not a part to the Rocky
13 Mountain Power 2010 rate case, I have reviewed the final order and some of the filings by the
14 parties. Based on my review I did not see any discussion of the level of cost effective energy
15 effciency potential and the funding required to achieve this potential. As such, I cannot
16 comment on whether reducing the rider level due to a change in accounting was appropriate.
17 But the record in this Idaho Power case will be different. Again, the Conservation Parties believe
18 that the best method to determine the appropriate level of funding for effciency is to compare
19 the documented level of cost effective potential with the funding necessary to acquire this
20 potentiaL.
21
22 Q. Why did Idaho Power propose to move demand response payments out of the energy
23 effciency rider and into power costs?
Hirsh, Di 11
Conservation Parties
1 A. According to Idaho Power's testimony in the IPC- E-l 0- 2 7 case, the Company requested this
2 change to address the growing negative balance in the energy effciency rider.14 This issue of
3 funding pressure on the energy effciency rider did not appear in the Rocky Mountain Power rate
4 case. By contrast, Idaho Power continues to follow the directives repeated by this Commission to
5 acquire all cost effective energy effciency. Because the available potential is quite large, Idaho
6 Power continues to experience pressure on the energy effciency rider to provide suffcient
7 funding to meet this Commission directive.
8
9 Q. How much cost effective potential for energy effciency exists?
10 A.Energy effciency potential is analyzed in three tiers - overall technical potential,
11 economic potential, and then achievable economic potentiaL. Technical potential gives the
12 absolute opportunity with no regard for the cost of the measure. Economic potential is a subset
13 of technical potential that zeros in on cost-effectiveness. Achievable economic potential narrows
14 the scope even more by applying expected customer participation rates given conventional
15 incentive levels. In Idaho Power's most recent DSM Potential Study the gap between economic
16 potential and achievable economic potential is huge. l5 The Study calculates there was 945 GWh
17 of economic, or cost effective, potential available in 2009, with increasing amounts going
18 forward. l6 Allowing for a substantial margin of error, 30% of this potential is 283.5 GWh or 2%
19 of energy sales. In 2010, Idaho Power acquired 187.6 GWh, or 1.39% of sales.l7 While a laudable
20 achievement, this is less than Idaho Power's projection of future demand growth from their latest
21 IRP, which averages 1.4% with the peak growing at 1.8% annually. l8 Current fuding levels are
l4 See Direct testimony of Rick Gale at 17, IPC-E-1O-27 (October 22,2010).l5 Nexant, Idaho Power Demand Side Management Potential Study- Volume 1, (August 14,2009).
l6 Id. at Figure 3.1, Figure 4.1, and Figure 5.1.
l7 Savings shown in Idaho Power 2010 DSM Annual Report at 3 (including NEEA); Percentage of
sales is based on 2010 kilowatt hour sales of 13,492 GWh used in the 2011 PCA, IPC- E-II-06.l8 2011 IRP at 62, table 6.2 (Average) and p. 61, table 6.1 (Peak).
Hirsh, Di 12
Conservation Parties
1 suffcient to acquire less than 20% of the cost effective energy effciency potential available to
2 Idaho Power. It is important to note that a significant portion of the DSM funding has been for
3 demand response programs, which are not included in the economic potential of 945 GWh.
4 Current funding is not suffcient to actually avoid new supply side generation, merely defer it for
5 a few years. The Conservation Parties believe the public interest is best served by avoiding new,
6 expensive supply side resources. The first step to doing so is to ensure Idaho Power has suffcient
7 funding to acquire all cost effective energy effciency.
8
9 Q. Doesn't movig demand response incentives into power costs reduce the pressure on the
10 energy effciency rider budget?
11 A. The stipulation does reduce some pressure on the energy effciency rider account by moving
12 certain costs into rates. But significant pressure remains based on our analysis of the funding
13 necessary to support existing programs, recover the prudently incurred back balance, and provide
14 a reasonable amount of headroom for both planned growth to achieve more of the identified
15 economic potential and meeting increased expectations to improve marketing, recordkeeping,
16 and EM&V. Reducing the rider percentage now is not supported by the facts and is bad public
17 policy.
18
19 Q. Given that Idaho Power's rates are increasing, won't reducing the rider level mitigate this
20 impact to ratepayers?
21 A. Reducing the rider level wil have a negligible impact to each individual ratepayer, but a
22 sizable impact to Idaho Power's overall energy effciency budget. Assuming the growth in sales
23 from actual 2011 to the 2012 forecast used in this rate case, maintaining a 4.75% rider will
Hirsh, Di 13
Conservation Parties
1 generate an additional $1,597,640 for Idaho Power's energy effciency programs. l9 When spread
2 across all customers, maintaining a 4.75% rider has a negligible impact ofless than $3.36 per
3 customer annually in 2012. By contrast, the total revenue increase of $33,999,992 spread across
4 al 475,697 customers means each ratepayer will see their annual bils increase by $71.47. While
5 this is an average across all ratepayers and actual numbers will vary, I believe it puts energy
6 effciency investments into perspective. Maintaining the rider at 4.75% is lost in the noise of the
7 overall rate increase for each ratepayer but has a measurable impact on Idaho Power's energy
8 effciency investments.
9
10 Q. Over the past few years Idaho Power DSM investments have increased rapidly. What is the
11 harm in slowig down the growt in DSM investments now?
12 A. Energy effciency investments are the only part of utilty rates that directly empowers
13 customers to take control of their energy bils. In the face of rising electric rates, now is not the
14 time to slow the growth of energy effciency investments. Rather, as explained by the
15 Commission in 2008 upon increasing the tariff to 2.5%: ((When the Commission approved the
16 initial rider, we described conservation and DSM programs as powerfl tools customers can use
17 to mitigate the impact of rate increases."20 In 2009, on the heels of a $27 milion rate increase, the
18 Commission again raised the rider to 4.75%.2l In doing so, the Commissioners acknowledged
19 that ((administration of energy effciency programs adds to utilty costs. . ." but ((cost-effectve
20 DSM including energy efficiency programs and load management programs, helps customers
21 control their utilty bils, reduces the need for higher-cost, supply-side resources, and increases
l9 2010 - 2011 firm Idaho sales of 812,166,191 from Direct Testimony ofNoe, Exhibit 26, p. 1, line
9. Test year sales of 845,800,709 from Idaho Power Motion in Support of the Stipulation, Exhibit
2, page 1, line 23 minus line 19 (Hoku first block sales).20 Order No. 30560 at 6, IPC-E-08-03 (May 30,2008) (citing Order No. 29026, p. 20, Case No.
IPC- 02-2 and IPC- 02-3 (May 13,2002)).2l Order No 30722, IPC-E-08-10 (January 30, 2009)(approving a $20,878,884 increase); Order
No. 30754, IPC-E-08-1O (March 19, 2009) (approving a $6,138,581 increase).
Hirsh, Di 14
Conservation Parties
1 system reliabilty.'.i This statement reinforces the Commission's thinking from 2008: ('Even if
2 the Company's DSM program costs increase, al cost-effective DSM programs will delay the need
3 to construct new, costly generating facilties. This delay in new investment and facilities will
4 benefit all Idaho Power customers.',i3 When electric rates rise, DSM funding is the only utilty
5 investment that helps customers control their electric bils. To limit this '(powerfl tool" runs
6 counter to the public interest.
7
8 Q. The stipulation includes movig demand response incentives into the power costs and
9 custom effciency incentives into a regulatory asset account. Doesn't this create enough
10 headroom in the energy effciency budget between expected collections and expected expenses
11 to suffciently support Idaho Power's programs?
12 A. While these changes do relieve some of the pressure on the energy effciency budget, the
13 Conservation Parties believe several factors will quickly and appropriately consume any
14 headroom in the energy effciency budget. Below we describe our specific analysis, but first a
15 simple analogy for our concerns might be helpfuL. Imagine DSM funding as a pie. This pie feeds
16 the suite ofDSM programs, both energy effciency and demand response, as well as other
17 expenses like marketing, evaluation, measurement, and verification. Currently this pie consists
18 of a single slice, the DSM tariff rider. When the Commission increased the rider to 4.75% the
19 staff
((recognized, however, that the proposed increase may be insuffcient to both fund on-going
20 DSM expenses and recover the current Rider balance deficit."24
21 The stipulation does create a second slice by collecting certain expenses through rates
22 thereby enlarging the DSM funding pie. But the demand for DSM investments continues to
23 grow as Idaho Power follows the Commission's directive to pursue all cost effective energy
22 Order No. 30184 at 8. IPC-E-09-05 (May 29,2009).
23 Order No. 30506 at 5. IPC-E-08-03 (May 30,2008).
24 Staff Comments at 5, IPC-E-09-05.
Hirsh, Di 15
Conservation Parties
1 effciency and meet the Staff and other parties' expectations to increase marketing, expand
2 residential programs, improve recordkeeping and increase evaluation, measurement and
3 verification. The single slice of the DSM rider funding is no longer suffcient. After considering
4 all of the factors, we believe the need for DSM program funding justifies a fully funded pie with a
5 reasonable amount of headroom for growth.
6 The tables below quantify our concerns. Using round numbers, in 2010 the DSM
7 expenses in Idaho were $42.4 milion.25 Table 1 shows the increase in DSM rider generated
8 revenues from 2010 actuals to the forecast for 2012 - the original slice of the pie at $41 milion.
9 Table 2 shows the total level ofDSM funding including the new slice of the pie at $57 milion.
Revenue
DSM Tariff Rider
DSM Collections
Hoku Block 1 DSM
Total Rider Funding
Table 1: Rider Fundig
2010
$812,166,191
4.75%
$38,577,894
$38,577,894
Proposed
$845,800,709
4.75%
$40,175,534
$1,149,706
$41,325,240
Table 2:
DSMFundig
Demand Response Incentives
Custom Effciency Incentives
Total DSM Funding in Rates
DSM Rider Funding
Total DSM funding
$11,252,265
$5,193,650
$16,445,915
$41,325,240
$57,771,155
10 Taken alone these tables shows the overall pie for DSM funding is larger. But that is only
11 part of the story. The more important part is to compare funding with projected DSM
12 investments. Table 3 tells the rest. Removing the costs for demand response and custom
13 effciency incentives of $16.4 milion leaves $26 milion in expenses. In addition, ratepayers owe
14 the Company $8 milion in prudently incurred expenses from 2010. Because the Commission
15 has already determined these are prudently incurred expenses, the Conservation Parties believe
252010 DSM Report
at 128.
Hirsh, Di 16
Conservation Parties
1 Idaho Power has the right to collect this amount in a single year. Combined, projected expenses
2 to maintain DSM activities at 2010 levels and return the back balance brings the needed funding
3 for 2012 to $34 milion. Remember, this is the funding necessary to maintain energy effciency
4 acquisitions and EM&V activities at 2010 levels. Any growth requires more money.
5
6 Table 3:
DSM Exenses
Idaho Rider Funded DSM Programs 2010
Remove DSM Expenses Collected Rates in 2012
Remaining Energy Effciency Only Expense
Prudent DSM Back Balance as of August 2011
Funding Needed in 2012 to Maintain 2010 Program
Levels and Recover Back Balance
$42,479,692
$( 16,445,915)
$26,033,777
$8,000,000
$34,033,777
7
8
9
10
11 The important measure of whether the energy effciency rider will provide suffcient
12 funding is comparing the projected rider revenue in 2012 with the forecast of program expenses.
13 Table 1 shows the projected revenue is $41 milion. Table 3 shows that to maintain 2010
14 program activities requires $34 milion. This creates headroom for growth of $7 milion.
15 Growth will come in several areas including acquiring additional energy savings as
16 identified in the 2009 DSM Potential Study and the 2011 IRP, as well as responding to the Staff
17 and other parties' requests for increased marketing, recordkeeping, and EM&V. The
18 Commission has steadfastly instructed Idaho Power to acquire all cost effective DSM.26 PUC staff
19 and others have repeatedly admonished the Company to increase its marketing and EM&V
20 efforts.27 These efforts are not free.
26 Order No. 32331 at 10, IPC-E-ll-05 (August 18,2011); Order No. 32113 at 8, IPC-E-1O-09
(November 16, 201O)(citing Order No. 29784 IPC-E-04-29 (May 13, 2005), Order No. 29952,
RMP-E-05-1O)(January 12, 2006)(authorizing RMP to initiate DSM programs and cost
recovery) ).
27 Order No. 32113 at 9, IPC-E-1O-09 (November 16,2010); Staff Comments at 6-7, ICIP
Comments at 14-15, (September 13,2010); Order No. 32331 at 4-5, IPC-E-ll-05 (August 18,
2011); Staff Comments at 6-8, ICIP Comments at 8-9, IPC-E-ll-05 (July 18, 2011).
Hirsh, Di 17
Conservation Parties
1 Just increasing spending on EM&V to meet the expressed expectations of Staff and others
2 will increase the pressure on the DSM budget. Currently Idaho Power spends $698,890 on
3 accounting and analysis, which is less than 2% of the DSM budget.28 Other utilties spend 3-5%,
4 which for Idaho Power is $1.27 milion - $2.1 milion.29 It simply is unfair to ask the Company
5 to invest more in EM&V and then refuse to provide suffcient funding to support this
6 investment.
7 As stated earlier in my testimony, Idaho Power current DSM program achievements are
8 laudable, but not suffcient to capture all the economic potential energy savings available in the
9 servce territory. Achieving just 30% of the 945 GWH of economic potential identified in the
10 2009 DSM Potential Study, 283.5 GWh or roughly 2% of 2010 sales, is a reasonable target for
11 future years.30 In 2010, Idaho Power acquired 178.2 Gwh, or 1.32% of sales. The 2011 IRP
12 projects annual load growth of 1.4% and peak growth of 1.8%.3l Growing to 2.0% of sales is 59%
13 greater than present levels, which requires energy effciency spending to increase by roughly $8
14 milion. This alone swallows the entire headroom generated by a 4.75% rider. Energy effciency
15 acquisition levels should aspire to offset load growth and capture all cost effective savings. A
16 reduction in the level of energy effciency funding puts these efforts in jeopardy and will result in
17 higher costs in the future.
18
19 Q. Does the 2011 Idaho Power Integrated Resource Plan show increased program growt
20 despite reduced avoided costs?
282010 DSM Report at 128 Appendix 2.29Schiler, Steve, Energy Effciency Evaluation, Measurement and Verification, Issues and
Opportunities, at 41 (January 4,2011); (Idaho Power DSM spending of $42.479,695*3% =
$1,274,390.76; $42.479,695*5% = $2,123,984.60)30 Based on 2010 kilowatt hour sales of 13,492 GWh used in the 2011 PCA, IPC- E-II-06.
3l 2011 IRP at 62, table 6.2 (Average) and p. 61, table 6.1 (Peak).
Hirsh, Di 18
Conservation Parties
1 A. Yes. Idaho Power is on the path to increase energy savings. Current programs have grown at
2 roughly 38% per year from 2006-2010.32 The 2011 IRP plans for existing programs to expand by
3 122,640,000 kiowatt hours and new energy effciency acquisitions of 26,280,000 kilowatt hours
4 annually.33 Even using the 2011 IRP costs, current and future DSM programs remain cost
5 effective, with an overal total resource cost ratio of 2.3 and utilty cost ratio of 4.4.34 So even with
6 reduced avoided costs Idaho Power has identified and analyzed cost effective energy effciency
7 potential that will require increased program funding compared to 2010 levels.
8
9 Q. Are there other identied programs that might fuer increase cost effective energy
10 effciency and requie increased program fuding?
11 A. Yes. The Commission recently approved an agreement between Idaho Power and the Offce
12 of Energy Resources concerning the K-12 Energy Effciency Project.35 Under this agreement,
13 OER may be eligible to collect effciency incentives through Idaho Power programs. The Staff
14 commented that under this agreement ('the additional $9.6 milion potentially invested by OER
15 through the three eligible DSM programs will exceed previous program demand forecasts and
16 therefore significantly increase the number of projects incented" and consequently the need for
17 additional program funding.36 While some of these projects may qualify for the Custom
18 Effciency program, and the incentives will come from rates, most projects are likely to increase
19 the pressure on existing DSM rider-funded budgets.
20
322010 DSM Report at p. 4 figure 2.332011 IRP at 38 - 41; See also 2010 DSM report at 12; 2011 IRP Appendix C at 72, table DSM 5
(existing energy effciency portfolio) and 74, table DSM -10 (new energy effciency portfolio).342011 IRP at 39, table 4.2.
35 Order No 32368, IPC-E-1l-16 (September 29,2011).
36 Staff Comments at 3, iPC- E-11-16 (September 20, 2011).
Hirsh, Di 19
Conservation Parties
1 Q. Wil partes and the Commission have the opportunity to review these expanded DSM
2 programs in the future?
3 A. Yes. Maintaining adequate funding today does not foreclose parties from reviewing the
4 prudency of Company spending tomorrow. Instead, maintaining the rider funding level now
5 provides the opportunity to meet expectations for increased administrative costs and acquire
6 savings from existing programs and clearly identified new measures that are preliminarily shown
7 to be cost effective.
8
9 Q. In the past Idaho Power has spent more on DSM programs than the rider supplied in
10 fudig. Why not continue this cycle of accumulating back balances and increasing fuding
11 later?
12 A. It is true the Commission has regularly allowed Idaho Power to collect money spent on energy
13 effciency when program expenses exceed program funding. In fact, the Commission recently
14 specifically rejected the argument of the Industrial Customers ofIdaho Power that the utilty
15 should cap DSM programs at the level supported by current rider funding.37 But the
16 Conservation Parties believe that providing adequate funding with reasonable room for growth
17 reaffrms the directive to acquire all cost effective energy effciency. Further, constant changes to
18 the energy effciency rider level are confusing to the public and trade alles providing effciency
19 servces and programs. Finally, Idaho Power is currently using rider funding to recover an
20 approved back balance. Until they do so, we believe the Commission should support adequate
21 funding to prevent the back balance from continuing to grow and allow for timely recovery of
22 new programs and expectations for increased marketing, record keeping, and EM&V.
23 II
24 II
37 Order No. 32245 at 5, IPC-E-1O-27 (May 17, 2011)
Hirsh, Di 20
Conservation Parties
1 Q. Please summarize your recommendations.
2 A. The Conservation Parties believe the proposed Stipulation should be approved. In addition,
3 we believe the best method to evaluate fuding levels for energy effciency programs is to
4 compare the potential for acquiring all cost effective effciency with the fuds necessary to
5 achieve this full potentiaL. The Commission should adopt the low- income weatherization
6 program funding recommended by the CAP AI Agencies. Also, the Commission should maintain
7 the current energy effciency rider leveL.
8
9 Q. Does this conclude your testiony?
10 A. Yes it does.
Hirsh, Di 21
Conservation Parties
Benjamin Otto (ISB No. 8292)
710 N 6th Street
Boise,ID 83701
Ph: [phone] x 12
Fax: [phone]
botto~idahoconservation.org
Attorney for the Idaho Conservation League, the NW Energy Coalition, and the Snake River
Aliance
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF IDAHO POWER )
COMPAN FOR AUTHORITY TO )
INCREASE ITS RATES AND CHARGES )
FOR ELECTRIC SERVICE TO ITS )
CUSTOMERS IN THE STATE OF )IDAHO. )
CASE NO. IPC-E-ll-08
DIRECT TESTIMONY
OF
NANCY HIRSH
EXHIBIT 801
October 7, 201 i
Exhibit 801
Di, Hirsh
Conservation Pares
October 7, 2011
Idaho Power Company's Response to Communty Acton Parership Association ofIdaho's
First Production Requests to Idao Power.
REQUEST NO.5: Based on the number of Residential customers used for the
test year and the Company's current funding level of its WAQC program, please state
the W AQC per capita funding level for Idaho Power.
RESPONSE TO REQUEST NO.5: The total average system Residential class
customer count from the test year is 410,981. Using the 2010 actual WAQC program
expenditures included in the 2011 Test Year of$I,321,132, the average per capita
expenditure for WAQC is $3.21.
The response to this Request was prepared by Darlene Nemnich, Senior Pricing
Analyst, Idaho Power Company, in consultation with Jason B. Wiliams, Corporate
Counsel, Idaho Power Company.
Exhibit 801
Di, Hirsh
Conservation Parties
October 7, 2011
CERTIFICATE OF SERVICE
I hereby certify that on this 7th day of October, 2011 I delivered true and correct copies of
the foregoing DIRECT TESTIMONY OF NANCY HIRSH to the following via the method of
servce noted:
Hand delivery:
Jean Jewell
Commission Secretary (Original, nine copies, and one CD provided)
Idaho Public Utilties Commission
427 W. Washington St.
Boise, ID 83702-5983
Electronic Mail Only:
Idaho Power
Lisa D. Nordstrom
Donovan E. Walker
Jason B. Wiliams
Idaho Power Company
1221 West Idaho Street
Boise, Idaho 83707-0070
lnordstrom~idahopower.com
dwalker~idahopower.com
lwillams~idahopower.com
Dr. Don Reading
6070 Hil Road
Boise, Idaho 83703
dreading~mindspring.com
GregW. Said
V.P. Regulatory Affairs
Idaho power Company
P.O. Box 70
Boise ID 83707-0070
gsaid~idahopower.com
IIPA
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
elo~racinelaw.net
Anthony Yankel
29814 Lake Road
Bay Vilage, Ohio 44140
ton~ankel.net
CAPAI
Brad M. Purdy
Attorney At Law
2019 N. 17th st
Boise, Id 83702
bmpurdy~hotmail.com
DOE
Steven A. Porter
Assistant General Counsel
Electricity and Fossil Energy
United States Department of Energy
1000 Independence Ave. SW
Washington, DC 20585
Steven.porter~hq.doe.gov
ICIP
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
515 N. 27th Street
Boise, ID 83702
peter~richardsonandoleary.com
greg~richardsonandoleary.com
Arthur Perry Bruder
Attorney -Advisor
United States Department of Energy
1000 Independence Ave. SW
Washington, DC 20585
Arhur.bruder~hq.doe.gov
Mr. Dwight Etheridge
Exeter Associates
5565 Sterrett Place, Suite 310
Columbia, MD 21044
detheridge~exeterassociates.com
Kroger
John R. Hammond, Jr.
Batt Fisher Pusch & Alderman, LLP
U.S. Bank Plaza, 5th Floor
10 1 S. Capitol Boulevard, Suite 500
P.O. Box 1308
Boise, ID 83701
E-mail: jrh~battfisher.com
Kurt J. Boehm
Boehm, Kurtz & Lowr
36 E. Seventh St., Suite 1510
Cincinnati, OH 45202
KBoehm~BKLlawfrm.com
Micron
Mar V. York, ISB No. 5020
Holland & Hart LLP
Suite 1400, U.S. Bank Plaza
101 South Capitol Boulevard
P.O. Box 2527
Boise, Idaho 83701-2527
Myork~hollandhart.com
Thorvald A. Nelson
Mark A. Davidson
Holland & Hart LLP
6800 South Fiddlers Green Circle, Ste. 500
Greenwood Vilage, CO 80111
Tnelson~hollandhart.com
Madavidson~hollandhart.com
Snake River Alliance
Ken Miler, Clean Energy Program Director
Snake River Alliance
P.O. Box 1731
Boise, Idaho 83701
Kmiler~snakeriverallance.org
NW Energy Coalition
Nancy Hirsh, Policy Director
NW Energy Coalition
811 First Avenue, Suite 305
Seatte, Washington 98104
Nan~nwenergy.org
Hoku Materials, Inc.
Dean J. Miler
McDEVITT & MILLER LLP
420 East Bannock
Boise, Idaho 83702
Joe~mcdevitt - miler. com
Heather~mcdevitt -miler .com
Scott Paul, CEO
Hoku Materials, Inc.
One HokuWay
Pocatello, Idaho 83204
Spaul~hokucorp.com
lÅ z:
Benjamin J. Otto