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HomeMy WebLinkAbout20120319Reply Comments.pdfRECE~I\fi:n. ...l'S '1.... Nancy Hirsh NW Energy Coalition 811 1st Ave. Suite 305 Seattle, W A 98104 2UIl MåR 19 AM 8= 1+1 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF ) IDAHO POWER COMPANY FOR AUTHORITY ) TO CONVERT SCHEDULE 54 - FIXED COST ) ADJUSTMENT - FROM A PILOT SCHEDULE ) TO AN ONGOING PERMANENT SCHEDULE ) CASE NO. IPC-E-11-19 REPL Y COMMENTS OF THE NW ENERGY COALITION The NW Energy Coalition appreciates the opportunity to fie these reply comments in this proceeding. We have been engaged with the Commssion, staff and staeholders in the discussion around decoupling and a fixed cost adjustment mechanism since 2004. These reply comments wil address issues raised in comments submitted by Commission Staff, Idaho Conservation League (ICL) and Snake River Allance (SRA). We agree with the comments fied by Commission staff, ICL and SRA and the original application of the Company that the Fixed Cost Adjustment (FCA) addresses a very specific problem - recovery of fixed costs is linked to sale of electricity, encouraging increased use and discouraging investments in energy efficiency or any other program (like distributed generation) that reduces electricity throughput. By calculating the per-customer revenues needed to cover specific fixed costs, the FCA removes the disincentive for demand-side investments that help customers use less electricity. The FCA also helps ensure the Company's timely recovery of the fixed system costs regardless of sales volumes. COMMENTS OF COMMISSION STAFF Commission Staff's Concerns with the FCA 1) The mechanism captures sales reductions beyond those driven by energy effciency. This is true, but by design. From the beginning, everyone appreciated the difficulty of determining exactly which factors (eg. economic conditions, energy effciency) and by how much they impact changes in sales. Adding to the complications is the challenge of fully quantifying all the impacts of Company efficiency efforts beyond specific program savings. But differentiating energy effciency-driven savings from economy-driven demand reductions is not critical when the goals are to reduce the incentive to sell more, to reduce the disincentive to save more and to protect the utility and it's customers from the risks associated with rising and fallng sales volumes. The page 4 table showing savings vs. reduced consumption and the Staff conclusion provide only part of the picture. Staffs argument that 50% recovery gives plenty of headroom given that the past few years of energy effciency efforts have accounted for a maximum of 43% ofload reduction in any given year. We are encouraged that staff included energy code and market transformation savings in the savings calculation. However, the calculations don't fully account for the broad aray of Company education and marketing efforts that may significantly drive energy effciency investments. We acknowledge that these efforts are hard to quantify, but the value surely is greater than zero and could be more than 7%. Whether or not usage reductions due to broad conservation messaging or economy-related belt-tightening are linked to direct paricipation in a Company program the revenue impact is the same. Since Staff attributes a percentage of sales reductions to energy efficiency and uses that calculation to establish its proposed 50% solution -- its approach undervalues the importance of freeing the Company to aggressively market and deploy its programs to increase savings. Furthermore, the significant sales reductions detailed in the page 4 table highlight the unusual utilty load circumstances of the past two-three years. The FCA is designed to ensure recovery of approved fixed costs and to avoid both over-recovery durng times of good sales growth and under-recovery in times - such as the last few years -- of dramatic sales decline. The Commission should assume that once the economy stabilzes, loads wil increase and decrease on a more measured basis and the Company's ever increasing energy efficiency efforts wil comprise a larger percentage of the consumption reductions. 2) Staff characterize the Company's 2007 rebate to customers as a penalty on the Company. On page 6, Staff refer back to comments they filed in Case No. IPC-E-09-28 expressing concern that the Company had to pay customers over $2 milion when energy use increased, thus penalizing the Company. It is important to remember that the Company paid the rebate to customers because its fixed cost revenues exceeded those approved by the Commission. It is not clear to us why Staff call this a penalty. The Coalition supports an adjustment NW ENERGY COALITION REPL Y COMMENTS 2 MARCH 15,2012 mechanism that pivots from rebate to surcharge based on the approved fixed cost marker set by the Commission in a rate case. The curent pilot FCA provides this symmetry - the utilty is assured revenues to cover costs and customers are protected from over-recovery of revenues. Staff state, on page 10 of their comments, that their research has shown that a broadly applied FCA can provide "found" revenue unelated to energy efficiency activities. These "found" revenues arse when sales decline and the FCA increases rates to cover costs that remain unchanged from those set in the most recent rate case. Not recovering this revenue in an anual adjustment most likely means that these "found" revenues wil be recovered in the next formal rate case. The oft-quoted book by the Regulatory Assistace Project explains that no matter what drives the sales changes, the previously authorized revenue is collected:. "With full decoupling, all changes in units of consumption, regardless of cause, are translated into price changes to maintain the allowed revenue leveL. Thus, no matter the amount of consumption, the utilty and the consumers as a whole wil receive and pay the allowed revenue. Neither the company nor its customers are exposed to weather or economic risks in this case." Revenue Regulation and Decoupling, Regulatory Assistance Project, June 2011, page 35. Staff Proposal for Changes to the FCA We appreciate the Staff s commitment to maintain a simple mechanism and to avoid a lost margin recovery approach that relies heavily on savings calculations. While we agree that the FCA may not be perfect, neither is traditional regulation that gives conficting signals and incentives to the utilty. The Staff have recommended an unecessar change in the mechanism that shifts the risks of sales changes back to both the utility and its customers. In essence Staff are proposing to go from a full decoupling mechanism to a parial decoupling mechansm that provides the utilty parial recovery of reduced revenues. Yet the Staff have not made the case that with full decoupling the recovery of revenues has resulted in or come close to going over the 3% rate adjustment cap imposed by the Commission. With FCA recovery set at 50%, the mechanism no longer eliminates the throughput incentive nor does it reduce customers and utility risks from fluctuating sales. COMMENTS OF IDAHO CONSERVATION LEAGUE ICL lays out a clear and succinct case for the benefits of the FCA from both the consumer and environmental perspectives. In particular, the comments on pages 12-13 supporting full NW ENERGY COALITION REPLY COMMENTS 3 MARCH 15,2012 weather-normalized decoupling, and not excluding economic factors, make a strong case for balancing the risks faced by both the utility and customers when revenues are recovered with no regard for the costs of serving customers. This argument clearly rebuts Staffs call for a change to parial decoupling and limiting the fixed costs recovery. Whle the Coalition supports most of I CL' s arguments for making the FCA permanent, we want to be clear that the Coalition takes no position on ICL's discussion of changing the debt-to-equity ratio as a means of addressing reduced risk borne by the Company as a result of the curent FCA mechanism. PUBLIC COMMENTS OF SNAKE RIVER ALLIANCE In the public comments submitted by the Snake River Allance (SRA) they note the record of improvement in Idaho Power's energy efficiency programs over the past five years. In fact, the steady increase in savings achieved by the Company is disputed by no par in this proceeding; we concur with this finding of fact as well. We agree with SRA's comments that many factors have influenced the scale and scope of the Company's energy effciency programs in reèent years. And we agree with SRA' s comments on page 4 that adoption of the FCA pilot in 2007 was a major, though not the only, factor in the Company's pursuit of an increased tarff rider and the significant increase in its energy savings since 2008. CONCLUSION The ICL and SRA submissions state a compellng case for making the FCA a permanent schedule and maintaining the basic structure of the mechanism. The Coalition is not persuaded by Staff arguments for allowing only a 50% recovery of revenue shortfalls or 50% return to customers of over-collections. Going from full decoupling to parial decoupling materially changes the mechanism and the rationales provided do not justify such a change. We agree with Company testimony and others' comments on FCA administration. In paricular, we support Staffs proposal to change how customer bils reflect the FCA. Consolidating all "anual adjustments" under one heading will provide more clarty to customers who seek more detail on what the "anual adjustment" includes. Since the FCA is primarily about cost recovery as a means of unleashing Company efforts to capture all cost-effective energy savings, rollng it into the energy efficiency services line item is inappropriate. In NW ENERGY COALITION REPLY COMMENTS 4 MARCH 15,2012 addition, we agree with all the comments submitted in this proceeding that eliminating the FCA- related energy efficiency filing is appropriate and warranted given the extensive DSM report filed anually. Respectfully submitted ths 15th day of March 2012. ~Nancy Hirsh Policy Director NW Energy Coalition NW ENERGY COALITION REPL Y COMMENTS 5 MARCH 15,2012 CERTIFICATE OF SERVICE I hereby certify that I have this 15th day of March 2012 served the foregoing REPLY COMMENTS OF THE NW ENERGY COALITION to the following via the method of service noted: Electronic Mail and Hard Copy: Jean Jewell Commission Secretar Idaho Public Utilities Commission 427 W. Washington St. Boise, ID 83702-5983 Electronic Mail: Jason B. Wiliams Lisa D. Nordstrom Michael 1. Y oungbood Zachary L. Harris Idaho Power Co. 1221 W. Idaho St. Boise, ID 83707 jwillamsßYidahopower.com InordstromßYidahopower.com myoungbloodßYidahopower.com ?h~nj~CidahQQower.com Thorvald A Nelson Frederick J Schmidt Brian T Hansen Mar V York Holland & Har LLP 6380 S. Fiddlers Green Cir Suite 500 Greenwood Vilage, CO 80111 tnelson~ollandhar.com fschmidtêhollandhar.com bhansenêhollandhar.com myorkêhollandhar.com lnbuchananêhollandhart.comBenjamin J. Otto Idaho Conservation League 710 N. 6th St. Boise, ID 83701 p..9JtQ.\f;.igrth9.S.QD..seivatioH,Qff Richard E. Malmgren Sr. Asst. General Counsel Micron Technology Inc. 800 S Federal Way Boise, ID 83716 remalmgrenêmicron.com NW ENERGY COALITION REPLY COMMENTS 6 MARCH 15,2012