20180802IPC Reply Comments.pdf

JULIA A. HILTON (lSB No. 7740)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
i h i lton @ ida hopower. com
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR A
DETERMINATION OF 2017 DEMAND-
SIDE MANAGEMENT EXPENSES AS
PRUDENTLY INCURRED
RECEIVED
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Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. IPC-E-18-03
IDAHO POWER COMPANY'S
REPLY COMMENTS
ldaho Power Company ("ldaho Power" or "Company") respectfully submits these
Reply Comments in response to the Comments filed by the ldaho Public Utilities
Commission ("Commission") Staff ("Staff') and the ldaho Conservation League ("lCL") on
July 19, 2018. The Company notes that Staff and lCL both recommend that the
Commission find that ldaho Power's 2017 demand-side management ("DSM") related
expenditures were prudently incurred. The Company appreciates the highlights of
positive program trends by ICL and program achievements and recognition of cooperation
with the Energy Efficiency Advisory Group ("EEAG') by Staff. !n these Reply Comments,
the Company responds to and clarifies a few of the issues raised in Staff's and ICL's
Comments, respectively.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
I. DSM LABOR EXPENSE WAS CONSISTENTLY
AND APPROPRIATELY CALCULATED
ln its Comments, Staff agrees that the Company's calculation of DSM labor
expense is consistent with the methodology used by Staff when calculating labor
adjustments for 2011-2016, but believes that methodology is inconsistent with the
Commission's intent in Order No. 33908, Case No. IPC-E-17-03.1 ldaho Power disagrees
with Staff's assertion that the Commission's intent in Order No. 33908 is to introduce a
new methodology from what has been historically utilized to evaluate labor-wages per
full-time equivalent employee ("FTE'). This methodology, wages per FTE, has been
applied to evaluate wage increases since it was first introduced by Staff in ldaho Power's
2011 DSM prudence case, Case No. IPC-E-12-15. Wage evaluations for the 2005 to
2011 period in Case No. IPC-E-12-152 and for2010 to 2016 in Case No. IPC-E-17-033
demonstrate that annual hours charged to the ldaho Energy Efficiency Rider ("Rider"), as
represented by FTE, may increase or decrease from year-to-year depending on
employees' Rider hours necessary to appropriately support program activity for that
respective year. A methodology whereby the 2 percent labor cap applied to total labor
dollars would remove the ability of the Company to properly increase labor resources for
additional energy efficiency program activity opportunities.
While Staff praises Idaho Power for its increased efforts on DSM programs, it
contemporaneously suggests a methodology that would interpret Commission Order No.
33908 to create a total labor cap that would significantly limit the addition of necessary
1 Staffs Comments at 6.
2 Staff's Comments, table at 8.
3 Aschenbrenner Direct Testimony, Table 10 at 42.
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
resources to DSM programs. Staff states the addition of eight Customer Solutions
Advisors ('CSA') who make outbound customer service calls to commercial and irrigation
customers on a range of issues, including energy efficiency, may help create and sustain
participation in energy efficiency programs.a Here Staff identifies the ability of the
Company to increase labor resources for additional energy efficiency program activity as
beneficial to the pursuit of all cost-effective energy efficiency. ldaho Power believes it is
important to clarify that its ability to expand customer outreach for energy efficiency in this
case is because CSAs charge the proportion of their time spent on energy efficiency
activities to Rider labor expense. The eight CSAs' time allocation to energy efficiency
efforts is equivalent to 1.2 FTEs in tota!, representing nearly 4.5 percent of total 2017
Rider labor hours, and an addition of approximately 2,300 Rider labor hours from 2016.
lmportantly, Staffs alternative interpretation of the maximum allowed labor would
effectively impede the Company's ability to recover costs from aggressively pursuing all
cost-effective energy efficiency, which ldaho Power does not believe was Staffs nor the
Commission's intent. Therefore, the Company believes the calculation of the 2 percent
labor cap should apply to wages per FTE, consistent with the historical methodology
approved by the Commission and utilized to evaluate Rider labor increases.
II. IDAHO POWER HAS USED APPROPRIATE TESTS FOR
CONSIDERATION OF COST.EFFECTIVENESS OF ENERGY EFFICIENCY
AND DEMAND RESPONSE PROGRAMS
Although ldaho Power believes that comments related to resource planning should
be addressed in an lntegrated Resource Plan ("lRP") planning docket where all interested
parties have an opportunity to participate and all supply- and demand-side resources are
more holistically considered, the Company believes it is important to clarify its position on
4 Staff's Comments at 13
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
cost-effectiveness measurement between resource and program planning and demand
response in supply-side acquisition for the Commission.
A. Enerqv Efficiencv in Resource Planning.
The Company disagrees with ICL's recommendation that the focus should be on
the Utility Cost Test ('UCT') as the primary test for cost-effectiveness and resource
planning.s Use of the Total Resource Cost ("TRC") in power supply planning is
reasonable, is supported by cost-effectiveness guidelines, and aligns with the methods
used by most utilities.
For the IRP's comparative analysis of demand-side resources equivalence with
supply-side resources, the Company also uses the TRC and it is necessary to do so in
order to correctly evaluate the total costs. Using the UCT alone to determine the energy
efficiency cost-effective achievable potential could result in the selection of measures that
are uneconomic from the perspective of participating customers and non-participating
customers as a whole.
ldaho Power would like to clarify the difference between the following terms:
o Utility Cost ("UC") versus Total Resource Cost (TRC).
Utility Cost Test (UCT) or ratio versus Total Resource Cost test ('TRC
test") or ratio.
a
The UC and TRC are the cost of an asset or measure levelized over its useful life.
The UC only includes costs incurred by the Company and ignores additional costs borne
by participants, while the TRC includes the UC plus additional costs from participating
customers. lt is important to remember that in supply-side and demand-side resources,
the UC is funded by all customers through retail rates or the Rider. The UCT and the
5 ICL's Comments at 4-6
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
TRC test considers the benefits from the measure or program being evaluated and are
used in DSM to determine the cost-effectiveness of the measure or program, expressed
Despite !CL's statements to the contrary,6 the TRC test is the best metric to use in
resource planning and is most similar to supply-side resource valuation because it
includes al! costs that lead to savings under a particular program. This approach is
supported by the California Standard Practice Manual,T which states:
The primary strength of the Total Resource Cost (TRC) test is
its scope. The test includes total costs (participant plus
program administrator) and also has the potential for
capturing totalbenefits (avoided supply costs plus, in the case
of the societal test variation, externalities). To the extent
supply-side project evaluations also include total costs of
generation and/or transmission, the IRC fesf provides a
usefulbasr's for comparing demand and supply-side options.
(Emphasis added.)
The approach is further supported by the National Standard Practice Manual for
Assessing Cost-Effectiveness of Energy Efficiency Resources, Edition 1, Spring 2017 8
Description: One of the key principles of cost-effectiveness
assessment is that utility EE investments should be evaluated
as a resource and compared with other demand-side and
supply-side resources. The TRC does so from the combined
perspective of the utility system and participants. Thus, this
test includes all impacts of the UCT, plus all impacts on the
program participants.
Relevance to EE urce Assessment The IRC fesf
provides more comprehensive information than the UCT by
including the impacfs on participating customers. (Emphasis
added.)
6 ICL's Comments at 6.
7 http://www.cpuc.ca.qov/uoloadedFiles/CPUC Public Website/ContenUUtilities and lndustries/Enerov -
Electricitv and Natural Gas/CPUC STANDARD PRACTICE MANUAL.odf at21.
I https://nationalefficiencvscreeninq.orq/national-standard-practice-manual/, A.3 Total Resource Cost Test, at
112-113.
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
Page l-16 of the April 1991 End-Use TechnicalAssessment Guide (End-Use TAG)
from the Electric Power Research lnstitute (EPRI)e further confirms that the TRC test is
most similar to supply-side tests.
Finally, the Northwest Power and Conservation Counci! ("Council") uses "an
estimate of all direct costs of a measure or resource over its effective life."to While the
Council does not use the TRC test as defined by the California Standards Practice
Manual, it uses a form of a "total resource" cost test. The Council's version of a TRC test
attempts to capture all costs and benefits. As Tom Eckman, former Conservation
Resource Manager of the Council has stated, it "directs funds toward measures that
minimize total Utility and customer investments in energy services" and "avoids promoting
measures that may impose non-energy costs on others."ll The Council, in its Seventh
Power Plan, states that the .TRC of conservation is used to compare costs with other
resources."12
B. Enerqv Efficiencv Measurement for Proqram Planninq.
For program planning, ldaho Power uses the UCT, TRC test, and the Participant
Cost Test ("PCT') because "it is prudent to consider all the tests prior to making a
determination on offering a new program or making a decision to continue offering an
existing program. The Company believes that this process ensures a DSM portfolio that
s "Since the TRC test measures the change in the utility's and participants' direct costs that result
from a demand-side resource, and since supply-side resources have no generally recognized customer
costs, some people argue that it is similar to supply-side tests, which measure the change in the utility's
costs that result from a supply-side resource. The use of a similar test has the effect of creating a level
playing field between demand-side and supply-side resources."
10 Cost-Effectiveness Analysis: A Tail of Two Solutions,
http://www.neec.neUsites/defaulUfiles/paoe attach/neeccosteffectiveness eckman 072313 2slides.pdf, slide 14.
11 /d., slide 18.
12 https://www.nwcouncil.orq/sites/defaulUfiles/Tthplanfinal chap12 conservationres 2.pdf at 12-12.
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
is not only good for the utility, but one that is good for all customers, both participating
and non-participating customers."l3 The Company believes it is in the best interest of its
customers to recommend offerings that will enable customers to recover their costs of
investing in energy efficiency products or measures.
Calculating the Ratepayer lmpact Measure Test ("RlM"), UCT, TRC, and PCT for
every energy efficiency program and comparing the tests leads to better, more informed
decisions for program planning and evaluation. This approach is supported by the
California Standard Practice Manual,la which states:
Ihe fesfs set forth in this manual are not intended to be used
individually or in isolation. The results of tests that measure
efficiency, such as the Total Resource Cost Test, the Societal
Test, and the Program Administrator Cost Test, must be
compared not only to each other but also to the Ratepayer
lmpact Measure Test. This multi-perspective approach will
require program administrators and state agencies to
consider tradeoffs between the various tests. (Emphasis
added.)
This approach is also supported by the NationalAction Plan for Energy Efficiency's
(NAP E E) U nderstand i ng Cost-Effectiveness of Energy Efficiency P rog rams: 1 s
Overall, the results of all five cost-effectiveness fesfs provide
a more comprehensive picture than the use of any one test
alone. The TRC and SCT [Societal Cost Test] cost tests help
to answer whether energy efficiency is cost-effective overall.
The PCT, [Program Administrator Cost Test or (UCT)], PACT,
and RIM help to answer whether the selection of measures
and design of the program is balanced from participant, utility,
and non-participant perspectives respectively. Looking at the
cost-effectiveness tests together helps to characterize the
attributes of a program or measure to enable decision making,
13 Case No. IPC-E-18-03, Aschenbrenner Direct Testimony at 18-19.
14 htto://www.cpuc.ca.qov/uoloadedFiles/CPUC Public Website/ContenUUtilities and lndustries/Eneroy -
Electricitv and Natural Gas/CPUC STANDARD PRACTICE MANUAL.odf at 6.
lshttps://www.epa.oov/sites/production/files/2017-06/documents/understandinq cost-
effectiveness of enerqv efficiencv proorams best practices technical methods and emerqinq issues for policy-
makers.pdf at 3-1.
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
to determine whether some measures or programs are too
costly, whether some costs or incentives are too high or too
low, and what adjustments need to be made to improve
distribution of costs and benefits among stakeholders.
(Emphasis added.)
The Council also recognized that one test was not enough to evaluate a program
or measure and that there is a need to use each test in combination.lo
ICL's recommendation for use of the UCT because it is the primary test used by
Utah and TexaslT ignores primary test directives for the jurisdictions under which the
Company operates. ln Oregon, al! program administrators (including ldaho Power) must
comply with Public Utility Commission of Oregon ('OPUC") Order No. 94-590, stating the
expectation of the OPUC that measures and programs pass both the UCT and TRC test
or that utilities file with the OPUC for a cost-effectiveness exception. Because ldaho
Power endeavors to offer a consistent portfolio of energy efficiency programs across its
service area, it would be problematic to operate programs which determine cost-
effectiveness of energy efficiency by relying on only one of the mandated tests. While
ICL cites Commission orders in other utility dockets, the Commission has recognized the
value of the TRC test as one of the tests to screen potential programs in ldaho Power's
service area and has recently provided parties with the very guidance ICL recommends
it clarifies:18
The TRC, UCT, and PCT evaluate EE programs from different
perspectives. We believe each perspective can help inform
the Commission, the utility, and stakeholders about a
particular program's effectiveness. We thus find it reasonable
for the Company to continue screening potential programs
15 Cost-Effectiveness Analysis: A Tail of Two Solutions,
http://www.neec.neUsites/defaulUfiles/paqe attach/neeccosteffectiveness eckman 072313 2slides.pdf, slide 24.
17 ICL's Comments at 4.
18 Case No. IPC-E-15-06, Order No. 33365 at 9-10
IDAHO POWER COMPANY'S REPLY COMMENTS - 8
using each test as a guideline, and to advise us on how the
Company's programs fare under each test. When the
Company ultimately seeks to recover its prudent investment
in such programs, however, we believe the Company may
(but need not exclusively) emphasize the UCT-and that
test's focus on Company-controlled benefits and costs-to
argue whether the programs were cost-effective. As always,
the Company ultimately must persuade us that its program
investments were prudent under the totality of the
circumstances.
As a point of clarification, on page 5 of ICL's Comments, ICL cites Commission
Order No. 33766 to support using the "UCT to more accurately assess the value of energy
efficiency as a resource." That same passage also includes the Commission's
encouragement to evaluate cost-effectiveness with multiple perspectives, stating: 1s
We find that the UCT more accurately assesses the value of
energy efficiency as a resource. Moreover, we have
previously approved using the UCT as the primary
determinant of cost-effectiveness. That said, fhe Commission
encourages fhe use of a full suite of cost-effecfiveness
evaluations, including the TRC, UCT, and participant cost test
(PCT). These measures each provide a different perspective
and valuable results. (Emphasis added.)
While the Company acknowledges that the Commission may emphasize the
results of one economic test over another for cost recovery decisions, ldaho Power
believes it is appropriate, and thus encourages the Commission, to consider all test
perspectives for resource planning purposes. Not doing so would lead to uneconomic
resource procurement and higher overall costs for customers.
Cost-effectiveness evaluation from multiple perspectives supports ldaho Power's
decision to end the Home lmprovement Program. ln their assessments, Staff and ICL
each believe the Home lmprovement Program was cost-effective based solely on the
1e Case No. PAC-E-16-14, Order No. 33766 at 5.
IDAHO POWER COMPANY'S REPLY COMMENTS - 9
results of the UCT.20 However, in their Comments, neither Staff nor ICL addressed the
2017 cost-effectiveness results from the TRC test and the PCT of 0.41 and 0.70,
respectively.2l These results indicate that from the TRC perspective, there is $0.41 of
benefit for every dollar spent (a loss of $0.59) and, from the PCT perspective, there is
$0.70 of benefit (a loss of $0.30) for every dollar an average customer spends on the
program. The Company made the decision to end the Home lmprovement Program after
considering the totality of the circumstances surrounding the program-input from the
EEAG was one consideration, as was the impact to participating customers and non-
participating customers alike. ldaho Power has a responsibility to promote energy
efficiency programs and measures that are economically beneficial for program
participants as well as al! its customers. The Company does not believe it is in the best
interest of its customers to recommend offerings which, in this case, will lead to customers
not recovering the costs of investing in an energy efficiency measure.
Pursuant to the Commission's directive in Case No. IPC-E-17-03,22 the Company
commits to continue to work with Staff and the EEAG to discuss ldaho Power's programs
and to limit misunderstandings surrounding cost-effectiveness. The Company plans to
work with the EEAG to determine the feasibility of developing a range of acceptable cost-
effectiveness test values for programs to evaluate whether a program or measure will
continue to be offered in the Company's energy efficiency portfolio.
20 Staff's Comments at 3 and 8; ICL's Comments at 2.
21 ldaho Power's Demand-Side Management 2017 Annual Report, page 35.
22 Order No. 33908 at 7.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1O
C. Demand Response.
ldaho Power appreciates Staffs recognition that its existing demand response
('DR') programs are well-managed and the acknowledgment of efforts made by the
Company to improve its programs.23 The Company wishes to clarify for the Commission
that Staff's understanding that DR is considered after, not alongside, supply-side options
for future capacity deficits2a is inaccurate. ln its 2017 lRP, the Company included
approximately 390 megawatts ("MW") of DR as a committed resource in all portfolios and
considered expanded DR alongside supply-side resources in eiqht of the twelve portfolios
analyzed. ln those portfolios, ldaho Power analyzed 50 MW of additional DR in 25 MW
increments for years 2021 and 2026. ldaho Power believes its 2017 IRP analysis
appropriately considered incremental DR in a manner that is both fair and consistent with
the economic assessment of other supply-side resource alternatives.
Notwithstanding the above, the Company appreciates Staffs desire to continue
examining expanded DR in the IRP and looks fonrard to working with Staff and the
lntegrated Resource Plan Advisory Council in the development of the 2019 IRP resource
evaluation.
III. IDAHO POWER IS COMMITTED TO
CONTINUED COLLABORATION WITH STAKEHOLDERS
Parties and the EEAG acknowledge generally that ldaho Power continues to make
improvements in its implementation of cost-effective energy efficiency. While the
Company and parties may not fully agree in all aspects of program management, ldaho
Power is committed to continuing to work with the EEAG to improve program
implementation, marketing, and pursuit of new energy efficiency opportunities.
23 Staff's Comments at 7
2a ld. al7.
IDAHO POWER COMPANY'S REPLY COMMENTS - 11
The Company plans to continue to collaborate, through the EEAG, on program-
specific concerns raised by ICL and Staff, such as:
. Frequency of process and impact evaluations
. My Account opt-in to receive energy efficiency and program updates
. Rebate Advantage ad microtargeting
o Multifamily Energy Savings Program marketing efforts
. Small business customer focused direct install programs
IV. CONCLUSION
ldaho Power appreciates the opportunity to respond to comments filed in this case
and respectfully requests that the Commission issue an order designating ldaho Power's
expenditures of $37,162,002 in Rider funds and $6,983,314 of DR program incentives,
for a total of $44,145,316, as prudently incurred DSM expenses.
DATED at Boise, ldaho, this 2nd day of August 2018.
A.H N
Attorney ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 12
(
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 2nd day of August 2018 I served a true and correct
copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Edith Pacillo
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Customerc of ldaho Power
Peter J. Richardson
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
ldaho lrrigation Pumpers Association, lnc.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Avenue, Suite 100
P.O. Box 6119
Pocatello, ldaho 83205
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Anthony Yankel
12700 Lake Avenue, Unit 2505
Lakewood, Ohio 44107
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 North Sixth Street
Boise, ldaho 83702
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IDAHO POWER COMPANY'S REPLY COMMENTS - 13
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