20190315Eckman Direct.pdf

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BEFORE THE ]DAHO PUBLIC UTIL]TIES COMM]SSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF 2O1B DEMAND_
SIDE MANAGEMENT EXPENSES AS
PRUDENTLY INCURRED.
IDAHO POWER COMPANY
DIRECT TEST]MONY
OE
THOMAS ECKMAN
CASE NO. IPC_E_19_7I
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O. Please state your name and business address.
A. Tom Eckman, 17385 SW 108th Place, Tualatin, OR
91 062 .
O. By whom are you employed and in what capacity?
A. I am an independent energy consultant
operating as Tom Eckman LLC, a sol-e proprietorship. I was
retai-ned by Idaho Power Company ("Idaho Power") to provide
expert testimony in this case.
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o.
A
Forestry and
Studles from
descrj-be your
a Bachelor of
educational background.
Science degree in
Environmental
in Carbondale,
Please
I hold
t2
11 a Master of Sclence degree in
Southern Il-linois University
13 Illinois.
74 0. What is your experience in energy resource
15 planning?
76 A. I am the former Di-rector of the Power Division
71 of the Northwest Power and Conservation Council-
18 ("Counci1") . I have over 35 years of experience in
19 integrated resource planning and energy efficiency and I am
20 a nationally recognized expert in those fields. I was
2L intimately involved in the development of al-l- seven of the
22 Council-'s Regional Power Pl-ans and directed the development
23 of the Council's Seventh Power Pl-an. This incl-uded managing
24 ten professional staff, including economists, engineers,
25 and power system analysts across a broad range of
ECKMAN, DIRECT
Idaho Power Company
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1 analytical tasks, including the load forecasting, the
2 assessment of energy efficiency and generating resource
3 potential, power system modeling, and risk analysis.
4 Prior to serving as the Director of the Power
5 Divlsion, I was the Council's Manager of Conservation
6 Resources where I l-ead the development of six regional
7 energy efficlency potential assessments and establ-ished the
B underlying prlnciples and methodologies for the integration
9 of energy efficiency resources into utility system
10 lntegrated resource planning and resource portfollos.
11 Over the past three and a half decades, I've worked
12 with the Bonnevj-ll-e Power Administration, Northwest Energy
13 Efficiency Alliance, the Northwest region's public and
Power and regulatoryL4 private utilities, including Idaho
15 agencies to develop, implement, and evaluate energy
76 efficiency programs and assist 1n their
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integrated resource
of Idaho Power'splanning ef f orts. I was al-so a
Energy Efficiency Advisory Group
Since retiring from the Council,
20 Standard Practice Manual,
member
2l Standard Practice Manual
22 served as a consul-tant to
from 2003 through 20L5.
I co-authored the National
an update to the Cal-ifornia
guide to cost-effectiveness, and
the Lawrence Berkeley National
)?
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Laboratory provlding technical assistance to state utitity
commissions on integrated resource planning.
ECKMAN, DIRECT
Idaho Power Company
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O. What is the purpose of your testimony in this
proceeding?
A. The purpose of my testimony is to: (1) inform
the Idaho PubIic Util-ities Commission ("Commission") on the
commonly used industry recogni-zed economic
assess energy efficiency cost-effectiveness
planning, program planning, and evaluation,
tests used to
for resource
(2) describe
planning
10 the Total Resource Cost ("TRC") test for resource planning
11 is in the best interest for Idaho Power customers as
L2 compared to use of the Utility Cost Test ("UCT").
13 I. ENERGY EFFICIENCY TESTS
T4 o Please describe the history of the development
measure cost-effectiveness of energy efficiency
measures ?
15 of tests to
76 programs or
the appropriate test to be used for resource
versus program implementation, and (3) explain why use of
A. In L91 4, the Warren-Alquist Act established
the California Energy Commission ("CEC") and specified
cost-effectiveness as a leading resource planning
principle. In 1983, the CEC published Standard Practice for
Cost-Benefit. Analysis of Conservation and Load Management
Programs manual ("CaSPM"l t which set forth flve cost-
effectiveness tests for evaluating energy efficiency
1 Avail-abl-e at:
http: / /www.cpuc.ca.govluploadedErles/CPUC PubIic Website/Content/Util-ities and Industries/Energy -Electricity and Naturaf Gas/CPUQ STANDARD PRACTICE {{\UAL,pd!
ECKMAN, DIRECT
Idaho Power Company
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programs.
principal
programs
44 states
These approaches, with minor updates, are the
approaches used for evaluating energy efficiency
across the United States. A national survey2 of all
operatlng ratepayer funded energy efficiency
revealed that al-l- these states relied on one or
the five tests described 1n the CaSPM to compare
demand
programs
more of
the costs and benefits of energy efficiency and
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response programs to supply-side resources.
In 20L7, the National- Energy Efficiency Screening
Project published an update to the CaSPM, the National
Standard Practice Manual ("NSPM") of whlch I am one of the11
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co-authors .3
comprehensive
effectivenes s
provj-des
the past
and takes
of
gu j-dance
20 years, responds
into account the
to current needs,
relevant policies
and addresses
The NSPM i-s intended to provide a
the cost-framework for assessing
energy efflciency resources. The NSPM
that incorporates lessons learned over
and goals of
18 each jurisdiction undertaking efficiency investments. The
79 NSPM al-so addresses the use of secondary tests.
20 Within the Northwest, the Northwest Power Electric
2I Power Planning and Conservation Act ("Power Act") sets
2 Kushler, M., Nowak, S. and Witte, P. A National Survey of State
Policies and Practices for the Evafuation of Ratepayer-Funded Energy
Efficiency Programs. ACEEE Report UL22. February 2012
https : / / aceee. orqlresearch-reporL/oL22)
3 Available at: https : //nationalefficiencyscreenj-ng. orglwp-
content/uploads/2017l05/NSEM May-2017 finaf .pdf .
ECKMAN, DIRECT
Idaho Power Company
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forth a specific definition for cost-effectiveness that is
requi-red
The Power
to be used by the Bonneville Power Administration.a
Act's cost-effectiveness definition was
subsequently enacted into law through a 2001 public
initiative in Washington State. It is now required to be
used by both public and i-nvestor owned utilities in that
state.5 The utiJ-ity system cost and benefits as defined 1n
the Power Act are equivalent to those considered in the TRC
test.
O. What are the five cost-effectiveness tests?
A. The
Participant Cost
Test (*RIM")
TRC test, UCT, Societal Cost Test ("SCT"),
Test (*PCT"), and Ratepayer Impact Measure
O Which tests are recommended for comparlng
15 supply-side and demand-side resources?
L6 Of the five
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L1 that compare the cost of
1B resources. These are the
L9 The PCT and RIM test are
CaSPM tests, there are only three
new supply-side and demand-side
UCT, the TRC test, and the SCT.
not appropriate for resource
20 planning because neither of these tests considers the
2! avoided cost of new resources, nor do they consider the
22 impact to the entire customer base served by utilities.
a Northwest Power Act, S3(4) (A) (i), 94 Stat. 2698, Northwest Power
Act, 53(4) (A) (ii), 94 Stat. 2698 and Northwest Power Act, 53(4)(B), 94
Stat. 2698-9.
s https : / / app.feg.wa. govlrcwldefault .aspl?cile:l9.2!!
ECKMAN, DIRECT
Idaho Power Company
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1 Q. Can you briefly describe how the UCT test is
2 intended to be used to compare the cost of new supply-side
3 and demand-side resources?
4 A. Yes. The purpose of the UCT is to indicate
5 whether the benefits of an energy efficiency resource will-
5 exceed its costs from the perspectlve of only the utility
7 system. The UCT includes all, but on1y, those costs and
8 benefits that affect the operation of the utility system
9 and the provision of electric and/or gas services to
10 customers. The UCT can be useful for identifying the
11 extent to which uti-Iity investments wil-l- provide reduced
L2 costs to that same overall
therefore, can have
i-nforming decisions
of utility customers, and
other factors) for
program priorities, program
l-evels), and/or limits on
value
group
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on relative
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program spending.
O. How is the TRC test intended to be used to
compare the cost of new supply-side and demand-side
resources ?
A. The TRC test is intended to measure the net
benefits of energy efficiency resources for a jurisdiction
as a whole. That is, the TRC test is designed to ascertaj-n
whether an j-nvestment is economically justifled when all
its reasonably quantlfiable and monetizable costs and
benefits are inc1uded. To do So, the TRC test combines
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Idaho Power Company
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perspecti-ves of the utility system (i.e., the UCT) with
that of program participants.
1n the TRC test are
Unlj-ke the UCT, the costs
the total costs to purchase
and install- the energy efficiency measure, regardless of
whether those costs are paid by the utility or the program
participants, overhead cost, and the program particj-pant's
incremental cost of non-energy benefits. Since ldaho Power
only provides electricity, non-energy benefits would be
defined as "non-electric energy benefitsr " so that savj-ngs
(or cost) impacts on other fuels would be considered.
Utility overhead costs and system benefits are defined the
same as in the UCT.
The TRC test is useful for jurisdictions wishing to
val-ue energy efficiency as a resource not just for the
utility system, but also for their program participants.
Thus, the TRC test is often the primary test considered by
those states seeking to include the benefits not just to
the utility and its ratepayers, but to other constituents
as well. This test specifically inc1udes non-energy impacts
on participants. This is particularly important for low-
income programs and for programs which produce slgnificant
non-energy savings, such as reduced operation and
mai-ntenance ("O & M") cost or reduced water use. Because
24 the TRC test includes impacts on other fuefs, it also
of the impacts of25 all-ows for a comprehensive assessment
ECKMAN, DIRECT
Idaho Power Company
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1 programs that impact other fuels, including fuel-switching
2 programs.
3 Q. How is the SCT test used to compare the cost
4 of new supply-side and demand-side resources?
5 A. The SCT test provides the most comprehensive
5 picture of the total impacts of an energy efficiency
7 resource. The SCT includes all the costs and benefits of
8 the TRC test, plus the additional impacts on socj-ety,
9 including environmental- and other non-energy benefits that
10 are not currently valued by the market. Therefore, the SCT
11 should account. for all costs that are incurred to acquire
72 the energy efficlency resources. This includes all costs
13 described above for the UCT and TRC tests, plus any costs
L4 incurred by society, including environmental costs and
15 reduced economic development. If a state's energy policy
76 dictates the consideration of participant impacts as wel-l-
71 as societal goals such as economic development or job
18 creation, then incl-usion of the costs and benefits of these
19 goals are germane to achieving the utility's planning
20 objective and the use of the SCT is required.
2L Figure No. 1 befow provides a summary of the three
22 cost-effectiveness tests and the key questj-ons answered by
23 each.
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ECKMAN, D]RECT
Idaho Power Company
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Figrrre No. 1: Summary of the Key Questions Answered and
Factors Considered by the Cost-Effectiveness Tests
O. When presented with these cost.-effectiveness
tests, which test do state jurisdictions most frequently
use for resource planning?
A. The overwhelming majority of states with
ratepayer funded energy efflciency programs have determined
that it is important t.o consider participant costs and
benefits as well, adopting the TRC test as their primary
test for comparing energy efficiency to supply-side
resources. In an American Council for an Energy Efficient
Economy ("ACEEE") study completed in 20L2,u 29 states (17
percent) used the TRC test; 6 states (15 percent) used the
SCT and 5 states (L2 percent) used the UCT. A more recent
study, also done by ACEEE, which surveyed L9 states that
considered health impacts in their cost-effectlveness tests
found very similar resul-ts 68 percent of the states
surveyed used the TRC and 21 percent used the SCT as thelr
6 Kushler,M., Nowak, S. and Witte, P. A National Survey of State
Pol-icies and Practices for the Evafuation of Ratepayer-Funded Energy
Efficj-ency Programs. ACEEE Report U722- February 2072
(https : / / aceee. org,/research-report / u122) .
ECKMAN, DIRECT
Idaho Power Company
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Utility Cost The utility system Will utility system costs be
reduced?
lncludes the costs and benefits
experienced by the utility system
lncludes the costs and benefits
experienced by the utility system,
plus costs and benefits to
orooram oarticioants
Total
Resource
Cost
The utility system plus
participating
customers
Will utility system costs
plus program participants'
costs be reduced?
Societal Cost Society as a whole Will total costs to society
be reduced?
lncludes the costs and benefits
experienced by society as a
whole.
Percpective Key Question Answered Summary ApproachTest
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primary test for a total of 89 percent, with the remainder
using either a state specific test or the UCT.7
O. In your opinion, what is the primary reason
other jurisdictions support a cost-effectiveness test other
than the TRC test for resource planning?
A. In my judgment, the primary drivers for the
selection of a cost-effectiveness test for resource
planning are a jurisdiction's energy policy goa1s. For
example, based on this distribution and my knowledge of the
industry, the primary reason other jurisdictions have
adopted the
the TRC test
SCT for resource planning rather than either
or UCT is that they wish to account for
externafities in their analysis.
Historically, there may not have been an explicit
connectj-on between a jurisdiction's energy policy goals and
its inltial sefectlon of the metric used to consider whlch
costs and benefi-ts are relevant to include in such a test.
1B However, over
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the
time, if
desiredalign with
regulators,
revi sed.
the actual outcomes of a test do not
results expected by policy makers,
the metric wiIl likely beand stakeholders,
? Cost-Effectiveness Tests: Overview of State Approaches to
Account for Health and Environmental Benefits of Energy Efficiency.
ACEEE December 2018 (https: / /aceee. org,/sites/default/files/he-ce-tests-
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Idaho Power Company
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II. RESOI'RCE PI,A}INING VERSUS PROGRAI{ IMPLEMENTATION
economic tests be used forO. Can different
resource planning than for
eval-uation?
A. Yes. In fact,
cost-effecti-veness tests is
the industry.a The purpose of
test in resource planning is
program administration and
in my view, the use of multi-ple
considered a "best practice" Ln
the primary cost-effectiveness
to address the threshol-d
10
que st ion
costs and
11 help address other
L2 administrators and
of whether a resource has benefits that exceed its
therefore merits acquisition. Secondary tests can
important questions faced by program
evaluators such as how much utility
13 customers should be expected to pay for a resource that is
1,4 cost-effective under its primary test, which programs to
15 prioritize if it is not possible to pursue all- cost-
L6 effective efficiency, and/or if there should be constraints
Ll on key program design features (e.9., financial incentive
1B Ievels) . Secondary tests
sensitivities to and/or
can also help clarify
19 inform decj-sions regarding which
20 categori-es
are a wide
Decisions
of lmpacts to include in the primary test. There
range of potentiaf secondary tests to consider.
on which secondary tests to use should be a
8 tlnderstanding Cost-Effectiveness of Energy Efficiency Programs:
Best Practices, Technicaf lulethods, and Emerging Issues for Policy-
I4akers, page 5-1 (https : / /www. epa. govlenergy/understanding-cost-
2L
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ECKMAN, DIRECT
Idaho Power Company
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ef fectiveness-energy-ef f iciency-programs ) .
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function of the primary purpose (s) for using them and the
pollcy priorities of the jurisdlction.
III. TRC TEST FOR RESOT'RCE PI,ANNING
O. Which test do you consider the best for
resource planning?
A. The economics of utility generating resource
options (or long-term power purchase agreements) are
generally tested against competing resources usi-ng some
form a life-cycle cost analysis. The cost-effectiveness of
efficiency acquisitions shoul-d be judged using the same
screening criterj-a used for generating resources.e In my
professional- judgment, a properly implemented TRC test
should be used for utility resource planning, unless a
jurisdiction's energy poJ-icy goals dictate the
consideration of broader societal goaIs, such as the
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l7 development and job creation. In those cases, a more
18 inclusive test, such as the SCT would be appropriate.
19 O. How do you define a properly implemented TRC
20 test for use in resource planning?
2l A. A properly implemented TRC test (1) accounts
22 for all utillty system benefits and costs, including the
9 Eckman, Tom. Some Thoughts on Treating Energy Efficiency as a
Resource. Originally published in El-ectrcityPolicy.com and pubIlcaI1y
avallable at:
https : / /secure.in.govliurc/files/ACEEE Attachment H Eckman EE as Resour
ce . pdf
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Idaho Power Company
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cost of risk mitigation, (2) incrementally and
symmetrically considers reasonably quantifiable and
monetizable participant costs and benefits and (3) ignores
the impacts of free-ridership.lo
O. Why is use of TRC test preferable to the UCT
for resource planning?
A. First, it is more consistent with Idaho
Power's consideration of the non-el-ectric energy costs and
benefits of generatlng resources in its integrated resource
the UTC, use of aplanning process. Second, ds
properly implemented TRC test
efficiency's cost and savings
plannj-ng:
compared to
to determine energy
potential for resource
1. Avoids potential double-counting the
value of energy savings
2. Directs investment toward measures that
optimize benefits for the utllity and its customers
3. Avoids promoting measures that may impose
non-electricity costs on others
4. Alfows consideration of measures wlth
quantifiable non-el-ectriclty benefits
10 The express purpose for estimatlng free-ridership is to test
whether too many program participants are being subsidlzed to undertake
energy effi-ciency measures they would have installed without the
subsldy.
ECKMAN, D]RECT
Idaho Power Company
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5. Reduces the likelihood of over or
underestimating achievable cost-effective energy
efficiency potential
a. How can use of the UCT lead to double-counting
the value of energy savings?
A. The UCT, by not accounting for the total cost
of a resource, mlght result in decisions that appear cost-
effective but are not because some benefits (most likely
words, if theenergy
cost of
utility
savlngs) are counted twice. In other
system
offered towards
10 a resource is divided between two entlties (the
11 and the participant), then there is a risk that the
72 total cost of the resource exceeds its total- benefit, but
13 neither the utility nor the participant would recognize
14 this because each entj-ty is concerned with onj-y its own
15 costs. This could be considered an uneconomj-c outcome,
L6 because the total- (utility plus participant) costs might
71 exceed the total- beneflts.
18 O. Can you provide an example for how thj-s
19 doubl-e-counting might occur?
20 A. Yes. Assume that the installation of a more
2l efficient electrj-c motor cost $1,000 and saves 10,000
it iskilowatt-hours ("kwh") per year. Using the
determlned that based on all of the utility
benefits, the maximum incentj-ve that can be
UCT,
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Idaho Power Company
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cost-effective is $500. An lndustrial customer determines
that the 10,000 kVih of electricity savings from the more
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ef f icient motor wil-l- reduce their power biII by $500. After
accounting for the $500 incentive from the utility the
industrial- customer's investment of $500 will provide a
one-year simple payback, so the customer might be very
wlIIing to buy and install the more efficient motor.
In this example, both the utility and the customer
each believe they have made an economic investment (i.e.,
each is saving 10,000 kwh for just $500) . However, both the
utility (i . e. , its col-l-ective ratepayers ) and the
individual industrial customer counted the energy savings
as a benefit, so col-lectively a $1000 was invested to save
10,000 kwh, not ;ust $500. That is, as a result of the
utility's offer of $500, another $500 was aflocated to
energy efficiency without increasing the savings, rather
than belng all-ocated to some other purpose. Because the
utility's customers have a limited amount of money, the
fess money they coffectively spend on electric energy
services the more they can afford to invest in other goods
and services that may be of hlgher value to them, their
state, or to the region such as funding education, health
carer or public safety. By ignoring what participating
consumers spend to procure savings, there is
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Idaho Power Company
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a risk of over-allocating money to the purchase of electric
energy servr-ces.
How does the TRC test direct investment toward
measures that optimlze benefits for the util-ity and 1ts
customers ?
n The TRC test ensures that the funds col-lected
from all- customers are invested in actions that reduce the
long-run cost for aII customers. Whereas, use of the UCT
can result in one group of customers "subsidizing" another
ECKMAN, DIRECT
Idaho Power Company
10 group's investments in measures that do not benef it al-l-
11 customers in the long run. That is, using the UCT instead
L2 of the TRC test can lead to allocating utility funds to
13 purchase savings from measures that displace those that are
14 cost-effective using the TRC test. This displacement leaves
15 less funding to acquire the energy efficiency resources
16 ca1led for in a utillty's integrated resource planning
1,1 process. During times of budget l-lmitations and rate
1B pressures (which pretty much describes all of the time)
19 this dj-splacement is a less valuable outcome for society.
20 Plus, tf utility costs for the chosen measure are higher
27 than utility costs for the measure displaced, the utility
22 and its ratepayers are also worse off.
23 O. What is an example of this type of utility
24 investment optimization?
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A. A utility collects $500 from its customers to
invest in energy efficiency. Under the UCT it coul-d
contribute that $500 towards the $4,000 incremental cost of
lnstalling a geothermal heat pump system that produces
5,000 kVih a year in savings. The l-evelized cost to the
utility of these savi-ngs is about 4.4 cents/kWln.11 Erom the
utility's perspective these savings appear to be cost-
effective under the UCT, because it ignores the $3,500
customer wil-l- need to pay for the geothermal heat pump.
However, by spending this $500 on a geothermal heat pump
system the utillty cannot allocate these funds to the
purchase of what might be fess expensive savings.
For example, instead of purchasing the geothermal
heat pump savings, the utility might pay all of the cost of
acqulring savings equivalent to the geothermal heat pump by
purchasing 500 LEDs for around $725.12 Alternatively, with
the same $5OO incentive it is offering for the geothermal
heat pump system it coul-d have purchased 2,000 LEDs to
produce nearly 20,000 kwh a year in savings. In the first
scenario, the utility woufd not need to collect an
11 Assuming a 2O-year measure llfe and 6 percent nomi-nal discountrate.
12 In order to be comparable, the li-fetime of these measures must
be equivalent. LEDs have expected li-fetj-mes of over 25,000 hours.Therefore, they coul-d operate nearly 3.5 hours per day and still last
20 years. Metering done for the Northwest Energy Efficj-ency AlJ-iance
found that the average lamp in a residence is operated fess than two
hours per day.
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Idaho Power Company
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additional $375 from other ratepayers to produce the
second scenario, the utilityIn theidentical savings.
would have secured
investment by other
cost-effectiveness
these two options,
four times the savj-ngs for the same
ratepayers. Using the UCT as a resource
test wou]d not differentiate between
while the use of a TRC test will.
UCT ignores costs
O
that may
A
How does the TRC test avoid promoti-ng measures
impose non-el-ectricity costs on others?
The TRC test for resource planning avoids
10 promoting measures that may impose non-electricity costs on
11 others. The
that ignore
society.
For
might be
or build
o
measures
A
others' costs can
to others. Eunding measures
lead to bad outcomes for
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74 example, installlng wood stoves was at one ti-me,
15 in the 1980s, considered a potential renewable resource
76 that coul-d save electricity. But the cost of
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18 undesirable, despite the fact
79 l-ower due to less need to fuel existing resources
soon recognized
that electri-c
air pollution
as hiqhl-y
system costs
new ones.
Does the TRC test allow consideration of
wlth quantifiable non-energy benefits?
Yes. Using a TRC test al-Iows consideration of
24 measures with quantifiable non-efectri-clty values to the
expanding the list of qualifying
ECKMAN, DIRECT
Idaho Power Company
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1 measures as compared to use of UCT. Non-electricity
2 benefits figure prominently both in developing energy
3 efficiency estimates and 1n designi.ng efficiency programs.
4 Utilities and program admj-nistrators take advantage of
5 large non-el-ectricity benefits to reduce el-ectric system
6 costs by getting end-use customers to contribute more to
7 measure installation.
8 On net, more energy efficiency savings are added to
9 the fist of cost-effectlve measures than removed by the
10 consideration of quantifiable non-efectricity costs and
11 benefits. This is due to the fact that many energy
12 efficiency measures provide substantial participant non-
13 energy benefits (e.9., water savings, O & M savj-ngs) that
14 are readily quantifiabl-e and monetizable. If there are any
15 measures with such non-energy beneflts included in an
\6 energy efficiency potential assessment, the use of a TRC
77 test to determine cost-effectiveness will- resul-t in a
18 J-arger cost-effective energy efficiency potential than the
1,9 use of a UCT.
20 The fact that TRC test is a l-ess conservative cost-
2l effectiveness test than the UCT 1s often misunderstood.
22 Under the UCT, the maximum cost of an energy efficiency
23 measure that will be determined to be cost-effective in
24 resource planning is equivalent to the total value of al-l-
25 of utillty system benefits provided by that energy
ECKMAN, DIRECT
Idaho Power Company
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1 efficiency measure. Whereas, when the TRC test is used in
2 resource planning, the maximum cost of an energy efficiency
3 measure that will be determined to be cost-effective in
4 resource planning is equivalent to the total- value of all
5 of utility system benefits provided by that energy
6 efficiency measure, plus the value of the non-electric
7 benefits provided by the measure.
I Q. How does the TRC test reduce the llkel-ihood of
9 overestimating achievable cost-effective energy efficiency
10 potential?
11 A. Use of the UCT to establish the level of
72 energy efficiency that is cost-effective in a resource
13 planning context, particularly when the results of the
14 planning process are translated into utility efficiency
15 goaIs, can produce problematic results. Some have argued
76 that if a utility were to consider only that share of the
77 cost of energy efficiency that was paid for out of utility
18 revenues in its resource planning process, many more
t9 measures would become "cost-effective." This is because
20 historically, util-ities have typically paid around 50
2! percent of the total cost of efficiency measures across all
22 sectors with exception of l-ow income customers where
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ECKMAN, DIRECT
Idaho Power Company
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utilities cover around 95 percent of the total cost.13 A11
else equal, using 50 percent "cost-sharing" assumption in
the resource plannlng process would clearly increase the
amount of energy efficiency found to be cost-effective in
that process since it woul-d effectively reduce the cosL of
savj-ngs by half . There are two probl-ems with this approach.
First, because energy efficiency is being treated as
a resource in the planning process the cost of acquiring
this resource (as with any other resources) must be
included in t.he analysis to determj-ne the preferred
resource portfolio or resource strategy. Therefore, this
approach assumes that there is very high confidence that
paying the assumed share of the total cost of energy
efficiency wiIl achi-eve the expected savings. That is, it
assumes that utility programs will be abl-e to achieve the
market penetration requlred to develop the annual and
cumulative energy savings identified i-n the preferred
resource plan by offering no more than the share of cost
embedded in the resource planning process inputs.
Second, j-t j-s impossible to forecast exactly what
share of each measure's cost wiII be borne by the utiJ-ity
system over the course of a particular resource p1an. In
13 fan M. Hoffman, Gregory Rybka, Greg Leventis, Charles A.
Goldman, Lisa Schwartz, Megan Billingsley, and Steven Schiller. The
Total Cost of Saving Electricity through Utility Customer-Funded Energy
Efficiency Programs: Estimates at the NationaI, State, Sector and
Program LeveI. Lawrence Berkeley National Laboratory, EJ,ectricity
Markets and Policy Group Technlcal Brief. April 2015(https://emp.lbl.9ovlsites/all/fi)-esltotal-cost-of-saved-energy.pdf).
ECKMAN, DIRECT
Idaho Power Company
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many cases, util-iti-es may pay a higher fraction of a
measure's cost in the near term and l-ess over time,
particularly if the measure is adopted into state code or
federal standards. In other cases, util-ities may find it
necessary to pay a higher fraction of a measure's cost in
order to achieve higher market penetration over time. In
either case, because the utility establ-ished its efficiency
goals assuming it only needs to pay 50 percent of the cost,
it may not have allocated sufficient funds to achieve the
preferred resource pJ-ans short-run or long-term goa1s.
While this risk can be mitigated by assuming l-ower l-evels
of achievable potential associated wlth greater customer
cost sharing, that is definitely not a desirabl-e outcome.
This is because it results in evaluating only resource
plans that deliberately forego the opportunity to develop
all- energy efficiency that is l-ess expensi-ve than the next
simllarly available and rel-iab1e resource options.
rv. coNcLusloN
0.
proceeding.
A.
Please summarize your testimony 1n this
My testimony (1) describes the industry
used to assess energy efficiency
intended use for each test, (2)
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recognized economic tests
cost-effectiveness and the
24 which economic tests are used for resource planning and
25 why, (3) different economic tests may be used for resource
ECKMAN, DIRECT
Idaho Power Company
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planning versus program
(4) that the Commissj-on
cost-effectiveness test
is in the best interest
0. Does this
A. Yes.
administration and evaluation, and
rely on the TRC test as the primary
to use for resource planning as it
for Idaho Power customers.
conclude your testimony?
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ECKMAN, DIRECT
Idaho Power Company
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ATTESIATION OF TESEIMONY
STATE OE OREGON
ca
County of Washington
T, Thomas Eckman, having been duly sworn to testify
trut.hfu11y, and based upon my personal knowledge, state the
following:
f am an independent energy consuftant operating as
Tom Eckman LLC, aasole proprietorship, and am competent to
be a witness in this proceeding.
I declare under penalty of perjury of the laws of
the state of Oregon that the foregoing pre-filed testimony
and exhibits are true and correct to the best of my
information and belief.
DATED this 15th day of March 2019.
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{4C?
Thomas Eckman
SUBSCRTBED AND SWORN to before me this 15th day of
March 20L9.
o ary Pub c for
Residing at
My commissi
Oregon
ffi cnnrsBT'f;'Ss'Jffin n er,rKfi#ifi NoTARYPUBUc.oREGoN\slfiifz coMMtsstoNNo,95642r
MYCoilMrs$roNlPtRES fi0vrM8En t3, 2020
on expITCS:
ECKMAN, DIRECT
Idaho Power Company
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