20170720Redacted Comments.pdf

DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR A
DETERMINATION OF 2016 DEMAND.SIDE
MANAGEMENT EXPENDITURES AS
PRUDENTLY INCURRED
CASE NO. IPC-E-I7.03
REDACTED COMMENTS
OF THE COMMISSION STAFF
Street Address for Express Mail:
472 W . WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILTTIES COMMISSION
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COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attomey of record, Daphne Huang, Deputy Attomey General, and submits the following
comments.
BACKGROUND
On March 75,2017,Idaho Power Company f,rled an Application requesting the
Commission's determination that the Company prudently incurred demand-side management
(DSM) expenses in20l6, as well as incremental DSM labor expenses incurred from 20ll-2016
that have yet to be deemed prudent. 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 an opportunity to
recover its DSM expenses through rates if the Commission finds that the expenses were
prudently incurred. However, if the Commission finds any of the DSM expenses were not
ISTAFF COMMENTS JULY 20,2OI7
prudently incurred, then it will not allow the utility to recover those expenses through rates, and
the disallowed expenses will be bome by the utility's shareholders and not by customers.
The Company states 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 at3-4. The Company says its DSM efforts saved 170,792 megawatt hours
(MWh), including 24,616 MWh of energy efficiency market transformation savings through the
Northwest Energy Efflrciency Alliance ("NEEA"). Id. The Company offered its customers 22
energy efficiency programs, three demand response programs, and several educational
initiatives. Aschenbrenner Direct 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 the savings through NEEA initiatives. Application at 3-4. The Company
reports it enrolled enough participants in its demand response programs to provide 392 MW of
load shedding capacity, and that the programs ultimately reduced demand by 378 MW. Id. at 4.
The Company funds its Idaho energy efficiency programs through the Idaho Energy
Efficiency Rider, base rates, and the annual Power Cost Adjustment (PCA). Id. at l, 4-5. With
this Application, the Company asks the Commission to find that the Company prudently incurred
$40,242,182 in expenses. 1d at l. The Company states these expenses include $31,321 ,862in
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 seeks a prudency determination for $ I ,860,901 of incremental
DSM labor expenses incurred from 201I 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 201 I to 2016. Id. at 5-6,10.
The Company's Application describes the Company's evaluation of its DSM programs
and whether they were cost-effective in 2016. The DSM Report discusses the cost-effectiveness
of the Company's DSM programs and energy savings measures in greater detail.
The Company says it used the following benefit/cost tests to determine the cost-
effectiveness of its energy efficiency programs and measures: (l) the total resource cost test
("TRC"); (2) the utility cost test ("UCT"); (3) the participant cost test ("PCT"); and (4) the
2STAFF COMMENTS JULY 20,2OI7
ratepayer impact measure test ("RIM").I Application at 3. The Company reports that in 2076,
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. at7. Of the Company's Idaho energy
efficiency programs, I I were cost-effective from the UCT or TRC perspectives. Id. at 8. Three
of the 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. Id. at7-8.
The Company reports that independent, third-party consultants were used to provide
impact and process evaluations to verify that program specifications are met, recommend
improvements, and validate program-related energy savings. In2076, impact evaluations were
completed on six programs and process evaluations were completed on two programs. Id. at9.
The Company's Application notes that it received input from various stakeholders,
including the Company's Energy Efficiency Advisory Group (EEAG), in developing the
Company's DSM activities. Id. at9-10.
STAFF ANALYSIS
Staff has reviewed the Company's Application and the accompanying testimony and
exhibits of Connie Aschenbrenner, along with the 2016 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 Energy Efficiency Tariff Rider account balance and expenditures, demand response
programs, incremental DSM labor expenses for 2011-2016, and other program management
issues. Staff notes that the absence of any discussions on other issues presented in the 2016
DSM Annual Report should not be construed as Staff support for those issues.
I Th. for. tests examine a program's cost-effectiveness from different perspectives. In summary, the TRC
compares program administrator costs and customer costs to the avoided supply-side resource costs. The UCT
compares program administrator costs to the avoided supply-side resource costs. The PCT compares the costs and
benefits of the customer installing the measure, and assesses whether an average program participant will benefit
over the measure's life. The RIM measures the impact on 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 benefiVcost ratio above 1.0.
JSTAFF COMMENTS JULY 2O,2OI7
Financial Review
Staff performed an extensive audit of the Company's DSM expenses, sampling and
testing over 300 transactions across all of the Company's programs. With few minor exceptions
discussed later in these comments, expenses were well documented and controls were in place
designed to eliminate improper payment of incentives. Based upon results of its audit, Staff
recommends that the Commission issue an order declaring that the Company prudently incurred
$40,225,286 in DSM related expenses during 2016. This amount consists of $31 ,304,965 in
Idaho Energy Efficiency Tariff Rider expenses, $7,059,420 in Demand Response incentives that
have been included for recovery in the 2017 Power Cost Adjustment, and $1,860,901 in
incremental labor expenses for 2011-2016 already included in the rider balance.
Staff calculated the DSM Rider account balance as of December 3 I ,2016 as follows:
Table 1: Tariff Rider Reconciliation
2016 Beginning Rider Balance (Overfunded)
2016 Funding plus Accrued Interest
Company Identified Accounting Adjustments
Total2016 Funds
2016 Reported Expenses
Transfer to PCA (Commission Order No. 33526)
Vehicle Charge Error
Chambers of Commerce and Rotary Club Fees
Balance as of December 31, 2016 (Overfunded)
$6,554,074
39,437,692
30,283
$46,022,049
(31,321,862)
(3,970,036)
16,705
192
s10.747.048
Staff s ending balance is $16,897 less than reported by the Company, which is
attributable to the proposed adjustments discovered during Staff s audit.
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 G\fPSE) included in base rates
and approved in Order No. 33000. The Commission approved this annual transfer in the
Company's 2015 and 2016 PCA cases. See Order Nos. 33306 and33526. In 2013, Idaho Power
proposed and the Commission approved an increase of approximately $100 million to the net
power supply expenses base level effective June 1, 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
4STAFF COMMENTS JULY 20,2OI7
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, at the time), the inclusion of approximately $100 million in base rates would generate an
additional $4 million in revenue through the DSM Tariff Rider. To maintain revenue neutrality,
the Commission approved this annual transfer from the DSM Tariff Rider account to be refunded
through the PCA.2
While compiling invoices in response to Staff s audit requests, Idaho Power realized an
accounting discrepancy for a transaction identified in Staff s sample. A charge to the Idaho
Rider for a Field Staff Support Expenses for use of a fleet vehicle was incorrectly entered into
the Company's accounting system. The "Equipment Utilization Report" (the supporting
documentation for a fleet vehicle entry) was incorrectly entered using equipment no. 6636 (1998
INT 4900 6X4 ALTEC D2055) atarate of $37.35 per hour instead of equipment no. 1992 (2010
Chevrolet Impala Passenger vehicle) atarate of $0.33 per mile. The total charge for this vehicle
was calculated at $17,741.25, with $16,854.19 charged to the Idaho jurisdiction. The correct
charge for the usage of the 2010 Chevrolet Impala should have been $156.62, with S148.79
allocated to the Idaho Rider. The adjustment of $16,705 reflected in Table 1 above accounts for
the correction of this error.
During the audit, Staff discovered two expenses charged by employees on Company
OneCards (Company issued credit cards for employee use on business expenses) for quarterly
dues to the Rotary Club and Boise Metro Chamber of Commerce. The Commission routinely
removes expenses to these social organizations in rate cases because they serve to enhance the
Company's image in the community and do not provide direct benefit to ratepayers. Following
the Commission's well-established precedent, Staff has reduced Idaho Tariff Rider expenses by
$192.
Additionally, there were two expenses charged on Company OneCards for lunches for
which the Company was unable to provide receipts because the employees had lost them.
Instead, the Company provided the business purpose for the lunch and a list of people in
attendance. Staff is not proposing an adjustment for these lunches because the Company
provided sufficient documentation to support the expenses; however, Staff reminds the Company
2 In Order No. 33736, the Commission approved a proposal by Idaho Power to eliminate the annual transfer of Rider
funds through the PCA while simultaneously reducing the Rider collection percentage by 025% (from 4Yo to
3.75%). This annual transfer will no longer occur after2016.
5STAFF COMMENTS JULY 20,2077
that lack of receipts and proper documentation for employee charges to the Company's
OneCards will result in Staff s recommendation of disallowance in future cases.
Incremental Labor Increases
In Order No. 32667 (Case No. IPC-E-12-15), the Commission declined to decide the
reasonableness of the Company's labor-related expense increase until the Company provided
evidence to better assess the reasonableness of those expenses. The Commission directed the
Company to work with Staff to determine the type of information necessary to determine the
reasonableness of labor-related increases in the tariff rider. In Case No. IPC-E-13-08, the
Company again sought a prudency determination on the incremental labor increases funded
through the tariff rider. In Order No. 32953, the Commission questioned the accuracy and
completeness of the Company's compensation analysis and found that the Company was not
persuasive in its arguments supporting the 2011 and 2012 Rider-funded labor increases. The
Commission again deferred ruling on the reasonableness of the Company's labor expenses, and
stated its preference that the Company revisit the incremental labor expenses in its next general
rate case. The Commission again suggested the Company work with Staff to determine the kind
of evidence the Company should provide to substantiate its claims.
In each of the annual DSM prudency cases since IPC-E-I3-08, the Company has
quantified the amount of the annual incremental expenses associated with DSM labor above the
2010 baseline and removed those amounts from the Company's prudency requests. The
Company is now requesting that the Commission determine the prudency of the incremental
labor increases from 201I to 2016. While Staff continues to believe that DSM labor expenses
are best addressed in the context of a general rate case, Staff agreed to examine the issue in the
current case. Staff s agreement was based on the collaborative process that resulted in Case No.
IPC-E-16-33 where the Company requested a decrease in the tariff rider percentage, authority to
refund surplus rider funds through the PCA, and the elimination of the annual transfer of rider
funds to the PCA.
Staff thoroughly audited the information provided in Company witness Aschenbrenner's
Confidential Exhibit No. 4 and discovered several discrepancies with the information provided.
For the Intermountain Utilities Salary Data used by the Company, Staff noted that the wage
adjustments used by Idaho Power in its analysis routinely overstated the actual general wage
adjustments awarded to non-union employees of Avista Utilities and PacifiCorp. Staff was
6STAFF COMMENTS JULY 2O,2OI7
unable to obtain actual general wage adjustments of the Intermountain Utilities outside of
Idaho's jurisdiction, but is concerned that the wage adjustments for the two other utilities used in
the proxy group that serve Idaho customers was incorrect. Table 2 below illustrates the
discrepancies between the Idaho Power analysis and actual wage increases for Avista and
PacifiCorp for the years 2010-2015. Based on these discrepancies, Staff remains concerned with
the accuracy and completeness of the Company's compensation analysis.
I I I
IIrIIIIIIIIIIIII
I IIIIIrIIIIII
The Company also provided projected wage increases for local companies, such as Boise,
Inc., Intermountain Gas Company, Micron, Qwest, Simplot, State of Idaho, and URS. Staff
notes that the information provided for these local Companies on Exhibit No. 4 is incomplete
therefore raises questions about analysis' credibility. In several instances, the projected wage
increases included in Idaho Power's analysis overstated the actual wage increases awarded by
these local companies. Staff also reviewed the national survey data provided by the Company
and noted a few instances where the increases listed on Exhibit No. 4 overstated the results of the
surveys.
In Order No. 32963 (Case No. IPC-E-13-08), the Commission stated that the Company
should consider regional price parities when deciding whether to increase rider-funded labor
expenditures. Regional Price Parities were noticeably absent from the information provided by
Company witness Aschenbrenner.
Staffls analysis shows that the Company is regularly near or above the average increases
of the local companies, as well as the nationwide survey findings. Also, when Staff adds in the
7 JULY 2O,2OI7
t-t
STAFF COMMENTS
local wage increases for Idaho, the Company has significantly outpaced local wage growth, as
well as national wage growth. See Table 3 below for specific details of these findings.
Table 3: Staff Wage Increase Analysis
Year
IPC
Increase
Local Utility
Increases Survey Average
Idaho
Wage
Increases
National
Wage
IncreasesUnionNon-Union Non-Exempt Exempt
20tt 2.00%2.91%2.79%2.85%2.88%0.29%1.87%
2012 2.75%2.25%256%3.r0%3.03%0.04%1.03%
2013 3.00%2.07%2.72%2.95%2.93%0.67%t.t1%
20t4 3.00%2.29%2.87%2.88%2.93%1.75%1.44%
2015 3.00%2.44%2.00%2.99%3.03%2.44%2.23%
2016 3.00%2.50Yo 2.75%3.00%3.03%2.66%2.5004
Staff believes the Company's incomplete analysis does not support the level of wage
increases granted by the Company, however Staff also recognizes that some level of wage
increase is both appropriate and necessary. The Commission's stated preference is to address
rider funded wage increases in a general rate case. However, Staff does not believe the
Company would be able to provide any additional information in a general rate case that would
support the increases. Therefore, despite the misgivings mentioned above, Staff is willing to
recommend that these wage increases be deemed prudent on the condition that the Commission
order a cap on rider-funded labor expense at the 2016 levels. During the Company's next
general rate case, Staff plans to address the appropriateness of labor increases in the DSM Rider,
and potential solutions to escalating labor costs outside of general rate cases. Consequently, if
the Commission does not wish to order a cap on the DSM labor expenses, Staff would
recommend the Commission once again defer ruling on the reasonableness of the labor increases
until the next general rate case, at which time Staff will be able to perform a benchmark analysis
on a position by position basis and quantify a proposed adjustment for disallowance.
STAFF COMMENTS JULY 20,2OI78
Demand Response
Idaho Power has three demand response programs to curtail load at times when the
system capacity is constrained: the A/C Cool Credit Program, the Flex Peak Program, and the
Irrigation Peak Rewards Program. Together, these programs can provide a total of 379 MW of
demand reduction. Idaho Power does not calculate benefit/cost ratios for these programs under
the traditional cost-effectiveness methodologies. As apart of the public workshops in
conjunction with Case No. IPC-E-13-74,Idaho Power and other stakeholders agreed on a
methodology for valuing Demand Response. The settlement stipulation approved in Order No.
32923 mandated the annual cost of operating Idaho Power's Demand Response portfolio not
exceed the levelized annual cost of a l70MW deferred resource over a 2)-year life, calculated to
be $16.7 million. In2016, the Idaho jurisdictional cost of operating the three programs was
approximately $8.9 million ($7.1 million in incentives and $ I .8 million in other program costs).
Idaho Power estimated that if the three programs were dispatched for the full 60 hours allowed,
the total costs would have been approximately 812.9 million.
In addition to the audit of the DSM Rider account, Staff reviewed the Demand Response
incentive payments made in 2016. Staff believes these programs are critical in delaying the need
for more expensive peaking generation, and the Company is prudently operating these programs.
Approximately $ 1.8 million in other program costs were charged to the Idaho Rider and included
in 2016 reported expenses identified in Table l. Demand Response incentive payments totaling
87 ,059,420 are currently being recovered through the 2017-2018 Power Cost Adjustment
approved in Order No. 33775.
In comments submitted in the 2015 DSM Prudency Case, Case No. IPC-E-16-03, Staff
raised concerns about the large inventory of unused Advanced Metering Infrastructure (AMI)
switches for the A/C Cool Credit Program (4,529 switches with an approximate value of
$680,000). In reply comments, Idaho Power estimated that the existing stock of switches would
be used within the next year and a half. At that time, Idaho Power was seeking authority for the
Company to use the switches for the Irrigation Peak Rewards program (Tariff Advice No. 15-
16). As of May 24,2017, the Company had 2,675 switches remaining in its inventory after
converting all irrigation peak rewards customers to the AMI switches. Staff believes the
Company will not be able to use the existing switches in the time frame suggested in their reply
comments in Case No. IPC-E-16-03. Staff remains concemed that the switches paid for with
customer funds through the tariff rider are not providing any benefit to current customers, and
9STAFF COMMENTS JULY 2O,2OI7
has raised this concern at the EEAG meetings. The Company has been dismissive of these
concerns. With the continued attrition in the program and the significant inventory of switches
paid for by existing customers, Staff recommends the Company work with the Advisory Group
to develop a plan to reduce the inventory of switches to a reasonable level. Absent a plan to
address the stockpile of inventory, Staff would recommend that the value of the inventory be
removed from the tariff rider balance. As the switches are placed in service and become used
and useful, then the Company would be able to include them in the rider.
Program Management
2016 was another very successful year for the Company's energy efficiency portfolio.
Savings increased 4Yo overall and achieved the target identified in the 2015 Integrated Resource
Plan. In recent years, the Company has expanded the breadth of programs it offers customers
and focused on improving the ways that it offers programs to customers in order to remove
barriers to participation. While significant progress has been made, one program that is cost-
effective from the utility resource perspective was cancelled, and several other notable
opportunities for expansion and improvement exist. Staff looks forward to the Company
rectifying these problems and continuing the trajectory of success it has established.
Achievements
The most striking success of 2016 was the Energy Savings kits that Idaho Power
distributed for free as part of its Educational Distributions residential program. The Company
provided Energy Savings kits containing nine LEDs, a shower timer, a water flow-rate test bag, a
digital thermometer to measure refrigerator and freezer temperatures, an LED night light, and
easy to understand tips on how to reduce electrical usage to any customer who requested a kit.
Kits could be requested by phone, mail, or by returning a postcard. The program was a
tremendous success. The Company planned to distribute 7,500 kits in the first year, but greatly
exceeded that goal when over 34,000 customers requested kits. Even more strikingly, this was
achieved with very little social media outreach from the Company. Instead, an Idaho Power
customer posted the offer to a neighborhood group Facebook page where word quickly spread.
Although these kits were distributed free of charge for customers, the program was still very
cost-effective (3.6 UCT) in large part because the price of LEDs has significantly declined over
the past few years.
STAFF COMMENTS l0 JULY 20,2OI7
In addition to the blockbuster Energy Saving kits, the Company also continued its very
successful cohort training effort within its Commercial and Industrial program. The cohort
training approach helps facility operators implement low cost or no-cost energy improvements
by providing energy audits, technical trainings, and guidance on how to implement "energy
management principles, including forming an energy team, setting energy goals, and establishing
energy policies in their organization for persistence of savings."3 Participating facilities are also
eligible to receive incentives for qualifying capital improvement projects that result from the
cohort training. In2076, the Company offered a Wastewater Efficiency Cohort, a Municipal
Water Supply Optimization Cohort, and added a Continuous Energy Improvement Cohort for
Schools which officially launched in early 2017. This thoughtfully designed subset of programs
has been very effective at providing affordable and cost-effective energy reduction strategies to
wastewater and water supply facilities. These facilities are large energy consumers, but as part
of local governments, often have difficulty accessing funds for capital improvements. Staff
supports the expansion of this initiative to include schools which face similar barriers to energy
efficiency.
The Company also launched a Multifamily Energy Savings program in20l6. In this
program, the Company contacts apartment complex owners and property managers to offer low-
cost direct install measures at no cost to either the owner or tenants. This program began with a
pilot in Pocatello in spring of 2016 and two more projects in Boise and Twin Falls later that year.
In 201 6,96 apartments units received direct install measures in those three projects in the first
year. Apartment units received LEDs, high-efficiency showerheads, kitchen and bathroom
faucet aerators, and water heater pipe insulation which are installed by a contractor hired by
Idaho Power. This is an effective method for overcoming the split-incentive issue in the hard-to-
reach apartment rental market.
Even though the measures are free for participating apartment complexes, the program
was cost-effective with a 1.43 UCT. Idaho Power plans to expand this program to at least two
apartment complexes in each of its three regions in2077, for a total of six projects. Staff
supports this expansion, but notes that the Company's outreach is restrained. The Company does
not engage in any broad-based marketing efforts for this program, nor does it advertise this
program on its website with its other efficiency programs. Instead the Company plans to use
3 Idaho Power 2016 DSM Annual Report, at I l8
STAFF COMMENTS ll JULY 2O,2OI7
direct-mail to "encourage engagement and participation from property managers/owners." It is
not clear why a more typical marketing campaign for this program has not been deployed.
Because the pilot was successful and the program is cost-effective, Staff believes the Company
should expand this program in a manner more consistent with its other programs.
Staff also appreciates that Idaho Power's CEO, Darrel Anderson, addressed the EEAG at
the first meeting of 2016. Mr. Anderson spoke about retro-fitting his home with LED lights, the
extensive internal eff,rciency efforts the Company has undertaken at its Company headquarters
and substation facilities, and the potential for DSM resources to contribute to the Company's
financial health in the same way as other resources that help meet customer demand. Creating a
Company-wide culture that values energy efficiency begins at the top, and Staff appreciates Mr.
Anderson's work to move that forward.
The improvements made in 2016have extended into 2017. This year, the Company
continued incenting smart thermostats and distributing clothes drying racks, launched a
residential behavioral program, contracted with an outside firm to provide an online marketplace
where customers can easily compare the energy attributes of consumer products, continued
developing its ductless heat pump program for multifamily buildings, started offering incentives
for ground source heat pumps, began exploring the potential for providing residential
thermostatic valves, commercial energy savings kits, and incentives for heat pump water heaters,
and is in the process of building a mobile-ready website that may eventually push notifications to
customers to help them monitor usage and bills.
Opportunities for Improvement
Despite the significant progress in 2016, there were some missteps. At the November
EEAG meeting, the Company discussed sunsetting the Home Improvement program, a
residential program that offers incentives for insulation and windows. The Company reported
that the TRC was 0.4 or 0.5, and when asked by Staff and stakeholders, responded that the UCT
was also under 1.0. Staff supported sunsetting the program because the UCT was under 1.0.4
But at the next meeting in February, the Company disclosed that the UCT was actually 1.7 with
the most recent (and lowest) avoided cost estimates. Staff pointed out that this was different than
the information at the previous meeting. The Company apologized for the miscommunication,
4 At the August 2016 EEAG meeting, the Company's slide deck showed that the Home Improvement program was
cost-effective under the UCT.
STAFF COMMENTS 12 JULY 20,2OI7
but confirmed that the decision to sunset the program had already been made and would not be
revisited even though the effective date of the cancellation (June 30) was five months away.
Because the UCT is the test that most accurately reflects the revenue requirement needed
to acquire a resource, Staff opposes the Company's decision to cancel a program that is UCT
cost-effective. If a resource is cost-effective from the utility's perspective, then it is also cost-
effective from the perspective of its customers whose rates fund those resources. Cancelling a
program that is UCT cost-effective means that the Company is forcing its customers to buy a
more expensive resource. Staff does not believe that is a prudent use of customer funds.
The Company maintains that it uses all the tests to decide whether to offer or suspend a
measure. But that ignores the most relevant point-whether or not the measure is cost-effective
compared to the other resources options. If the Company is concerned about incenting programs
that may not pay back for a participant over the life of the measure, it could develop an online
calculator so that customers can determine the economics of their individual situation rather than
rely on the average payback (indicated by the Participant Cost Test) or the aggregate payback
including non-energy benefits (indicated by the Total Resource Cost test).
The Company's decision to suspend the Home Improvement program is significantly
different from the decision it made about the ductless heat pumps. According to the Company,
ductless heat pumps fail the TRC (0.88), but pass the UCT (1.48). Similar results for the Home
Improvement program caused the Company to cancel that program. However, the Company has
decided to continue offering incentives for ductless heat pumps even though it is not cost-
effective under the TRC. In fact, the Company moved ductless heat pumps out of the Heating &
Cooling Efficiency program because that measure was causing the entire program to fail the
TRC.
The Company maintains that incenting ductless heat pumps is prudent because that
measure is part of a region-wide effort with the potential to generate an extremely large amount
of savings when the price of the technology declines sufficiently. Staff acknowledges the
wisdom in taking a long-term view of the benefits of a measure, but also points out that ductless
heat pumps are already cost-effective from a resource perspective. However, Staff notes that in
addition to being much more efficient than zonal electric heating, ductless heat pumps are also a
way for electric utilities to compete with natural gas utilities for space heating marketing share.
Staff remains concerned with the inconsistent decision-making process to continue incenting
STAFF COMMENTS 13 JULY 20,2OI7
ductless heat pumps while suspending the Home Improvement program which incented
insulation and windows.
A few other areas of concern remain as well. The Company has not made progress
developing a program designed specifically for small business customers. As Staff has pointed
out in previous comments, other Idaho utilities have developed cost-effective direct install
programs to reach this hard-to-serve market. Further, small commercial customers are obligated
to pay into the Fixed Cost Adjustment mechanism, which was instituted to remove the
disincentive for the Company to pursue energy efficiency. Small business customers often do
not participate in Company sponsored programs because they do not have the time, expertise,
and resources to investigate the available options.
Value of Deferred Transmission and Distribution
Another areathat warrants additional attention is the Company's study regarding the
value of transmission and distribution that can be deferred through energy efficiency. Most
notably, the analysis only used a seven year stream of deferred investments rather than the 20
year stream used in all other avoided cost calculations. By understating the value of the deferred
investments, the Company is forcing customers to pay more for an equivalent resource.
An accurate T&D study is also an important first step towards developing location-based
programs to target distribution constraints. Maintaining the distribution system is extremely
expensive and the Company will eventually seek to include those expenses in rates. In order to
recover those investments, the Company must be able to demonstrate, that even after examining
alternatives, the investments were prudent. Staff recommends that the Company work with
stakeholders to understand how targeted, location-based DSM investments could defer more
expensive distribution system investments.
Marketing
Similar to its DSM portfolio, the Company's marketing efforts have dramatically
improved in recent years. The Company has aggressively expanded into digital marketing and
now advertises on Hulu, Pandora, the Weatherbug app, and digital ads in the Idaho State Journal.
The Company's efforts were so proactive that they even tried to advertise onHouzz, a home
improvement website, and NextDoor, a neighborhood social network website, before either of
those companies were ready to partner with utilities. The Company's social media posts about
STAFF COMMENTS 14 JULY 2O,2OI7
efficiency have also become more frequent and compelling: each week the Company makes a
"Tip Tuesday" post which gives customers easy ways to save energy in their homes. The
Company's print marketing has also become more innovative-this year it ran an ad in the Idaho
Shakespeare Festival program. Staff acknowledges the impressive progress the Company has
made in marketing and looks forward to continued innovation.
But while marketing for energy efficiency clearly improved, other types of marketing
conducted by the Company sometimes undermines the efficiency message. For example, the
Company published a monthly customer newsletter called "Connections." The spring and fall
issues of Connections focus on energy efficiency. The July 2016 Connections edition featured
story essentially said that Idaho Power's rates are so affordable that the family could heat or cool
as much as they want and not only afford the bill, but also have enough leftover money to buy a
"mini-pony." This clearly undercuts the message sent out in the April 2016 Connections under
the headline o'Energy Saving Improvements Keep Heating and Cooling Costs Down." Staff
previously discussed this issue on page 9 of its IPC-E-14-04 comments:
Staff has attached the second page of the Company's 2013 Spring
Commercial newsletter as an example. At the top of the page, the
Company recommends energy efficiency lighting as a cost-saving measure
for businesses. Directly below that ad, the Company promotes itself as
having the lowest commercial rates in the nation. A commercial customer
reading the advertisement might question the value of investing in energy
efficiency when it already enjoys the "lowest electric rates in the nation."
Staff believes that the conflicting ad placement undermines the message to
invest in energy efficiency.
Staff believes that the Company should be more diligent in recognizing and preventing
general communications from undermining energy efficiency marketing.
RECOMMENDATIONS
Based upon Staff s audit and analysis of the Company's Application, Staff recommends
the Commission find that the Company prudently incurred DSM-related expenditures of
$40,225,286. This amount consists of $31 ,304,965 in Idaho Energy Efficiency Tariff Rider
expenses, $7 ,059,420 in Demand Response incentive payments, and $ I ,860,901 in incremental
labor expenses for 201I through20l6. Staff also recommends that the Commission cap the
labor expenses included in the tariff rider at20l6levels until the Company's next general rate
STAFF COMMENTS l5 JULY 2O,2OI7
case. Absent a cap on the escalating labor costs, Staff recommends that the Commission defer its
decision on the incremental labor increases until the next general rate case.
Additionally, Staff recommends the Commission order the Company to work with the
Energy Efficiency Advisory Group to develop a plan to reduce the inventory of unused AMI
switches for the A/C Cool Credit Program.
Respectfully submitted this L&-day of July 2017.
lL*(6.'Huang
Deputy Attorney General
Technical Staff: Donn English
Stacey Donohue
Joe Terry
i : umisc:comments/ipce I T.3djhdejtsd comments
STAFF COMMENTS t6 JULY 20,2077
CERTIFICATB OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2OTH DAY OF JULY 2017,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF IN CASE NO. IPC-E-17.03, BY MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
LISA D NORDSTROM
LEAD COUNSEL
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
E-mail: [e-mail]
(Confi dential Information)
PETER J. RICHARDSON
RICHARDSON ADAMS PLLC
515 N. 27TH STREET
P0 BOX 7218
BOISE, TD 83702
E-mail : peter@richardsonadams. com
(Confi dential Information)
BRAD M. PURDY
ATTORNEY AT LAW
2019 N. ITTH STREET
BOISE, TD 83702
E-mail : [e-mail]
(Non-Confi dential Information)
ANTHONY YANKEL
I27OO LAKE AVENUE, LINIT 2505
LAKEWOOD, OH 44107
E-mail : [e-mail]
(Conf,rdential Informati on)
CONNIE ASCHENBRENNER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
dockets@idahopower. com
(Non-Confidential Information)
DR. DON READING
6070 HILL ROAD
BOISE,ID 83703
E-mail: [e-mail]
(Confi dential Information)
ERIC L. OLSEN
ECHO HAWK & OLSEN, PLLC
505 PERSHING AVENUE, SUITE 1OO
PO BOX 6119
POCATELLO, ID 83205
E-mail : [e-mail]
(Non-Confi dential Information)
CERTIFICATE OF SERVICE