20171016final_order_no_33908.pdf

Office of the Secretary
Service Date
October 16,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANYFOR A )CASE NO.IPC-E-17-03
DETERMINATIONOF 2016 DEMAND-SIDE )MANAGEMENTEXPENDITURESAS )ORDERNO.33908
PRUDENTLYINCURRED )
On March 15,2017,Idaho Power Company applied to the Commission for a
determination that the Company prudently incurred its demand-side management (DSM)
expenses in 2016 and incremental DSM labor expenses from 2011-2016.More specifically,the
Company asked to recover about $40 million in deferred costs for its 2016 DSM programs,and
about $1.86 million in deferred costs for incremental DSM labor expenses from 2011-2016.
DSM generally refers to utility activities and programs that encourage customers (i.e.,on the
demand-side as opposed to the generation-side)to use less overall energy or use less energy
during peak usage hours,thus improving their efficient use of energy.
The Commission issued a Notice of Application and Notice of InterventionDeadline,
and set deadlines under Modified Procedure.Order No.33737.The Commission granted timely
petitions to intervene by the Industrial Customers of Idaho Power (ICIP),Community Action
Partnership Association of Idaho (CAPAI),and Idaho Irrigation Pumpers Association,Inc.
(IIPA).Order Nos.33752 and 33754.Staff,ICIP,and CAPAI timely filed comments,and Idaho
Power timely filed reply comments.Also,Idaho Conservation League filed public comments.
The Commission received no other public comments,nor comments from IIPA.CAPAI timely
petitioned for intervenor funding,whichno party opposed.
The Commission now grants the Company's request in part,denies in part,and grants
CAPAI's request for intervenor funding,as more fully described below.
BACKGROUND
The Commission has "consistently stated that cost-effective DSM programs are in the
public interest and has admonished electric utilities operating in the State of Idaho to develop
and implement DSM programs in order to promote energy efficiency."Application at 2 (quoting
Order No.32113 at 8).To furtherthe Commission's stated objectives,the Company asserted it
"implements and manages a wide range of opportunities for its customers to participate in DSM
activities,to be informed about energy use,and to use electricity wisely."Id
ORDER NO.33908 1
The Company uses the followingbenefit/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 (UCT);(3)the participant cost test (PCT);and (4)the ratepayer impact measure
test (RIM).Application at 3.The four 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 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 utility bills will increase.The PCT compares the costs and benefits of the
customer installingthe measure,and assesses whether program participants will benefit over the
measure's life.The RIM measures the impact to customer bills or 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.
The Company started its modern DSM programs in 2002.2016 DSM Annual Report
at 1.Per Order No.29419,the Company files a DSM report each year.To recover costs from its
programs,the Company must request and obtain the Commission's finding that such costs were
reasonably and prudently incurred.See Order No.29103.
THE APPLICATION
The Company's 2016 DSM Annual Report includes a detailed evaluation of its DSM
programs and whether they were cost-effective in 2016.Idaho Power stated that in 2016,DSM
efforts increased the Company's annual energy savings by 4%and exceeded the savings target
specified in the Company's Integrated Resource Plan.Application at 3-4.The Company stated
its DSM efforts saved 170,792 megawatt hours (MWh),including 24,616 MWh of energy
efficiency market transformation savings through the Northwest Energy Efficiency Alliance
(NEEA).Id.The Company offered its customers 22 energy efficiencyprograms,three demand
response programs,and several educational initiatives.AschenbrennerDirect at 4.
The Company's 2016 energy savings consisted of 42,269 MWh from the residential
sector,88,161 MWh from the commercial/industrial sector,and 15,747 MWh from the irrigation
sector,in addition to savings through NEEA initiatives.Application at 3-4.According to the
Company,it enrolled enough participants in its demand response programs to provide 392
megawatts ("MW")of load shedding capacity,and the programs reduced demand by 378 MW.
Id.at 4.
ORDER NO.33908 2
The Company ftmds its Idaho energy efficiency programs through the Idaho Energy
Efficiency Rider,base rates,and the annual Power Cost Adjustment (PCA).Id.at 1,4-5.With
its Application,the Company asked the Commission to find that the Company prudentlyincurred
$40,242,182in expenses.Id.at 1.The Company stated these expenses included $31,321,862 in
Idaho Energy Efficiency Rider expenses,and $7,059,420 in Demand Response Program
incentive payments for 2016,calculated after several adjustments to amounts set forth in the
DSM Report.Id.at 5-6.The Company also requested a prudency determination for $1,860,901
of incremental DSM labor expenses incurred from 2011 through 2016 that have yet to be deemed
prudent,but which the Company believes "were prudently incurred and necessary to acquire the
total energy savings and demand response capacity achieved"from 2011 to 2016.Id.at 5-6,10.
The Company reported that in 2016,its overall energy efficiency portfolio was cost-
effective from TRC,UCT,and PCT perspectives with ratios of 2.56,3.58,and 2.93,respectively.
Id.at 7.Of the Company's 15 Idaho energy efficiency programs for residential customers,11
were cost-effective from the UCT or TRC perspectives.Id.at 8;Aschenbrenner Direct at 4.
Three of those programs -the Home Improvement program,Fridge and Freezer Recycling
program,and weatherization programs for income-qualified customers --were not cost-effective
from either the TRC or UCT perspectives,or both;these programs are being discontinued or
evaluated for discontinuation.Application at 7-8.
Idaho Power's three demand response programs are:A/C Cool Credit (for residential
customers);FlexPeak Management (for commercial /industrial customers);and Irrigation Peak
Rewards (for irrigation customers).Aschenbrenner Direct at 4.These programs curtail load
when the system capacity is constrained.When assessing the cost-effectiveness of its demand
response programs,the Company used a pre-determined annual value of $16.7 million,
established by Commission Order No.32923,rather than calculating a benefit/cost ratio.
Application at 8.The Company estimated that the three demand response programs,if fully
dispatched,would have cost a total of about $12.9 millionon a system-wide basis -well under
the $16.7 millionvalue.Id.at 8-9.
The Company reported that independent,third-partyconsultants were used to provide
impact and process evaluations to verify that program specifications were met,to recommend
improvements,and to validate program-relatedenergy savings.Id.at 9.Idaho Power noted that
it received input from various stakeholders,including the Energy Efficiency Advisory Group
(EEAG),in developing the Company's DSM activities.Id.at 9-10.
DISCUSSIONAND FINDINGS
Commission Staff,ICIP,CAPAI,and ICL filed timely comments to which Idaho
Power replied.These comments and reply are summarized below,followed by Commission
findings where pertinent.
A.Staff
Followingan extensive audit,Staff recommended that the Commission find the
Company prudentlyincurred $40,225,286 in 2016 DSM related expenses.Staff Comments at 4.
This amount consists of $31,304,965 in Tariff Rider expenses (with two adjustments to the
Company's requested amount),$7,059,420 in Demand Response incentives (as the Company
requested),and $1,860,901 in incremental labor expenses for 2011-2016 already included in the
Rider balance (also as the Company requested).Id.Staff calculated the DSM Rider account
balance as of December 31,2016,as follows:
Table 1:Tariff Rider Reconciliation
2016 Beginning Rider Balance (Overfunded)$6,554,074
2016 Funding plus Accrued Interest 39,437,692
Company Identified Accounting Adjustments
Total 2016 Funds $46,022,049
2016 Reported Expenses (31,321,862)
Transfer to PCA (per Commission Order No.33526)(3,970,036)
Vehicle Charge Error 16,705
Chambers of Commerce and Rotary Club Fees 192
Balance as of December 31,2016 (Overfunded)$10,747,048
Id.
1.Proposed Adjustmentsto Tariff RiderExpenses
Staff recommended two adjustments to the Tariff Rider expenses that the Company
asked to be deemed prudent:a $16,705 vehicle charge error in its Equipment Utilization Report,
and $192 in Company credit card charges for dues to Rotary Club and Boise Metro Chamber of
Commerce.Id.at 5.Idaho Power agreed with Staff's proposed $16,705 adjustment to account
for the Company's error in its Equipment UtilizationReport.Reply at 13.However,the
Company disagreed with Staff's proposal to remove expenses associated with the Rotary Club
and Boise Metro Chamber of Commerce.Id.at 14.The Company contended that only $88 of
Staff's recommended $192 adjustment represented membership dues,while $48 was for business
meals and $57 was related to employee training.Id.The Company asserted that the $88 should
not be removed from the rider because the Company's presence in the organizations provide
ORDER NO.33908 4
"value to Idaho Power's energy efficiency efforts via building relationships,contacts,and
promotion of its programs to potential participants."Id.at 14-15.
Commission Findings:We find the Company prudently incurred $31,304,965 in
Tariff Rider expenses.In so finding,we reduce the Company's requested amount by $16,705
(with which the Company agreed)to adjust for the vehicle charge error.We also reduce the
requested amount by $192 in credit card charges booked as Rotary Club and Boise Metro
Chamber of Commerce expenses per Staff's audit.Staff Comments at 5.The Commission
appreciates the Company's desire to participate in organizations such as the Rotary Club and
Boise Metro Chamber of Commerce,but we find these expenses should not be recovered from
customers.The clarification provided by the Company does not demonstrate adequate customer
benefit.Even the claimed meals and training costs paid to these organizations do not
demonstrate any direct benefit to customers.Therefore,we decline to include the $192 in the
Company's Energy Efficiency TariffRider.
2.Incremental Labor Increases
As to the Company's proposed incremental labor increases,Staff believed Idaho
Power overstated national wage data and "actual general wage adjustments awarded to non-
union employees of Avista Utilities and PacifiCorp."Id.at 6-7.Staff also questioned the
completeness of "projected wage increases for local companies such as Boise,Inc.,
Intermountain Gas Company,Micron,Qwest,Simplot,State of Idaho,and URS."Id.at 7.Staff
recognized that "some level of wage increase is both appropriate and necessary."Id.at 8.Thus,
Staff recommended that the Company's wage increases be deemed prudent,but on condition
"that the Commission order a cap on rider-funded labor expense at the 2016 levels."Id.Absent
such condition,Staff recommended the Commission "defer ruling on the reasonableness of the
labor increases until the next general rate case"when Staff would perform a position by position
benchmark analysis to quantifyits proposed adjustment.Id.
Idaho Power disagreed with Staff's assessments that the Company's wage data were
"incorrect and 'routinely overstated.'"Reply at 2.The Company described Staff's assessments as
mischaracterizations,noting that Staff compared "actual wage adjustments made by peer utilities
in the first quarter of each year against estimated wage adjustments provided by peer utilities to
Idaho Power many months prior,"then incorrectly concluded the differences were
overstatements of data points.Id.at 3 (emphasis original).The Company countered that "the
ORDER NO.33908 5
information [it]presented was an estimate and the best available data at the time the Board made
its wage adjustment decision."Id.
As to Staff's request that the Commission either defer ruling on the reasonableness of
the labor increases until the next general rate case or limit rider-funded labor expense at the 2016
levels,Idaho Power stated "it would be premature and unnecessary for the Commission to issue a
determination on the prudence of expenses not yet incurred."Id.at 2.
Commission Findings:We recognize there is an almost inevitable discrepancy
between the Company's estimated wage adjustment and actual wage adjustments made months
later.While it is reasonable to expect wages to increase annually,we find that total wages can be
more thoroughlyexamined and are more appropriately addressed in the context of a general rate
case rather than in the DSM filings.Accordingly,we find it reasonable and appropriate to deem
the Company's incremental DSM labor expenses of $1,860,901 from 2011 through 2016 as
prudent.We also find it reasonable to establish a process where general rate cases establish base
wage levels and wage increases in the DSM cases that are capped beyond 2016.Rather than
establishing the cap on the rider-funded labor expense at 2016 levels,we find it reasonable to
include actual wage increases up to a 2%cap in the DSM rider.This process does not require
pre-determination as to prudence and no longer requires labor to be exainined in DSM cases.The
base and cap will be reset in general rate cases.
3.The Company's Energy Efficiency Portfolioand Marketing
Staff highlighted achievements such as the Company's energy savings kits distributed
as part of its educational distributions residential program,the cohort training effort in its
commercial and industrial program,and the multi-family energy savings program,all of which
were cost-effective.Staff Comments at 10-11.Also,Staff remarked that,in general,"the
Company's marketing efforts have dramatically improved in recent years,"including use of
digital and social media marketing.Id.at 14-15.
Staff also commented on areas of concern,such as Idaho Power's decision to
discontinue its Home Improvement program,despite that the program scored as cost-effective on
the UCT test.Id.In addition,Staff expressed concern that the Company's study about the value
of transmission and distribution that can be deferred through energy efficiency "used only a
seven year stream of deferred investments rather than the 20 year stream used in all other
avoidedcost calculations."Id.at 14.
33908 6
Commission Findings.We continue to encourage the Company to take advantage of
all cost-effective programs.We are concerned that a cost-effective program was discontinued.
To this end we encourage the Company to thoroughlydiscuss its programs and evaluate their
cost-effectiveness with EEAG,and to limit misunderstandings.Further,we find it appropriate
for the parties to address with EEAG whether the Company should use a seven or 20-year
deferred investments stream and report back to the Commission if the 20-year analysis is not
acceptable.
4.Inventoryof Unused Switches
Staff was concerned that the Company's inventory of 2,675 Advanced Metering
Infrastructure(AMI)switches,left from its conversion program for irrigation peak rewards
customers is too high.Id.at 9-10.Staff recommended that the Company develop a plan with the
EEAG to reduce the inventory of switches to a reasonable level.Id.Staff noted that the
switches -paid for with customer funds through the Tariff Rider -are not currentlyproviding
any benefit,and thus recommended that their value be removed from the Tariff Rider balance
until the switches are placed in service and thus made used and useful.Id.
Idaho Power disagreed with Staff "that the existing switches are not providing value
to current customers."Reply at 6.The Company noted that the Commission already deemed the
expenditures prudent in Case No.IPC-E-13-08,and the Company has not purchased any
additional switches since that time.Id.The Company stated it solicits participation from past
participants and customers who move into a new home,and that it has installed about 875
switches in the new homes of former participants over the last two years.Id.at 6-7.
Accordingly,the Company stated it "needs an inventoryon hand to ensure it can replace existing
switches that may fail."Id.at 7.The Company believes its switch inventoryis at a reasonable
level,and there is no need for Idaho Power to work with EEAG to develop a plan to reduce it.
Id.
Commission Findings:We find it reasonable and appropriate for the Company to
maintain some level of inventory of switches,deploying them as appropriate.We decline to
order the Company to reduce its current inventory.The inventoryof switches are paid for and no
additional rider funds are being used for new switches.
B.CAPAI and Idaho Conservation League
CAPAI's comments were limited to discussing Idaho Power's low-income
weatherization assistance program -Weatherization Assistance for Qualified Customers
ORDER NO.33908 7
(WAQC),which performed poorly under cost-effectiveness tests.CAPAI Comments at 2-3.
CAPAI stated it would like to develop a strategy with Idaho Power to improve WAQC's cost-
effectiveness,and to work toward "providing whole house weatherization and cost sharing with
federal funding sources."Id.at 4.CAPAI supported the Company's request to recover expenses
from the WAQC program.Id.at 5.
Althoughnot an intervening party,the Idaho Conservation League (ICL)filed public
comments.ICL recommended that the Commission "continue to determine prudence based
primarily on the [UCT]results for each program."ICL Comments at 3.ICL also suggested that
the Commission direct the Company "to work with EEAG to redesign the Home Improvement
Program by considering changes to incentive structures and program marketing,"and to refine
the refrigerator recycling program.Id.at 4.Further,ICL recommended that the Company work
with EEAG and CAPAI to redesign the weatherization program.Id.In sum,ICL recommended
that the Commission find Idaho Power's 2016 DSM programs were prudent.
The Company appreciated the comments by CAPAI and ICL,and indicated it will
continue to work with these groups and with the EEAG to discuss program redesign that may
lead to improved cost-effectiveness.Reply at 9-10.
C.ICIP
ICIP stated it is unable to recommend approval or rejection of Idaho Power's request
for a prudency determination because the information for assessing the cost-effectiveness of the
Company's demand-side and energy efficiency measures has not changed since the Company's
settlement agreement four years ago.ICIP Comments at 3-4.ICIP thus asserted the inputs are
stale,and the validityof any financial assumptions based on those inputs should be questioned
for purposes of a prudency review.Id.
Idaho Power disagreed with ICIP's conclusion that the Commission "does not have
sufficient informationavailable to make a prudence determination."Reply at 12.The Company
noted that the EEAG has been supportive of the Company's methods for determining cost-
effectiveness of its DSM programs.Id.The Company also disagreed with ICIP's contention
that "none of the inputs to the annual valuation of demand response have been updated since the
initial valuation was calculated four years ago."Id.(quoting ICIP Comments at 4).Idaho Power
countered that it has updated a number of inputs,consistent with its policy of "using the best
available information at the time of budgeting and program planning."Id.at 12-13.The
Company thus opposed ICIP's recommendation that the Commission "initiate a process to
update the inputs and measures used to measure cost-effectiveness of the Company's DSM
programs."Id.at 13.
Commission Findings:We encourage the Company to maintain its dialogue with all
parties and the EEAG regarding its DSM program and cost-effectiveness tests.
DISCUSSIONAND ULTIMATE FINDINGS
Idaho Power is an electrical corporation,and the Commission has jurisdiction over it
and the issues in this case under Title 61 of the Idaho Code and the Commission Rules of
Procedure,IDAPA 31.01.01.000,et seq.Idaho Code §§61-119,-129,-501,-503.Based on our
review of the record,we find that the Company prudently incurred $40,225,286 in 2016 DSM-
related expenses consisting of $31,304,965 in expenses booked to the DSM Rider Account,and
$7,059,420 in Demand Response program expenses that have been included for recovery in the
2017 PCA,and $1,860,901 in incremental labor expenses.We note that,except for a $192
adjustment to the 2016 DSM-related expenses,these amounts were undisputed.We find it fair,
just,and reasonable for the Company to take such other actions as referenced in the body of this
Order.
CAPAI'SPETITIONFORINTERVENORFUNDING
Intervenorfunding is available under Idaho Code §61-617A and Commission Rules
161 through 165.Section 61-617a(l)declares it is "the policy of [Idaho]to encourage
participation at all stages of all proceedings before this commission so that all affected customers
receive full and fair representation in those proceedings."Idaho Code §61-617A(2).The
statute authorizes the Commission to order any regulated utility with intrastate annual revenues
exceeding $3.5 million "to pay all or a portion of the costs of one or more parties ...in any
proceeding before the Commission."Id.;IDAPA 31.01.01.161 (intervenors may apply for
funding in any case involvinga regulated utility with gross intrastate revenues exceeding $3.5
million).Intervenorfunding costs include legal fees,witness fees,transportation and other
expenses,so long as the total funding for all intervening parties does not exceed $40,000 in any
proceeding.Idaho Code §61-617A(2).
The Commission must consider the following factors when deciding whether to
award intervenor funding:
(1)That the participation of the intervenor has materially contributed to the
Commission's decision;
ORDER NO.33908 9
(2)That the costs of intervention are reasonable in amount and would be a
significant financial hardship for the intervenor;
(3)The recommendation made by the intervenor differs materially from the
testimony and exhibits of the Commission Staff;and
(4)The testimony and participation of the intervenor addressed issues of
concern to the general body of customers.
Id.An intervenor's petition must contain:an itemized list of expenses broken down into
categories;a statement explaining why the costs constitute a significant financial hardship;and a
statement showing the class of customer on whose behalf the intervenor participated.IDAPA
31.01.01.162.
CAPAI filed the only Petition for Intervenor Funding,and requested $995.00 for
attorney and expert fees.CAPAI submitted,and it is undisputed,that Idaho Power is a regulated
public utility with gross intrastate annual revenues exceeding $3.5 million.Petition at 2.CAPAI
stated,"To the extent that CAPAI represents a specific customer class of Idaho Power,it is the
residential class."Id.at 6.CAPAI asserted it is a nonprofit organization fighting causes and
conditions of poverty throughout.Idahowith little discretionary funds.Id.at 4.Its sole funding
source is the Low Income Home Energy Assistance Program (LIHEAP)program,which has a
very limited budget.Id.
CAPAI expressed that its requested funds are reasonable and that without such funds,
its costs would present a significant financial hardship.See id.Also,CAPAI noted that it was
the only party to address the Company's low-income programs in significant detail.Id.at 5.
AlthoughCAPAI suggested that it had proposed a finding "that there no longer is a moratorium
on future increases in Avista's low income programs depending upon circumstances at the time,"
this appears to be in error -perhaps from a filing in an Avista case.Id.CAPAI has requested no
similar finding in this case;its only recommendation was that the Commission allow recovery of
Idaho Power's expendituresrelated to the WAQC program.CAPAI Comments at 5.
Commission decision.We have jurisdiction to consider CAPAI's timely request,and
find that CAPAI provided an itemized list of its expenses and that it its costs would present a
significant financial hardship without intervenor funding.We further find that CAPAI's
comments differed materially from Staff's in that it focused on the Company's low-income
programs.In addition,we find CAPAI's presentation of such issues to be in the public interest,
and thus a material contribution to our decision.Accordingly,we approve CAPAI's request for
$995.00 in intervenor funding,chargeable to Idaho Power's residential customers.
ORDER
IT IS HEREBY ORDERED that Idaho Power's 2016 DSM expenditures are approved as
prudentlyincurred in the amount of $40,225,286,as described above.
IT IS FURTHERORDERED that CAPAI's Petition for IntervenorFunding is granted as
requested in the amount of $995.00.This amount will be chargeable to the Company's
residential customers.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration withintwenty-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 UtilitiesCommission at Boise,Idaho this
day of October 2017.
PAUL KJEËLANDER,PRESIDENT
K)tÌSÌ R
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
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