20140425Decision Memo.pdf

DECISION MEMORANDUM- 1
DECISION MEMORANDUM

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

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: APRIL 25, 2014

SUBJECT: IDAHO POWER’S APPLICATION FOR A DETERMINATION OF 2013
DEMAND-SIDE MANAGEMENT (DSM) EXPENSES AS PRUDENTLY
INCURRED, CASE NO. IPC-E-14-04

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 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 (“DSM”) expenses.
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.
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 with its
Application the Direct Testimony of Darlene Nemnich, Senior Regulatory Analyst. 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.
DECISION MEMORANDUM- 2
2013 DSM ENERGY SAVINGS AND EXPENDITURES
In 2013, Idaho Power states that it offered 18 energy efficiency programs, 1 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 attached 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:
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.
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 Commission
DECISION MEMORANDUM- 3
decisions, Idaho Power has excluded from this filing its 2013 increase in Rider-funded labor-
related expenses amounting to $269,432.
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.
Prior Year-End Adjustments. In 2012, Idaho Power removed $21,952 from its
prudence request and was also removed from the Rider in 2013. In order to avoid a double
removal, the Company states, it is necessary to add this amount to this prudence request of the
$21,952.
Current Year-End Adjustments. Idaho Power transferred $248 to the Idaho Rider
account, associated with the Home Energy Audit program, which were initially charged to the
Oregon Rider account in error.
In the DSM 2013 Annual Report, Idaho Power calculates cost-effectiveness from the
RIM, PCT, UCT, and 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 DSM 2013 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.
DECISION MEMORANDUM- 4
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.
Net-to-Gross Adjustments. For the DSM 2013 Annual Report, Idaho Power used
these ratios as an input to cost-effectiveness calculations where appropriate.
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 states that a technical hearing is unnecessary in this case and requests
that the Commission process its Application through Modified Procedure.
COMMISSION DECISION
Does the Commission wish to process Idaho Power’s Application through Modified
Procedure with a 90-day comment period?

M:IPC-E-14-04_np