20190529final_order_no_34345.pdf

Office of the Secretary
Service Date
May 29,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.IPC-E-19-06
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO REVISE THE ENERGY )
EFFICIENCY RIDER,TARIFF SCHEDULE )ORDER NO.34345
91 )
On February 12,2019,Idaho Power Company applied to the Commission for an order
authorizing the Company to revise its Energy Efficiency Rider,Tariff Schedule 91,by decreasing
the Rider collection rate from 3.75%of base rates to 2.75%of base rates,effective June 1,2019.
The Rider appears on customers'monthlybills as a line item for Energy Efficiency Services.The
Company uses the Rider to collect funds to pay for energy efficiencyprograms and other demand-
side management (DSM)programs.The Rider currentlycollects about $40 million per year,and
at the end of 2018,the Rider account had a surplus balance of about $5.3 million.
With its proposal,the Company seeks to decrease the Rider surplus by decreasing the rates that
contribute to that surplus.
After the Commission received the Application,it issued a Notice of Application and
Notice of Modified Procedure setting comment and reply deadlines (Order No.34264).The City
of Boise,Industrial Customers of Idaho Power (ICIP),and Idaho Conservation League (ICL)
intervened in the case.These intervenors,the Commission's Staff,and the NW Energy Coalition
(NWEC)then filed timely comments,and the Company filed timely reply comments.
Having reviewed the record,the Commission now enters this Order approving the
Company's Application as follows.
THE APPLICATION
In its Application,the Company discussed the Rider's history.In summary,the first
Rider rate was established in 2002 at 0.5%.In 2005,the rate was increased to 1.5%.In 2008,the
rate increased further to 2.5%.In 2009,the rate was increased again to 4.75%.In 2011,the rate
was decreased to 4.0%and $10 million was transferred from the Power Cost Adjustment (PCA)
balance to the Rider balance to decrease a deficit in Rider funds.Since then,$41 million has been
transferred from the Rider balance to the PCA,with $20 million transferred in 2014,$4 million in
2015 and 2016,and $13 million in 2017.Also in 2017,the Rider was reduced to its current 3.75%
rate and the annual transfers to the PCA were eliminated.Id.at 2.
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With this Application,the Company seeks to decrease the Rider collection percentage
from 3.75%to 2.75%of base rate revenues,effective June 1,2019.Id at 1.The Company notes
that,without the adjustment,the Rider account balance would increase from about $5.3 million to
$11.6 million by the end of 2019.Id at 2-3.
The Company states that if the proposed change is approved,the price Idaho customers
pay for electric service would reflect about a $10.4 million decrease in annual revenue collection,
which would be a 0.90%decrease from current billed revenue.A typical residential customer's
monthly bill would decrease by 83 cents.Id at 4.
THE COMMENTS
The Commission Staff,City of Boise,ICIP,ICL,and NWEC commented on the
Company's Application,and the Company replied to those comments.The comments and reply
are summarized below.
A.Commission Staff.
Commission Staff supported the Company's request to decrease Rider rates from
3.75%to 2.75%,effective June 1,2019.Staff Comments at 2 and 3.Staff noted the rate decrease
would lower costs by about $10 per year for an average residential customer using 950 kilowatt-
hours per month.Id at 3.
Staff stressed that decreasing the Rider rate does not signal a loss of support for DSM
programs,because the Rider enables the Company to recover prudently incurred DSM costs
without affecting the level of DSM or number of programs the Company will pursue.Id Staff
notedthe Company forecasts a significant surplus Rider balance even if the proposed rate decrease
takes effect,and this would allow the Company to continue to pursue DSM programs even if
expenses exceed projections.Id Staff continued to encourage the Company to pursue all cost-
effective DSM,even if expenses exceed projections,and noted the Rider reduction would properly
align expenses and revenue in 2019-2021.Id
B.City of Boise.
The City of Boise noted it intends for the City to be supplied entirely with clean
electricity by 2035,and that achieving this goal will depend on both existing and new energy
efficiency programs.City Comments at 2.The City thus asked the Commission to direct the
Company to review how it evaluates a program's cost effectiveness.Id.The City believes the
Company should use the Utility Cost Test (UCT)instead of the Total Resource Cost test (TRC)to
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evaluate program cost effectiveness,and that using the UCT would increase the number of
programs that would qualify for Rider funding.Id The City suggested the number of energy
efficiency programs would increase if the Company used the UCT,similar to Rocky Mountain
Power and Avista,instead of the TRC as used by the Company.Id.at 2-3.The City argued it is
inappropriate for the Company to use the TRC and customer costs when evaluating program cost
effectiveness because it is outside the Company's purviewto protect customers from making poor
financial decisions.Further,customer costs have "no material impact on IPC from an energy
efficiency investment standpoint as the cost for energy efficiency purchases are borne solely by
the customer."Id.at 3.
C.Industrial Customers of Idaho Power.
ICIP recommended the Commission decrease the Company's DSM Rider rate to 2.5%
instead of to the 2.75%sought by the Company.ICIP Comments at 8.ICIP highlighted that Rider
collections have consistently produced surpluses despite decreases in the Rider collection
percentage,and that the Company's proposal to drop the percentage to 2.75%still would cause
excessive surpluses beyond 2021.Id at 1.ICIP noted the surpluses were caused by a dramatic
decrease in DSM expendituresthat started in 2010.Id at 2.ICIP argued this occurred because the
Company calculates program cost effectiveness using "stale"data from acknowledged Integrated
Resource Plans (IRPs),rather than the most current data in its resource planning forecast.Id at 3-
4.ICIP expressed concern that the Company's 2019 IRP will use even lower gas prices than earlier
IRPs.Id at 6.ICIP noted this would eliminate more DSM programs for lack of cost effectiveness,
decrease the program expenditures to be funded by the Rider,and thus increase the Rider surplus.
Id at 6-7.
ICIP criticized the Company for using different gas forecasts dependingon whether the
Company is deciding what future resources to develop,calculating avoided cost for standard offer
PURPA projects,or determining which conservation programs to offer.Id.at 7.ICIP noted this
inconsistency causes an inexplicable mismatch of selected resource costs that makes it difficult to
ensure the Company can secure a least cost electric power supply for ratepayers.Id
ICIP explained that the long-term trends toward leaner and fewer energy efficiency
programs,and the fact that ratepayers benefit when a utilitydoes not needlessly retain their money
for possible future rebates,warrant the Commission decreasing the Rider rate from the Company-
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proposed 2.75%to 2.5%.Id at 8.ICIP noted a 2.5%Rider would still result in significant,though
smaller,projected surplus.Id
D.Idaho Conservation League.
ICL supported the Company's Application in reliance on the Company's commitment
that decreasing the Rider rate from 3.75%to 2.75%would not diminish the Company's pursuit of
all cost-effective energy efficiency.ICL Comments at 2.ICL noted the Company's commitment
aligns with the Commission's prior orders,includingOrder No.32426 (the Rider rate appropriately
funds energy efficiencyand enables the Company to pursue all cost-effective energy efficiencies
while lowering customers'rates).Id.at 1.ICL also observed that the Company's efficiency
achievements have rebounded since dipping down between 2012 and 2016,which shows that
Rider levels have not dictated the Company's conservation activities.Id at 1-2.ICL stated it
continues to believe the Company can achieve more cost-effective energy efficiency,but
acknowledges the Rider account has a surplus of funds.Id at 2.ICL stated it would continue to
use Energy Efficiency Advisory Group (EEAG)to recommend ways for the Company to expand
access to its energy efficiencyprograms.Id Last,ICL supported using a multiyeartimeframe to
align DSM expenditures and revenues,and stated it would work with stakeholders after the
Company completes its 2019 IRP to establish a longer-term fundingbalance that matches expected
program performance.Id
E.NW Energy Coalition.
NWEC recommended the Commission not reduce the Rider at this time,and that the
Company instead continue to work with stakeholders to find cost-effective ways to procure energy
efficiency.NWEC Comments at 3.Alternatively,NWEC suggests that if the Commission opts to
reduce the Rider,the reduction should adjust 0.25%,from 3.75%to 3.5%.Id In making its
recommendation,NWEC applauded the Company for its ongoing commitment to energy
efficiency and demand response.Id at 1.But NWEC expressed concern that the Company's
request to decrease the Rider by 1%could be an extreme reaction to decreased savings,and could
decrease collection,spending,energy efficiencytargets,and acquisition.Id While NWEC noted
it is committed to affordability,it believes the benefits of targeting new energy efficiency
possibilities outweigh the $10 per year savings an average customer would enjoy under the
Company's proposal.Id.at 2.NWEC stated that slashing the Rider rate would contravene the
Company's conservation potential assessment and the gap between achievable and economic
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energy savings.Id NWEC recommended the Company continue to work with the EEAG to
develop a new portfolio of programs that targets hard to reach markets,pay-for-performance
strategies for large commercial buildings,the transition to 2020 lighting standards,and measures
that are economic but not currentlyin the Company's acquisition effort.Id at 2-3.
F.Company Reply.
In its reply,the Company first addressed comments about the level of funding for the
Rider.The Company noted Staff and ICL concurred with its request to decrease the Rider rate to
2.75%of base rates,while ICIP recommended a more "ratepayer centric"decrease,to 2.5%.The
NWEC,on the other hand,recommended the Rider not be reduced or,at most,that it be reduced
from 3.75%to 3.5%.Company Reply at 2.After noting Staff,ICL,and ICIP recommended the
Rider rate decrease,although to different levels,the Company focused on NWEC's
recommendation that the rate not decrease or decrease only slightly.The Company suggested
NWEC had misconstrued the relationship between Rider funding levels and the Company's pursuit
of cost-effective energy efficiency.The Company noted NWEC believes a decrease in collection
and spending equals a decrease in energy efficiency targets and acquisition.However,the
Company clarified it does not modify its energy efficiencytargets and efforts based on fund levels,
but instead forecasts energy efficiency savings and necessary funding based on the economic and
achievable savings identified in the Company's third-party 2019 potential study.The Company
explained its current forecasts of funding and expenditures show the proposed 2.75%Rider
collection would adequately mitigate the accumulation of surplus Rider balances while allowing
the Company to recover prudentlyincurred costs and pursue all cost-effective energy efficiency.
Id at 2-3.
Next,the Company replied to the ICIP's claim that the Company uses inappropriate
avoided cost inputs to determine program cost effectiveness.Id.at 3.The Company stated it would
be better to address cost effectiveness concerns in the 2018 DSM prudency review case (Case No.
IPC-E-19-11).The Company then summarized its practices.Id.at 3.The Company noted it has
budgeted and planned its DSM programs using DSM alternate costs from the most recently
acknowledgedIRP since 2014.Id at 4.As an example,the Company noted the budget for the 2018
program year was developed in August-September of 2017,and that at the November 2017 EEAG
meeting the Company gave a presentation on Future EE Measure Savings and IRP Avoided Costs
that contained the assumptions for DSM alternate costs and other inputs for the 2017,2018,and
ORDER NO.34345 5
2019 program years.Id The Company stated it thus uses the best data to budget and plan its
programs,and this practice complies with utility standards and third-party evaluator
recommendations.Further,the practice has been supported by the EEAG,and the Company has
explained the practice to the Oregon and Idaho Commissions.Id.Thus,the Company does not
support changing its practice of using the most recently acknowledged IRP.However,the
Company suggested that,if the Commission determines the Company should instead use the most
recently filed IRP,then the Commission should allow the parties in Case No.IPC-E-19-11 to
address that change in that docket before ordering the Company to implement it.Id
Last,the Company replied to the City's request that the Commission direct the
Company to consider using the UCT to evaluate energy efficiency programs.Id at 4-5.The
Company disagreed with the City that the Company should not use the TRC or consider customer
costs.The Company noted it must engage in least cost resource planning to offer electric service
at just and reasonable rates (Id.at 5,citing Order No.22299 and Idaho Code §61-502),and that
relying on the UCT to inform DSM resource acquisition targets could lead to uneconomic
outcomes and higher energy costs for customers.Further,the Company argued it would be
inappropriate to adopt resource planning changes that could increase costs for all customers to
further the City's goals.Id The Company reiterated that the Company's 2018 DSM prudence case,
IPC-E-19-11,is the appropriate case in which to evaluate the tests the Company uses to evaluate
DSM program cost effectiveness.Id at 5-6.
FINDINGS AND DISCUSSION
The Commission has jurisdiction over the Company and the issues in this case under
Title 61 of the Idaho Code,includingIdaho Code §§61-336,-502,and -622.Having reviewed the
record,the Commission finds it reasonable and in the public interest to approve the Company's
Application and allow the Company to decrease the Schedule 91 Rider collection rate to 2.75%of
base rates.The Commission notes the Rider balancing account had a $5.3 million surplus at the
end of 2018.Decreasing the Rider rate from 3.75%to 2.75%will help to decrease that surplus,
afford the Company an opportunityto recover its prudentlyincurred DSM expenses,and allow the
Company to continue to pursue all cost-effective DSM.
We are mindful of the ICIP's and City's arguments about the inputs the Company
should use to determine cost effectiveness,includingwhether the Company should continue to use
data from acknowledged IRPs or more current data,and whether the Company should continue to
ORDER NO.34345 6
use the more-restrictive TRC instead of the UCT when deciding whether it would be cost effective
for the Company to pursue and offer a particular DSM program.We decline to decide those policy
arguments here,and believe they would be more appropriately raised and addressed in the
Company's ongoing DSM prudency review case,Case No.IPC-E-19-11.
ORDER
IT IS HEREBY ORDERED that the Company's Application to decrease its Energy
EfficiencyRider collection rate to 2.75%of base rates is approved,with the new Rider rate to take
effect June 1,2019.The Company's proposed Tariff Schedule 91 is approvedas filed.'
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 with regard to any
matter decided in 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.
I Besides this case,the Company has filed three other cases that propose rate adjustments to take effect June 1,2019.
The other cases are:Case No.IPC-E-19-08,in which the Company seeks to increase customer rates by 0.11%to
recover its costs of exiting the North Valmy coal-fired power plant;Case No.IPC-E-19-10,in which the Company
seeks to increase rates for residential and small general service customers by 3.64%through its fixed cost adjustment
mechanism;and Case No.IPC-E-19-16,in which the Company seeks to decrease rates by 3.49%for residential
customers through its power cost adjustment mechanism.If all fourproposed rate adjustments are approved,customer
rates would decrease by 0.65%,or by about 59 cents per month for the average residential customer.
ORDER NO.34345 7
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2019.
PÄUL KJEL'LÁNDER,PRESIDENT
KRI E RAPER,CO MISSIONER
EÈIC ANDERSON,COMRISSIONER
Diane M.Haman
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-19-06\ORDERS\IPCEl906_finalorder_kk.docx
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