20160914final_order_no_33583.pdf

Office of the Secretary
Service Date
September 14, 2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF 2015 DEMAND-SIDE
MANAGEMENT EXPENDITURES AS
PRUDENTLY INCURRED
)
) CASE NO. IPC-E-16-03
)
)
) ORDER NO. 33583
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On March 15, 2016, Idaho Power Company applied to the Commission for an Order
establishing that the Company prudently incurred $35,196,964 in demand-side management
(DSM) expenses in 2015. Subsequently, the Commission issued a Notice of Application, and set
deadlines for intervention and the filing of comments. See Order Nos. 33504, 33505. The
Industrial Customers of Idaho Power (ICIP) and Idaho Conservation League (ICL) intervened as
parties. ICIP and Commission Staff filed comments, and the Company filed a timely reply. No
other comments were received.
After thoroughly reviewing the record, we issue this Order approving the Company's
Application, with direction, as discussed below.
THE APPLICATION
As it has in previous DSM expenditure filings, the Company broke its Application
into sections addressing: (A) DSM Savings; (B) DSM Expenses; (C) DSM Cost-Effectiveness
and Evaluations; and (D) Stakeholder Input. Each section is summarized below.
A. DSM Savings
The Company stated that in 2015, it offered its customers 19 energy efficiency (EE)
programs and 3 demand response (DR) programs. The Company also participated in Northwest
Energy Efficiency Alliance (NEEA) market transformation activities and several educational
initiatives. The Company reports that these efforts achieved annual energy efficiency savings of
162,533 megawatt hours (MWh) on a system-wide basis, exceeding the savings target in the
Company's Integrated Resource Plan (IRP). Broken down, the 2015 savings consist of 24,532
MWh from the residential sector, 102,074 MWh from the commercial/industrial sector, 14,027
MWh from the irrigation sector, and about 21,900 MWh from market transformation initiatives.
The Company also enrolled enough participants in DR programs to provide 385 MW of load
shedding capacity. These DR programs ultimately reduced demand by 367 MW and saved
customers about $6.7 million.
ORDER NO. 33583 l
B. DSM Expenditures
The Company reported funding for Idaho DSM programs from several sources. The
Company funds its EE and DR programs through the EE Rider, base rates, and the annual Power
Cost Adjustment (PCA). In its Application, the Company asks the Commission to find that it
prudently spent $35,196,964 in 2015 to develop and run its DSM programs. This amount is
comprised of $28,495,701 in EE Rider expenses, and $6,701,263 in DR program incentive
payments. The Company noted that its prudency request includes no request for $441,856 in
labor-related expenses, and an adjustment relating to $1,153 in Energy House Calls Program
incentives that should have been charged to the Oregon Rider and was corrected in 2015 via an
accounting entry.
C. DSM Cost-Effectiveness and Evaluations
The Company stated that independent, third-party consultants conducted process
evaluations on three programs and impact evaluations on six programs to verify program
specifications, recommend improvements, and validate energy savings estimates. The Company
also conducted its own cost-effectiveness analyses on each program.
The Company stated that it measured cost-effectiveness under: (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 test (RIM). 1 The Company ultimately concluded that its overall EE
portfolio was cost-effective under the TRC and UCT. Of the Company's 16 Idaho-based EE
programs, 11 programs passed the TRC and UCT, two programs failed the TRC but passed the
UCT, and three programs failed both the TRC and UCT. Further, all of the EE programs with
customer costs passed the PCT.
In addition to the Company's EE portfolio, the Company also had a $16.7 million DR
portfolio. The Company estimates that its DR programs would have remained cost-effective if
fully dispatched.
1 These tests examine cost-effectiveness from different perspectives. The TRC compares program administrator
costs and customer costs to utility resource savings, and assesses whether the total resource 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 the utility's resource cost 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 rates due to changes in utility revenues and operating costs caused by an
energy efficiency program. Under these tests, a program or measure is deemed cost-effective if it has a benefit/cost
ratio above 1.0.
ORDER NO. 33583 2
D. Stakeholder Input
To assist with the development of DSM activities, the Company consults with its
Energy Efficiency Advisory Group (EEAG) and other stakeholders. The Company reported that
in 2015, it participated in four meetings and a conference call with EEAG. The Company
claimed that EEAG input in 2015 led the Company to increase its marketing efforts for its DSM
programs.
JURISDICTION
The Company is an electrical corporation as defined by Idaho Code § 61-119, and a
public utility subject to the Commission's jurisdiction pursuant to Idaho Code § 61-129. The
Company's duties and burden in presenting this Application to the Commission are set forth in
Title 61 of the Idaho Code, and the Commission's Rules of Procedure, IDAPA 31.01.01.000, et
seq. In particular, the Commission looks to Chapter Three of Title 61 in reviewing this
Application to determine whether the proposed action is "just and reasonable," or should be
"prohibited and declared unlawful." See, e.g., Idaho Code§§ 61-301 through-315.
DISCUSSION AND FINDINGS
The parties' comments and recommendations, and the Company's reply are
summarized by issue below. The Commission's findings and conclusions follow the discussion
of each issue.
A. Prudency of DSM Expenditure
As previously stated, the Company asked the Commission to find that it prudently
incurred $35,196,964 in DSM expenses, including $28,495,701 in EE Rider expenses, and
$6,701,263 in DR program expenses for recovery in the 2016 PCA. Staff supported this request
and recommended the Commission find the Company prudently incurred its 2015 DSM
expenses. Staff Comments at 3. ICIP did not support or oppose the Company's request, but
instead recommended allowing the Company to recover expenses that the Commission deemed
were prudently incurred, and not allow the Company to recover those that were imprudently
incurred. See ICIP Comments at 1-2.
Commission Findings: Based on our review of the record, and the undisputed
comments of the parties, we find that the Company prudently incurred $35,196,964 in 2015
DSM-related expenses. Specifically, we find that the recovery of $28,495,701 in DSM Rider
ORDER NO. 33583 3
account expenses, and $6,701,263 in DR program expenses (included for recovery in the 2016
PCA) is just and reasonable.
B. EE Rider Balance and Surplus
Staff and ICIP both provided comments on the EE Rider balance. Both suggest that
the Company work to remedy the mismatch between revenue and expenses associated with the
Rider and its large surplus. Staff recommended that the Rider percentage be reduced and the
surplus refunded to customers and that the Company work with stakeholders to redesign the
Rider percentage and make use of the Rider balance surplus. Staff requested that the
Commission direct the Company to work with stakeholders to resolve the surplus issue within 90
days. In addition to advocating for a reduction to the Rider percentage, ICIP recommended that
future transfers of Rider funds to the PCA should cease.
Staff calculated the EE Rider account's balance as of December 31, 2015, as follows:
2015 Beginning Rider Balance
2015 Funding plus Accrued Interest
Total 2015 Funds
2015 Expenses
Rider Transfer to PCA
2015 Ending Rider Balance per Report
$(781,078)
39,800,889
39,019,811
(28,495,701)
(3,970,036)
$6,554,074
See Staff Comments at 4. Staff has monitored the Rider revenues and expenses since 2013, and
reported that the Company has collected, on average, over $13 .5 million dollars more each year
than it spends through the Rider. Staff Comments at 5. Staff suggests that this pattern will
continue absent a rapid deployment of DSM resources or an adjustment of the Rider percentage.
Rider revenues from January through May in 2016 have already exceeded expenses by nearly $4
million.
In its reply, the Company agreed that the Rider has consistently created a surplus, and
stated that it is willing to work with Staff and other interested parties to adjust the Rider
percentage. However, the Company argued that the 90-day timeline advocated by Staff is
premature, stating that it is planning to file its Integrated Resource Plan (IRP) in June 2017, and
that changes to the Rider should coincide with typical annual rate adjustments after the IRP is
filed with the Commission.
Commission Findings: There is no dispute that the collection of DSM rider revenues
has exceeded DSM rider expenses by millions of dollars each year over the past four years. It is
ORDER NO. 33583 4
illogical to continue to allow the Company to recover DSM revenues from customers that far
exceed DSM expenses. Consequently, we find it reasonable to direct the Company to examine
an adjustment to the Rider percentage. We further find no reasonable basis to wait for the
Company's other annual rate adjustments to effectuate a change.
We note Idaho Power's willingness to work with Staff and other stakeholders in
adjusting the Rider. Following collaboration, we direct the Company to submit a proposal for
revising its Rider percentage to this Commission no later than Friday, December 30, 2016.
ICIP's suggestion that DSM Rider transfers to the PCA be eliminated is misplaced.
This annual transfer occurs to ensure revenue neutrality associated with a previously-approved
increase in net power supply expenses (NPSE). See Order Nos. 33000, 33306, and 33526.
C. Demand Response Programs
Staff reviewed the effectiveness of incentive payments from the Company's 2015
demand response programs. Staff stated that the programs were successful in delaying the need
for more expensive peaking generation and that the Company adequately operated the programs.
Staff thus recommended the Commission find that the Company prudently paid $6,701,263 in
customer incentives from these programs.
Staff also noted the November 2013 settlement agreement regarding the Company's
demand response programs, which stated that Idaho Power would not actively market its demand
response programs to new customers. See Order No. 32923. This proviso was part of the
agreement to keep down costs. However, Staff opined that conditions have changed, and
recommended that marketing of the programs to new customers is now appropriate.
Specifically, Staff pointed out increases in peak loads, rapid attrition from the Company's A/C
Cool Credit program, and a large number of A/C switches stockpiled in the Company's
inventory.
The Company argued against increasing marketing efforts beyond what is in the 2013
settlement agreement. It recognized the increase in peak loads, but contends that the increase is
not to the magnitude that warrants new spending for marketing. Further, the Company stated
that attrition in the A/C Cool Credit program is attributable mostly to temporary suspension of
the program in 2012-2013, and that current attrition levels are much lower. Finally, the Company
claimed that the existing stock of switches is warranted, and will likely be used within the next
year and a half.
ORDER NO. 33583 5
Commission Findings: After reviewing the comments of Staff and the Company's
reply, we find that the Company prudently paid $6,701,263 in customer incentive payments. We
further find that the Company's marketing efforts are consistent with the 2013 settlement
agreement approved by the Commission in Order No. 32923. We decline to direct the Company
to market to new customers. Although demand response programs lost a small number of
participants in 2015, participation in 2016 has increased. Instead, we direct the Company to
continue to monitor attrition and switch inventory in anticipation of its next DSM prudency
filing.
D. Low-Income Weatherization Programs
Idaho Power currently has two low-income programs: Weatherization Assistance for
Qualified Customers (W AQC)2 and Weatherization Solutions.3 Both programs provide
participants in electrically-heated homes with measures aimed at increasing energy efficiency
and safety. W AQC program costs are included in base rates, and Weatherization Solutions is
funded through the Company's DSM tariff rider. The Company operates its low-income
programs through five regional Community Action Partnership (CAP) agencies within Idaho
Power's service territory. The CAP agencies both determine if participants are qualified, and if
so, install the measures in participants' homes. During the 2015 program year, Idaho Power
provided $1,315,032 in W AQC funding for the completion of 243 units. During that same time,
the Company provided $1,243,269 in Weatherization Solutions funding for the completion of
171 units. Notably, unlike WAQC, Weatherization Solutions is operated with a larger variety of
entities located throughout the Company's service territory, including for-profit affiliates of the
regional CAP agencies.
Staff expressed concern that the Company "may not be rece1vmg adequate
documentation from CAP agencies." Staff Comments at 8. The insufficient documentation
makes it difficult for Staff to determine if funds are being used appropriately. Staff suggested
that the Company be directed to work with Staff on both programs to develop better records and
improve program administration generally.
2 Qualification for W AQC is limited to customers who earn 200% of the federal poverty level or less.
3 Qualification for Weatherization Solutions is limited to customers who earn between 175% and 250% of the
federal poverty level. Participants who qualify for both programs can only receive assistance through one or the
other.
ORDER NO. 33583 6
The Company disputed Staff's assertion regarding inadequate records. Rather, the
Company stated that it provided "voluminous data" for all its weatherization projects including
material costs, labor, and support costs. Reply Comments at 7. The Company did commit to
working with Staff to develop a better understanding of the programs and recordkeeping.
Commission Findings: The Commission appreciates the Company's efforts to
document and support the effectiveness of its low-income weatherization programs. In order to
further guard against the potential for waste, fraud and abuse -and noting the willingness of the
parties we direct the Company to work with Staff in determining how to obtain the most usable
data from the participating CAP agencies. We encourage the Company to continue to refine its
documentation regarding the use of weatherization funds.
E. Program Management and Expansion
The Company rolled out several new programs in 2015, including a multi-family
direct install project targeting difficult-to-reach apartment dwellers, Horne Energy Audits
marketing and education programs. The Company also expanded its Shade Tree program, and
maintained or expanded some marketing efforts. Staff reported that it is generally encouraged by
the Company's efforts, but is concerned the Company has been slow to move forward on
implementing or expanding programs. In particular, Staff pointed to delays in the study of value
of deferred transmission and distribution investments, combination of commercial and industrial
(C&I) programs, expansion of C&I behavioral programs, and small and medium business
programs. In sum, along with its support for the Company's efforts, Staff reported that there are
a number of missed opportunities to expand its DSM offerings including typical industry
programs such as residential behavioral, small-medium business efficiency programs, and
expanded C&I offerings. Staff encouraged the Commission to direct the Company to work with
Staff and the EEAG going forward, and evaluate programs by peer utilities in expanding its
portfolio.
Notably, ICIP argued that the Company's surplus Rider balances and high
cost/benefit test ratios indicate "that there is ample room" to expand C&I programs, add further
programs, and reduce the collection percentage going forward. ICIP Comments at 6.
In reply, the Company related to the Commission the variety of its current DSM
offerings. The Company emphasized its educational initiatives, the expansion of its my Account
portal, energy savings and efficiency kits, and components of the Home Energy Audits.
ORDER NO. 33583 7
Company Reply at 10-1 l. Nonetheless, the Company commented that it will continue to seek
new opportunities in residential behavioral-based opportunities, and work with the EEAG going
forward.
Commission Findings: We appreciate the Company's efforts and commitment to
investigating other opportunities to implement residential behavioral programs and expanding its
EE program offerings overall. We find it reasonable for the Company to work with Staff and the
EEAG to develop a DSM portfolio that considers more programs offered by peer utilities in
neighboring states. In particular, we encourage the Company to consider residential behavioral
programs and small-medium business efficiency programs in expanding its DSM portfolio.
SUMMARY
Based on our review of the record and the discussion above, we find that the
Company prudently incurred $35,196,964 in 2015 DSM-related expenses consisting of
$28,495,701 in EE Rider expenses, and $6,701,263 in DR program expenses that have been
included for recovery in the 2016 PCA. We further find it fair, just, and reasonable for the
Company to take such other actions as directed in the body of this Order.
ORDER
IT IS HEREBY ORDERED that Idaho Power's 2015 DSM expenditures are
approved as prudently incurred in the amount of $35,196,964 as described above.
IT IS FURTHER ORDERED that the Company take such actions as directed in the
body of this Order.
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.
ORDER NO. 33583 8
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of September 2016.
ATTEST:
J~fttn D. Jewtl1V
C~mmission
1
Secretary
0:IPC-E-16-03 bk2
ORDER NO. 33583
ERIC ANDERSON, COMMISSIONER
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