20130517Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: KARL KLEIN
DEPUTY ATTORNEY GENERAL

DATE: MAY 7, 2013

SUBJECT: IDAHO POWER’S APPLICATION TO DETERMINE PRUDENCY OF
2012 DSM EXPENDITURES, CASE NO. IPC-E-13-08

On April 3, 2013, Idaho Power Company applied for an Order establishing that it
prudently incurred $46,356,160 in demand-side management (“DSM”) expenses in 2012,
including $25,857,603 in Idaho Energy Efficiency Rider expenses, $6,019,109 in Custom
Efficiency program incentive expenses, and $14,479,447 of demand response program incentive
expenses. Application at 1. The Company submitted a copy of its DSM 2012 Annual Report
and testimony in support of its Application. The Company asks the Commission to process the
Application under Modified Procedure. Id. at 9.
THE APPLICATION
The Company says it has implemented or manages wide-ranging opportunities for all
customer classes to participate in DSM activities, consistent with the Commission’s direction
that the Company pursue DSM programs to promote energy efficiency. The Company says it
uses DSM programs to: (1) provide customers with programs and information to help them
manage their energy usage, and (2) achieve prudent cost-effective energy efficiency and demand
response resources to meet the Company’s electrical system’s energy and demand needs. Idaho
Power consults with an Energy Efficiency Advisory Group that provides a broad range of
recommendations, including input on new program proposals, modifications to existing
programs, and overall expenditures of DSM funds. Id. at 2.
The Company says it has progressively increased the breadth and funding level of its
DSM activities since the Rider was implemented in 2002. The Company also notes that the
DECISION MEMORANDUM 2
Commission found the Company prudently incurred cost-effective, DSM-related Rider expenses
of $29 million from 2002-2007, $50.7 million from 2008 and 2009, $41.9 million in 2010, and
$42.5 million in 2011. Id. at 2-3, citing Order Nos. 30740, 31039, 32113, 32331, 32667 and
32690.
In the latter two Orders, the Commission also declined to decide the reasonableness
of the Company’s increase in Rider-funded, labor-related expense included in the 2011 DSM
expenses until the Company provides evidence by which to better assess the reasonableness of
those expenses. In this Application, the Company says it has included the evidence requested by
the Commission. Id. at 3 and 8. In light of this evidence, the Company says this Application’s
$25,857,603 in Idaho Rider expenses include the previously excluded 2011 increase in Rider-
funded labor-related expenses. This Application also quantifies the corresponding amount of
increase in 2012 Rider-funded labor-related expenses, as measured from the 2012 labor expense
level. Id. at 9.
The Application says that in 2012, the Company continued its DSM programs to
increase participation and facilitate energy savings. The Company’s DSM programs included
energy efficiency programs, demand response programs, market transformation programs, and
educational initiatives. The Company says 13 of its 15 energy efficiency programs in Idaho were
cost-effective; the Weatherization Assistance for Qualified Customers and the Weatherization
Solutions for Eligible Customers programs were not cost-effective. The Company says all three
of its demand response programs are cost-effective from a long-term perspective, but that the
A/C Cool Credit program was not cost-effective in 2012. Id. at 3-4. The Company says its
efficiency activities produced 170,228 MWh in energy savings in 2012. Id.at 3.
The Company attached its DSM 2012 Annual Report to the Application. The DSM
Report discusses the cost-effectiveness of the Company’s DSM programs and energy savings
measures, as well as financial information separated by expense category and jurisdiction. Id. at
5. The Company examines a program’s cost-effectiveness using the following four tests: (1) the
total resource cost test (“TRC”); (2) the utility cost test (“UCT”); (3) the participant cost test
(“PCT”); and (4) the ratepayer impact measure (“RIM”). Id.1 The DSM Report also describes
1 The four tests compare a program’s cost-effectiveness from different perspectives. In summary, the TRC
compares program administrator and customer costs to utility resource savings, and assesses whether the total cost
of energy in a utility’s service territory will decrease. The UCT compares program administrator costs to supply-
side resource costs, and assesses whether utility bills will increase. The PCT compares the costs and benefits of the
DECISION MEMORANDUM 3
the Company’s plans to evaluate its DSM programs, and contains copies of completed evaluation
reports and research reports. Id. The DSM Report also describes each DSM program, including
2012 activities, along with customer satisfaction and process, impact, and market effect
evaluations. Id. at 6.
The Company says independent, third-party consultants provide impact and process
evaluations to verify that program specifications are met, recommend improvements to the
programs, and validate program-related energy savings. Id. at 8. In 2012, impact evaluations
were completed on six programs and a process evaluation was completed on one program.
Third-party consultants researched cycling strategies for the A/C Cool Credit program and
evaluated measure assumptions for the Irrigation Efficiency Rewards program. Additionally,
Idaho Power analyzed the FlexPeak Management and Irrigation Peak Rewards programs and has
submitted corresponding reports with the Application. Id.
The Company says that when it calculated the prudently incurred expenses referenced
in the Application, it adjusted some of the amounts set forth in the DSM Report. Specifically,
the Company included an $82,856 adjustment for the disallowance of 2011 expenses in the A/C
Cool Credit program; accounting corrections that principally reflect incentives paid to customers
from the Idaho Rider that should have been charged to the Oregon Rider; an adjustment
deferring a determination of prudence for some expenses incurred in 2012; and an exclusion of
incentive payments paid to program participants that did not meet program requirements.
Additionally, $3,512 of the incentives paid to customers from the Idaho Rider, which should
have been charged to the Oregon Rider, occurred in 2011. The Company asks the Commission
to reflect this adjustment in its records as necessary. Id. at 7.
STAFF RECOMMENDATION
The Company requests that its Application be processed by Modified Procedure.
Staff recommends that Idaho Power’s Application be processed by Modified Procedure with a
90-day comment period, followed by a 14-day reply comment period.

customer installing the measure, and assesses whether program participants will benefit over the measure’s life. The
RIM measures the impact to customer bills or rates due to changes in utility revenues and operating costs caused by
an energy efficiency program.
DECISION MEMORANDUM 4
COMMISSION DECISION
Should the Commission issue a Notice of Application and Notice of Modified
Procedure providing for a 90-day comment period, followed by a 14-day reply comment period?

M:IPC-E-13-08_kk