20190315Application.pdf

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An IDACORP Company
March 15,2019
VIA HAND DELIVERY
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Case No. IPC-E-19-11
2018 Demand-Side Management Expenses
ldaho Power Company's Application and Testimony
Dear Ms. Hanian
Enclosed for filing in the above matter please find an original and seven (7) copies of
ldaho Power Company's Application and attachment (2018 Demand-Side Management report
and supplements).
Also enclosed for filing are an original and eight (8) copies of the Direct Testimony of
Connie Aschenbrenner, Direct Testimony of Thomas Eckman, and Direct Testimony of Paul
Goralski. One copy each of the testimonies has been designated as the "Reporter's Copy." A
disk containing a Word version of the testimonies is enclosed for the Reporter.
lf you have any questions about the enclosed documents, please do not hesitate to
contact me.
Very truly yours,
LISA D. NORDSTROM
Lead Counsel
[e-mail]
LDN.KKt
Enclosures
:i;i ii;:il i 5 PFI 3: irg
Lisa D. Nordstrom
Re.
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
L N o rd strom @ id a hopowe r. com
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Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF 2018 DEMAND-
SIDE MANAGEMENT EXPENSES AS
PRUDENTLY !NCURRED.
CASE NO. rPC-E-19-11
APPLICATION
ln accordance with RP 052 and RP 201, et seg., ldaho Power Company ("ldaho
Power" or "Company") respectfully submits its Demand-Srde Management 2018 Annual
Report ('DSM 2018 Annual Report") and makes application to the ldaho Public Utilities
Commission ("Commission") for an order designating ldaho Power's expenditures of
$33,560,433 in ldaho Energy Efficiency Rider ("Rider") funds and $7,151,730 of demand
response program incentives funded through base rates and tracked annually through
the Power Cost Adjustment ("PCA") mechanism, for a total of $40,712,164, as prudently
incurred demand-side management ("DSM") expenses. The Company also requests the
Commission find that the inclusion of all cost-effective DSM resources in the Company's
APPLICATION - 1
long-term resource planning process, from a total resource cost perspective, will lead to
the most economic planning outcome and best serve the public interest.
ln support of this Application, ldaho Power represents as follows:
I. INTRODUCTION
1. The Commission has "consistently stated that cost-effective DSM programs
are in the public interest and has admonished electric utilities operating in the state of
ldaho to develop and implement DSM programs in order to promote energy efficiency."
Case No. IPC-E-10-09, Order No.32113 at S,citing Order Nos.29784 and 29952. To
further the Commission's objective, ldaho Power informs its customers of a wide range
of opportunities to participate in DSM activities and receive information that allows them
to use electricity wisely. Through DSM programs, ldaho Power seeks to provide
customers with programs and information to help them manage their energy use and to
utilize cost-effective DSM resources to meet the Company's electrical system's energy
and demand needs.
2. ldaho Power's portfolio of energy efficiency program energy savings
remains strong, with savings of 183,378 megawatt-hours ("MWh") in2018, including the
estimated savings from the Northwest Energy Efficiency Alliance ("NEEA"). These
savings represent enough energy to power over 16,000 average homes for one year in
ldaho Power's service area. |n2018, the Company's energy efficiency portfolio was cost-
effective from both the Total Resource Cost ("TRC") test and the Utility Cost Test ('UCT')
perspectives with ratios of 2.26 and 3.04, respectively. The portfolio was also cost-
effective from the Participant Cost Test ("PCT") ratio, which was 2.85. The savings from
ldaho Power's energy efficiency programs alone, excluding NEEA savings, was 158,412
MWh in2018. DSM 2018 Annual Report at 2. From its demand response programs, for
APPLICATION - 2
2018,ldaho Power achieved a total demand reduction of 359 megawatts ("MW"). DSM
Annual Report at 10.
3. Idaho Power's 2018 achievements in energy savings exceeded the annual
savings target identified in ldaho Power's 2017 lntegrated Resource Plan ("lRP"). On a
cumulative basis, the Company's energy savings have exceeded the IRP targets every
year since 2002. DSM 2018 Annual Report at 2. The Company's actions in 2018, as
reflected in the DSM 2018 Annual Report, demonstrate its efforts to carefully allocate
customer funds to support a broad suite of cost-effective DSM programs and activities.
II. CONTENTS OF THE DSM 2018 ANNUAL REPORT
4. The DSM 2018 Annual Report, Attachment 1 to the Application filed in this
proceeding, provides details for each program, including a description of each program,
2018 performance and activities, cost-effectiveness, customer satisfaction, and
evaluation results when applicable. ln addition, the DSM 2018 Annua! Report provides a
description of ldaho Power's DSM strategies for 2019. The DSM 2018 Annual Report
satisfies the DSM reporting obligation set forth in Order No. 29419 in Case No. IPC-E-03-
19.
5. The DSM 2018 Annual Report consists of the main document (with
appendices) and two supplements. The main document provides information on items
such as DSM program descriptions, program performance, expenditures, and marketing
efforts. Supplement 1: Cost-Effecfiveness ("Supplement 1") to the DSM 2018 Annual
Report shows the results of the cost-effectiveness tests that ldaho Power has applied to
the programs and includes a table that reports expenses by funding source and cost
category. Supplement 2: Evaluation ("Supplement 2") to the DSM 2018 Annual Report
includes copies of ldaho Power's 2018 program evaluations, customer surveys and
reports, evaluations conducted by the Company's third-party contractors, ldaho Power's
APPLICATION - 3
evaluation plans, general energy efficiency research, and demand response research,
which are reflective of ldaho Power's continued commitment to its own review, as well as
third-party evaluation of programs.
III. 2018 DSM PROGRAM PERFORMANCE
6. ln 2018, on a system-wide basis, ldaho Power offered a portfolio of energy
efficiency programs and demand response programs available to all customer segments,
participated in market transformation efforts through NEEA, and offered several
educational and behavioral initiatives including the Residential Energy Efficiency
Education lnitiative, the School Cohort, Home Energy Reports, and other activities.
7. As explained in more detail in the Direct Testimony of Pawel P. Goralski
("Goralski Testimony") filed contemporaneously with this Application, Idaho Power
achieved 183,378 MWh of incremental annual energy efficiency savings on a system-
wide basis in 2018. This value includes 158,412 MWh from ldaho Power's energy
efficiency programs and an estimated 24,966 MWhl of energy efficiency market
transformation savings through NEEA initiatives. Goralski Testimony at 5-6.
8. The 2018 savings results consisted of 43,651 MWh from the residential
sector,95,759 MWh from the commercial/industrial sector, and 19,002 MWh from the
irrigation sector. The Custom Projects option in the Commercial and lndustrial Energy
Efficiency Program contributed 30 percent of ldaho Power's direct program savings, while
the residential sector Energy Efficient Lighting and Educational Distributions programs
contributed 80 percent of the residential savings and 22 percent of ldaho Power's direct
program savings. DSM 2018 Annua! Report at 7.
1 Because ldaho Power will not receive final 2018 savings from NEEA until May 2019, the NEEA-
attributable savings is an estimate provided to ldaho Power by NEEA.
APPLICATION - 4
L The 2018 Rider-funded DSM expenses for which ldaho Power is seeking a
prudence determination are a 5 percent decrease from the 2017 Rider-funded DSM
expenses2 reviewed in last year's prudence case, Case No. !PC-E-18-03 ("2017
Prudence Case"). This decrease in 2018 expenses was driven by a 5.6 percent decrease
in system-wide energy savings from 2017 energy savings when considering ldaho
Power's energy efficiency programs alone. When the NEEA-estimated savings are
included, the 2018 energy savings experienced a decrease of 4.6 percent from 2017
levels. While down slightly from the prior year's savings, the 2018 energy savings
represents the fourth largest annual incremental energy savings achievement since the
establishment of the ldaho Rider in 2002. Goralski Testimony at 3.
10. The Residential Energy Efficient Lighting program experienced a 50 percent
decrease in 2018 as compared to 2017. As explained in the 2017 Prudence Case,3 the
Company anticipated savings associated with residential lighting would decrease during
2018 and 2019 as implementation of the 2020 Phase ll code required by the Energy
lndependence and Security Act of 2007 ('EISA') approaches. The 2020 EISA Phase l!
code implementation requires that most light bulbs be 60 to 70 percent more efficient than
they were when EISA was signed into law in 2007. Thus, while this energy savings from
energy efficient lighting will be realized in grid savings and customer energy usage,
energy savings will no longer count in energy efficiency program savings but will be
accounted for in the Company's load forecast once it becomes part of lighting code in
2020.
2 The $37,162,002 funded by the Rider in 2017 includes $1,860,901 of incremental DSM labor
expenses incurred between 2011 and 2016 which were deemed prudent in Order No. 33908, Case No.
IPC-E-17-03. The 2017 DSM expenses funded by the ldaho Rider, excluding the one-time collection of
previously incurred labor-related expenses, were $35,301,101.
3 Case No. IPC-E-18-03, Aschenbrenner Testimony at B.
APPLICATION - 5
11. ldaho Power's 2018 energy savings exceeded the annual savings target
identified in ldaho Power's lRP. DSM 2018 Annual Report at 2. To determine the annual
savings target in the 2017 lRP, ldaho Power contracted with a third party to conduct an
energy efficiency potential study to estimate the amount of energy efficiency to be
included in the IRP for planning purposes. ldaho Power considers the achievable
potential as a reasonable planning estimate and does not consider the achievable
potential as a ceiling limiting energy efficiency acquisition. Goralski Testimony at 9. On
a cumulative basis, the Company's energy savings have exceeded the lRP targets every
year since 2002, when the Rider was implemented. DSM 2018 Annual Report at 2.
12. The total available capacity of ldaho Power's three demand response
programs was approximately 382 MW. This value represents the total demand response
capacity calculated by applying a maximum realization rate to the total enrolled MW in all
three demand response programs. The programs provided actual demand reduction of
359 MW during the 2018 program season. DSM 2018 Annual Report at 2, Goralski
Testimony at 10.
13. Table 1 on page 4 of the Goralski Testimony contains a list of ldaho Power's
DSM programs and the 2018 energy savings or demand reduction from each of the
programs. That table is illustrative of the broad suite of programs that ldaho Power offers,
as well as the significant savings resulting from those programs.
IV. 2018 DSM EXPENSES AND ADJUSTMENTS
14. Funding for the ldaho DSM programs in 2018 came from severa! sources.
The ldaho Rider funds are collected directly from customers on their monthly bills at a
APPLICATION - 6
specified percent of base rate revenues.a Additionally, ldaho demand response program
incentives are included in base rates and tracked annually through the PCA. Energy
efficiency and demand response-related expenses not funded through the Rider are
included as part of ldaho Power's ongoing operations and maintenance ('O&M") costs.
15. ln the delivery of energy efficiency, demand response, and market
transformation programs, as well as education and administrative costs, ldaho Power
expended $33,560,433 of Rider funds and $7,151,730 of demand response program
incentives, for a total of $40,712,164 spent on demand-side resource acquisition for ldaho
customers in 2018. Exhibit No. 2 to the Goralski testimony,20lS ldaho DSM Expenses
and Adjustments for Prudence Filing, shows a breakout of these expenses by program,
customer sector, and funding source.
16. One accounting adjustment included in the 2017 Prudence Case was a
reversing adjustmentfor 2018. !n 2017, the Company classified $89,304 of Rider-funded
labor to non-Rider funded O&M based on an incorrect determination that 2017 Rider-
funded labor exceeded the 2 percent cap on average labor expense per full-time
equivalent ('FTE") annual increases. Upon preparation of the 2017 Prudence Case filing
in February 2018,ldaho Power determined the total amount of Rider-funded labor in 2017
was below the2 percent annual labor cap and made an adjustment to include that amount
in the 2017 Prudence filing. Thus, the Company made an accounting adjustment in 2018
to reverse the $89,304 that had been initially classified as non-Rider funded O&M in2017 .
This laborexpensewas determined to be prudently incurred in Order No.34141. The
I The Rider account balance at December 3'1, 2018, had a positive, or collected balance of
$5,258,957. To address the increasing Rider balance, the Company recently filed Case No. IPC-E-19-06
seeking Commission approval to decrease the Rider collection from 3.75 percent of base rates to 2.75
percent of base rates to better align the near-term level of funding with the forecast level of energy efficiency
expenditures related to the pursuit of all cost-effective energy efficiency.
APPLICATION - 7
reversing entry is included in the 2018 DSM expenses to accurately represent the amount
incurred related to 2018 DSM efforts.
17. Upon preparation of this filing, ldaho Power discovered an incorrect
accounting entry was made in2018 for the Multifamily Energy Savings Program. Oregon
activity totaling $13,264 in program expenses were charged to the ldaho Energy
Efficiency Rider and should have been charged to the Oregon Energy Efficiency Rider.
This entry was identified after the 2018 accounting books had closed and is made as an
adjusting entry for 2019. The correcting entry is included in the "Current year-end
accounting adjustment" section of Exhibit No. 2.
V. DSM PROGRAM COST.EFFECTIVENESS AND EVALUATIONS
18. The DSM 2018 Annual Report and accompanying testimony of witness
Pawel P. Goralski provide a sufficient basis for the Commission to determine whether
ldaho Power's DSM expenses were prudently incurred.
19. For purposes of calculating cost-effectiveness, the DSM 2018 Annual
Report uses the benefiUcost methodologies used in previous DSM annual reports,
including the TRC test, the UCT, and the PCT. ldaho Power calculates cost-effectiveness
from the TRC, UCT, and PCT perspectives at the program level, except for those
programs with no customer costs, in which case the PCT is not applicable. ldaho Power's
goal is to have all programs achieve benefiUcost ratios of 1.0 or greater for the TRC test,
the UCT, and PCT at the program and measure level where appropriate. Goralski
Testimony at 15. When it determines that a program is not cost-effective from one of
these tests, ldaho Power works with the Energy Efficiency Advisory Group ("EEAG") to
get input on a continued offering for Commission approval. ld.
20. The DSM 2018 Annual Report, Supplement 1, includes detailed results of
the cost-effectiveness tests by program and by measure. The DSM 2018 Annual Report,
APPLICATION - 8
Supplement 2, Historical DSM Expense and Performance, shows the historical TRC and
utility cost for each of ldaho Power's energy efficiency programs from a program-life
perspective. ldaho Power's cost-effectiveness test results for 2018 energy efficiency
programs are summarized as follows:
a. Portfolio Basis. On a portfolio basis, ldaho Power's energy efficiency
programs are cost-effective, passing the TRC test, the UCT, and the PCT with ratios of
2.26,3.04, and 2.85, respectively. Goralski Testimony a|17, Table 3. The Company's
energy efficiency programs' customer sector portfolios were also cost-effective from a
TRC test, UCT, and PCT perspective. ld.
b. Proqram Basis. On an individual program basis, these results reflect
that, using 2018 DSM program year costs and benefits, 12 of the 16 energy efficiency
programs offered in ldaho for which the Company calculates cost-effectiveness had
benefiUcost ratios greater than 1.0 for both the TRC test and UCT. Of the four programs
that did not pass at least one of the tests, the Weatherization Assistance for Qualified
Customers and Weatherization Solutions for Eligible Customers programs failed to
achieve a benefiUcost ratio of greater than 1.0 for both the TRC test and UCT. The
Heating & Cooling Efficiency Program had a benefiUcost ratio of greater than 1.0 for the
UCT and PCT, but less than 1.0 for the TRC test. The Shade Tree Project had a benefit
cost ratio of 0.71 for the UCT and 0.80 for the TRC test. Some of these programs offer
other benefits that are difficult to quantify, and ldaho Power intends to continue the
programs in 2019 and work with stakeholders and seek to adjust the programs to make
them more cost-effective. Goralski Testimony at 20-27.
c. Measures Basis. ln 2018, ldaho Power evaluated the benefits and
costs of 279 measures from both the TRC test and the UCT perspective. The results of
APPLICATION - 9
these calculations along with measure assumption details and source documentation can
be found in Supplement 1 to the DSM 2018 Annual Report.
21. While benefiUcost ratios are not currently calculated for the three demand
response programs, the methodology used to determine the cost-effectiveness of the
demand response programs compares the annual cost of operating ldaho Power's
demand response portfolio to the levelized annual cost of a 170 MW deferred resource
over a 2O-year life.s ln 2018, the system-wide cost of operating the three demand
response programs was approximately $8.2 million, of which $7.9 million were attributable
to the ldaho jurisdiction. ldaho Power estimated that if the three programs were
dispatched for the full 60 hours allowed, the total costs would have been approximately
$11.3 million on a system-wide basis. Using the 2017 !RP, the maximum annual cost of
running all three demand response programs for the maximum allowable hours of 60
hours should be no more than $19.8 million, leading ldaho Powerto conclude that its
three demand response programs were cost-effective in 2018.
22. ln addition to the annual cost-effectiveness analysis that the Company
conducts for each program, the results of which are summ arized in Supplement 2 to the
DSM 2018 Annual Report, the Company retains independent, third-party consultants to
provide impact and process evaluations to verify that program specifications are met,
provide viable recommendations for program improvement, and validate energy savings
estimates achieved through ldaho Power's programs. ln2018, these independent, third-
party consultants conducted three program impact evaluations, one program process
evaluation, one savings determination analysis, and three program summary analyses.
Goralski Testimony aL28. In 2017, The final reports for these evaluations and studies,
s Demand response valuation methodology was reached by settlement agreement and approved
in Case No. IPC-E-13-14, Order No. 32923.
APPLICATION.lO
surveys, and the market effects evaluations conducted by NEEA are included in
Supplement 2 to the DSM 2018 Annual Report.
VI. STAKEHOLDER INPUT
23. ldaho Power relies on input from the EEAG to provide a customer and
public-interest review of energy efficiency and demand response programs and
expenses. The EEAG provides input on enhancing existing DSM programs and on
implementing new DSM programs. Currently, the EEAG consists of members
representing a cross section of customers from the residential, industrial, commercial,
and irrigation sectors, as well as representatives for low-income individuals,
environmental organizations, state agencies, public utility commissions, and ldaho
Power.
24. ln 2018, the Company held four meetings with the EEAG. During these
meetings, ldaho Power discussed and requested recommendations on a broad range of
DSM issues and requested feedback on new program ideas and new measure proposals,
marketing methods, and specific measure details. ldaho Power worked with the EEAG
on several topics, including development, design, promotion, or input on the Residential
Energy-Saving Kits, Simple Steps, Smart Savings, School Cohort, and A/C Cool Credit
programs. DSM 2018Annual Report at16-17. Notesfrom the 2018 EEAG meetings are
included in the DSM 2018 Annual Report, Supplement 2.
VII. COMPLIANCE WITH ORDER NO. 34141
25. ln the 2017 Prudence Case, the Commission ordered the Company to
address with the EEAG several issues and recommendations presented by Commission
Staff ("Staff') and the ldaho Conservation League ("lCL") in their respective comments.
The Commission further ordered that in this current case, the Company, Staff, and ICL
APPLICATION - 11
would each report on how the EEAG addressed and considered each of the
recommendations. Order No. 34141 at 6.
26. After the issuance of Order No. 34141, the Company held two EEAG
meetings to facilitate discussion of the issues raised by parties. The Direct Testimony of
Connie G. Aschenbrenner describes the Company's efforts to reach compromise on each
of the issues identified by parties in the 2017 Prudence Case, identifies where parties
reached a resolution or at least identified a path toward resolution, and notes one specific
area (use of the UCT for resource planning) where alignment was not reached.
Aschenbrenner Testimony at 4-10. Exhibit No. 1 - Report in Compliance with
Commission Order No. 34141, further documents the parties' issues and resulting
recommendations.
27. ln addition to discussing the items with the EEAG, the Company addressed
two resource planning-specific recommendations (demand response and UCT) with the
IRP Advisory Council. The Company also met directly with Staff, lCL, and the Sierra Club
on December 19,2018, and Staff and lCL in a meeting held on January 4,2018, lo
address how the Company establishes the level of energy efficiency included in the lRP.
Aschenbrenner Testimony at 6 and 15.
VIII. RESOURCE PLANNING COST.EFFECTIVENESS TEST
28. The Company's primary focus in its IRP is to select resources that will result
in lower overall energy costs across its system while ensuring continued reliability. As
noted in the Direct Testimony of Thomas Eckman, regional energy efficiency expert, the
TRC test is one of two tests designed to ascertain whether an investment is economically
justified when all its costs and benefits are included - that is, an investment must be cost-
effective for the jurisdiction as a whole, including the participating customer. Eckman
Testimony at 6 and 8.
APPLICATION - 12
29. Use of an incomplete measurement of the cost to procure energy efficiency
can result in uneconomic resource acquisition and higher overall costs for ldaho Power
customers. Eckman Testimony at 14. Consequently, most jurisdictions rely on the TRC
test perspective for resource planning, while a small number of jurisdictions rely on one
of two other perspectives. Eckman Testimony at 9-10.
30. Mr. Eckman recommends the Commission rely on the TRC test as the
primary cost-effectiveness test to use for resource planning rather than the UCT because
it (1) avoids potential double-counting the value of energy savings, (2) directs investment
toward measures that optimize benefits for the utility and its customers, (3) avoids
promoting measures that may impose non-electricity costs on others, (4) allows
consideration of measures with quantifiable non-electricity benefits, and (5) reduces
likelihood of over or under estimating achievable cost-effective energy efficiency potential.
Eckman Testimony al 13-22.
31. ln contrast to utility resource planning, the use of multiple cost-effectiveness
tests for energy efficiency program implementation and continuation decisions is
considered a "best practice" in the industry. Eckman Testimony at 11. This practice
ensures a DSM portfolio that is not only good for the utility (the UCT perspective), but one
that is good for all customers, both participating and non-participating customers (the TRC
test and PCT perspectives). Aschenbrenner Testimony a|23.
IX. MODIFIED PROCEDURE
32. Idaho Power believes that a technical hearing is not necessary to consider
the issues presented herein and respectfully requests that this Application be processed
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201,
et seg. ldaho Power has, however, contemporaneously filed the Goralski,
Aschenbrenner, and Eckman Testimonies in support of this Application. The Company
APPLICATION - 13
stands ready to present the testimony in support of this Application in a technical hearing
if the Commission determines such a hearing is required
X. COMMUNICATIONS AND SERVICE OF PLEADINGS
33. Communications and service of pleadings with reference to this Application
should be sent to the following
Lisa D. Nordstrom
ldaho Power Company
1221West Idaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
I nordstrom@ idahopower. com
d ockets@ idahoppwereqm
Connie Aschenbrenner
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
caschen bren ner@ ida hopower. com
XI. REQUEST FOR RELIEF
34. As described in greater detail above, ldaho Power respectfully requests that
the Commission issue an order designating ldaho Power's DSM expenses of
$40,712,164, including expenditures of $33,560,433 in Rider funds and $7,151,730 of
demand response program incentives included in base rates and tracked annually
through the PCA, as prudently incurred DSM expenses. The Company also requests the
Commission find that the inclusion of all cost-effective DSM resources in the Company's
longterm resource planning process, from a total resource cost perspective, will lead to
the most economic planning outcome and best service the public interest.
DATED at Boise, ldaho, this 1Sth day of March 2019.
a
LISA . NORD
APPLICATION -,14
Attorney for ldaho Power Company
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E -19-11
IDAHO POWER COMPANY
ATTACHMENT 1
D EM AND.S'D E MAN AG EM ENT
2018 ANNUAL REPORT