20130820Comments.pdf

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KARL T. KLETN
DEPUTY ATTORNEY GENERAL :i:_ iijl ,1": !,';i ';: 52
IDAHO PUBLIC UTILITIES COMMISSION
Po Box 83720 n^A Ar\nA " ,'-iit,'
l' ' ' .BOISE, IDAHO 83720-0074
[phone]
IDAHO BARNO.5156
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-59I8
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
oF IDAHO POWER COMPANY FOR A ) CASE NO. rPC-E,13-8
DETERMTNATTON OF 2012 DEMAND-SrDE )
MANAGEMENT EXPENDITURES AS ) COMMENTS OF THE
PRUDENTLY INCURRED.) COMMISSION STAFF
)
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application for a determination of 2012 demand-side management expenditures as
prudently incurred.
BACKGROUND
On April 3,2013,Idaho Power Company applied for an Order establishing that it prudently
incurred 546,356j60 in demand-side management (DSM) expenses in2012, including $25,857,603
in Idaho Energy Efficiency Rider expenses, $6,019,109 in Custom Efficiency program incentive
expenses, and$74,479,447 of demand response program incentive expenses. Application at l The
Company submitted a copy of its DSM 2012 Annual Report and testimony in support of its
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: (l) provide customers with programs and information to help them manage their energy
STAFF COMMENTS AUGUST 20,2OI3
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 the
Energy Eff,rciency Advisory Group (EEAG) that provides a broad range of recommendations,
including input on new program proposals, modifications to existing programs, and overall
expenditures of DSM funds. Id. at2.
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 Commission
found the Company prudently incurred cost-effective, DSM-related Rider expenses of $29 million
from2002-2007, $50.7 million from 2008 and2009, $41.9 million in 2010, and$42.5 million in
2011. Id. at2-3, citing OrderNos. 30740, 31039, 32113,32331,32667 and32690.
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. at3 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 in2012 Rider-
funded labor-related expenses, as measured from the2012labor expense level. Id. at9.
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 (WAQC) and the Weatherization Solutions
for Eligible Customers (WSEC) 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 in2012. Id. at3-4. The Company says its efficiency
activities produced 170,228 MWh in energy savings rn20l2. Id.at3.
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
STAFF COMMENTS AUGUST 20,2OI3
measures, as well as financial information separated by expense category and jurisdictton. 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.] The DSM Report also describes 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, including2012 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. at8. ln2012, 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 Inigation Efficiency Rewards program. Additionally, Idaho Power analyzed the
FlexPeak Management and Irrigation Peak Rewards programs and has submitted corresponding
reports with the Application. 1d
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 incurre d 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 in2}ll. The Company asks the Commission to reflect this adjustment
in its records as necessary. Id. at 7 .
I Th" fou. 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 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.
STAFF COMMENTS AUGUST 20,2OI3
STAFF ANALYSIS
Staff reviewed the Company's Application and accompanying testimony and exhibits. Staff
also auditedthe2012 DSM expenditures. Stafls audit reviewed all DSM expenditures charged to
the Rider, and the Company's internal processes of paying incentive payments to customers. Based
on Staff s review, Staff generally supports the Company's DSM programs and expenditures with
exceptions as discussed below. Staff recommends that the Commission find that the Company
prudently incurred $46,128,307 in DSM-related expenditures. This amount consists of $25,594,191
in Rider funds, $6,019,109 in Custom Efficiency program incentive payments, and$14,479,447 of
demand response program incentive payments included in base rates and the annual Power Cost
Adjustment (PCA).
Staff has calculated the appropriate Rider balance as of December 31 ,2012 as follows:
Company Reported 2012 Beginning Balance
2012 Funding plus Accrued Interest
Total2012 Funds
2012 Booked Expenses
2012 Adjustments
2012 Staff Recommended Ending Balance
$(5,321,997)
35,101,807
29,779,870
(25,739,188)
(227,853)
3,812,769
Staff s ending balance of $3,812,769 rs$227,853 less than the Ending Balance reported in
the Company's2012 DSM Annual Report. This difference is reflected on the 2012 Adjustments line
in the table above and listed in greater detail on the table below. When the Company accrues
carrying charges on the Rider balance, it should apply the carrying charge to the appropriate
Commission-authorized Rider balance as of December 3 1't.
The Company's DSM Rider-funded expenditures charged through the Rider tn20l2 are
greater than the reported Booked Expenses. The Booked Expenses reflect a negative accounting
entry that adjusts for a disallowance in20ll. Though the Booked Expenses help to determine the
Rider account's appropriate ending balance, they do not reflect the actual amount of DSM Rider-
funded expenditures for which the Company seeks a prudency determination. The following table
STAFF COMMENTS AUGUST 20,2013
illustrates the2012 Rider-funded expenditures that Staff recommends the Commission deem
prudently incurred:
2012 Booked Expenses
20ll NC Cool Credit Disallowance (Order No. 32667)
Energy House Call Program Accounting Correction
Miscellaneous Accounting Corrections
A/C Cool Credit Program Switch Installations
ENERGY STAR Homes Northwest Incentives
20 12 Labor Increase Adj ustment
Staff Recommended Prudent Expenditures
$25,739,188
82,856
(17,1 l3)
(83e)
(32,090)
(4,000)
(173,811)
925,594,191
Staff recommends that the Commission find that the Company prudently incurred $263,412
less in DSM Rider-funded expenditures than the Company requests. This difference consists of:
(l) the $89,601 in 201I labor increases on which the Commission deferred judgment; and (2) an
additional $173,811 in labor increases from2012. The2012labor increases are discussed in greater
detail below. The other adjustments in the table above reflect amounts that Staff and the Company
concur should be removed from the DSM Rider account. They are reflected in the Company's
Application Exhibit No. 3.
In Exhibit No. 3, the Company adjusts the requested recovery amount to correct for program
management or accounting mistakes. First, the Company credits the Idaho Rider with the
approximately $17,000 that the Company mistakenly paid to Oregon customers as Energy House
Calls incentives in 2012, and $3,500 in incentives paid out the same way in20l l. Second, the
Company delays asking to recover about $32,000 spent on A/C Cool Credit switches that were
inadvertently installed after the Company asked the contractor to discontinue installing them on
December 14,2012. Third, the Company does not ask to recover $4,000 in Energy Star Homes
Northwest program incentives that the Company mistakenly paid to gas-heated homes. Staff
acknowledges the Company for discovering and disclosing these errors.
Besides the Rider-funded expenditures, the Company requests that the Commission find that
in 2012 the Company prudently incurred $6,019,1 09 in incentive payouts under the capitalized
Custom Efficiency program, and$14,479,447 in demand response programs incentive payments that
the Company currently recovers through base rates and the PCA mechanism. Staff has reviewed
those expenditures and agrees that they were prudently incurred.
STAFF COMMENTS AUGUST 20,2073
Rider-Funded Labor Increase
Staff recommends that the Commission deny the Company's request to recover the $263,412
in incremental Rider-funded labor expenses that the Company says it prudently incurred in 2011 and
2012. In Order No. 32667 and Reconsideration Order No. 32690, the Commission deferred its
decision on whether the Company should recover $89,601 in 2011 Rider-funded labor increases
because the Company did not provide sufficient evidence to support its request. Though Staff still
believes the prudency of those increases should be assessed under the heightened scrutiny of a
general rate case, the Commission has notified the Company that it need not wait until a rate case to
provide such evidence. The Company thus requests a prudence determination for the deferred 201I
and 2012 incremental labor increases in this case.
The Company argues that the Commission should determine the prudency of incremental
Rider-funded labor expenses each year when the Commission reviews the Company's annual DSM
expenses (Tatum, Di pg. 8). Staff believes the Company's argument incorrectly relies on the DSM
Memorandum of Understanding (MOU) between Staff and other investor-owned utilities. The DSM
MOU sets guidelines for evaluating and reporting on DSM perforrnance. Its purpose is to facilitate
an objective and transparent Staff and Commission assessment of the utilities' DSM efforts.
Because cost-effective programs suggest that customers are benefitting more from a lower
cost resource than they would from the next best alternative, the Company argues that a "cost-
effective program should be a factor in determining the prudence of the labor component of the total
program costs." Staff disagrees for several reasons. First, the Company ignores that cost-
effectiveness compares a program's benefits to its costs, and that the resulting ratio informs the
determination of whether the DSM program is economically reasonable overall. But the ratio does
not indicate whether any particular expenditure charged to the program was prudently incurred. The
Company's suggested approach provides no incentive for the Company to efficiently utilize rate
payer funds; as long as the overall program is cost effective, the Company would be unconstrained
from charging unreasonable expenses to programs. Further, if the overall program cost-effectiveness
were the only measure used to determine prudency of individual program expenditures, then there
would be no need to scrutinize the program's underlying expenditures.
In order for Rider-funded labor expenses to be treated like the Company's other labor
expenses and included in base rates, the level of labor expenses charged to the Rider should be set
through a general rate case. Salary increases in a general rate case are routinely rejected by the
Commission or negotiated by Staff and Interveners during settlement negotiations. Once the level is
STAFF COMMENTS AUGUST 20,2013
set, that is the level the Company recovers through base rates until it files its next base rate
adjustment. Meanwhile, the Company is free to increase its employees' wages, but the overall level
of wage recovery remains constant. This approach encourages the Company to control its labor
costs. Labor increases are partially offset through attrition, but shareholders still appropriately bear
some minimal risk. Staff believes that DSM Rider-funded labor expenses should be treated like the
Company's other labor expenses.
Second, the Company's evidence does not support recovery of incremental Rider-funded
labor increases. The Company attempts to support its request with a 2013 DSM Total Compensation
Analysis. The study performed by Towers Watson is a benchmarking analysis comparing total
compensation for specific Idaho Power positions to the total compensation for similar positions at
other utilities. In the study, utilities are grouped together based on their annual revenues. Idaho
Power's compensation levels are higher than those of utilities with annual revenues of less than
$1 billion, and slightly less than those of utilities with annual revenues between $1 billion and
$3 billion. But the Company ignores that it falls between those two categories as its revenues only
recently grew to slightly over $l billion annually. The study nevertheless shows that the Company's
total compensation is relatively equal to utilities with annual revenues up to $3 billion.
Idaho Power's evidence is also unpersuasive because it does not adjust for Regional Price
Parities (RPP). RPPs compare the cost of living in different states and metropolitan areas by
measuring the differences in the price levels of their goods and services over ayear. RPPs are
expressed as a percentage of the overall national price level for each year, which is equal to 100.0.
The U.S. Bureau of Economic Analysis performs this analysis each year. In 20ll,ldaho had92.8
RPP, which means that Idaho's cost of living is 92.8o/o of the national average. Idaho has the lowest
RPP of any western or mountain state. When RPPs are factored in to wage levels, Idaho Power
employees enjoy a significant wage advantage over similarly positioned employees in other states.
Idaho Power's evidence also suffered because it shows that the Company decided to increase
itsg labor expenditure based on a flawed understanding of other entities' wage and salary
information. Specifically, Staff Production Request No. 47 requested that the Company provide all
materials presented to the Compensation Committee of the Board of Directors that assisted them in
determining the amount of pay increases, or general wage adjustments. The Company response
included a spreadsheet illustrating the annual pay increases for several regional utilities, local
businesses, and State of Idaho employees. Staff identified several errors with the spreadsheet, all of
which overstated organizational salary increases. First, the spreadsheet indicated that State of Idaho
STAFF COMMENTS AUGUST 20,2OI3
employees received a3Yo increase in 2013. As the Commission is aware, the Idaho Legislature did
not approve any additional funding for State employees this year. Second, Staff confirmed with
Avista that Idaho Power's analysis overstated the general wage adjustment for Avista non-union
employees in each of the three years from 2011-2013. Third, Idaho Power's analysis included the
1.75% wage increases for PacifiCorp union employees, but did not acknowledge that non-union
employees of PacifiCorp only received a0.75Yo increase from 201l-2012. It should also be noted
that neither Avista nor PacifiCorp received full recovery of those wage increases. Given the errors
in Idaho Power's analysis, Staff does not believe the Company has justified its salary request.
In summary, based on Idaho Power's evidence and Staff s analysis, Idaho Power's
incremental Rider-funded labor increases for 2011 and2012 should not be deemed prudent and
should not be passed through to rate payers. Furthermore, Staff believes that the currently approved
2010 labor amounts included in the Rider should be the cap on labor expenses included in the Rider
until the Company's next general rate case, at which time that cap can be adjusted as warranted.
Demand-Side Management within Idaho Power
Staff has carefully reviewed the Company's Application and finds most of the Company's
DSM programs to be well run. The program managers implementing existing programs are
committed and even passionate about energy efficiency and demand reduction. In addition, the
research and evaluation team has significantly improved programs by consistently delivering
rigorous evaluations and ensuring that the evaluation findings are incorporated in future program
implementation.
But, Staff questions the Company's commitment to comply with the Commission's directive
to "pursue all cost-effective demand side management" when this year the Company has:
filed to suspend its cost-effective demand response programs on short-notice;
failed to analyze the cost-effectiveness impact of a 40o/o fall in avoided costs on its
energy efficiency programs;
announced that it will not renew its contract with the Northwest Energy Efficiency
Alliance (I{EEA) which delivered almost 18,000 MW of cost-effective energy
savings in2012; and
remained silent about its decision not to pursue partnership funding of Idaho-based
energy efficiency research and development.
a
a
STAFF COMMENTS AUGUST 20,2OI3
While parts of these individual decisions may have merit, the Company has declined to
provide much explanation for all but one of them. Staff recognizes that changing circumstances may
necessitate action on existing programs. Unfortunately, Idaho Power has informed interested
stakeholders after the fact rather than in a collaborative, proactive manner.
Demand Response
Since Idaho Power's demand response programs are currently the subject of a series of
workshops that address the substantive issues of capacity surplus, pricing, program design, and cost-
effectiveness, Staff will focus here on the Company's short notice to stakeholders when asking to
temporarily suspend demand response.
During a December 5 and 14 webinar and conference cal[, Idaho Power announced to the
EEAG that the Company's Integrated Resource Plan (IRP) analysis showed no capacity deficits until
2016. On December 21,2012 - slightly more than two weeks after the first notification - Idaho
Power filed to suspend its demand response programs in 2013.
Idaho Power says it had no indication that the 2013 IRP analysis would show a capacity
surplus, and that it informed the EEAG almost immediately upon receiving the analysis. But Staff
noticed the ever-increasing amount of demand response capacity and minimum program dispatch in
201 I and 2012. Staff s June 2012 prudency comments, which were published six months before the
Company filed to suspend its demand response programs, observed that irrigation demand response,
which was almost 80% of Idaho Power's 201I demand response portfolio, may need to be "reftned"
to preserve the "program's viability."2 Staff believes the Company should have anticipated and
begun exploring program modifications and solutions to the capacity surplus with its stakeholders
well before the announcement in December 2012.
The Company's $4.5 million investment to replace old paging load control switches with
Advanced Metering Infrastructure (AMI) switches just months before it filed to suspend the A/C
Cool Credit program highlights the problem of waiting until a document is released to apply the
results of utility resource planning. The loads forecasted in the 2011 IRP never materiahzed and
projections of a speedier economic recovery proved to be optimistic. Staff believes the Company
knew this well in advance of releasing the IRP analysis in late 2012 and could have used the
information to limit switch investment.
' Staff Comments, IPC-E-l 2-15, page 12.
STAFF COMMENTS 9 AUGUST 20,2OI3
Also, before the Company's request to suspend demand response, its research on the A/C
Cool Credit program in2012 conclusively demonstrated how to maximize the demand reduction
delivered by this program. The Company hired a third-party consultant to develop an adaptive
algorithm to determine how to dispatch the program for the most effective demand reduction in a
variety of temperatures. While monitoring indoor air-temperature change, thirteen events of varying
duration with a range of cycling rates were dispatched in order to measure actual demand reduction
per unit. If Idaho Power's demand response programs are continued in 2014 and beyond, Staff
believes that knowledge gained through the A/C Cool Credit research can combine with the
program's potential to be dispatched immediately without significant costs or inconvenience to
participants to make A/C Cool Credit one of the Company's most valuable DSM resources.
Falling Avoided Costs
As part of the IRP analysis that informed the Company's request to suspend demand
response, the Company also updated its alternate, or avoided costs. Mostly driven by falling natural
gas prices, this analysis found that avoided costs for energy dropped about 40%. Since many
residential energy efficiency programs, including Idaho Power's, tend to narrowly pass cost-
effectiveness tests, Staff believes a dramatic decline in avoided costs could cause Idaho Power to ask
to suspend or dramatically curtail some programs.
Although lower avoided costs make delivering cost-effective programs more difficult,
changes to program design and delivery, new measure offerings, and shifting cost-effectiveness
emphasis from the TRC test to the UCT could help preserve these resources. Staff has asked the
Company to discuss how the new avoided costs may impact its current energy efficiency programs
in order to identify solutions. But the Company says it cannot accurately assess those impacts until
the avoided cost analysis is finalized. Staff notes however, that in late 2012ldaho Power provided
the preliminary IRP avoided cost estimates to its third-party contractor during development of the
economically achievable energy savings in its Conservation Potential Assessment (CPA), which was
published with the DSM Annual Report.3 The CPA forecasted about a2lYoreduction in energy
efficiency potential over the next 20 years compared to the 201I IRP.
3 EnerNoc Utility Solutions, Idaho Power Energy Efficiency Potential Study, pages 2-23.
STAFF COMMENTS l0 AUGUST 2O,2OI3
Staff recommends that the Commission direct Idaho Power to analyze how its new avoided
cost impacts its current energy efficiency portfolio and present those results to the EEAG to begin an
ongoing collaborative discussion about possible solutions if necessary.
Declining Enerey Savings
Idaho Power's 2012 DSM Annual Report showed a decline of almost 11,000 MWh of energy
savings from 201 | to 2012. Since 2010, the Company's energy savings have fallen by more than
11%. Through no fault of the Company, much of the decline in savings came from the residential
classes as increasing efficiency standards for baseline products and market saturation reduced the
savings provided by its Compact Fluorescent lighting (CFL) and home appliance programs. In
addition, the impact evaluations for its two low income programs reduced the savings thought to be
generated by those programs by more thanTlo/o.
Many of Idaho Power's energy efficiency programs have remained largely unchanged since
their inception. Some programs are now producing fewer saving as appliance standards toughen,
building codes improve, and Energy Star appliances become more popular. But that does not mean
there are no new opportunities for cost-effective energy savings. It means that utilities must adapt
their portfolios to continue generating savings in changing circumstances.
While the energy savings decline has been relatively modest thus far, Staff is concemed that
lower avoided costs could dramatically reduce energy savings in the next few years. Staff
understands that increasing baselines and declining avoided costs complicate the task of acquiring
cost-effective energy effi ciency.
Staff recognizes that Idaho Power has successfully developed its existing DSM portfolio.
But the Company will be challenged to adapt and innovate to maintain the performance of its current
programs. Staff would like to see the Company investigate, discuss, and propose new DSM
opportunities, especially for residential customers. New programs that Idaho Power could pursue
include behavior-based energy efficiency programs, residential LED lighting programs, programs
that target the "electric islands" of apartment complexes, and "smart" thermostats that learn the
customer's comfort preferences without having to be manually programmed.
Rate design, which can be considered infinitely cost-effective energy savings, was researched
in2012. The Company conducted a Time of Use study that unfortunately targeted structural winners
as participants and thus failed to identifu any statistically significant energy savings. Staff
understands the difficulty in recommending that customers enroll in a pilot program that could either
llSTAFF COMMENTS AUGUST 20,2OI3
cause their bills to increase or require consumption adjustments. But a study that omits these types
of customers greatly reduces the study's value and therefore has limited use in program design.
Since its inception, the rationale for the Fixed Cost Adjustment (FCA) has been to make the
Company indifferent to reduced energy sales caused by its residential and commercial DSM
programs. In 2008, 43%o of the reduced residential energy sales collected through the FCA was
attributable to the Company's DSM programs. In 2072, that number fell to 25Yo. To the extent that
energy savings produced by decoupled classes continue to decline, the need for the FCA is also
reduced.
Northwest Energy Efficiency Alliance
In November 2072,Idaho Power informed the EEAG by phone that it would not continue to
participate in NEEA after the current contract expires at the end of 2014. The Company had not
previously discussed its decision with EEAG even though the full EEAG met in person less than a
month earlier. The Company maintains that it was proper to inform NEEA of the decision before
discussing the matter with other stakeholders. While there may be some validity in that approach,
Idaho Power has not used the time since the announcement to fully justify its decision or present a
plan for replacing the cost-effective savings that may no longer be provided by NEEA. Despite
several requests, Idaho Power has offered very little explanation for its decision and repeatedly
declined to more fully discuss this decision with either the EEAG or Staff.
In response to production requests in this case, the Company explained that its support for
NEEA began as the Company was rebuilding its DSM portfolio. The Company strongly implied
that NEEA is no longer necessary since the Company now has a robust suite of DSM offerings and
provides for its customers what once could only be acquired through NEEA. Staff questions the
Company's decision for several reasons.
First, Staff believes the upstream market-transformation leverage provided by a four-state
regional body is distinguishable from the direct-customer programs run within individual utility
service territories. Staff does not believe these two activities are interchangeable. Each provides
benefits that the other cannot deliver.
For example, the incentives that NEEA offers retailers attracted Wal-Mart's attention. The
large intemational retailer called NEEA to find out which television models would be incented, and
based its buying decisions for retail stores in NEEA's territory on those incentives. Staff does not
STAFF COMMENTS t2 AUGUST 20,2OI3
believe that Idaho Power, if it provided retailer incentives or incented televisions, could command
the attention of Wal-Mart.
As was the case with NEEA's CFL initiative, market transformation efforts can provide the
ground-breaking efforts which make direct incentives or buy-downs from the utilities possible.
NEEA spent many years developing CFL technology, educating customers about CFLs, and
incenting retailers to stock them. Having laid this groundwork, NEEA no longer intervenes in the
CFL market. But utilities, including Idaho Power, have instituted very effective CFL buy-down
programs. In2012,ldaho Power's CFL buy-down program, Energy Efficiency Lighting, provided
7lo/o of the Idaho Power's residential DSM energy savings. Staff doubts that this program would
have achieved such scale and success without NEEA's market intervention work.
Second, Idaho Power claims its robust DSM portfolio negates the need for NEEA's market-
transformation work. As described previously, Idaho Power has not analyzed its current energy
efficiency programs under its new avoided costs. So neither the Company nor Staff has any basis for
determining that the Company's DSM portfolio will be robust into the future. This is particularly
true for the residential class, where NEEA provides over 85olo of its savings.
Third, the Company outlined its request of NEEA "to allow Idaho Power to direct its funding
toward those activities which it believes bring the most value to its customers. There were some
aspects in this funding cycle [2009 -2014] that Idaho Power supported, such as regional research
especially with emerging technology, regional training, and their 'upstream' work with
manufacturers." Staff points out that these three activities constitute by far the biggest portion of
NEEA's activities and total budget. Further, Staff notices that Idaho Power did not specify the value
it finds in NEEA's work to support federal code and standards requirements. Idaho Power does not
fulfill that FCA requirement other than through its financial participation in NEEA.4 Idaho Power
has not explained how alignment on the vast majority of NEEA activities constitutes sufficient
reason to not renew the contract.
Idaho Power says it still is negotiating with NEEA and hopes to work out an agreement
where the financial partnership can continue in some form. But in the ten months since Idaho
Power's announcement, there have been no updates on these negotiations.
a Page 134 of the2012 DSM report reads, "ldaho Power is participating in these ongoing [Idaho Building Code update]
meetings and monitoring the situation to assess where support may be offered."
STAFF COMMENTS 13 AUGUST 20,2OI3
Staff believes NEEA has provided significant value to Idaho Power's customers and is
currently cost-effective by the Company's own admission. Given that NEEA programs have been
found to be cost-effective and Idaho Power DSM savings are declining, the Company should
thoroughly explain why its customers are better off outside of that regional partnership. Staff
recommends that the Commission direct Idaho Power to convene a collaborative discussion with the
EEAG to fully discuss and explain the status of the Company's NEEA funding partnership, the
justification for the decision to discontinue NEEA funding, provide updates on any ongoing
negotiations, and explore alternate solutions.
CAES Energl-Effi ciency Research Institute (CEERI)
In the December 14,2012 EEAG conference call that primarily addressed the demand
response suspension, Idaho Power also announced that it was considering an opportunity to fund
energy effrciency research and development projects in partnership with Idaho universities through
CEERI and its umbrella organization, the Center for Advanced Energy Studies (CAES). The
announcement was brief and vague. After the Company "emphasized that [it] wanted to keep
members of the EEAG informed and asked if they had any questions," it said it "was not in a
position to share what the funding would be at this time" or describe how or what types of projects
would be funded. s Idaho Power has not provided any updates on this research and development
project since that conference call.
As Staff understands it, Idaho Power has declined to fund this research effort because the
Company and universities could not agree about publication rights associated with these projects.
Staff points out that Avista has been able to agree with the universities on that issue, and is moving
forward with their research and development funding proposal.
Idaho Power has not explained why retaining publication rights is non-negotiable when
publications rights are ancillary to its core business. The Company is letting this issue prevent what
could be an important DSM research and development opportunity. Idaho Power's current
investment in research and development, which is needed immediately to help the Company's
programs remain relevant in changing circumstances, is primarily provided through NEEA. If Idaho
Power does not continue participation in NEEA, the Company will be funding almost none of the
t EEAG Conference Call Minutes, December 14,2012.
STAFF COMMENTS 14 AUGUST 20,2073
research and development that Staff believes is critical to maintaining long-term, cost-effective DSM
programs.
Staff recommends that the Commission direct Idaho Power to convene a collaborative
discussion with the EEAG to fully discuss and explain the status of its CEERI funding partnership,
justification for the Company's decision not to participate, provide updates on any ongoing
negotiations, and explore alternate solutions.
Energy Efficiency Advisory Group (EEAG)
Idaho Power has made several meaningful improvements to the EEAG in the last year. In
particular, letting non-members speak and ask questions freely, soliciting input on agendas, and
scheduling meetings further in advance have helped create a richer dialogue between stakeholders
and the Company than in past years.
However, Staff believes that the Company has failed to discuss several important DSM
issues with the EEAG before taking action. These issues include demand response suspension,
NEEA withdrawal, impact of lower avoided cost on DSM cost effectiveness, and CEERI
participation. Staff maintains that the Company's failure to discuss these issues with the EEAG
ignores the fact that the "EEAG's primary purpose isto advise the Company on new measure
recommendations, existing measure revisions, measure prioritization, and evaluation."6 Despite
some improvements in the EEAG meetings over the past year, Staff believes the stakeholder input
Idaho Power solicits and considers in the measures it funds, modifies, and suspends has declined.
Irrigation Efficiency
Idaho Power has historically relied on Regional Technical Forum (RTF) savings estimates as
the basis for incenting prescriptive irrigation measures through its Irrigation Efficiency program.
Staff anticipates that Idaho Power will likely continue relying on the RTF for these estimates until
the Company completes its impact evaluation.
Although the RTF is widely recognized as a transparent and credible source for energy
savings, even the RTF has struggled to establish reliable savings estimates for prescriptive irrigation
measures. Notably, it was so difficult for the RTF to acquire sufficient data to establish energy
savings that RTF's estimates were "out of compliance" with its own requirements for active measure
u Order No. 32667 at l7 (ltalics in the original).
STAFF COMMENTS 15 AUGUST 20,2OI3
status for more than a year. When the new estimates were finally approved in April 2013, the RTF
opted to change the categorization of prescriptive irrigation measures from "proven" to "small
saver" and thereby reduce the quality standard to which the supporting data were held.7
Staff does not object to the RTF's methods or conclusions. While this is the appropriate
method for determining regional savings, measuring the energy savings associated with a specific
program through an impact evaluation may yield an altemate, but more accurate, conclusion. Rocky
Mountain Power's recently complete impact evaluation of its irrigation efficiency program found
that its prescriptive measures were not cost-effective. After several years of delay, Idaho Power has
scheduled an impact evaluation for its irrigation efficiency program in 2013. Staff believes Idaho
Power may also discover that its prescriptive irrigation measures produce significantly less energy
savings than previously assumed.
Weatherization Assistance for Oualified Customers and Weatherization Solutions for
Eligible Customers
The Company's two low income weatherization programs, WAQC and WSEC, were the only
energy efficiency programs that did not pass the TRC and UCT in2012. As the Commission knows,
low income weatherization programs have been the focus of a lengthy and ongoing investigation.
Staff is very concerned with the cost-effectiveness of these programs. But Staff is pleased with the
Company's approach to addressing the problem. The Company's research and evaluation team is
working with third-party consultants to correct the over-estimation of the audit tool that was used to
determine each project's energy savings. This correction will help the Company manage cost-
effectiveness during each project and throughout the program year by allowing the Company to
selectively fund only cost-effective measures. Staff believes that the process evaluation currently in
progress will help the Company work with Community Action Partnership (CAP) agencies to further
refine program implementation and target utility funding for these programs around utility cost-
effectiveness. Staff looks forward to receiving updates and providing feedback about the progress of
this work at upcoming EEAG meetings.
7 See Section 2.4.4 of its "Roadmap for the Assessment of Energy Efficient
STAFF COMMENTS t6 AUGUST 20,2OI3
Office of Enerey Resources (OER) Projects
In2012,Idaho Power paid out almost $600,000 in incentives for OER projects installed in
2011 through the Company's Easy Upgrades program. Part of the Commission Order approving the
MOU between the OER and Idaho Power specifically instructed the Company to "evaluate whether
an OER-funded project qualifies for incentive payments according to each DSM program's existing
rules."8 In response to discovery, the Company confirmed that the while OER projects were being
approved and installed, the Easy Upgrades programs rules prohibited Idaho Power from incenting
the portion of any project that was grant or stimulus-funded. The Company also confirmed that
other stimulus projects received incentive funding.
Because the program rules changed to allow incentive payments on stimulus projects in
December 2011 and most OER projects received pre-approval and were installed in mid-2011, Staff
concludes that Idaho Power did not conform to its existing program rules during that period.
Although Idaho Power has the discretion to change its program rules at anytime, it appears that the
Company failed to align the program rules with program implementation in this case.
STAFF RECOMMENDATIONS
Staff recommends that the Commissron:
(l) Find that the Company prudently incurred DSM-related expenditures of $46,128,307 .
This amount consists of $25,594,191 in Rider funds, $6,019,109 in Custom Efficiency
program incentive payments, and$14,479,447 of demand response program incentive
payments included in base rates and the annual PCA;
(2) Find that the appropriate Rider balance as of December 3l ,2012 is $3,812,769,
and direct that the Company accrue carrying charges on this balance beginning on
January 31,2013;
(3) Direct Idaho Power to analyze how its new avoided cost impacts its energy efficiency
portfolio, and present those results to the EEAG to begin an ongoing collaborative
discussion about possible solutions, if necessary;
(4) Direct Idaho Power to convene a collaborative discussion with the EEAG to fully discuss
and explain the status of its NEEA and CEERI funding partnerships, the justification for
8 See Order 32368,page2.
STAFF COMMENTS 17 AUGUST 20,2OI3
the decisions to discontinue funding and not participate, provide updates on any ongoing
negotiations, and explore alternate solutions.
Respecttully submiued this Z 6+) day of August 2013.
4/ I /,/-
Karl T. Klein
Deputy Attorney General
Technical Staff: Stacey Donohue
Donn English
Nikki Karpavich
i:umisc/commentVipce I 3.8kkblnksdde.doc
STAFF COMMENTS AUGUST 2O,2OT3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2O'H DAY OF AUGUST 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-13-08, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
JULIA A HILTON
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
lnordstrom@idahopower. com
i [e-mail]
dockets@idahopower. cqm
CBearry@idahopower. com
DARLENE NEMNICH
TIM TATUM
IDAHO POWER COMPANY
PO BOX 70
BOISE tD 83707-0070
dnemnich@idahopower. com
ttatum@idahopower. com
CERTIFICATE OF SERVICE