20111116Higgens Rebuttal.pdf

BOEHM, KURTZ & lOWRY
ATIORNEYS AT lAW
36 EAST SEV STREET
SUITE 1510
CINCINNATI. OHIO 4S2Ô2
TELEPHONE [phone]
TELECOPIER [phone]
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Via Hand Delivery
November 16, 20 I I
Jean D. Jeweil, Secretary
Idaho Public Utilities Commission
P.O. Box 83720
472 W. Washington Street
Boise, Idaho 83720-0074
In re: Case No. IPC-E-ll-08
Dear Ms. JeweU:
Enclosed please find the original and (9) copies of the REBUTTAL TESTIMONY OF KEVINC.
HIGGINS on behalf of THE KROGER CO. d/b/a FRED MEYER AND SMITH'S FOOD AND DRUG to .be
filed in the above referenced matter. I also attach a CD containing same in .Word format.
Please place this document offile.
MLKkew
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
IN IDAHO )Case No. IPC-E-II-08
Rebuttal Testimony of Kevin C. Higgins
on behalf of
The Kroger Co.
November 16, 2011
REBUTTAL TESTIMONY OF KEVIN C. HIGGINS
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Please state your name and business address.
Kevin C. Higgins, 215 South State Street, Suite 200, Salt Lake City, Utah,
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Are you the same Kevin C. Higgins who pre-fied direct testimony in this case
on behalf of The Kroger Co. ("Kroger")?
Yes, I am.
What is the purpose of your rebuttal testimony?
My rebuttal testimony responds to the positions of other paries on the
issue of the appropriate level of the Energy Efficiency Rider, Schedule 91.
Specifically, I respond to proposals from the PUC Staff to reduce the Rider from
4.75% to 4.0% and the NW Energy Coalition, the Idaho Conservation League,
and the Snake River Allance - collectively the Conservation Paries - to maintain
the Rider at 4.75%.
Please summarize your rebuttal testimony.
In my direct testimony I recommend that the Energy Efficiency Rider be
reduced from 4.75% to 3.40%. I continue to recommend adoption of this
proposaL. My proposal wil increase the funding available for energy efficiency
programs by $6.35 million relative to current funding levels, after taking into
account the fact that $16.4 milion in Demand Response and Custom Efficiency
Incentives program costs are in the process of being shifted from energy
efficiency funding into base rates, as pointed out by Staff witness Don English. I
HIGGINS /1
believe my proposal strikes the appropriate balance between energy efficiency
fuding and customer rate impacts.
PUC Staff proposes to reduce the Energy Effciency Rider to 4.0%. When
taken in combination with the 4.1 % rate increase proposed in the Stipulation,
Staff s proposal increases net funding for energy efficiency by $16.6 milion
relative to 2010 levels. I recognize and appreciate that Staff is taking into account
the transfer of major program funding from the Energy Efficiency Rider into base
rates and is attempting strike a balance between energy efficiency funding and
customer rate impacts. However, in my view, Staffs proposal is stil too heavily
weighted toward increased program funding.
The Conservation Paries recommend that the Energy Efficiency Rider
remain at its curent level of 4.75%. The level of energy efficiency fuding
recommended by the Conservation Parties represents an increase of
approximately $23 millon relative to 2010 levels. In my view, this is
overreaching and should be rejected by the Commission.
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What does the PUC Staff recommend with respect to the level of the Energy
Effciency Rider?
PUC Staff witness Donn English recommends that the Energy Effciency
Rider be reduced from 4.75% to 4.0%. Mr. English points out two major
considerations to support his recommendation: (1) the shifting of $11.25 milion
in demand response program costs from energy efficiency funding into base rates
pursuant to the proposed Stipulation; and (2) the establishment of a regulatory
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asset for Custom Effciency Incentives pursuant to Order No. 32245 that removes
$5.2 milion from energy efficiency cost recovery. When taken in combination
with the 4.1 % rate increase proposed in the Stipulation, Mr. English points out
that Staff s proposal actually increases net fuding for energy efficiency by $16.6
millon relative to 20 i 0 levels. This would be a 92% increase in available energy
effciency funds after moving the incentive payments for Demand Response
programs and incentives paid under the Custom Effciency program from DSM
Rider funding into base rates.
What is your response to Staff's proposal?
I appreciate that Staff is taking into account the transfer of major program
fuding from the Energy Effciency Rider into base rates and is attempting strke
a balance between energy efficiency fuding and customer rate impacts.
However, in my view, Staffs proposal is stil too heavily weighted toward
increased funding. A 92% increase in available energy efficiency fuds is too
steep a ramp-up when customers are also facing a rate increase. Greater weight
should be given to customer rate impacts.
As I stated in my direct testimony, my proposal to reset the Energy
Effciency Rider to 3.40% would increase the funding available for energy
efficiency programs by $1.2 millon when considering the shift in $1 1.25 millon
in demand response program costs from energy efficiency funding into base rates.
But as Mr. English points out, another $5.2 million is being shifted into base rates
as a result of the establishment of a regulatory asset for Customer Effciency
Incentives pursuant to Order No. 32245. When this additional headroom is taken
into account, my proposal to reset the Energy Effciency Rider to 3.40% would
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actually increase the funding available for energy efficiency programs by $6.35
milion. In my opinion, this strengthens the case for a reduction in the Rider to
3.4%.
5 Response to Conservation Parties
What do the Conservation Parties recommend with respect to the level of the
Energy Effciency Rider?
As presented in the direct testimony of Nancy Hirsch, the Conservation
Parties recommend that the Energy Efficiency Rider remain at its current level of
4.75%.
What is the Conservation Parties' rationale for retaining this level of charges
in light of the headroom that is created by the shifting of $16.4 milion of
current funding into base rates?
Ms. Hirsch argues that the increased revenue available should be used to:
(l) pay down in one year the $8 milion balance owed by customers due to prior
period spending in excess of revenues collected; (2) continue the level of program
spending that led to the $8 milion balance owing; and (3) expand program
spending beyond this level by an additional $7 millon per year.
Do you believe this level of program expansion is reasonable?
No. I do not agree that it is reasonable to be expanding the funding to the
degree advocated by the Conservation Parties. As I discussed above, a 3.4%
Rider would increase energy effciency fuding by $6.35 million per year. At a
Rider of 4.0%, Staff demonstrates that its proposal would increase funding by
$16.6 million over 2010 levels. Maintaining the Rider at 4.75% would add
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another $6.5 milion per year to Staff s calculation. Thus, the level of energy
effciency funding recommended by Ms. Hirsch represents an increase of
approximately $23 milion relative to 2010 levels. In my view, this is
overreaching.
Why shouldn't energy effciency funding continue to be expanded so long as
it is cost effective?
Even if energy efficiency is cost-effective it is stil important to consider
the importance of short-term rate impacts. When energy efficiency programs pass
the standard tests used to determine cost effectiveness it may be tempting to
become complacent about the potential short-term rate impacts of the energy
efficiency investments. So long as an investment is cost effective, the argument
goes, society is better off if the investment is made, so we should strive to make
the incremental investment capital available. What sometimes gets overlooked in
this situation is that energy efficiency cost-effectiveness is measured (properly)
over the life of the investment by comparing it to the cost of supply-side
alternatives. Yet, the costs of the supply-side alternatives with which energy
efficiency competes are recovered from customers in a very different manner than
the cost of effciency investments: supply side costs are recovered from customers
over the life of the investment, e.g., 35 years, smoothing out the rate impact over
time, whereas efficiency investment costs typically are recovered in full from
customers by the utility upfront, i.e., expensed in a single year. This mismatch
between cost recovery periods of supply-side and demand-side resources explains,
in part, why energy effciency that is cost effective can nevertheless cause
unreasonable rate impacts in certain situations. Add to this the fact that utility
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energy efficiency programs are fundamentally structured as cross subsidies
among individual customers, and we come to the obvious (but sometimes
overlooked) conclusion that short-term rate impacts do matter.
What is your recommendation to the Commission with respect to the
proposal by the Conservation Parties to continue the Energy Efficiency Rider
at its current level of 4.75%?
I recommend that the proposal be rejected in light of the additional
headroom that is now available.
Does this conclude your rebuttal testimony?
Yes, it does.
HIGGINS / 6
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC SERVICE
IN IDAHO
)
)
)
)
)
Case No. IPC-E-II-08
AFFIDAVIT OF KEVIN C. HIGGINSSTATE OF UTAH )
)COUNTY OF SALT LAKE )
Kevin C. Higgins, being first duly sworn, deposes and states that:
1. He is a Principal with Energy Strategies, L.L.C., in Salt Lake City, Utah;
2. He is the witness who sponsors the accompanying testimony entitled "Rebuttal
Testimony of Kevin C. Higgins;"
3. Said testimony was prepared by him and under his direction and supervision;
4. If inquiries were made as to the facts in said testimony he would respond as
therein set forth; and
5. The aforesaid testimony is true and correct to the best of his knowledge,
information and belief.
KeVi~ig~1i~2,,;¡\,
Subscribed and sworn to or affirmed before me this 15th day of October, 201 i, by Kevin
C. Higgins.
Jj(L.)eO- yt~
Notary Public
My Commission Expires: ;¿. ;¿Ð/ .5
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I. ..'Ç) Febar07, 2015 I'" State of Utah /...._--------_..
CERTIFICATE OF SERVICE
I hereby certify that true copy ofthe foregoing was served by electronic mail (when available) and regular
u.s. mail, unless otherwise noted, this 16TH day of November, 2011 t tb 11 ing:
IDAHO.POWER COMPANY
Lisa D. Nordstrom
Donovan E. Walker
Jason B. Williams
Idaho Power Company
1221 W. Idaho 81. (83702)
Boise, ID 83707-0070
E-mail: In
dwal
GregoryW. Said
Vice President, Regulatory Affairs
Idaho Power Company
122 i W. Idaho S1. (83702)
POBox 70
Boise, ID 83707-0070
E-mail: ahoower.com
COMMISSION STAFF:
Donald L. Howell, II
Karl Klein
Deputy Attorneys General
Idaho Public Utilities Commission
472 W, Washington (83702)
PO Box 83720
Boise, ID 83720-0074
E-mail: don.howeH(luc.idaho.gov
karl.klein(i4puc. idaho.göv
IDAHO IRRGATION PUMPERS
ASSOCIATION, INC:
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey, Chartered
20 I E. Center
PO Box 1391
Pocatello, ID 83204-139 I
E-mail: ela(ã1.racinelaw.net
G:\WORK\MlK\KR()",fR\!DMIO'JlC.f-. J I08\Commission leiter.doo,
Anthony Yanicel
29814 Lake Road
Bay Vilage,OH44140
E--mail: net
INDUSTRIAL CUSTOMERS OF IDAHO
POWER:
PeterJ. Richardson
Gregory M. Adams
Richa.rdson & O'Leary, PLLC
515 N.iihStreet, PO Box 7218
Boise, 10 837Q2
E..ma.iE'ete 'chardsøondoleiJcom
Don Reading
6070 Hil Road
Boise, ID 83703
E-mail:
THE UNITED STATES DEPARTMENT OF
ENERGY:
Arthur Perr Bruder
Attorney-Advisor
United States Department of Energy
1000 Independence Ave., SW
Washington, DC 20585
Email: Uf.
Dwight Etheridge
Exeter Associates, Inc.
5565 Sterrett Place, Suite 3 10
Columbia, MD 21044
Email:detheridgetlexeterassociates.com
Steven A Porter
AssÌstant General Counsel
Electricity and Fossil Energy
United State Department of Energy
E-mail: steven.porter(thg.doe.gov
..
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COMMUTY ACTION PARTNRSHIP
ASSOCIATION OF IDAHO:
Brad M. Purdy, Attorney at Law
2019 N. flth St.
Boise, ID 83702
E-mail:
MICRON TECHNOLOGY, INC:
Richard E. Ma.lmgren
Sr. Asst. General Counsel
MicronTechnology, Inc.
800 South Federal Way
Boise, ID 83716
E-mail:
MaryV. York
Thorvald A. Nelson
Mark A. Davidson
Holland. & Hart, LLP
6800 S. Fiddlers Gre.en Circle
Suite 500
Greenwood Vi
Email:
IDAHO CONSERV A nON LEAGUE:
Benjamin J. Otto
Idaho Conservation League
710 N. Sixth Street
PO Box 844
Boise, ID 83701
Email: .bottdgìdahoc()iiseryation..oQj;
SNAKE RIVER ALLIANCE:
Ken Miler
Snake River Alliance
PO Box 1731
Boise, ID 83701
Email: kmillerCà)snakeriverallianc.e.om
G:\WORK\MLK\KRiX;FR\lOAIIO\lPC.E ¡ i.08\Commissíon letter.docx