20160714Comments.pdf

BRANDON KARPEN NECTIVED
DEPUTY ATTORNEY GENERAL
rDAHo pUBLIC UTILTTTES C6MMISST9N r,;i i'ri- il, PH 2: 33
PO BOX 83720 ,-, ,- i-r r{:
BOISE, IDAHO 83720-0074 t,';.,iijS;0H
(208) 334-03s7
IDAHO BAR NO. 7956
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
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-16-03
DETERMINATION OF 2015 DEMAND-SIDE )
MANAGEMENT EXPENDITURES AS ) COMMENTS OF THE
PRUDENTLY INCURRED. ) COMMISSION STAFF
)
COMES NOw the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Brandon Karpen, Deputy Attorney General, and in response to the Notice of
Application, Notice of Intervention Deadline and Notice of Modified Procedure issued in Order
No. 33505 on April 19,2016, in Case No. IPC-E-I6-03, submits the following comments.
BACKGROUND
On March l5,20l6,Idaho Power Company applied to the Commission for an Order
establishing that in 2015, it prudently incurred $35,196,964 in demand-side management (DSM)
expenses, including $28,495,701 in ldaho Energy Efficiency Rider (DSM Tariff Rider, Rider)
expenses, and $6,701 ,263 in demand response program expenses. Generally, a utility incurs
DSM expenses by developing and operating programs that are designed to reduce or shift
customers' energy consumption and improve their efficient use of energy. The Commission will
allow the utility to recover its DSM expenses through rates if the Commission finds that the
expenses were prudently incurred. If the Commission finds any of the DSM expenses were not
STAFF COMMENTS JULY 14,2016
prudently incurred, it will not allow the utility to recover those expenses. The disallowed
expenses will be borne by the utility's shareholders and not by customers.
The Company claims that in 2015, DSM efforts increased the Company's annual energy
savings by 18% and exceeded the savings target specified in the Company's Integrated Resource
Plan. The Company says its DSM efforts saved 162,533 megawatt hours (MWh), including
140,633 MWh from energy efficiency programs and 21,900 MWh from market transformation
initiatives through the Northwest Energy Efficiency Alliance (NEEA). The Company offered its
customers 19 energy efficiency programs, three demand response programs, and several
educational initiatives.
The Company primarily attributes energy savings to commercial/industrial sector DSM
activities (102,074 MWh) and, to a lesser extent, residential sector DSM activities (24,532
MWh), and irrigation sector DSM activities (14,027 MWh). The Company reports it enrolled
enough participants in its demand response programs to provide 385 MW of load shedding
capacity, and that the programs ultimately reduced demand by 367 MW and saved customers
about $1.6 million.
The Company funds its Idaho energy efficiency programs through the Idaho Energy
Effrciency Rider, base rates, and the annual Power Cost Adjustment Mechanism (PCA). It funds
its Idaho demand response programs through base rates and the PCA. The Company states it
incurred $35,196,964 in expenses to develop and run its DSM programs in 2015. The Company
says these expenses include 928,495,701 in Idaho Energy Efficiency Rider expenses and
$6,701,263 in demand response program incentive payments. In addition to these amounts, the
Company incurred program costs of $1,315,032 for the Weatherization Assistance for Qualified
Customers (WAQC) funded through base rates. The Company is not requesting a prudency
determination on the WAQC funds in this case. The Company states it calculated expenses after
several adjustments to amounts set forth in the DSM Report, including an exclusion of $441,856
in Rider-funded labor-related expenses.
The Company's Application also describes the Company's evaluation of its DSM
programs and whether they were cost-effective in 2015. The DSM Report discusses the cost-
effectiveness of the Company's DSM programs and energy savings measures. The Company
says it used the following benefit/cost tests to determine the cost-effectiveness of its energy
efficiency programs and measures: (1) the total resource cost test (TRC); (2) the utility cost test
STAFF COMMENTS JULY 14,2016
(UCT); (3) the participant cost test (PCT); and (4) the ratepayer impact measure test (RIM).t
The Company reports that in 2015 its overall energy efficiency portfolio was cost-effective from
a TRC and UCT perspective with ratios of 2.32 and3.57. Of the Company's Idaho energy
efficiency programs, l2 programs pass the TRC and UCT, one program fails the TRC but passes
the UCT. Two programs fail both the TRC and UCT. All energy efficiency programs with
customer costs pass the PCT. When assessing the cost-effectiveness of its demand response
programs, the Company does not calculate a benefit/cost ratio. Rather, the Company uses a pre-
determined annual value of $ 16.7 million, as established by Commission Order No. 32923. The
Company estimates that the programs would have remained cost-effective if fully dispatched.
The Company reports that independent, third-party consultants provided impact and
process evaluations to verify program specifications, recommend improvements, and validate
program-related energy savings. In 2015, impact evaluations were completed on six programs
and process evaluations were completed on three programs.
Finally, the Company's Application describes the input that various stakeholders,
including the Company's Energy Effrciency Advisory Group, had in developing the Company's
DSM activities. The Company notes that stakeholder input in 2015 led the Company to increase
the scope and reach of its marketing efforts for its DSM programs.
STAFF REVIEW
Staff has reviewed the Company's Application and accompanying testimony and exhibits
of Connie Aschenbrenner, along with the 2015 DSM Annual Report and additional information
provided by the Company. Based on its review, Staff is generally supportive of the Company's
DSM expenses and programs. In the comments below, Staff addresses the Company's DSM
Rider account and expenditures, demand response programs, low-income programs, and program
management issues. Staff notes that the absence of any discussion on other issues presented in
the 201 5 DSM Annual Report should not be construed as Staff support for those issues.
I The forr tests examine a program's cost-effectiveness from different perspectives. In summary, the TRC
compares program administrator costs and customer costs to supply-side resource savings, and assesses whether the
total cost of energy and capacity in a utility's service territory will decrease. The UCT compares program
administrator costs to supply-side resource savings, and assesses whether the utility's cost of energy and capacity in
its service territory 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
rates due to changes in utility revenues and operating costs caused by an energy efficiency program. Under the first
three tests, a program or measure is deemed cost-effective if it has a benefit/cost ratio above 1.0.
STAFF COMMENTS JULY 14,2016
Financial Review
Staff performed an audit of the Company's DSM expenses and internal processes for
paying incentives to customers. With the exception of low income programs, as discussed in
greater detail below, Staff found that expenses were well documented and controls were in place
designed to eliminate improper payment of incentives. Based upon Staff s audit, Staff believes
the Company's DSM rider expenses to be prudent without any adjustments, and recommends
that the Commission rule that the Company prudently incurred $35,196,964 in2015 DSM
related expenses. This amount consists of $28,495,701 in Rider expenses and $6,701 ,263 in
Demand Response (DR) program expenses that have been included for recovery in the 2016
Power Cost Adjustment (PCA).
Staff calculated the DSM Rider account balance as of December 31, 2015, as follows:
2015 Beginning Rider Balance $ (781,078)
2015 Funding plus Accrued Interest 39.800.889
Total 2015 Funds 39.019.811
2015 Expenses (28,495,701)
Transfer to PCA (Commission Order No. 33306) (3.970.036)
2015 Ending Rider Balance $_6J54JZ
The $3,970,036 transfer to the PCA maintains revenue neutrality associated with the June
2014 update to the normalized level of net power supply expenses OIPSE) included in base rates
and approved by Order No. 33000. The Commission approved this annual transfer in the
Company's 2015 and 2016 PCA cases. See Order Nos. 33306 and33526. In2}l3,Idaho Power
proposed, and the Commission approved, an increase of approximately $100 million to the net
power supply expenses base level effective June l, 2014. Order No. 33000. The Commission
ordered the Company to "implement the change to base level NPSE so it has no net impact to the
overall revenue collected through customer rates and is revenue neutral for all classes of Idaho
customers. 1d Because the DSM Tariff Rider is calculated as a percentage of base rates (4
percent), the inclusion of approximately $100 million dollars in base rates would generate an
additional $4 million in revenue through the DSM Tariff Rider. To maintain revenue neutrality,
the Commission has approved these annual transfers from the DSM Tariff Rider account to be
refunded through the PCA until the next general rate case.
In the 2015 DSM Prudency Review, the Commission encouraged the Company, Staff,
and other stakeholders to monitor the Rider balance and apprise them of any positive or negative
STAFF COMMENTS JULY 14,2016
trends. Likewise, Staff has closely monitored the DSM Rider revenue and expenses and between
2013 and 2015, the Company has collected, on average, approximately $13.5 million dollars
more each year than it spends through the Rider. The trend has continued in 2016, where Rider
revenues exceeded expenses by nearly $4 million through May. The following table illustrates
annual Tariff Rider revenues and expenses for 2013 -May 2016.
Calendar Year Rider Revenue Rider Expenses
20t3
20r4
20t5
$ 37,005,370
$ 38,088,1l3
$ 39,800,888
$ 20,160,075
$ 25,556,088
$ 28,494,548
$ 10,521,2822016 (through May) $ 14,451,227
While Staff has expressed concerns to the Company related to the mismatch of Rider
funding and expenses in every Energy Efficiency Advisory Group meeting, the Company has
repeatedly stated, and confirmed again that it has no near-term plans to adjust the Rider
percentage. See Response to Production Request No. 6.
Absent the Company aggressively and expeditiously pursuing additional cost-effective
DSM resources, Staff believes the rider percentage should be reduced. Staff recommends that
the Commission direct the Company to work with Staff and other interested parties to establish
an appropriate Rider rate that aligns the Rider revenues with forecasted expenses through 2017
while also refunding any surplus balance. The parties should address the disposition of surplus
Rider funds, additional programs that may be in the Company's pipeline, and adjustments to
screening practices that could increase program offerings. Because the Rider continues to collect
more revenue than needed to cover DSM program expenses, and the EEAG has been ineffective
in addressing the Rider surplus issue, Staff recommends the issue be addressed as part of this
case. Specifically, Staff believes the Commission should direct the Company and interested
parties to collaborate and submit to the Commission within 90 days a mutually agreeable
solution to the Rider surplus issue. Staff notes that an Energy Efficiency Advisory Group
meeting is scheduled for August 30, 2016. While Staff believes the EEAG is effective in
addressing a variety of other DSM issues, time constraints do not allow the in-depth discussion
necessary to resolve the issues associated with disposition of rider surplus revenues. Staff
STAFF COMMENTS JULY 14,2016
believes that EEAG members may choose to participate in the collaborative process and progress
in resolving the issue can be reported at EEAG meetings.
Demand Response
In addition to the audit of the DSM Rider account, Staff also reviewed the incentive
payments from the Company's 2015 demand response programs and those programs'
effectiveness. Total available capacity of the Company's three demand response programs was
385 MW, providing actual non-coincident load reduction of 367 MW. Staff believes the
programs are critical in delaying the need for more expensive peaking generation, and that
despite some shortcomings in the self-administration of the FlexPeak program, the Company
adequately operates them. Staff thus recommends that the Commission find that the Company
has prudently paid $6,701,263 in customer incentives from these programs.
Absent demand response, the Company estimates its peak load would have been
approximately 3,433 MW, which would have exceeded the previous all-time system peak of
3,407 MW. However, with the use of demand response progrtrms, the actual peak load during
2015 was 3,320 MW.
In November 2013, the Commission approved an agreement settling an inquiry into the
Company's demand response programs. See Order No. 32923. The settlement, among other
things, stated that Idaho Power would not actively market its demand response programs to new
customers. At the time, the need for demand response was minimal and every attempt was made
to keep costs low. However, Staff now believes that considering the increase in peak loads, the
rapid attrition in the A/C Cool Credit program, and the number of A/C switches stockpiled in the
Company's inventory, marketing of this program to new customers is now appropriate.
In June 2016, participation in the A/C Cool Credit program declined to 28,891
participants, a decrease of 22 percent from a June 2012 peak of 36,906 participants.
Additionally, the Company currently has 4,529 switches in stock for use in the A/C Cool Credit
program, valued at approximately $680,000. Staff recognizes that the A/C Cool Credit program
does not provide the same magnitude of capacity relief as the other programs (36 MW compared
to 305 MW for Irrigation Peak Rewards). However, because the guiding concepts of the
Demand Response workshops and the Demand Response Settlement Agreement were to use
existing demand response resources when possible, have demand response offerings to all three
customer classes, and to take long-term outlooks, Staff believes programs should not see attrition
STAFF COMMENTS JULY 14,2016
rates of the magnitude of this residential program. Staff thus recommends that the Company
increase marketing of the A/C Cool Credit program in order to reduce the stock pile of inventory
of the A/C switches to a replacement level only, and to minimize any further attrition in the
program. Additionally, Staff recommends that the Company reevaluate the need for marketing
its other demand response programs during the Company's Integrated Resource Planning (IRP)
Advisory Committee meetings leading up to the development and filing of its 2017 IRP.
Low Income Programs
Idaho Power currently has two low-income programs: Weatherization Assistance for
Qualified Customers (WAQC) and Weatherization Solutions for Eligible Customers
(Weatherization Solutions). WAQC is an income-based2 program that provides participants in
electrically-heated homes with measures aimed at increasing energy efficiency and safety. Many
participants' monthly electric bills are also reduced, which subsequently lowers arrearages. The
Weatherization Solutions program is designed to mirror the WAQC program, providing
assistance to low-income customers who don't qualif,,3 for WAQC with weatherization services.
Weatherization Solutions is funded through the Company's DSM tariff rider, while WAQC
program costs are included in base rates.
The Company provides funds to five regional Community Action Partnership (CAP)
agencies operating in Idaho Power's service territory. The CAP agencies determine if
participants are qualified to take part in the programs as well as install measures in participants'
homes. WAQC funds are used in conjunction with federal funding provided by the U.S.
Department of Energy's Weatherization Assistance Program (WAP) and the U.S Department of
Health and Human Services' Low Income Home Energy Assistance Program. During the 2015
program year, Idaho Power provided the regional CAP agencies with $ 1,3 15,032 in funding for
the completion of 243 units.
Unlike WAQC, Weatherization Solutions contracts with entities located throughout Idaho
Power's service territory to provide weatherization services to qualifying participants. In some
2 In order to be income-qualified for WAQC, the participant must be at or below 200Yo of the federal poverfy level.
3 In order to be income-qualified for Weatherization Solutions, participants must be between 175%o and250oh of the
federal poverfy level. Participants who qualiff for both programs can only receive assistance through one or the
other.
STAFF COMMENTS JULY 14,2016
instances, Idaho Power contracts with for-profit affiliates of the regional CAP agencies. In 2015,
$1,243,269 was used to complete 171 units under the weatherization solutions program.
Upon review of information provided by the Company, Staff is concerned that the
Company may not be receiving adequate documentation from CAP agencies. In some instances,
sufficiently detailed information about what measures were installed, the cost of each measure
and associated labor costs were not properly identified. It was also unclear to Staff how costs are
allocated to the Company, making it difficult to determine if utility funds are being used
appropriately. Staff is also concerned that without complete information pertaining to installed
measures, the Company cannot adequately estimate energy savings.
Staff will continue its review and work with the Company to develop a better
understanding of how the weatherization programs are currently administered. Staff recognizes
that only Weatherization Solutions is funded through the DSM tariff rider, but maintains that it
would be reasonable to continue its analysis of both the WAQC and Weatherization Solution
programs outside of this prudency determination case.
Program Management
The Company continues its recent trend of investigating and deploying new programs
and implementing a more robust marketing strategy. As a result, it exceeded its IRP targets and
continues to make progress towards pursuing all cost-effective DSM. For example, the
Company continued its successful shade tree program, frnalized plans to give away free drying
racks to reduce clothes dryer use, and added a Water Supply Operator Certification to its very
successful Custom Efficiency Strategic Energy Management training cohorts. The Company
also maintained, and in some cases expanded, its revitalized marketing efforts which now
include web, social media, television commercials and public radio in addition to the
longstanding use of bill stuffers. The Company also streamlined the deployment of demand
response at its dispatch center, which increases value of the Company's investment in that
resource. The Company also began providing a voting member to the Regional Technical Forum
for the first time ever. This is a significant contribution to the region and gives the specific needs
of Idaho Power's customers more visibility and attention in regional conversations.
Additionally, the Company launched a multi-family direct install project in order to target
the difficult-to-reach apartment dwellers market. Measures for this project are free for the
participant. Idaho Power funds the measures through the DSM Tariff Rider and works with the
STAFF COMMENTS JULY 14,2016
building owner and facility manager on installation. One multi-family project is currently
underway, and the Company has indicated the pilot may be expanded into a fuIl-fledged program
if the initial project goes well. Staff supports this program and expects the Company will
capitalize on the pilot to build and maintain an on-going multi-family program.
Despite continued progress, more work remains to be done. Staff is concerned that the
Company has been slow to move forward on two cost-effectiveness and program-related
initiatives, as well as opportunities for development into new areas that could help the Company
maintain pace with ever-advancing industry standards. For example in late 2014, the Company
committed to studying the value of deferred transmission and distribution investments, but few
progress updates have been shared and no preliminary or final results have been provided. The
2015 DSM report states that findings will not be available until mid or late2016, which is almost
two years after the initial announcement. Staff notes that other utilities have included the value
energy efficiency has on delayed transmission and distribution investment in their avoided costs
and have for quite some time. Staff requests that the Company provide a progress update with
preliminary results of the study to the EEAG at the August 30,2016 meeting.
In a step towards reducing confusion and lowering barriers to participation for its
Commercial and Industrial (C&I) programs, in early 2015, the Company announced that it would
combine its three C&I programs into a single, customer-facing program. The combined program
would be more intuitive and reduce confusion for customers who have the interest and available
capital to participate, but may not be clear about how to proceed. Other utilities, including other
Idaho utilities, have successfully moved to this consolidated program model. But after the initial
announcement, progress for Idaho Power was slow. The Company recently implemented the
new program delivery system after receiving approval from the Oregon PUC. Waiting for
Oregon approval was reasonable in order to ensure the changes were comparatively made on a
system basis, but it took ayear and a half to combine three programs. Rocky Mountain Power
made a similar shift in less than 6 months.
Opportunities for cost-effective energy efficiency also exist in areas where the Company
has taken little or no action. For example, Idaho Power has had significant success with its large
C&l customer behavioral efforts, including its industry-specific training cohorts and strategic
energy management work. However, the Company has done little outside of broad education
efforts to advance residential behavioral efficiency. The 2015 DSM Annual Report (page ),42)
reads, "[t]he Residential energy efficiency initiative will continue to work with the [Program
STAFF COMMENTS JULY 14,2016
Planning Group] to explore behavioral programs that may include enhancements to kit programs,
increased promotion of myAccount, home energy reports, or a pilot program to test other
behavioral messages." Staff is encouraged by this announcement, but remains wary of continued
delays that push the Company further behind its peers in this area. Staff notes that Avista and
Rocky Mountain Power launched cost-effective residential behavior programs years ago, and
peer utilities in neighboring states already have residential behavior programs in place. Such
programs can include home energy reports, and cost and usage notifications to help customers
plan for bills. Regular cost and usage notifications by email and text reminds customers to be
mindful of their usage over the month. Such programs generally increase customer satisfaction
by providing useful information and preventing billing surprises.a Many cell phone companies
have adopted a similar system for alerting customers about data usage.
Another significant, but stalled area of opportunity is small and medium business
efficiency. Small business customers often lack the capital, time, and personnel to undertake
energy efficiency. Idaho Power investigated a direct install program to overcome these barriers,
but has decided not to move forward with a specific program. The Company maintains that it is
too difficult to explain the criteria it uses to determine if potential participants qualiff. Because
small business customers are one of only two customer classes that pay into the Fixed Cost
Adjustment Mechanism, the Company should aggressively pursue options to include small
businesses in the Company's DSM offerings. Staff believes that communication challenges can
be effectively overcome and should not be a barrier to introducing new programs.
To make its program offerings more effective, Staff encourages Idaho Power to
investigate practices used by other utilities. One possibility is using data analytics to identify
energy efficiency opportunities. This approach could reduce the need for expensive and labor
intensive on-site visits. Another option is exploring financing mechanisms to overcome the up-
front capital costs that many customers face as a barrier to cost-effective energy efficiency
investments. The Company could build relationships with local lenders to provide a seamless
path for small business and residential customers to invest in efficiency. The Office of Energy
Resources offers a low-interest loan program, but it's not clear that Idaho Power has fully
4For example NV Energy offers its customers "Weekly Cost to Date Alerts," providing them with usage and cost
data over the month to help plan for billing. See NV Energy Customer MyAccount webpage,
hffps://www.nvengergy.com/myaccount/ ("The MyAccount Alert Center").
STAFF COMMENTS l0 JULY 14,2076
integrated that option in its marketing materials or trade ally training. Some utilities offer on-bill
financing, meaning the efficiency investment is added to the customer's bill and it is repaid on a
monthly basis. The finance charge is assigned to the meter, so if the house sells or the tenant
changes, the new occupant (who is receiving the benefit of the measure) pays the charge.
STAFF RECOMMENDATIONS
Based upon Staff s audit and analysis, Staff recommends the Commission:
l. Find that the Company prudently incurred $35,196,964 in2015 DSM related
expenses. This amount consists of $28,495,701 in Rider expenses and $6,701 ,263 in Demand
Response program expenses that have been included for recovery in the 2016 PCA.
2. Direct ldaho Power, Staff, and interested parties to collaborate to form
recommendations to set the Energy Efficiency Tariff Rider rate to a level that appropriately
aligns revenue and expenses and submit to the Commission within 90 days a mutually agreeable
solution to the Rider surplus issue.
3. Direct Idaho Power to increase its marketing efforts for the A/C Cool Credit
program to utilize the inventory of A/C switches and stop the attrition in that program.
Additionally, the Company should be prepared to evaluate the need to market the remaining
programs and present its findings to the Integrated Resource Planning Advisory Committee for
recommendations in preparation of the 2017IRP.
Respectfully submitted this t qrY day of July 2016.
Technical Staff: Donn English
Stacey Donohue
Johnathan Farley
i :umisc/comments/ipce I 6.3bkdesdacjf comments
llSTAFF COMMENTS JULY 14,2016
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I4TH DAY OF JULY 2016,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
CASE NO. IPC-E-I6-03, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWNG:
LISA D NORDSTROM
LEAD COUNSEL
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-mail : [e-mail]
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH ST
BOISE ID 83702
E-mail : [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: [e-mail]
CONNIE ASCHENBRENNER
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail: [e-mail]
dockets@ idahopqwe{.com
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE TD 83702
E-mail: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE