20141029Kline Direct.pdf

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?tlt OCT 29 PH lr: l8
u t, t"?, * ='f.'Yit ;, i s r o r,r
BEFORE THE IDAHO PUBLIC UTILTTIES COMMISSION
IN THE MATTER OF THE APPLICATTON
OF IDAHO POV{ER COMPANY FOR
AUTHORITY TO FUND TTS CONTINUED
PARTICIPATION IN THE NORTHWEST
ENERGY EFTICIENCY ALLIANCE THROUGH
THE ENERGY EFEICIENCY RIDER.
CASE NO. IPC-E-14-38
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
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o.
A.
address is
o.
("Idaho Power"
A.
Operat j-ons.
Please state your name and business address
My name is Warren Kline and my business
7227 West Idaho Street, Boise, Idaho 83702.
What is your position at Idaho Power Company
or "Company") ?
I am the Senior Vice President of Customer
A.
Please outl-ine your business experience.
I began workj-ng ful1 time in the electric
utility industry at Idaho Power over 40 years ago soon
after I graduated from high school. For the l-ast nine
years I have been an officer of the Company. I joined the
Company in 1,973 in the customer service department and have
spent the majority of my career with the Company in the
customer service and f i-el-d operations areas. I became a
member of the Company's senior l-eadership team in 1989 when
I was named Division Accounting Manager and since then have
held positj-ons of lncreasing responsibility including:
Customer Servj-ce Manager, General Manager of Customer
Service and Metering, General Manager of Regional
Operations, Vice President of Customer Service and Regional
Operations, and Vice President of Customer Operations. In
2014 I was promoted to my current position of Senior Vice
President of Customer Operations.
W. KLINE, DI
Idaho Power Company
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O. What are your duties as Senior Vice
2 President of Customer Operations?
A. I am responsible for the planning, directing
4 and strategic oversight of a1l- activities within the
5 Customer Operatj-ons organj-zatj-on. The Customer Operati-ons
6 organization includes Customer Operations Engineering and
7 Constructionr ds wel-l as Customer Service and Regional
8 Operations.
O. What is the purpose of your testimony in
10 this proceeding?
11 A. My testimony describes Idaho Power's
1,2 partnership with the Northwest Energy Efficiency Alliance
13 (*NEEA") and how the Company negotiated an agreement to
74 participate in the upcoming 2015-2079 funding cyc1e. I
15 present Idaho Power's request for authority to use the
16 Idaho Energy Efficiency Rider ("Rider") to fund the
Ll Company's continued participation in NEEA.
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O. What j-s NEEA?
A. NEEA is a non-profit organization whose
20 ongoing purpose is to maximize energy efficiency in the
27 Northwest via the acceleration and adoptj-on of energy
22 efficient products, services, and practices through market
23 transformation. NEEA's definition of market transformation
24 is the strategic process of intervening in a market to
25 create lasting change. NEEA is funded by Northwest
W. KLINE, DI
Idaho Power Company
I util-ities, the Energy Trust of Oregon, and the Bonnevill-e
2 Power Administration. This strategi-c al-Iiance is built
3 around recognition that greater market transformatlon can
4 be achieved across Washington, Oregon, Montana, and Idaho
5 by working in concert rather than by working as individual
6 states or organi-zations. This collaboration and pooling of
7 resources has drj-ven greater regJ-onal gains and market
8 transformation success than would have been gained by
9 individual participants' efforts. In addition, NEEA brings
10 regional and national expertise and best practices to
11 Northwest utilities which they might not be able to access
!2 as readily or at lower cost. From 7991-20L3, NEEA has
l-3 delivered L r 024 average-megawatts ("aMW" ) total- regional
L4 energy savings, 398 aMW of which are net market effects
15 energy savings. Net Market Effects are the savings
16 associated with market change and not counted as 1oca11y
Ll incented savings or baseline savings.
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O. Have you been dlrectly involved with NEEA?
A. Yes. I served on the NEEA Board of
20 Directors from 2008 to 2072.
21.O. What do Idaho Power and its customers
22 receive in exchange for participating in NEEA?
23 A. Idaho Power can better leverage its market
24 transformation investment by building on NEEA's pooled
25 resources, suppliers, market research, and program design
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in the four-state area. Because NEEA works in markets
beyond Idaho Power's service area, there is a greater
likelihood that market change in Idaho Power's service area
wiII be rooted i-n a regional market. Idaho Power's
participation in NEEA enables it to infl-uence the direction
of NEEA's activities to bring direct benefit to Idaho
customers. Since Idaho Power first began participating in
NEEA in 1997, Idaho Power's allocated portion of NEEA
savings from L991 through 2013 was 246,753 MWh or 28.2 aMW.
o.What objectives did Idaho Power expect to
achj-eve as it considered participation i-n NEEA's 20L5-20L9
funding cycle?
A. In Case No. IPC-E-10-4, the fdaho Public
Utilities Commission ("Commission"), Commissi-on Staff, and
parties expressed reservations about or outrj-ght oppositj-on
to the near-doubling of NEEA's budget from $20 mill-ion in
prior years to $38 mill-ion in 2010. Idaho Power's annual
share of that was $3,304,560.
As stated on page 6 of Order No. 31080, "The
Commission expects Rider funds to be used judiciously to
ensure customers receive tangible benefits from their
payments to support energy efficiency programs. " While its
customers certainly benefitted from participatj-on in NEEA,
Idaho Power believed it could further i-mprove the value of
its customers' contributions by advocating for an
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alternative funding model that more directly addressed the
needs of fdaho Power's service area. Although fdaho Power
began advocating for a change in NEEA's approach to funding
as far back as 2009, prior to the current 2010-20t.4 funding
cyc1e, a mutually agreeable arrangement coul-d not be met to
change the funding structure for the 2070-2074 funding
cyc1e. After several years of discussion between Idaho
Power and NEEA to develop a lower cost/higher val-ue funding
mechanism failed to yield results, Idaho Power gave notice
of 1ts intent to cease participation once the 2070-20L4
funding cycle ended.
o.When did Idaho Power indicate its intent to
withdraw from future NEEA funding?
A.Idaho Power provided notice to NEEA in late
20L2 of its intent to not participate j-n the next funding
cycle (20L5-2019), identifying NEEA's current funding model
design as a primary concern. Idaho Power believed that
some of the programs and services offered under the NEEA
funding model duplicated services that the Company could
perform at a lower cost or more effectively. As early as
2009, Idaho Power expressed a desire to see a change in the
way NEEA services were offered that woul-d differentiate
"core" services of market transformation activities from
optional servj-ces, whereby utilities coul-d el-ect to support
projects and activities that matched their interests and
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needs. Additionally, at that time, Idaho Power expressed
concerns about the escalating costs in supporting NEEA
regardless of the funding model.
O. Was Idaho Power required to give advance
notice of its intent to not participate in the next funding
cycle?
A. No. Idaho Power was not required to give
NEEA any advance notice regarding its funding intention.
O. Why did Idaho Power give such early notice
of its intent to withdraw from NEEA?
A. Because NEEA has been a long-term and valued
partner in Idaho Power's energy efficiency efforts, Idaho
Power wished to give NEEA enough l-ead time to minimize
disruption to its operatj-ons. This early notlce also
provided enough time for Idaho Power to continue worklng
with NEEA on al-ternative funding model solutions.
O. What actions have taken place since 2072 to
address Idaho Power's concerns regarding the funding model?
A.Multiple meetings were held between NEEA's
executive team members and Idaho Power representatives
durj-ng 2073 to further explore Idaho Power's desire to
optlmize the value derived from NEEA on behalf of its
customers. Idaho Power has a representatj-ve on the NEEA
Board of Directors who also continued to advocate for NEEA
to explore funding model al-ternatives as NEEA advanced
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through its strategic planning process. fn December 2073,
the Idaho Power representative serving as a NEEA Board
member chaired and served on the Alternative Eunding Model-
Working Group Committee (rrAFM Committee" ) of the NEEA Board
of Directors. This AFM Committee provided NEEA's executive
committee with a white paper that identified primary goals
and possible solutions to address funding options.
Ultimately, the AEM Committee's efforts resulted in
unanj-mous approval by the NEEA Board of Directors of a
funding model that provides for NEEA's core funding as wel-I
as optional funding activities.
o.Please describe NEEA's 20L5-2019 Business
Plan ("P1an") and funding model.
A.The 20L5-20L9 Business Plan differs from the
2010-2014 Business Plan by offering optionaf programs and
act j-vities. The Pl-an targets four strategic markets and
focuses on core activities of market transformation -
filling the energy efficiency pipeline and creating market
conditions that will acceferate and sustain the market
adoption of energy efficiency products, services, and
practices in the Northwest. The Pl-an identifies ways to
collaborate and avoid overlap between NEEA activities and
activities performed by local utilities. It provides some
choice and flexibility through options for local delj-very
of certain activities. The Plan also accounts for
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increased l-ocal energy efficiency investments and
capabilitj-es. For more detail on the objectives and
de1iverables of the 2075-2079 PIan, please see Attachment 2
to the Application, NEEA 2015-20L9 Business P1an.
O. What agreement did Idaho Power and NEEA
ultimately reach?
Idaho Power has examined the 2075-2079 Business Plan
and has agreed, subject to regulatory approval, to fund its
share of NEEA's core budget and the Top Tier Trade AlIy
Advanced Training and associated administratj-ve expenses
not to exceed $13,450,835 over the five-year period. As
described in "Attachment A" to the Regional Energy
Efficiency Initiative Agreement ("Agreement"), included as
Attachment 3 to the Application, fdaho Power's five-year
direct funding "all-in" commitment is 8.966 percent. This
assumes all funders participate in all NEEA programs and
activities. Actual or "effective" funding shares wiIl vary
depending on which optional programs and activities Idaho
Power and other funders opt into. Idaho Power has elected
not to fund optional programs for Commercial Real Estate
("CRE") which j-ncludes Existing Building Renewal (*EBR"),
Industrial Technical- Trainj-ng, and optional components of
Specific Market Transformation Activities related to
marketing and stakehol-der support.
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o.
A.
o.Why isn't Idaho Power participating in al-l
NEEA offerings?
A. Idaho Power chose not to participate in the
optional programs and activities where it believes it is
providing or can provide the same services at a lower cost
or more effectively.
Please explain.
I have segmented my response into three
pr-eces.
Comercia]. Real Estate Initiative
The tools NEEA proposes to provide through its CRE
initiative are of questionabl-e val-ue to Idaho Power
customers. NEEA's focus on CRE has historically aligned
with markets that contain a higher density of large
commercial office buildings than exist in Idaho. It
remains unclear if Idaho customers will util-ize the deep
energy retrofit tool- that is under deveJ-opment as a direct
result of NEEA's prior EBR initiative, how complex the tool
will be, and how it will influence the outcome of a
project. Strategic Energy Management ("SEM") tools are
already included in NEEA's core activities in the 20L5-2079
Business PIan and benchmarking that would occur in the CRE
initiative is an industry practice already avail-abl-e
through ENERGY STAR@ Portfolio Manager.
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Idaho Power believes that 1t is better positioned
than NEEA to address the CRE market in its servi-ce area.
Since 2007, NEEA has only engaged two CRE firms in SEM in
Idaho Power's service area through the CRE Market Partners
Program. Whil-e NEEA's original intent through the EBR
initiative was to secure one large deep energy retrofit
project in Idaho, it took years to secure a phased-p1an
project that consists of smaller retrofits extended over a
longer period of time. The Company has a long hJ-story of
engaging with the industry associations, loca1 governments,
districts, service providers, and commercial real estate
firms that NEEA references. Idaho Power's outreach efforts
include support from Idaho Power's Customer
Representatives, memberships in and support for the
Building Owners and Managers Association, International-
Building Operator Association, International Facility
Management Assocj-ation, the U.S. Green Building Council,
and the fntegrated Design Lab ("IDL"), participation in the
Company's energy efficiency programs, creation of local-
success stories, and participation in Boise IDL-related
activities. Idaho Power has worked with IDL to create
leasing sheets that display a bui1ding's energy performance
and promote energy efficiency best practices.
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Industrial Technical Training
Idaho Power believes it can provj-de industrj-al
technical training classes to its customers at a lower cost
than what NEEA can offer. The Company belj-eves it is
better positioned to understand the profiles of its
industrial customers than NEEA and can more effectively
promote training that is tailored to the specific needs of
its industrial customers. Idaho Power has established
relationships with its industrj-al- customers through
outreach by its Major Customer Representatives, its Energy
Efficiency Advisory Group ("EEAG"), its energy efflciency
programs, and demand response program.
Specific Market Transformation Activities Re].ated to
Marketing and Stakeholder Support
Idaho Power believes that NEEA's marketing
activities are a duplication of efforts that can l-ead to
customer confusion. The Company has a Corporate
Communications department that is experienced and effective
at creati-ng and executing marketing campaigns for Idaho
Power customers. Marketing materials developed by NEEA are
designed to accommodate the entire region, and do not
provide the necessary details that bring value to Idaho
Power customers. Coordinating marketing campaigns with
NEEA is difficult and requires more resources than running
internal marketing campaj-gns. Marketing material created
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by NEEA is inconsistent with Idaho Power program
requirements at times, and sometj-mes in conflict with the
Idaho Power brand. NEEA promotions that engage retail
partners in the Company's service area may promote
installers that are not approved through Idaho Power
programs, thereby preventing customers from receiving Idaho
Power incentives.
Idaho Power obtains better loca1 media coverage
gained through public relations' efforts than a non-Iocal
entity such as NEEA because Idaho Power has established
relationships with media outlets in its service area. NEEA
media representatj-ves are not as familiar with Idaho
Power's local markets, service area, ot media outlets, and
therefore, campaigns in Idaho Power's service area are less
effective. Additionally, Idaho Power's media purchase
rates are often lower than the nonprofit rates that NEEA
can obtai-n.
O. Does Idaho Power bel-ieve it is in the best
interest of its customers to move forward with the NEEA
contract as proposed?
A.Yes. The NEEA funders considered critical-
topics during the Plan development such as core activi-ties,
investment guidelines, and overlap of activities when local-
utility capabilities exist. The unanimously-approved 20L5-
20L9 NEEA Business Pl-an provides for investments of up to
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$169 million to achieve energy savings estimated at l-east
1-45 aMW during a five-year cycle. The end result is an
approximate $30 million reduction from the earlier draft
version of the 20L5-2019 P1an, but with similar projected
energy savings to the PIan that was ultimately approved.
Idaho Power's share of the approved 2015-2079 funding is
$13,450,835 or $2,690,761 annuaIly. For the 20L0-2074 NEEA
Business PIan, Idaho Power's funding share was $16,522,800
or $3,304,560 annually. This represents a savings of more
than $3 mil-l-j-on for Idaho Power's customers when compared
to the 2010-20L4 funding cycle agreement approved by
Commission Order No. 31080.
O. Has Idaho Power consul-ted with EEAG
regarding the Company's concerns about the NEEA funding
model and the ultimate resolution of NEEA's 201,5-20L9
Business Pl-an?
A.Yes. Idaho Power explained its position in
regards to NEEA fundj-ng to the EEAG beginning in late 20L2
and provided updates to, and facilitated discussions with,
EEAG throughout 20L3 and 2014. At the February 6, 2014,
EEAG meetj-ng, fdaho Power's representative on the NEEA
Board of Directors updated the EEAG regarding the
conceptual outline of the funding model consj-derations and
the NEEA Board's timeline for the 2015-20L9 Business Plan
development. Once the NEEA Board worked with the NEEA
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executive team to have the draft plan prepared, Idaho Power
held a special topic webinar with EEAG on AprJ-I 24, 20L4,
to discuss the highlights of the 20L5-2019 Business Plan
and seek feedback. Idaho Power also encouraged EEAG
members to attend one of NEEA's public meetings specific to
the proposed P1an, held in varj-ous Iocations in the
Northwest including Boise. On JuIy 3, 201,4, after the NEEA
Board meeting and subsequent approval vote of the 2075-20L9
Business Plan, Idaho Power apprised EEAG members of its
lntent to participate in NEEA's core activities.
o.
approved by the
account for and
A.
NEEA expenses
NEEA funding
participation
report filed
each year.
a.
this case?
A.
If the 20L5-20L9 funding cycle Agreement is
Commission, how does Idaho Power propose to
recover the cost of its participation?
Idaho Power proposes to continue funding
through the Rider. The Company will document
amounts and annual savings resulting from its
in NEEA in the Demand-Side Management annual
with the Commission on or before March 15th of
Does this conclude your direct testimony in
Yes, it does.
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STATE OF IDAHO )
)
County of Ada )
ATTESTATIOII OF
ss.
TESTIIONI
I, [rflarren K1ine, having been duly sworn to testify
state thetruthfully, and based upon my personal knowledge,
following:
I am employed by fdaho Power Company as the Senior
Vice President of Customer Operations and am competent to
be a witness in this proceeding.
I declare under penalty of perjury of the l-aws of
the state of fdaho that the foregoj-ng pre-filed testimony
and exhibit are true and correct to the best of my
information and belief.
AND SWORN to before me this Lflday of
W. KLINE, DI
Idaho Power Company
DArED this fi! OuO of october, 20L4.
SUBSCR]BED
October, 201-4.
KIine
Notary Publi
Residing at:
My commission expi