20190917Reply Comments.pdf

ldaho Public Ulilities Commission
ofiloo of the Secretary
REOEIVED
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]
lnold strom @ ida h opower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMI\4ISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
DETERMINATION OF 201 8 DEtVlAND.SIDE
MANAGEMENT EXPENSES AS
PRUDENTLY INCURRED.
sEP I 7 2019
Boisq lddp
CASE NO IPC-E-19-11
IDAHO POWER COMPANY'S
REPLY COMMENTS
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ldaho Power Company ("ldaho Power" or "Company") respectfully submits the
following Reply Comments in response to Comments filed by the ldaho Public Utilities
Commission ("Commission") Staff, the ldaho Conservation League ("lCL"), and the city
of Boise City ("Boise City") on August 20, 2019. The Company appreciates Staff's
recommendation that the Commission find the Company's 2018 Demand-Side
ltlanagement ("DSM")-related expenditures were prudently incurred.l ln its Comments,
ICL defers to Staff's assessment of program accounting details, however supports the
Commission's finding that the Company's 2018 DSM investments prudent if Staff's
assessment results in the benefits exceeding the costs.2 ln its Comments, Boise City
1 Staff's Comments, p. '18
2lCL's Comments, p.1
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
focused on the level of energy efficiency savings and appropriate cost-effectiveness test.
Staff and ICL also provide their respective reports in response to the Commission's
directive in Order No. 34141.s Both ICL and Staff have recognized the issues which have
been largely resolved and, with the exception of two issues identified by Staff: (1)use of
the Utility Cost Test ("UCT"), not the Total Resource Cost ("TRC") perspective to measure
costs and benefits of energy efficiency as a resource4 and (2) reinstatement of the Home
lmprovement Program,s acknowledged the Company's commitment to continue
discussions with the Energy Efficiency Advisory Group ("EEAG")to resolve any remaining
items.
I. IDAHO POWER'S REPLY
ln these Reply Comments, the Company responds to (1) Staff's recommendation
that the Commission decline the Company's request to rely on the TRC perspective for
its long-term resource planning, and ICL and Boise City's support of using the UCT as
the screening test for resource planning, and clarifies (2) the Company's position on
reinstatement of the Home lmprovement Program.
A. Usinq the UCT to Evaluate Supplv-Si Resource Acquisition Will lncrease
Costs for Customers.
Staff states that it "does not believe it appropriate to include costs in ldaho Power's
IRP that are not passed on to all rate p?yers."o ldaho Power generally agrees with this
3 Case No. IPC-E-18-03, Order No. 34141, p. 6.
a Attachment No. A to Staff's Comments, p. 7: "The issue is not resolved, Staff therefore
recommends that the Commission decline the Company's request to use the TRC in its long-term resource
planning."
5 Attachment No. A to Staff's Comments, p. 2: "During the January 23,2019 EEAG meeting, the
Company presented additional information regarding the cost-effectiveness of the Home lmprovement
Program . . . . Staff does not believe this meets the Commission directive."
6 Staff's Comments, p. 6.
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
objective. However, Staff rncorrectly concludes that the application of the UCT to
evaluate supply-side resources will accomplish this goal. The TRC test, also referred to
as the "All Ratepayer" test, by definition, is the only economic test that measures the
change in the average cost of energy across all customers. According to the Electric
Power Research lnstitute ("EPR|"), the use of the TRC test has the "effect of creating a
level playing field between demand-side and supply-side resources."T The important fact
that Staff seems to overlook in arriving at its UCT recommendation is that direct program
funding through the DSM Rider is not the only rate mechanism that passes costs of DSM
programs to non-participating customers.
The very reason that the Fixed Cost Adjustment ("FCA") exists is because the
Company's energy rates include a component that collects fixed costs that are not
avoided by reduced energy consumption.E When the Company experiences reduced
sales volumes from energy efficiency, the result is higher rates for non-participating
customers in the form of an FCA surcharge on their bills. The UCT does not consider the
impact to the average energy costs for "all ratepayers" -- only the TRC test includes this
measurement. EPRI defines the cost-effectiveness tests as follows:
. TRC test as "A sum of the Ratepayer lmpact Measure and the Participant Test."e
. The Ratepayer lmpact Measure ("RIM") test is a measure of the difference
between the change in total revenues paid to a utility and the change in total costs
to a utility resulting from the DSM program.l0
7 EPRI End-Use TechnicalAssessment Guide Volume 4. Fundamentals and Methods, p. 1-16.
8 Case IPC-E-1 1-1 9, Order No. 32731 , p. 1 .
e EPRI End-Use TechnicalAssessment Guide, Volume 4: Fundamentals and Methods, p. 1-16.
10 EPRI End-Use TechnicalAssessment Guide, Volume 4: Fundamentals and Methods, p.1-17
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
r The Participant Test is a measure of the quantifiable benefits and costs of a DSM
program from a point of view of the participating customer.tt
Because the UCT does not quantify the impact on total customer rates (by ignoring the
FCA) and only looks at the direct DSM program costs (funded through the DSM Rider), it
cannot possibly achieve Staff's stated goal of evaluating only costs passed on to "all
ratepayers," While not a perfect summation of FCA and DSM Rider revenue, the TRC is
a much closer reflection of the cost of energy efficiency ultimately borne by ldaho Power
customers. Omitting the total impact on customer rates not only runs counter to Staff's
objective, but it will also lead to uneconomic resource acquisition decisions and ultimately
higher rates for customers.
To illustrate the flaws in applying the UCT for resource planning it may be helpful
to consider negative consequences of that application in the context of rooftop solar. Use
of the UCT to evaluate supply side resources will lead to the potential selection of
resources, such as rooftop solar, that would appear to be "free" from the utility
perspective. However, as ldaho Power has demonstrated,,z and the Commission has
acknowledged,l3 expansion of retail rate net metering has the potential to increase costs
for non-participating customers Without consideration for participant costs, on-site
generation could be selected in resource planning as it appears to be a "no-cost" resource
to the Company, which may or may not materialize (be built by customers). Further, the
economic analysis from the Utility Cost perspective could result in resource costs for on-
11 EPRI End-Use TechnicalAssessment Guide, Volume 4: Fundamentals and Methods, p. 1-11
l2Case No. IPC-E-17-13, Tatum Dl, pp 12-15, AschenbrennerDl, ExhibitNo.9, pp.5-6.
13Case No. IPC-E-17-13, OrderNo.34046, p. 16; Case No. IPC-E-01-39, OrderNo.28951, p.
12; Case No. IPC-E-12-27,Order No 32846, p. 13.
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
site generation so low that it may suggest ldaho Power pay an incentive to drive additional
uneconomic resou rce acquisition.
The Company would like to highlight the Rocky Mountain Power customer cost
impact of the Public Service Commission of Utah's decision to mandate the use of the
UCT perspective in resource planning in the state of Utah. While Staff states adopting
the UCT has not had adverse impacts to Rocky Mountain Power,14 use of the UCT
perspective to evaluate supply-side resources resulted in Rocky Mountain Power's Utah
customers' uneconomic funding of up to $50 million in incentives for customer-owned
rooftop solar photovoltaic systems ("solar PV") over a five-year period (2013-2017).ts
lnitially launched in 2007 as a five-year pilot, the Solar lncentive Program provided a
$2.00 per watt incentive (reduced to $1 .55 per watt in 2011t0) for installation of solar PV
systems by customers with an estimated annual cost of $314,500 and annual cap of 107
kilowatts ("kW") of capacity.tz
After the Public Service Commission of Utah ordered the use of the UCT mid-way
through the pilot program,ls The Cadmus Group, lnc, evaluated cost-effectiveness under
the UCTand reported an expected UCTratio of 1.75 versus aTRC ratio of 0.25.1e The
1a Staffs Comments, p. B
1s State of Utah Public Service Commission, Docket No: 1 1-035-104, Report and Order lssued
October 01,2012, p. 3.
16 State of Utah Public Service Commission, Docket No: 07-035-T14, Order on the Three-Year
Solar Assessment, p, 7.
17 State of Utah Public Service Commission, Docket No: 07-035-T14, Order Approving Tariff with
Certain Conditions, pp, 2-3
18 State of Utah Public Service Commission, Docket No. 09-035-27 , Order lssued October 7, 2009,
p.9
1e State of Utah Public Service Commission, Docket No: 07-035-T'14, Annual Report for the Solar
Photovoltaic lncentive Program for the year 2012, Exhibit A, p. 4, Table 2. Resu/ts for Standard Economic
fests (wtho ut f ree -ri d e rsh i p).
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
UCT ratio supported program expansion with solar PV levelized costs of energy ("LCOE")
in Utah because it was approximately one-quarter of the LCOE compared to the other
five states in which Rocky Mountain Power operates that use the TRC test for resource
planning.z0 Because the UCT test does not consider the total impact to customer rates,
Rocky Mountain Power's customers overpaid for rooftop solar in the form of a cost-shift
to non-participating customers, as evidenced by the TRC ratio of 0.25. Subsequent to
the expansion of the Solar lncentive Program, Rocky Mountain Power's Utah lntegrated
Resource Plan ("lRP") methodology was changed to remove solar PV as a selectable
resource, with customer solar PV adoption instead modeled as a reduction to the load
forecast,2l neutralizing the UCT impact to select additional, non-participant funded solar
PV.
The Company does not dispute the fact that a few states2z rely on the UCT as the
primary cost-effectiveness test in resource planning. However, the Company also
recognizes that other states often adopt policies that are uneconomic in nature. The
Company is aware that this Commission takes its role as an economic regulator quite
seriously, and the recommendation in this case to continue the use of the TRC test for
resource planning aligns with, and supports, the Commission's desire to keep costs low
for ldaho Power's customers.
20 State of Utah Public Service Commission Docket No: 13-2035-01, RMP 2013 Assessmentof
Long-Term System Wide Potential for Demand Side and other Supplemental Resources, Vol. 1, p. 11 1,
Table 89. Solar PV Levelized Cost of Energy Summary Resu/ls and Capacity Factors.
21 State of Utah Public Service Commission Docket 15-035-04, Exhibit N6 - Navrgant Distributed
Generation Resource Assessmentfor Long-Term Planning Study, dated June 9,2014.
22 ln an American Councilforan Energy Efficiency Economy ('ACEEE") study in 2012,five states
out of the surveyed 40 (12 percent) used the UCT as the primary cost-effectiveness test. ln a 2018 ACEEE
survey of 19 states, 89 percent used either the TRC or SCT. Eckman Dl, pp. 9-10.
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
B The Company Met the C,ommission's Directive in Order No. 34{41 and Does
!!ot Bellqye Reir!_gtatement of the Hom-e lmprovement Proqram is in the Hest
lnterest of Customers.
ln its Comments, Staff appears to take the position that because the Company has
not reinstated the Home lmprovement Program,23 that it did not meet the Commission's
directive in Order No. 34141 to "address these issues, and others that stakeholders may
raise, at the next round of EEAG meetings."24 The Company respectfully disagrees with
that assessment. As noted by Staff, the Company performed additional analysis of the
Home lmprovement Program economics and presented those resultszs to EEAG at the
January 23,2019, EEAG meeting. ln that discussion, the Company further explained the
rationale for its initial decision to discontinue the Home lmprovement Program in 2018
and presented an updated analysis it had performed to determine the economic viability
of the program using then-current DSM Alternate Costs.z0 The Company shared with
EEAG that the UCT had declined to 1.67 and the TRC had further declined to 0.29 using
2017 DSM Alternate Costs. While Staff has continued to take the position2T that it
generally supports program continuation provided the UCT is above 1.0, not all members
of EEAG, or the Company, share that position. Despite the lack of unanimous alignment
among EEAG on this issue, there was general agreement from EEAG at the January
2019 meeting that the explanation provided by ldaho Power regarding the discontinuation
of the Home lmprovement Program was satisfactory.
11
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
23 Staff's Comments, Attachment No A pp. 1-2.
2a Case No. IPC-E-18-03, Order No. 34141, p. 6.
2s Attachment 1.
26 Case No. IPC-E-17-11, Appendrx C: Technical Report, p.64
27 Case No. IPC-E-17-03, Staff's Comments, p 13; Case No. IPC-E-18-03, Staff's Comments, p.
ldaho Power appreciates the ongoing input and thoughtful guidance offered by
EEAG. Since 2002, the Company has adopted many recommendations brought to it by
EEAG members and has taken feedback into consideration related to program design,
incentive level recommendations, marketing, and general program management, among
other topics. While the Company endeavors to reach consensus on all matters it brings
to EEAG, ldaho Power does not believe it is a reasonable expectation to reach consensus
on all topics. ldaho Power believes it ultimately has the responsibility to promote energy
efficiency programs and measures that are economically beneficial for program
participants and non-participating customers alike.ze ln the case of the Home
lmprovernent Program, the Company ultimately decided to end the program, and for the
reasons stated in this case and prior cases,2e believes that was the right choice for
customers. lf the Commission ultimately determines the Company should reinstate the
Home lmprovement Program, ldaho Power will work expeditiously with EEAG and other
stakeholders to do so.
Summqrv of 2018 DSM Proqram Performance qnd Report in Compliance with
Commission Order No. 34141.
The Company appreciates the feedback offered by ICL and Staff with respect to
the Company's Report in Cornpliance with Commission Order No.34141, identifying
issues which were collaboratively resolved and highlighting continued efforts to work
through EEAG to resolve the remaining open items. Additionally, Staff comments that
highlight achievements for 2018 DSM program performance and opportunities for
28 Case No IPC-E-O1-13, Order No 28894 p. 7.
2e Case No. IPC-E-17-03, Aschenbrenner Dl pp 25-31; Case No. IPC-18-03, Aschenbrenner Dl p.
c
32"
IDAHO POWER COMPANY'S REPLY COMMENTS - B
improvement will assist the Company in formulating methods to improve existing program
methods and areas of focus for its work with EEAG in the upcoming year.
ln their Comments, Staff and ICL both recognized the Company's efforts to
examine the potential for expanded demand response in its 2019 lRP, and ICL
recommends a potential assessment to identify new demand response measures to be
evaluated in the next IRP cycle.3o The Company agrees with ICL that the IRP is the
appropriate forum for determining the optimal amount of current and future demand
response,st and is committed to evaluating the right level of demand response that will
ensure ldaho Power can continue to provide reliable service while keeping costs low for
customers.
ll. coNcLusroN
The Company remains committed to the pursuit of all cost-effective energy
efficiency, and in 2018 recorded the fourth largest annual incremental energy savings
achievement since the establishment of the ldaho Rider in 20O2.tz The Company also
has an obligation to serve a wide variety of customers in its service area with rates that
are fair, just, and reasonable. Use of the TRC perspective for cost-effectiveness in
resource planning results in acquiring the lowest cost energy for all customers, and
ensures energy efficiency and supply-side resources are valued equally. For the reasons
outlined in these Reply Comments, the Company believes the TRC test remains the
appropriate cost-effectiveness test to evaluate energy efficiency as a supply-side
resource
30 lCL's Comments, p 5
31 ld.
32 Goralski Dl, p. 3.
IDAHO POWER COMPANY'S REPLY COMMENTS - 9
ldaho Power also believes it is in the best interest of customers for the Company
to continue to evaluate decisions related to ongoing program continuation from a variety
of perspectives, including the use of all cost-effectiveness tests and input from EEAG. To
that end, ldaho Power will continue to collaboratively work towards establishing a
framework that can be consistently applied when facing declining cost-effectiveness from
any perspective.
ldaho Power respectfully requests that the Commission issue an Order finding (1)
ldaho Power's expenditures of $33,560,433 in Rider funds and $7,151,730 of demand
response program incentives, for a total of $40,712,164 as prudently incurred DSM
expenses, (2) the Company satisfied the Commission's directives issued in Order No.
34141, and (3) the Company should continue to rely on the TRC test perspective when
evaluating the amount of energy efficiency included in long-term resource planning.
DATED at Boise, ldaho, this 17'd day of September 2019.
L.?
LI
.J*-,
D. NO OM
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 1O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 17th day of September 20191 served a true and
correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following
named parties by the method indicated below, and addressed to the following.
Commission Staff
Matt Hunter
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 North Sixth Street
Boise, ldaho 83702
City of Boise
Abigail R. Germaine
Deputy City Attorney
Boise City Attorney's Office
150 North Capitol Boulevard
P.O. Box 500
Boise, ldaho 83701-0500
Hand Delivered_U.S. Mail
_Overnight Mail_FAXX Email matt.h-unter(Onuc.idaho.qov
_Hand Delivered
U.S. Mail
_Overnight Mail
_FAXX Email [e-mail]
_Hand Delivered
U.S. Mail
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Ki yT tive Assistant
IDAHO POWER COMPANY'S REPLY COMMENTS - 11
BEFORE THE
IDAHO ?UBtIfi UTILITIES COMM!$$ION
cA$E NO. lpC-E-I9-1 1
IDAHO POWER COMPANY
REPLY COMMENTS
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