20141104final_order_no_33161.pdf

Office of the Secretary
Service Date
November 4,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER’S )
APPLICATION FOR A DETERMINATION )CASE NO.IPC-E-14-04
OF 2013 DEMAND SiDE MANAGEMENT )
(DSM)EXPENSES AS PRUDENTLY )ORDER NO.33161
INCURRED )
On March 17,2014,Idaho Power Company (“idaho Power”or Company”)
submitted its Demand-Side Management 2013 Annual Report (“DSM 2013 Annual Report”)and
makes Application to the Idaho Public Utilities Commission (“Commission”)for an Order
designating Idaho Power’s expenditures of $21,748,331 in Idaho Energy Efficiency Rider
(“Rider”)funds and $4,203,155 of demand response (“DR”)program incentives included in the
2014 Power Cost Adjustment (“PCA”),for a total of $25,951,486,as prudently incurred
demand-side management (“D SM”)expenses.
On April 30,2014,the Commission issued a Notice of Application,Notice of
Intervention Deadline and Notice of Modified Procedure.See Order No.33032.A comment
deadline of 90 days from the date of the Order was established.
Thereafter,the Idaho Conservation League (“ICL”)and Industrial Customers of
Idaho Power (“ICIP”)submitted Petitions to Intervene as a party.Both parties were granted
leave to intervene as a party in this case.ICL,ICIP and Staff each submitted written comments
within the established comment period.Thereafter,Idaho Power submitted reply comments.
THE APPLICATION
Pursuant to reporting requirements included in Commission Order No.29419 and in
accordance with agreed upon guidelines set forth in the Memorandum of Understanding for
Prudency Determination of DSM Expenditures (“DSM MOU”),Idaho Power included a copy of
its 2013 DSM Annual Report and Supplements 1 and 2.The Company also included the Direct
Testimony of Darlene Nemnich,Senior Regulatory Analyst,with its Application.According to
the Company,the DSM 2013 Annual Report and accompanying Nemnich testimony provide a
sufficient basis for the Commission to determine whether Idaho Power’s DSM expenses were
prudently incurred.
ORDERNO.33161 1
2013 DSM Energy Savings and Expenditures
In 2013,Idaho Power states that it offered 18 energy efficiency programs.one active
demand response program.several educational initiatives,and savings to customers through
market transformation programs.Idaho Power estimates annual energy savings from its energy
efficiency activities totaled 107,284 megawatt-hours (“MWh”),which includes 18.346 MWh
(preliminary estimate)stemming from the Company’s participation with Northwest Energy
Efficiency Alliance in 2013.
The Company says that its overall energy savings is down this year.The DSM 2013
Annual Report explains that this reduction in energy savings in 2013 is due,in part,to Idaho
Power and the region’s increased evaluation,measurement,and verification activities.
Idaho Power’s expenditures on DSM-related activities decreased in 2013,largely due
to the suspension of two demand response programs.In 2013,the Company’s total system-wide
expenditures on DSM-related activities totaled $26,841,379,The $26,841,379 of system-wide,
DSM-related expenses in 2013 includes expenditures for customers in Oregon and other
operations and maintenance expenses that are not before the Commission as part of this prudence
request.In this filing.Idaho Power seeks a determination that a total of $25,951 ,486
expenditures were prudently incurred in 2013 ($21,748,331 in Rider expenses and $4,203,155 in
DR program expenses included in the 2014 PCA).
The Company’s direct testimony describes several adjustments to the total dollar
amounts contained in the DSM 2013 Annual Report.The Company requests that the
Commission accept the following adjustments:
A.Custom Efficiency Transfer.In Order No.32826,the Commission approved the
transfer of $14,200,174 in customer efficiency incentive payments to the Rider account.Of this
amount,$13,037,493 was previously deemed prudent in Order Nos.32667 and 32953 and
therefore is not included in this prudence request.The $1,162,681 remainder includes Custom
Efficiency program incentive payments made from January 1,2013,through May 31,2013,with
accrued interest.The $1,162,681 is included in this request for a determination that 2013 DSM
expenses were prudently incurred.
B.Rider-Funded Labor-Related Expenses.According to the Company,the
Commission declined to decide the reasonableness of increases in the Company’s Rider-funded
labor-related expenses for 2011 and 2012.Order Nos.32667.32690,and 32953.Due to these
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Commission decisions,Idaho Power has excluded from this filing its 2013 increase in Rider-
funded labor-related expenses amounting to $269,432.
C.A/C Cool Credit Switch Expenses.In 2012,Idaho Power incurred $32,090 in
costs to install A/C Cool Credit switches after Idaho Power issued a letter to its vendor directing
it to halt installation.Idaho Power set aside such amounts in its request for the Commission’s
prudence review of 2012 DSM expenses.Idaho Power states that the A/C Cool Credit program
will be operational for the 2014 program season,and the switches will now add value to the
program,and includes these expenses in this request for a prudency determination.
D.Prior Year-End Adjustments.In 2012,Idaho Power removed $21,952 from its
prudence request and the amount was also removed from the Rider in 2013.In order to avoid a
double removal,the Company states,it is necessary to add $21,952 to this prudence request.
E.Current Year-End Adjustments.Idaho Power transferred $248 to the Idaho Rider
account associated with the Home Energy Audit program,which was initially charged to the
Oregon Rider account in error.
In the 2013 DSM Annual Report,Idaho Power calculates cost-effectiveness from the
Rate Impact Measure (“RIM”),the Participant Cost Test (“PCT”),the Utility Cost Test (“UCT”),
and the Total Resource Cost Test (“TRC”)perspectives at the program level,except for those
programs with no customer costs,in which case the PCT is not applicable.This includes DR and
low-income weatherization programs which are evaluated at the UCT and TRC perspectives.
Idaho Power also evaluates cost-effectiveness using the UCT and TRC tests for each measure
within a program where the measures are not interactive.
The 2013 DSM Annual Report,Supplement 1 includes detailed results of the cost-
effectiveness tests by program and by measure.The DSM 2013 Annual Report,Appendix 4
shows the historical UCT and TRC results for each of Idaho Power’s active DR and energy
efficiency programs from a program-life perspective.Results show that of the 15 energy
efficiency programs for which the Company claims savings in 2013,11 programs had
benefit/cost ratios greater than 1.0 for both the TRC and UCT.
Two programs had benefit/cost ratios less than 1.0 for the TRC but greater than 1.0
for the UCT,two programs had benefit/cost ratios less than 1.0 for both the TRC and UCT,and
one program had a benefit/cost ratio of less than 1.0 for the PCT.
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The cost-effectiveness calculation for the FlexPeak Management program shows
benefit/cost ratios greater than 1.0 from the TRC and the UCT perspective when evaluated from
a five-year life-cycle perspective;cost/benefit analyses were not performed on the A/C Cool
Credit and Irrigation Peak Rewards programs because they were suspended in 2013.
F.Net-to-Gross Adjustments.For the DSM 2013 Annual Report,Idaho Power used
these ratios as an input to cost-effectiveness calculations where appropriate.
G.Program Evaluations.Independent,third-party consultants were used to provide
impact and process evaluations to verify that program specifications were met,provided viable
recommendations for program improvement,and validated energy savings achieved through
Idaho Power’s programs.In 2013,these independent third-party consultants conducted process
evaluations on six programs and an impact evaluation on one program.In addition,Idaho Power
conducted its annual internal analysis and reports for the FlexPeak Management and the
Irrigation Peak Rewards programs.Copies of these reports can be found in the DSM 2013
Annual Report,Supplement 2.
Idaho Power stated that a technical hearing is unnecessary in this case and requested
the Commission process its Application through Modified Procedure.
STAFF COMMENTS
Staff recommended the Commission approve the Company’s request and find the
Company prudently incurred DSM-related expenditures of $25,951,486.This amount consists of
$21,748,331 in Rider expenses,and $4,203,155 of demand response program incentive payments
included in the annual PCA.Staff also recommended the Commission find that the appropriate
Rider balance as of December 31,2013,is $6,685,745,and direct that the Company accrue
carrying charges on this balance as of that date.
However,Staff objected to the Company’s decision to “not spend”funds in the
pursuit of cost-effective DSM.Idaho Power’s actions led Staff to question its commitment
toward pursuing all cost-effective DSM,including:their request to suspend DSM programs;their
apparent intent to withdraw from the NEEA;failure to analyze the impact of a 40%fall in
avoided costs on its cost-effective energy savings;and refusal to participate in partnership
funding of an Idaho-based energy efficiency research and development effort.
Staff believes that a leading explanation of the declining DSM savings should be
attributed to ineffective marketing of its DSM programs.Staff cited the HANSA survey as
ORDERNO.33161 4
support for their claim that most customers simply are not aware of the Company’s programs.
Staff recommended the Company increase its investment/participation in high viewership
methods of marketing such as TV,billboards,radio,etc.Staff also compared Idaho Power’s
overall DSM marketing budget to national averages and found that the Company invests 2 to 3
percent in marketing while the national averages range from 4 to 8 percent.Staff attached a
Company flyer containing counterproductive messages to prospective DSM customers.Staff
criticizes the Company for largely failing to adapt its program implementation and offerings to
an ever-changing DSM landscape.
Staff recommended the Commission direct Idaho Power to provide the EEAG with a
DSM action plan explaining how the Company will increase its acquisition of cost-effective
energy efficiency over the next year.The plan should include,but not be limited to,pilot
programs and program delivery adaptations designed to address difficult to serve customer
populations,independent third-party evaluation recommendations that will be adopted,new
strategies to increase marketing effectiveness (including customer representative training,
contractor outreach,and trade ally partnerships),as well as projections for program budgets,
marketing budgets,energy savings acquisitions,and cost-effectiveness ratios.
ICL COMMENTS
ICL does not take exception to Idaho Power’s specific request.ICL states that Idaho
Power’s DSM investments for 2013 pass its preferred cost-effectiveness test,UCT.However,
ICL had various objections to the marketing and administration of some programs.
ICL stated that its comments cover five main topics:the calculation of the avoided
costs used to compare efficiency benefits;the appropriate cost and benefit test;a review of
residential programs;a review of commercial and industrial program;and a review of Idaho
Power’s market transformation activities.
ICL stated that the 2013 DSM Report does not provide a detailed accounting of the
avoided costs.According to ICL,the avoided costs for energy efficiency have never been
explicitly reviewed and approved by the Commission.ICL argues that avoided costs for energy
efficiency are artificially low because the methodology does not include all relevant avoided
costs.It accounts for avoided capacity and energy but the Commission and other stakeholders
have never formally vetted this methodology nor approved the resulting avoided costs.ICL
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stated that current avoided cost methodology excludes other commonly accepted and measurable
costs such as the costs of environmental compliance;transmission and distribution costs;etc.
ICL believes that the Commission should focus primarily on the UCT for determining
cost-effectiveness because it takes into account the costs (incentives and administration)and
benefits (avoided energy and capacity)controlled by the utility.ICL believes that this is
particularly important in Idaho because current methodologies do not consider the non-energy
benefits that accrue to participants in efficiency programs.The UCT uses the most accurate
benefits and costs and measures from the perspective of the utility whether those benefits
outweigh the costs.
ICL cited the lack of awareness of Idaho Power’s residential programs and believes
the Commission should order the Company to immediately engage with the EEAG group to
develop a detailed plan to raise program awareness.ICL requests that the Commission find that
the Company’s marketing and administration efforts were imprudent.
ICL asserts that Idaho Power should increase the incentive for the Ductless Heat
Pump pilot to increase participation.ICL criticizes the Company for its processes in the Energy
Efficient Lighting program,labeling the requirement for a program specialist to perform a line
item review of invoices as “onerous and cumbersome.”ICL suggests that Idaho Power should
expand a portion of the Energy House Calls program to other housing stock.ICL also criticized
the Company’s Home Products program,claiming that the process for customers to claim
incentives and require after purchase submission of receipts is cumbersome.ICL cites similar
concerns regarding Idaho Power’s marketing and administration of its commercial/industrial
programs.
ICL declares that it has serious concerns about Idaho Power’s management of the
relationship with NEEA in 2013.ICL claims that Idaho Power did not respond to its queries
regarding how the Company planned to replace NEEA activities if the Company were to
withdraw.ICL does not believe that Idaho Power works collaboratively with EEAG on this
issue.
In conclusion,while this case focuses on 2013 actions,ICL recommended the
Commission provide forward-looking guidance to explicitly review avoided cost calculations
and prudently administer the Company’s relationship with NEEA.
ORDER NO.33161 6
ICIP COMMENTS
ICIP requests that the Commission require Idaho Power to take corrective measures
to reverse what it views as a downward trend in energy efficiency achievement.ICIP included
charts to demonstrate that DSM savings and expenditures have fallen since 2010.According to
ICIP,expenses have fallen by 41%or $19 million,and MWh fallen by 45%or 86,000 MWh.
ICIP touts the MWh savings for the commercial and industrial programs exceeded
what the Company considered their “achievable potential.”ICIP believes that Idaho Power
should increase its efforts,specifically in this sector which has shown to provide the greatest
savings.
ICIP discussed the impact of the requirements of Section 111(d)of the Clean Air Act
on Idaho.ICIP believes that Idaho Power’s conservation programs will play a significant role in
the state’s ability to meet the EPA’s final targets.ICIP stated that it will be important for Idaho
Power to implement programs that reverse the trend and increase DSM savings.
IDAHO POWER REPLY COMMENTS
Following Staff’s Comments,Idaho Power engaged in an extensive discovery process
with Staff and submitted its reply comments.Notwithstanding Staffs agreement with Idaho
Power’s request,the Company’s reply comments centered upon its objections to what it termed
“Staff’s strong criticism of the Company and its DSM programs.”However,Idaho Power noted
that none of the comments filed recommend a disallowance of the expenditures and incentive
payments the Company included in its Application.
The Company stated that despite challenges it continues to work with its stakeholders
through the EEAG to optimize its current programs and to explore and implement new programs
and initiatives.Idaho Power has conformed to the MOU signed by Staff and Idaho’s lOUs.
Idaho Power reiterated its initial request that the Commission issue an Order that the Company
prudently incurred $25,951,486 in DSM-related expenditures.The Company requests that the
Commission limit its Order in this case to a determination of whether its 2013 DSM expenditures
were prudently incurred.
Idaho Power’s reply comments sought to rebut each of the six reasons cited by Staff
as to why the Summary within the Company’s 2013 DSM Report is inaccurate.The Company
makes several claims to support its rebuttal:(1)increased participation in the public sector
actually led to decreased energy savings;(2)inclusion of customers in non-electrically heated
ORDER NO.33161 7
homes may provide access to more energy savings,but these would not be cost-effective energy
savings;(3)savings from Building Efficiency program projects vary from year-to-year because
projects remain in process for multiple years due to long construction time-lines;the Customer
Efficiency programs have a similar issue with long construction time-lines;impact evaluations
and the changes in RTF savings estimates have had an impact on the reported savings over the
years;and it is premature to draw conclusions for all three utilities (Rocky Mountain,Avista and
Idaho Power)on activities and energy savings that have not been reviewed and approved by the
Commission.
Idaho Power claims that comparing Idaho’s TOUs’annual reported energy savings
can be problematic because the underlying data may be dissimilar.Each utility has different
savings estimates,participant cost information,and DSM alternative costs that impact the
savings reported and cost-effectiveness analyses.The Company cited to a recent ACEEE study
which found that Idaho Power’s performance compares favorably to its utility peers in the
region.Further,the Company stated that Staffs critique regarding the use of economic potential
as a realistic goal for achievable potential is “inappropriate.”According to Idaho Power,the
EnerNOC Study and the ACEEE Study rightly consider achievable potential as a subset of
economic potential.
Idaho Power believes that the parties’argument relating to future DSM expenses and
the assessment of cost-effectiveness in the future should be addressed in subsequent proceedings.
The Company asserts that Staffs complaint regarding DSM funds “not spent”would be better
heard in the context of the EEAG group.Also,the Company believes that Staffs demand for an
action plan is unnecessary because the information is already available in the 2013 DSM Report
and to EEAG members.
Idaho Power disputes ICL’s claims that the Company is not working collaboratively
with the EEAG and NEEA in addressing the NEEA funding model,citing to several EEAG
meetings where it was discussed.Idaho Power writes that it worked extensively with NEEA to
resolve its concerns about NEEA’s previous funding model.Idaho Power and other NEEA
funders are currently considering how to finalize their 2015-20 19 funding cycle agreements.
Idaho Power chides Staff for expecting the Company to make recommended program
changes in 2013 even though the recommendations were made in December 2013.The
Company remarked that Staff and intervenors should work with the Company through the EEAG
ORDER NO.33161 8
to use process evaluations as a method to make continuous program improvements,not as a
means to criticize the Company’s program administration before allowing the Company an
opportunity to address or incorporate suggested program modifications.
Idaho Power does not believe that the Commission should focus exclusively on the
UCT for determining cost-effectiveness.The Company says that it will,until directed otherwise,
follow the MOU and ascertain whether programs meet all cost-effective tests.Idaho Power
specifically referred to the Ductless Heat Pump pilot program which failed the TRC test.
Idaho Power referred to certain legal,regulatory and reporting requirements that
compel the Company to analyze invoices and institute certain processes.These requirements are
not always convenient and may or may not dissuade program participation.Nevertheless,the
Company claims that it routinely solicits recommendations from the EEAG group to make
processes more customer-friendly and thereby increase participation.
Idaho Power attempted to rebut Staff’s concerns regarding ineffective marketing of
the Company’s DSM programs.The Company states that awareness of its programs compares
favorably to other regional utilities.The Company complains that Staff and ICL’s criticism of its
marketing efforts contained very little substantive support.According to Idaho Power,
marketing alone does not induce program adoption.The Company went on to summarize the
findings of the HANS A study it conducted to analyze preferences of non-participants.
Specifically,the Company pointed out the disparity between what “green”programs customers
say they are willing to pay for and what they actually pay for.Finally,Idaho Power responds to
Staff’s criticism that the Company does not participate in high-viewership methods of marketing.
The Company argues that high-viewership methods are costly and ineffective.They
claim that customers have complained in the past that television marketing is perceived as too
expensive.Further,radio broadcasts have a higher cost and low effectiveness.Idaho Power says
that its HANSA Study revealed that its customers prefer learning about energy efficiency
through bill inserts and direct mail.Idaho Power continues to use bill inserts and direct mail
because year-after-year studies show they are effective.
In regard to its commercial customers,Idaho Power states that it has a three-pronged
strategy:(1)send targeted letters to small business customers,(2)conduct face-to-face visits with
small business customers,and (3)continue to produce and distribute customer publications such
ORDER NO.33161 9
as the Easy Upgrades bill insert (August 2013)and the Energy @ Work newsletter (Spring and
Fall).The Company formed a “New Ideas Team”to identify new energy savings measures.
COMMISSION FINDINGS
The Commission has reviewed the record in this case,including Idaho Power’s
Application,prefiled testimony,party comments,and the Company’s reply comments.The
Commission commends Idaho Power for its continued commitment to subjecting its DSM
programs to a thorough review process,including its collaboration with stakeholders to address
meaningful issues and concerns raised by these parties.
The Commission acknowledges ICL’s concern that the Company should do more to
raise awareness regarding its DSM programs.The public policy goals of ICL,and other like-
minded conservation groups,seem to be perfectly aligned with the promotion of these DSM
programs.The Commission appreciates ICL’s past efforts to increase public awareness and
hopes that JCL will continue to promote and support Idaho Power’s DSM.
The Commission recognizes ICIP and Staff’s forceful concern regarding Idaho
Power’s alleged waning commitment toward the acquisition of all cost-effective DSM and
Staff’s critique of the Company’s inefficient marketing techniques.The Commission notes that
Idaho Power issued a strong rebuttal of these claims,offering several reasons to explain the
recent decline in its DSM expenditures and a defense of its marketing efforts.While the
Commission is cognizant of the recent decline in energy savings,acknowledged by the Company
in its Application,we are encouraged by the Company’s reply comments that its commitment to
cost-effective DSM has not waned and that it has a renewed interest in taking action to procure
all cost-effective DSM.
Finally,the Commission notes Staff’s proposal to levy penalties and/or adjustments.
We limit our review in this case to whether the expenditures actually incurred by Idaho Power
were prudent.The Commission will address the issuance of penalties or adjustments in the
context of a specific request made by Staff or another party.In this case,the parties do not
contest the expense amount or incentive payments submitted by the Company for a
determination of prudency.
Based on our review of the record,the Commission finds that Idaho Power prudently
incurred $25,951,486 in DSM expenses,including $21,748,331 in net Rider expenses and
$4,203,155 in demand response program incentive payments.
ORDER NO.33161 10
CONCLUSIONS OF LAW
Idaho Power is an electrical corporation.The Commission has jurisdiction and
authority over Idaho Power and the issues in this case under Title 61 of the Idaho Code and the
Commission’s Rules of Procedure,IDAPA 31.01.01.000,et.seq.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Application for approval of its
calendar year 2013 DSM expenditures is approved as prudently incurred in the amount of
$25,951,486.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this d!lhhI
day of November 2014.
PRESIDENT
MACK A.REDFORD,COMMISSIONER
—
,./N ‘ç
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MARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jean D JewelL
Cmmission Secretary
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ORDER NO.33161 11