20181221final_order_no_34219.pdf

Office of the Secretary
Service Date
December 21,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
THE IDAHO DEPARTMENT OF
ADMINISTRATION FOR AN EXEMPTION
FROM THE IDAHO PUBLIC UTILITIES
COMMISSION'S MASTER.METERING
RULES FOR ELECTRIC UTILITIES AND
THE IDAHO POWER MASTER-
METERING STANDARDS
CASE NO.IPC-8.18-08
ORDER NO. 34219
On April 13,2018, the Idaho Department of Administration ("IDOA") petitioned the
Commission for an exemption to the Commission's Master-Metering Rules for Electric Utilities
(IDAPA 31.26.01) and Idaho Power Company's nearly identical master-metering standard in
Section 4 of Rule E to Tariff No. 101 (collectively the "Master-Metering Rules"). The Master-
Metering Rules require public utilities to individually meter commercial buildings where tenants
control their own electric space heating, water heating, or air-conditioning appliances. IDOA seeks
an exemption to the Master-Metering Rules as they might otherwise apply to Idaho Power's
provision of electrical service to the State of Idaho's Chinden Office Complex (the "Campus").
On May 7,2018, the Commission issued notice of the Petition. The Commission also
set a May 21, 2018 intervention deadline, a June 21, 2018 comment deadline, and a July 5, 201 8
reply deadline. Order No. 34056. The Commission later extended the comment deadline to July 5,
201 8, and the reply deadline to July 19, 201 8. Order No. 34077.
On July 5,2018, the Commission Staff and Idaho Power-the only intervenor in the
case*filed timely written comments about the Petition. Staff recommended the Commission grant
IDOA a limited exemption. See Comments of the Commission Staff ("Staff Comments"). Idaho
Power recommended that the Commission deny the requested exemption. See Comments of Idaho
Power Company ("Idaho Power Comments").No other comments were received.
Having reviewed the record, the Commission issues this Order denying IDOA's
Petition for an unlimited exemption to the Master-Metering Rules, but granting IDOA a temporary
2-year exemption so IDOA can individually meter the Campus. Our decision is explained below.
)
)
)
)
)
)
)
)
)
1ORDER NO. 34219
MASTER.METERING RULES
The Commission first adopted Master-Metering Rules in 1980 through Order No.
15556. The Commission based its decision "on the conservation goals of [the Public Utility
Regulatory Policies Act of 1978 (PURPA) andl upon goals of fostering and maintaining direct
relations between electric utilities and their customers and of equitable treatment of the ultimate
consumers of electricity." Id. at 1. The Master-Metering Rules were based on four premises:
l. Individually metered tenants who are responsible for paying their own
electric bills use less and waste less electricity than master-metered tenants
2. The ultimate consumers of electric energy are better served by a direct
customer relationship with the utility than by disguising utility costs in the
rent or by the landlord playing the role of the public utility ...;
3. It is inequitable for electric consumers to pay more or less than the cost of
electricity which they consume themselves ...; and
4. The adoption of easily understood rules capable of immediate application
without lengthy or costly studies or analyses is a better means of drawing
reasonable lines allowing or disallowing master metering than rules based
upon complex cost-benefit analyses that ignore unquantifiable benefits of
individual metering.
Id. at2. The current version of Master-Metering Rule 103 (IDAPA 31.26.01.103), which is at issue
here, states:
No unit of commercial buildings and shopping centers shall be master-
metered for electric service after July l, 1980, if the units for their tenants
contain an electric space heating, water heating, or air-conditioning (space
cooling) unit that is not centrally controlled and over which the unit's
tenants individually control electric usage. Tenants in otherwise master-
metered buildings whose electric load or who operate appliances whose
electric load exceeds the individual metering threshold found in the utility's
tariffs must be individually metered.
THE CAMPUS
ln2017, the state purchased the Campus from HP Inc. to address office space needs.
The Campus consists of about 200 acres, eight separately numbered buildings, a cafeteria building,
multiple outbuildings, a picnic shelter, trails, sports fields, and parking areas. The Campus also
houses several tenants with leases of various lengths. IDOA explained that over the long-term it
expects the Campus to ultimately house multiple state agencies that currently lease premises
2ORDER NO. 34219
elsewhere. Petition at 4. Idaho Power serves the Campus through a substation, and the electricity
is then distributed to the different buildings and other structures. Id. at3.
When the state bought the Campus, it also entered a Facilities Lease that requires
IDOA to operate and maintain the Campus. Further, IDOA agreed to lease back to HP Inc. all of
Campus Buildings 1,3,5, and 7, the cafeteria building, and certain connecting corridors and
outbuildings serving those buildings. IDOA also agreed to assume HP Inc.'s existing leases with
HP Inc.'s existing on-Campus tenants. Id. at 4-6. As the leases expire, state agencies will transition
to the Campus. The Idaho State Tax Commission and Idaho Industrial Commission will move to
Building 2 this year. Id. at7. And, except for a small suite, state agencies will fully occupy Campus
Buildings 2,4, and 6 by mid-2020. Id. at 5.
IDOA reported that HP Inc. requires IDOA to separate HP Inc.'s utilities from the rest
of the Campus to comply with Internal Revenue Service ("IRS") provisions for selling and leasing
back real property. HP Inc.'s lease specifies that IDOA must sub-meter HP Inc.'s electrical use by
the end of 2018. Id. at 8. If the exemption were approved, HP Inc. would see and pay for its
electrical use through meter-reading protocols developed by facilities-management experts from
IDOA and HP Inc. Additionally, IDOA provided a method for allocating Idaho Power's monthly
bill among the sub-metered tenants associated with that bill.
HP Inc. has a Supervisory Control and Data Acquisition ("SCADA") system that
meters and measures its electricity use. I For business confidentiality reasons, HP Inc. will not
share the SCADA system or its information with IDOA. Id. at7. HP Inc.'s lease precludes IDOA
from charging HP Inc. more for electrical service than Idaho Power's actual charges for HP Inc.'s
electricity use. If HP Inc.'s SCADA data does not match IDOA's invoices, and an HP Inc. audit
finds the electric charges were overstated, then IDOA would have to pay the audit costs. Id.ldaho
Power does not currently own or maintain any facilities or metering equipment at the Campus.
rhe existing electrica, o,JI;;JH::l is very complex, but runctional. rhe
Campus' Point of Delivery (POD) is the Idaho Power Substation on Cloverdale Road. The
substation has two 12.5 kV feeders; one goes to Building I and the other goes to Building 8, which
I The Campus SCADA server performs equipment and operations monitoring and receives/records data and
operations information including curent, load, voltage, temperatures, and equipment or process status. SCADA
systems are used by electric utilities to collect, record, and monitor data used to manage the electric grid.
JORDER NO. 34219
is individually metered. Buildings I through 7 are not individually metered. Instead, they are
served through a centralized switching system in Building 1. The Campus also includes five
electric chillers that provide air-conditioning to all eight buildings, which are not individually
metered. This unique configuration results from the Campus and its electric system being built
and expanded behind Idaho Power's POD over thirty years to meet HP's specific needs. Idaho
Power has indicated it cannot serve the Campus under a facilities charge agreement unless
significant investments are made to align the Campus with Idaho Power's standard equipment.
Because the Campus buildings are not owner-occupied (i.e., occupied by state agencies) and (for
the most part) are not individually metered, the Campus would need an exemption to the rules
against master metering. The exemption may need to last through 2035 to maintain the existing
leases, assuming renewals.
After an evaluation of the systems, and conversations with Idaho Power, IDOA
petitioned the Commission for an exemption to the Master-Metering Rules as they relate to the
Campus. Id. at 2-4. With its Petition, IDOA asked for an exemption so it can install the HP Inc.-
required sub-meters, require HP Inc. to pay the actual costs of its electric use, and otherwise
facilitate IDOA's ability to better operate and manage the Campus. Id. at 1-2, and 12. IDOA
claimed the HP Inc. lease follows the rationale behind the Master-Metering Rules because electric
charges are transparent to HP Inc. and based on protocols developed by both parties; HP Inc.'s
SCADA system and audit process in the lease ensure HP Inc.'s electric costs are its actual costs;
and HP Inc. controls the electric hot water systems, air systems, vacuum systems, and water
systems on the leased premises. IDOA stated these provisions enable HP Inc. to control the
efficiency of its electric use based on its actual use and business needs. Id. at 2 and 1 1 .
THE COMMENTS
Commission Staff and Idaho Power filed comments. IDOA did not reply. Staff s and
Idaho Power's comments are summarized below.
A. Commission Staff
Commission Staff recommended the Commission grant IDOA atemporary and limited
waiver of the Master-Metering Rules. Staff noted the Commission has previously granted waivers
to the Master-Metering Rules. Further, in this case the Campus needs a temporary waiver only
until its buildings are individually metered or wholly occupied by state agencies. Staff believes a
4ORDER NO. 34219
temporary and limited waiver would allow IDOA to honor its lease agreements and facilitate the
transition to state occupancy.
Staff summarized the mixed tenancy at the Campus making the waiver necessary. Staff
noted that state agencies and commercial tenants at the Campus, except HP Inc., operate under
variations of a full-service lease where electric charges are built into a base rent payment. These
leases provide tenants with a predictable rent payment over the lease term, and protect tenants from
cost increases and month-to-month expense fluctuations. While the absence of a direct utility bill
means the price signal is lost, Staff does not oppose this arrangement for state agencies because
they are part of the same broader organization. And Staff does not oppose this arrangement for
the other Campus commercial tenants because it would likely exist even if the Campus buildings
were individually metered. Staff Comments at 7-9.
While a full-service lease worked for the other commercial tenants and state agencies,
HP Inc. requires that its lease include direct billing for its utility usage. To account for this, IDOA
initially proposed to separately sub-meter and bill HP Inc. for its electrical consumption by
installing "electric meters at the service side of each transformer" and bill electrical use "through
the protocols for reading the sub-meters developed by the parties." But IDOA later learned it could
"duplicate the SCADA system server at the Campus, and then use that server to log electrical use"
and precisely meter HP Inc.'s electric consumption. This became IDOA's preferred option,
because it was less expensive and provided the most detailed usage data, though IDOA confirmed
to Staff that installing either limited (8) or full (25) sub-meters to track usage were also
possibilities. Staff believes the SCADA server, perhaps combined with the other sub-metering
options described by IDOA, can provide a robust price signal that preserves the intent of Master-
Metering Rules. Staff notes, however, the price signal is only retained if IDOA's billing method
aligns with Idaho Power's billing method for customers under Schedule l9-Large Power Service.
That is not the case now, but Staff believes a feasible solution exists. Id. at9.
Staff noted IDOA is billing HP Inc. for an allocated share of the cost of electricity based
on square footage until HP Inc.'s actual energy usage can be segregated and measured. Staff
believes the current billing arrangement generates bills that are too low. To remedy this, IDOA
has suggested that, in the future, IDOA would determine what percentage of kilowatt hours HP
Inc. uses in relation to the total kilowatt hours measured by Idaho Power at the primary meter.
IDOA would then apply this percentage to the total billed amount reflected on Idaho Power's bill
5ORDER NO. 34219
for the Campus. Staff noted this simplified billing method ignores demand, peak and oflpeak
usage, and other components of Idaho Power's Schedule 19, and expects it would continue to result
in underbilling, and potential subsidization by other Campus tenants, including state agencies. Id.
at 9-10.
Staff thus recommended IDOA use sub-meters and/or the SCADA server to derive all
the billing determinants, and then align HP Inc.'s bill with Schedule 19. Staff recommended IDOA
then submit a compliance filing to the Commission to confirm that the billing input and method
align with Schedule 19. Staff also recommended IDOA update its pricing schedule as pricing
inputs change within the Schedule 19. With this change, Staff believes a temporary waiver is
justihed because the price signal underlying the Master-Metering Rules would be maintained. Id.
at 10.
While Staff believes it might be reasonable to temporarily waive the Master-Metering
Rules through 2035 as described above, Staff prefers individual metering when possible. Staff
stated that, according to Idaho Power's construction studies, it actually would cost the state more
to obtain a waiver through 2035 and master meter the Campus ($1,311,508 in total and $20,191
per month in facilities charges) than it would cost the state to obtain a 54-week waiver (the
estimated time to align the Campus so Idaho Power can maintain and operate the system) and then
individually meter the Campus buildings ($1,728,822 in total and $ I 1,812 per month in facilities
charges). Id. at 11-12. Staff also observed that individual metering would provide IDOA with more
flexibility for future use of Campus buildings. Individual metering also could provide better price
signals to tenants even if the state continues bundling electricity costs into rent; individual meters
would enable IDOA to calculate each tenant's rent based on actual usage of the building the tenant
occupies, rather than simply factoring in a proportional share of the aggregate usage of the
Campus. Id. at 12.
Despite the benefits of individual metering, Staff believes it would be reasonable to
grant a waiver and temporarily allow master metering through 2035 while the state transitions the
Campus to full state occupancy. To discourage future parties from attempting to circumvent the
Master-Metering Rules, Staff recommended the waiver be granted with these limitations:
l. The waiver will expire when the Campus is individually metered, becomes
wholly occupied by state agencies, or when the existing lease extensions expire
in2035, whichever is earliest;
6ORDER NO. 34219
2. The price signal associated with direct metering should be preserved by
requiring IDOA to make a compliance filing confirming the final Campus sub-
metering method and demonstrating that its calculations and billing
methodology for HP Inc. aligns with Schedule 19; and
3. The waiver should remain in effect only as long as the facility maintains similar
use to the use that existed when the waiver was granted.
Id. at 12-13.
B. Idaho Power
Idaho Power recommended the Commission deny the proposed exemption, and instead
order IDOA to install individual meters on the Campus buildings. Company Comments at2.The
Company reasoned that requiring individual meters will advance the goals behind the
Commission's Master-Metering Rules. Id. at 10-11. The Company also provided the Commission
with the results of two studies it performed regarding costs over time of owning, operating, and
maintaining Campus facilities with either: l) a Commission waiver to Master-Metering Rules, as
requested; or 2) a Commission order to individually meter each building. Id. at7-10. Finally, the
Company reviewed intangible benefits of individually metering the Campus, including flexibility;
the possibility of setting a problematic precedent; and long-term cost considerations for the
customer. Id. at10-15.
The Company's Version I study assumed the Commission granted the requested
master-metering exemption. Id. at 7 . The study determined that, with a waiver, IDOA would not
be required to pay any upfront costs, and would pay approximately $20,191 in monthly facilities
charges. Id. at 7. The Company would install new equipment, and assume ownership of certain
facilities. The Company further explained that, because most of the Campus distribution system is
non-standard, significant facilities upgrades would be required.
The Company's Version 2 study assumed no exemption, and that individual meter
points would be installed at each building. Id. at9. This study estimated the Company would install
11 primary meters separately metering each building and chiller. Under this version, IDOA would
pay upfront contributions in aid of construction ("CIAC") of about $891,081, and monthly
facilities charges of $11,812.
The Company acknowledged the construction cost to individually meter the buildings
would be $417,314 higher than if a waiver were granted. Id. at 10. However, the Company also
argued those costs would be mitigated by IDOA not having to implement its own sub-metering
7oRDER NO. 34219
system, and facilities charges that would be $100,548 lower per year, greatly offsetting the higher
upfront costs over the long-run. Id. at 17-18.
Additionally, the Company argued that without individual metering, it cannot
accurately charge its customers for electricity. The Company questioned IDOA's proposed billing
methodology, stating that "Schedule l9P includes components that would not be possible to
accurately allocate under IDOA's proposed methodology." Id. at 12. Furthermore, the Company
believes that some of the individual meters would connect to accounts that qualify for different
rate schedules. Id. at 12. Because of those issues, the Company doubts IDOA could accurately
charge HP for its usage. Id. at 13.
Finally, the Company noted that individually metering the Campus would allow the
Company to better serve its customers through data collection, and identify behaviors that impact
consumption and demand. Id. at 15. The Company also pointed out that individual metering would
allow IDOA flexibility in long-term planning for the Campus. Id. at 14. Finally, the Company
expressed concern that a master-metering exemption for IDOA could lead others to seek similar
exemptions. Id. 14-15. The Company thus cautioned that any exemption for IDOA should "be
based on the narrow set of facts unique to this case." Id. at 15.
IDOA did not reply to the Staff s or Company's comments.
DISCUSSION AND FINDINGS
A, Authoriflt/lurisdiction
In this case, IDOA seeks a waiver of the Master-Metering Rules under which Idaho
Power Company would otherwise provide electric service to the Campus. Idaho Power Company
is an electric corporation and public utility subject to the Commission's regulation under the Idaho
Public Utilities Law. The Company's rates, charges, classifications, rules, and practices related to
electric service are subject to the Commission's jurisdiction. See ldaho Code $$ 6l-119, -129,
-501, -502, and -503.
B. Standard of Review
The issue before the Commission is whether it is in the public interest for IDOA to
receive a waiver to the Master-Metering Rules. When determining whether a course of action is in
the public interest, the Commission considers relevant factors, including cost:
In general, where the Commission is required to consider the "public interest,"
it must look to "the interest of the public, their needs and necessities and
8ORDER NO. 34219
location and, in fact, all the surrounding facts and circumstances to the end that
the people be adequately served."
Browning v. Wood,99 Idaho 174,579 P.2d 120 (1978); see also, Commission Order No. 28213,
Case No. PAC-E-99-1. Similarly, the Commission must seek to ensure that utilities execute their
statutory duty to provide "adequate, efficient, just and reasonable" service. Idaho Code $ 6l-302.
Notably, the statute does not require that services be provided at the lowest possible cost. Rather,
it considers broader concepts of safety, health, comfort, convenience of patrons, employees, and
the public.
Finally, as discussed, the Commission must base its decision "on the conservation
goals of PURPA, and upon goals of fostering and maintaining direct relations between electric
utilities and their customers, and the premises those [Master-Metering Rules] are based upon." See
Order No. 15556 and Rule 103 (IDAP A 31.26.01.103).
C. Requestfor Waiver
After analyzing IDOA's proposal for a waiver of unlimited duration, and Staff s
alternative proposal for a 17-year waiver, we find neither proposed waiver is in the public interest
or justified by the rationale by which prior waivers have been granted. See Order Nos. 23936,
26451,26512, and 28889. The mix of state agencies and commercial tenants at the Campus and
the less-than-serviceable electrical system are challenges that should be addressed at the outset.
The public interest would not be served by allowing for what amounts to only an interim solution.
We find that the requested waiver, if granted, would cause significantly higher costs for taxpayers
over time, and diminished service quality.
It is not yet possible to tell if and when the Campus will be entirely occupied by state
agencies. Regarding commercial tenants, the absence of a direct utility billing means that the price
signal of electricity costs would be lost. The SCADA system, while advanced and sophisticated,
is an inadequate substitute for an individual meter. As noted, IDOA's billing method would have
to align with Idaho Power's billing method for Schedules 9 (Large General Service) and l9 (Large
Power Service) to include demand, peak and off-peak usage, and other components. The record
shows the SCADA system alone cannot perform such a task. While Staff noted that a feasible
solution may exist, no specific remedy has been proposed or considered. Rather, by individually
metering the buildings, we find that commercial tenants and state agencies at the Campus will
9ORDER NO. 34219
receive a more accurate price signal regarding their usage, and be incentivized to use less and
waste less electricity than a master-metered tenant.
We understand that the intent of individually metering buildings is complicated when
multiple tenants, each with a full-service lease that includes utilities in the rent payment, occupy
the same building. Although it may be impractical to individually meter multiple tenants in a
building, it is not reasonable to compound that problem by allowing master-metering in this case.
The record shows that the price signal is best preserved through individual utility metering.
We find that, by individually metering the buildings, the commercial tenants and the
state agencies will be better served. The proposed waiver, on the other hand, would disguise utility
costs in rent or put the state in the position of serving as a de focto public utility. Further, the
proposed master-meter solutions could lead to inequities between tenants: The commercial tenants
or the agencies may unintentionally subsidize the other for electricity usage.
The Commission has granted only five Master-Metering exemptions since the Rules
were adopted in 1980. The exemptions were made under narow circumstances. The IDOA request
however is unprecedented as it does not align with any of the previously granted waivers.
Additionally, we cannot ignore the cost implications to state taxpayers (many of whom
are Idaho Power customers and ratepayers). While IDOA argues that the costs of separate metering
exceed the benefits, the evidence in the record-the Company's comprehensive study confirmed
by Staff and not disputed by IDOA-shows that granting a waiver would ultimately cause the state
to incur far more expense over time. Requiring IDOA to adhere to the Master-Metering Rules and
individually meter the buildings would require IDOA to pay about $900,000 in upfront
contributions in aid of construction. But the ongoing annual charges would be about $100,000 less
per year than they would be if master-metering were allowed. Furthermore, the state could avoid
implementing its own costly sub-metering system. Over the life of the existing commercial leases
at the Campus, this could save millions of dollars. Put another way, the waiver solution is both
more complicated and more expensive than individually metering the buildings at the outset.
Staff suggested it would take 54 weeks to align the Campus so Idaho Power can
maintain and operate the system. Staff Comments at 12. In an abundance of caution, and to avoid
placing Idaho Power and IDOA in a position that would violate the Master-Metering Rules, we
find it reasonable to grant a two-year waiver. This should allow the parties sufficient time to
prepare the Campus for individually metered buildings.
ORDER NO. 34219 l0
ORDER
IT IS HEREBY ORDERED that IDOA's Petition is denied.
IT IS FURTHER ORDERED that IDOA is granted a temporary two-year waiver of the
Master-Metering Rules.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. V/ithin 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 Utilities Commission at Boise, Idaho this Zl
day of December 2018
PAUL PRESIDENT
RAPER,SIONER
/ltu
ATTES
M. Hanian
Commission Secretary
l:\Legal\ELECTRICUPC-E- I 8-08\OrdersVPCE I 808_fi nal_bk_kk.docx
ERIC ANDERSON, COMMISSIONER
ORDER NO. 34219 11