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HomeMy WebLinkAbout20190820Comments.pdfMATT HUNTER DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTILITIES COMMISSION PO BOX 83720 BOISE, IDAHO 83720-0074 (208) 334-03r8 IDAHO BAR NO. 10655 REC E tVED l.iii AiiG 20 PH h: 39 ci'lctrrt Street Address for Express Mail 472W. WASHINGTON BOISE, IDAHO 83702-5918 Attorney for the Commission Staff BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF IDAHO POWER COMPANY'S APPLICATION FOR A DETERMINATION OF 2018 DEMAND.SIDE MANAGEMENT EXPENSES AS PRUDENTLY INCURRED CASE NO. IPC.E.19-11 COMMENTS OF THE COMMISSION STAFF The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power Company's Application. BACKGROUND On March l5,20l9,Idaho Power Company ("Company") applied for a Commission order finding that the utility's demand-side management ("DSM") expenses for the year 2018 were prudently incurred. The Company seeks to recover 540,712,164 in deferred costs for its DSM programs, which includes $33,560,433 in Idaho Energy Efficiency Rider expenses, and $7,151,730 in demand response program incentives. The Company also requests that the Commission find that the inclusion of all cost-effective DSM resources in the Company's long- term planning process, from a total resource cost perspective, will lead to the most economic planning outcome and best serve the public interest. Application at l-2. ) ) ) ) ) ) ) 1STAFF COMMENTS AUGUST 2O,2OI9 The Company states its energy efficiency programs saved 158,412 megawatt hours (MWh), comprising 43,65I MWh from the residential sector, 95,759 MWh from the commercial/industrial sector, and 19,002 MWh from the irrigation sector. Application at 4. The Company states its 2018 DSM efforts included Northwest Energy Efficiency Alliance (NEEA) market transformation activities, energy efficiency programs, demand response programs, and educational initiatives . Id. An additional 24,996 MWh of savings were achieved through energy efficiency market transformation at NEEA, creating a total of 183,378 MWh of incremental annual energy savings. Goralski Direct at 5. The Company funds its Idaho programs through the Idaho Energy Efficiency Rider, base rates, and the annual Power Cost Adjustment (PCA). Application at 1. It funds its demand response incentive payments through base rates and the PCA. Id. The Company reports that in 2018 its overall energy efficiency portfolio was cost- effective, passing the Utility Cost Test (UCT), Total Resource Cost (TRC) test, and the Participant Cost Test (PCT) with ratios of 3.04, 2.26, and 2.85, respectively.r Id. at9. Of the Company's 16 Idaho energy efficiency programs, 12 programs passed the UCT and TRC. All energy efficiency programs with customer costs passed the PCT. Goralski Direct at 17. The Heating & Cooling Efficiency Program had a benefit/cost ratio of less than 1.0 for the TRC, but the ratio was above 1.0 for both the UCT and PCT. Id. The Shade Tree program did not pass any of the cost-effectiveness tests, but a third-party evaluation by DNV GL provided insight into future savings potential, which will impact the cost-effectiveness of the program. Application at 9. Although they are not cost-effective, Idaho Power intends to continue to work towards greater cost-effectiveness for the Weather Assistance for Qualified Customers and Weatherization Solutions for Eligible Customers programs, because they offer benefits that are difficult to quantify. Id. When assessing the cost-effectiveness of its demand response programs, the Company did not calculate the benefit/cost ratio. Id. at 10. Idaho Power continues to determine the cost- effectiveness of its demand response programs based on the $16.7 million demand response portfolio value specified in Commission Order No. 32923. The Company estimated the cost of I The three tests examine a program's cost effectiveness from different perspectives. The UCT compares program administrator costs to the value ofutilityenergyandcapacitysavings,andassesseswhetherutilitycostswillincrease. TheTRCcomparesprogramadministratorcostsandcustomer costs to the value of energy and capacity savings, and assesses whether the combination of customer and utility costs will increase. The PCT compares the costs and benefits of an average customer installing the measure and assesses whether an average customer will save money over the measure's life. A program or measure is cost-effective ifit has a benefiVcost ratio above 1.0. 2STAFF COMMENTS AUGUST 20,2OI9 operating the three demand response programs in Idaho was approximately $7.9 million on a system-wide basis. If the programs were dispatched for the full 60 hours allowed, the total cost would have been approximately $11.3 million, which is less than the maximum annual cost calculated to be $19.8 million in the 2017 Integrated Resource Plan (IRP). Application at 10. The Company reported that independent, third-party consultants provided impact and process evaluations to verify that program specifications are met, recommend improvements, and validate program-related energy savings. Id. In2018, the Company completed three program impact evaluations, one program process evaluation, one savings determination analysis, and three program summary analyses. 1d STAFF REVIEW Staff has reviewed the Company's Application and the accompanying testimonies of Connie Aschenbrenner, Pawel Goralski, and Thomas Eckman, along with the 2018 DSM Annual Report and additional information provided by the Company. Based on its review, Staff believes the Company's programs are generally well-managed and recommends that the Commission approve the Company's request that $40,712)64 in 2018 expenses were prudently incurred. However, Staff also recommends that the Commission decline the Company's request to use the total resource cost perspective, which includes costs not incurred by the utility, as the appropriate way to plan the amount of energy efficiency to include as a resource in its Integrated Resource Plan. In Order No. 34141, the Commission identified a list of thirteen issues raised by Staff and the Idaho Conservation League (lCL) and ordered the Company to address those issues in the next round of Energy Efficiency Advisory Group (EEAG) meetings. The Commission further ordered the Company, Staff, and the ICL to file reports in this DSM prudency case addressing how the Company worked with the EEAG to consider those issues. Staffls report is included as Attachment A. While many issues have been resolved, Staff notes that the Company disregarded the near unanimous opinion of the EEAG to use the UCT, rather than the TRC, for resource planning. In the comments below, Staff addresses the Company's DSM Rider account, expenditures, and program management. Staff notes that the absence of any discussion on other issues presented in the 2018 DSM Annual Report should not be construed as Staff support for the Company's position on those issues. STAFF COMMENTS AUGUST 20,2019J Financial Review Staff audited the Company's DSM expenses, which included sampling and reviewing over 100 transactions across the Company's programs. Expenses were well-documented and controls were in place to regulate proper payment of incentives and other costs. Staff recommends that the Commission find that the Company prudently incurred 540,712,164 in DSM-related expenses for 2018. This total consists of $33,560,433 in Idaho Energy Efficiency Tariff Rider expenses and $7,151,730 in Demand Response incentives that have been included for recovery in the 2018 Power Cost Adjustment. Staff calculated the DSM Rider account balance as of December 3 l, 2018 as follows: Table 1: Tariff Rider Reconciliation $407,603 38,475,863 38,492 38,921,958 (33,560,433) (89,304) (13,264) $5,258,957 The $89,304 adjustment is a reversing entry to account for a portion of the 2017 Rider- funded labor that was initially transferred to non-Rider funded operations and maintenance ("O&M") based on an incorrect determination that 2017 Rider-funded labor exceededthe 2o/o cap imposed by the Commission. The labor expense was determined to be prudently incuned in Order No. 34141 and added back to the Rider in 2018 DSM expenses to accurately represent the amount incurred related to 2018 DSM efforts. Upon preparation of the 2018 prudence filing, the Company discovered an incorrect account entry was made in 2018 for the Multifamily Energy Savings Program. Oregon activity totaling $13,264 was inadvertently charged to the Idaho Rider instead of the Oregon Rider. The entry was identified after the 2018 accounting books had closed, and an adjusting entry was made in2019 to correct this error. STAFF COMMENTS AUGUST 20,2OI9 2018 Beginning Rider Balance (Overfunded) 2018 Tariff Revenue Interest on DSM Rider Total 2018 Funds 2018 Reported Expenses Prior Year Adjustment Ore gon Multifamily Correction Balance as of December 31, 2018 4 DSM Labor Expenses In Order No. 33908, the Commission adopted a process for DSM labor expenses that attempted to remove the examination of incremental labor expense from the DSM prudency case by allowing the Company "to include actual wage increases up to a2Yo cap in the DSM Rider." In 2018, the Company incurred $3,262,501in Rider-funded labor expense: a lo/o decrease in total DSM labor expense charged to the Tariff Rider. However, on a full-time equivalent basis, the average increase was 1 .3Yo, indicating that employees charged less of their time to the Tariff Rider. The Company's labor expense is below the 2%o cap established by the Commission and Staff recommends it be approved. The Total Resource Cost Perspective is not Appropriate for Integrated Resource Planning Staff recommends that the Commission decline the Company's request to use the total resource cost perspective in its integrated resource planning because that perspective includes costs that Idaho Power does not incur to provide electric service. It is not appropriate to include non-utility costs in Idaho Power's resource planning process. If the Company's request is granted, it will increase the cost for the Company to provide electric service to its customers by reducing the amount of cost-effective energy efficiency on the Company's system. In addition, the Company's request ignores nearly unanimous feedback that the Commission ordered the Company solicit from the EEAG on this issue. There are two main places in the lifecycle of an energy efficiency program where the resource cost perspectives are applied: first, in the integrated resource planning process to determine how much energy efficiency a utility should include as a resource; and second, in- after-the-fact cost effectiveness testing when the Company seeks recovery of prudently incurred investments. As has been the practice for many years, it is appropriate for the Company to continue advising the Commission on the results of after-the-fact cost effectiveness testing from multiple perspectives, including the TRC, UCT, and PCT. But it is not possible to apply multiple tests in resource planning because a single perspective must be selected. Staff believes it is more appropriate to use the utility cost test, rather than the total resource cost test, in integrated resource planning. The main difference between the utility cost test and the total resource cost test is that the utility cost test includes only those costs and benefits that the utility incurs to provide electric service. In contrast, the total resource cost test includes voluntary participant costs that will not 5STAFF COMMENTS AUGUST 2O,2OI9 be recovered in utility rates and non-energy benefits that do not accrue to the utility. Staff believes it is more appropriate to use the utility cost test, rather than the total resource cost test, in the integrated resource planning process because it ties more closely to the revenue requirement that will be used to establish the cost of providing electric service to customers in rates. Staff does not believe it appropriate to include costs in Idaho Power's IRP that are not passed on to all ratepayers. In addition to including non-utility costs, the TRC also includes non-energy benefits, which, as the name suggests, are not related to Idaho Power's responsibility to provide electric service. Non-energy benefits can include, but are not limited to: economic development, health impacts, labor savings for local businesses, improved comfort, water savings, and soap or detergent savings. The Company and its consultant, Mr. Eckman, make a variety of interrelated claims to justify including non-utility costs, which the TRC requires, in Idaho Power's IRP planning process. Among other things, Mr. Eckman believes that the TRC is the more appropriate test for screening energy efficiency potential in the IRP process because it avoids "potentially" double- counting energy savings, provides for the consideration ofbroader policy goals - such as "funding education, health care, or public safety" in order to prevent "bad outcomes for society" (Eckman at 1-8) - and allows for "substantial participant non-energy benefits, such as water savings, O & M savings" (Eckman at 19) to be included, and that it "reduces the likelihood of over or underestimating achievable cost-effective energy efficiency potential (Eckman at 14). Ms. Aschenbrenner specifies that the "Company agrees with each of the reasons articulated by Mr. Eckman for why a utility should rely on the TRC test for resource planning." Aschenbrenner Direct at 20. First, there is no possibility of double-counting energy savings in the UCT. The only savings that are counted are those that will appear on the Company's system. Mr. Eckman's argument mischaracterizes the mutually beneficial energy savings that a utility and a participant get from energy efficiency as double-counting. The fact that both the utility and the participant get the full benefit, but neither pays the full cost, is a positive - not negative - attribute of energy efficiency. Second, Mr. Eckman's preference for the TRC and its consideration of broader, non- electric, policy goals is consistent with the policies of the States of Oregon and Washington, federal agencies like the Bonneville Power Administration, and the Northwest Power and 6STAFF COMMENTS AUGUST 20,2OI9 Conservation Council, where Mr. Eckman worked for 35 years. This approach is not uncommon; many states adapt their electric resource planning to advance broader policy goals. However, Staff does not believe that this decision-making framework is appropriate in Idaho Power's IRP. Third, Mr. Eckman claims that using the TRC reduces the likelihood of overestimating the achievable cost-effective energy efficiency potential in the IRP. In fact, using the total resource basis in utility planning ensures that the utility will always underestimate the amount of cost-effective energy efficiency potential by increasing costs and benefits asymmetrically. This asymmetry occurs because it is impossible to include non-energy participant benefits (i.e. labor savings, comfort, etc.) in an electric resource plan. Including participant costs, but not including the participant non-energy benefits, artificially drives down cost-effectiveness and thereby reduces the amount of energy efficiency potential in the IRP. Reducing the amount of cost- effective energy efficiency in the IRP increases system costs for all customers. Within this argument, Mr. Eckman also claims that assuming the utility will pay l00Yo of energy efficiency costs - which is clearly not accurate - is a more reasonable estimate of future costs for efficiency than actual program expenses. Mr. Eckman also argues that the TRC directs "investment toward measures that optimize benefits for the utility and its customers." Eckman Direct at 16. Staff assumes "benefits" to mean non-electric participant and societal impacts. But Staff believes that in the context of Idaho Power's IRP, benefits are limited only to the utility's cost to provide electric service. The table Mr. Eckman provides on page 9 of his testimony correctly identifies the "Key Question Answered" by each of the cost-effectiveness tests: figrure ilo. 1: Surnary of lhe Kay Quartiont Ansrsrad and Factors Concidered by Lhs Cost-Effacti"vonals Tegta Totsl Regourco Cost Socictsl Cost 7 Ths utrlrty $y$lrn1 l{ill utihly sy*bm ffi!, ba r*ducsd? lndudc* ths rets &Id bsfl*ftti t)s**6rwed br &o utilxy syti{tnUlrlity Co*t Wdl ufrkly systorn etts plus program psrklps/rB' cos6 bc reducrd? l*dude* ttx ca*tr grd btntB6 aparrcrxd by &e u$*ly syildn, drrr cst3 stid bGoafds to procren rsteSstttl thr util{ly 3yrtffn phrf p.nic,patrttg ctr3lomafs Wr$ totel car$ to rmiity bc rudmcd? lrdtdc* thc ss{$ rttt, bottcf$ crosft}rstd by *ocirtyer r ufiolc So$at), s3 a *tlolt Frnlrcsv* t(rf *r trom*mr.ild fiffirrryffpmrshToat STAFF COMMENTS AUGUST 20,2OI9 Staff believes the UCT is the most appropriate test for resource planning because the key question it answers is whether utility system costs will be reduced. Mr. Eckman goes on to state that the TRC "avoids promoting measures that may impose non-electricity costs on others." Eckman Direct at 18. To demonstrate this issue, he cites the increased air pollution that resulted when electric utilities incented wood stoves in the 1980s to reduce electric costs. Idaho Power is not considering incenting any non-electric measures, so this issue is not a concern. Interwoven in this argument, Mr. Eckman claims that "using the UCT instead of the TRC test can lead to allocating utility funds to purchase savings from measures that displace those that are cost-effective using the TRC test. Eckman Direct at 16. Staff points out that the only time measures are cost-effective under the TRC but not cost-effective under the UCT are when non- energy benefits are included.2 Additionally, Mr. Eckman does not appear to be familiar with the Idaho Commission's directive and Idaho Power's repeated commitments to "pursue all cost- effective DSM". See Order Nos. 29784 , 32245, 32953 , and 34345 . Pursing "all" means that no cost-effective energy effi ciency measure displaces another. In Order No. 34141, the Commission directed the Company to work with the EEAG on a range of issues, including a discussion about the impacts of using the UCT rather than the TRC. At the January 2019 EEAG meeting, the EEAG members universally opposed the use of the TRC in favor of the UCT. One member stated that it "leaves cost-effective energy savings on the table." Another member commented that the Company should not artificially limit the opportunities for customers to voluntarily participate in energy efficiency if those measures are cost-effective from the utility's perspective. Staff agrees. Staff notes that Rocky Mountain Power petitioned the Utah Commission in 2009 to change the primary planning cost-benefit test from the total resource cost (TRC) test to the utility cost test (UCT). See Public Service Commission of Utah Docket No. 09-035 -27. Utrlities have stated costs and benefits in the UCT are easier to identify, control, and manage as electric resource needs change. In their Idaho service territories, Rocky Mountain Power has expanded its practice and Avista has also adopted the UCT for resource planning with no objections or adverse impacts. 2 ldaho Power also made this statement at the August 8,2019 EEAG meeting. 8STAFF COMMENTS AUGUST 20,2OI9 Demand Response Idaho Power manages three demand response programs as part of the demand-side portfolio: A/C Cool Credit, Flex Peak, and Irrigation Peak Rewards. The combined capacity of these programs is 382 megawatts (MW). The demand response programs were cost effective based on the methodology determined in settlement stipulations in Order No. 32923. Implementation of these demand response programs has become increasingly effective as the Company has improved its ability to layer program combinations to smooth system peaks. Though the size of these programs was initially limited by the terms of the settlement stipulation approved in Order No. 32923 the Commission Order also directed the Company to "continue evaluating opportunities associated with DR programs on an ongoing basis." Order at 7. Staff has previously expressed concern that additional DR was modeled after, rather than alongside supply-side resources in the Company's IRP and believed that approach harmed the Company's ability to identify expanded DR as a cost-effective resource to meet future capacity deficits. However, the Company's 2019 IRP took an important step forward by including DR as a resource that could be selected by the newly-implemented capacity expansion model alongside supply-side resources. This was accomplished by evaluating constraints outside the modeling process and incrementally adding the option of additional DR in 5 MW increments starting in2023. Energy Efficiency In 2018, the Company exceeded the energy efficiency resource acquisition established for the year in the 2017 IRP. In addition to exceeding its IRP targets, the Company also maintained very high cost-effectiveness ratios. Its total energy efficiency portfolio had a UCT of 3.04 and a TRC of 2.26. There was a relatively small decrease in savings between 2017 and 2018 of around 4.6 percent, due to lower lighting program savings. While total portfolio savings were relatively stable, residential program savings declined by 44 percent from the previous year. The Company continues to improve its approach to program development, implementation, and marketing, which increased 2018 savings significantly in its commercial and industrial programs. Although residential program savings declined, customers benefitted from energy savings kit distributions and direct-install programs in multifamily developments. While the Company made continued progress, opportunities for expanding program and marketing effectiveness remain. 9STAFF COMMENTS AUGUST 20,2079 Achievements Idaho Power's program made several significant strides forward in20l8. Staff acknowledges the Company's efforts to respond to feedback from Staff and other stakeholders myAccount Engagement In 2018, Idaho Power made a concerted effort to improve energy efficiency outreach at the customer point of contact. This included engaging with customers through myAccount by adding the option for customers to receive text and email notifications for high and overdue bills In addition, Idaho Power sent Welcome Kits to 30,000 new customers in 2018, including four LED lightbulbs, a nightlight, and tips on ways to save energy. Establishing a new home is a common time for customers to think more closely about their energy consumption habits. These cost-effective kits are a good tool to generate or rekindle a customer's interest in efficiency. Energy-Savings Kits (ES K) Idaho Power's ESK had another successful year in 2018, shipping over 44,000 kits to homes in its service territory. The free kit contains nine LED lightbulbs, a digital thermometer, a shower timer, a water flow-rate test bag, an LED night light, and energy efficiency educational materials. Although the number of kits delivered increased, the savings decreased because savings for lightbulbs declined slightly this year. In addition to the residential energy kits, the Company launched its energy savings kits for commercial customers, which tailored kits specifically for restaurants, retail, and office spaces. This new program delivered over 1,600 kits to small commercial customers in Idaho and Oregon. Residential New Construction Pilot Program In2018, the Company phased out its ENERGY STARTM Homes Northwest program and replaced it with the Residential New Construction Pilot program. This evolution increased both participants and savings in 2018. The updated pilot program had minimal changes: increasing the targeted savings above state energy code from I 5 to 20 percent, increasing the incentive from $1,000 to $1,500, and removing the requirement that homes meet EPA's ENERGY STARTM Verification Version 3 certification requirements. The pilot program offers a cash incentive to build energy-efficient, single-family homes to rigorous specifications identified by the Regional Technical Forum (RTF) and NEEA. The program achieved significant energy savings by STAFF COMMENTS 10 AUGUST 20,2OI9 incenting high-perforrnance HVAC systems (including heat pump technology) high-efficiency windows, increased insulation standards, and tighter building shells. Throughout the year, Idaho Power provided a number of program update workshops to electrical contractors, electrical suppliers, and large customers throughout the service territory to help contractors improve their knowledge of lighting controls and gain hands-on technical experience. Attendees benefitted from these workshops and requested additional training on advanced lighting controls. Staff encourages the Company's continued work to educate contractors on energy efficiency technology in order to drive savings. Multifamily Ener gy Savings Pr ogram The Company continued and expanded on the success of its Multifamily Energy Savings Program in2018. This program, which was established as a pilot in March 2016 to counteract the split-incentive problem which often limits the adoption of energy efficiency in rental housing, offers free, direct-install energy efficiency measures to qualifying apartment complexes. In 2018, the Company increased the number of apartment units receiving energy-saving measures through this program, from 687 in the previous year to 810. Staff acknowledges this positive trajectory and believes it may be in part due to the Company's improved marketing efforts. The Company added targeted multifamily energy material to its Landlord/Property Manager website and increased awareness through letters to landlords and property owners about eligibility requirements. The Company also created and shared a new marketing video on the Multi-Family Energy Savings program webpage. Staff stated in previous comments that program website traffic is low, less than 600 customers per year. While Staff appreciate the effort to create effective and engaging marketing materials, Staff believes it could be beneficial for the Company to share that content more broadly - for example, on its social media pages, which get more traffic than individual websites. Staff is encouraged by the increased energy savings achieved by the Multifamily Energy Savings Program in20l8. Staff anticipates an additional, but small, increase in savings as Idaho Power adds attic insulation to the list of direct-install measures in this program. Staff notes that expanding the availability of non-lighting measures will help the Company bolster savings against the decline anticipated from the increased lighting standards that will go into effect in 2020 from Phase 2 of the Energy Independence and Security Act of 2007 (EISA). STAFF COMMENTS 11 AUGUST 2O,2OI9 Commercial and Industrial Efficiency Programs Idaho Power's Commercial & Industrial Energy Efficiency program was very successful in2018. Savings increased by over 10 million kWh and totaled 95,759 MWh. This program provides incentives for Idaho Power's commercial customers for a wide range of measures and projects, including large custom projects, smaller streamlined custom offerings, new construction, and prescriptive retrofits. The Company continued its successful cohort training program working with wastewater, municipal water, and schools within the Commercial and Industrial program. In20l8, Idaho Power partnered with BPA and Rocky Mountain Power to add the Eastern Idaho Water Cohort. Similar to the existing cohorts, the new cohort will help facility operators implement low cost or no-cost energy improvements to municipal water facilities in eastern Idaho. These programs provide technical trainings, energy audits, and guidance on implementing energy management principles to improve facility operations. Cohorts also facilitate opportunities for capital improvement projects at qualiffing locations. The combination of these activities provide affordable and cost-effective energy reduction, as well as access to funds for capital improvements for resource-limited organizations that would have had difficulty accessing them. Custom Eficiency Program The Custom Program option incents energy efficiency modifications for new and existing commercial and industrial facilities. 2018 Annual Report at ll7 . The 248 Custom projects completed by the Company in 2018 accounted for 46,964 MWh of the Company's 158,412 MWh (29.6%) direct program savings. The program's Utility Cost Test ratio was 3.85, and the Company's independent evaluator, Tetra Tech, Inc. reported a 100.4% realization rate. Staff recognizes the Company's continued efforts to stock the pipeline with projects for this program. The Company reports it received 329 new applications for future projects, which have the potential for 6l million kWh of future savings. Custom projects may span multiple years because of the complexity of their design and installation. Customers may submit a pre-approval application for energy efficiency projects identified by the customer, Idaho Power, or by a third-party consultant. Idaho Power then works with the customer and vendors to gather sufficient information to support the energy savings calculations. Once the project is completed, customers submit a payment request, and Idaho Power staff or an Idaho Power contractor estimates the completed project's annual energy STAFF COMMENTS t2 AUGUST 2O,2OI9 savings using the Company's calculations, estimation tools, and end-use measurements. Customers are then paid either 70%o of the project cost or $0.18 per kWh of the first year's estimated savings, whichever is less. 2018 Annual Report at ll7 and 119. Staff believes that the tools and methodologies used by the Company to estimate project savings are appropriate. Staff confirmed that the Company actively uses information from its third-party evaluator, Tetra Tech, Inc., to identify opportunities for improving its estimation and verification processes. Staff learned that although the Company implemented most of Tetra Tech's recommendations, there were instances in which the Company modified the recommendations to ensure that the methods are usable by trade allies, customers, and reviewers, as well as to assure a straightforward and consistent process.3 In its review of specific projects, Staff found that most discrepancies between Company and Tetra Tech savings estimates could be attributed to the Company's use of more conservative assumptions than those used by Tetra Tech. Staff notes that the Company's practice of using conservative estimates tends to reduce program costs. Opportunities for Improvement Although 2018 was a good year for Idaho Power's DSM programs, there are a handful of current and emerging areas of concern. 3 The Company explained modifications to Tetra Tech's recommendations in response to Staff PR Nos. 20-22. STAFF COMMENTS 13 AUGUST 20,2019 EISA Impacts on Lighting Savings Staff remains concerned about the impacts to the Company's residential energy eff,rciency programs when Phase 2 of the Energy Independence and Security Act (EISA) code becomes effective in2020. Though uncertainty remains surrounding the implementation of EISA and which bulbs it will apply to, some estimates show savings for general use bulbs could decrease as much as 75-90 percent from current levels. At Idaho Power, eight of the twelve residential programs have lighting as a component of their savings that will be impacted -most notably, Energy Efficient Lighting and Educational Distributions, which comprised 80 percent of total residential savings in 2018. Energ,' Efficient Lighting Program The Company's Energy Efficient Lighting program savings decreased 50 percent between 2017 and20l8, while lamp sales declined nearly 24 percent. This program provides incentives directly to manufacturers and retailers. The cost savings are passed onto residential customers which helps them invest in more efficient lighting technology. Although market adoption has improved and many Idaho Power customers have already received LEDs through the Energy Efficiency Kit program, opportunity remains in subsections of the market. Staff encourages the Company to continue working on outreach in underserved markets with rural, low-income, and elderly customers and in areas with limited market penetration. Home Energy Reports Pilot Staff recommends the Company consider weather-normalizing savings for the Home Energy Reports Pilot. Providing a correction of actual weather to a normal or distributional scenario will allow Staff to see if energy use patterns are norrnal. The Company is currently using methods to control between groups that are receiving the report and those that are not, but that does not protect against the impact of weather differences across years. Weather normalization is important to demonstrate the variability of what savings would look like in a standard year versus the year in question. Providing this comparison will help the Company track savings over time and more accurately determine cost-effectiveness. Small Business Direct Install Program For several years, Staffhas encouraged Idaho Power to offer a direct-install program for these customers in order to create an opportunity for greater savings and participation in its current C&I Efficiency offerings. While small business customers qualify for many of the Company's C&I measures, they are often considered a hard-to-serve market because they often have less time, capital, and employee time to research and participate in energy efficiency programs. Both Rocky Mountain Power and Avista have addressed this issue by developing programs that remove these hurdles to participation for their small business customers. In these programs, the utility hires a contractor to offer small business customers a streamlined audit and installation of a combination of cost-effective energy efficiency measures in exchange for the customer paying for a portion of the measures. This approach makes it much easier for small business customers to participate in utility programs. STAFF COMMENTS t4 AUGUST 20,2019 The Company has become more open to this approach over time and will launch its program in October 2019. While encouraged by this progress, Staff hopes that the development of future programs demonstrated to be cost-effective by other utilities will be adopted on a timeline more similar to their counterparts. In the time it has taken Idaho Power to move towards launching a program, both Rocky Mountain Power and Avista have designed, deployed, and - after acquiring the available energy efficiency potential - sunsetted their small business programs. STAFF COMMENTS l5 AUGUST 20,2019 Shade Tree Project The Shade Tree Project offers shade trees, free-of-charge, to residential customers. Staff understands that this project was launched primarily for education rather than cost-effectiveness. Staff accepts this project as an effective way to promote energy efficiency and looks forward to reviewing the Company's ongoing work to calculate cost-effectiveness ratios. In2018, the UCT for this project was 0.71; however, this value was calculated using a 20 year assumed life. 2018 Annual Report at 89. Staff notes that little savings is realized during the first four years of a shade tree's life. DNV-GL Shade Tree Project Evaluation at7. According to the Company, most of the species being planted live from 50 to 500 years. 2018 Annual Report at 89. Staff believes that the Company's Shade Tree Project represents a long-term energy efficiency investment, and recommends that cost effectiveness for the Shade Tree Project be calculated over an assumed life of no less than 30 years. According to the Company, its use of a 2}-year assumed life was dictated by a limitation of the i-Tree software used by the Company to estimate program savings. Extrapolating the 2}-year savings value estimated by i-Tree to 30 years would have resulted in a UCT ratio greater than 1 . 2018 Annual Report 89-90. Staff believes the Company's extrapolation to be reasonable. Idaho Power relied on an independent evaluator, DNV-GL, to evaluate its program. DNV-GL audited a sample of 1,748 of the 9,830 trees that had been enrolled in the program at the time of the audit. According to DNV-GL,36yo of the trees audited had died. This is important because i-Tree, the software used by the Company to estimate program savings, does not factor mortality rate into its calculations. DNV-GL Shade Tree Project Evaluation at 5. Staff recommends that in future years, the Company adjust the energy savings estimated by i-Tree to account for shade tree mortality rate. The Company used i-Tree software to calculate the costs and benefits of non-electric impacts and determined that the monetary benefit of improved air quality and avoided storm- water runoff are largely offset by the increased costs of heating a home caused by winter shade. Furthermore, the Company determined that the amount of carbon dioxide removed from the air by shade trees is largely offset by the increase in carbon dioxide from home heating caused by winter shading. 2018 Annual Report at90. The Company included monetary values of these non-energy impacts (therms, air Pollutants, carbon, and stormwater runoff) in its TRC calculation. DNV-GL Shade Tree Project Evaluation at 2. Although Staff does not disagree that there are non-electric costs and benefits associated with its Shade Tree Project, Staff believes that quantifuing and assigning a dollar value to them does not relate to utility system costs and is, at best, imprecise. In particular, Staff is unaware of any universally accepted methods for either determining the rates of pollutants absorbed by trees, or for assigning a dollar value to those pollutants. To illustrate this difficulty, Staff notes that in urban environments, some species of trees contribute to pollution by releasing volatile organic compounds (VOCs).4 By themselves, VOCs contribute to urban haze, and in the presence of sunlight, VOCs combine with Nitrous Oxides emitted by vehicles to form ozone. Green Motors Initiative Idaho Power participates in the Green Motors Practices Group's Green Motors Initiative (GMI). Under the GMI, Idaho Power pays service centers $2 per horsepower (up to 5,000 hp) for motors receiving a Green Rewind. In2018,26Inigation and 25 Commercial and Industrial motors were rewound under the GMI, for a combined savings of I 3 1,843 kWh. Staff would like to see the next evaluation review the GMI independently from other programs. Staffs primary concern is that the eligibility criteria for this program is poorly defined, and does not preclude service centers and participants from receiving payment for rewinding motors that are already efficient. The criteria provided on Idaho Power's Green Motors Initiative website states only that, "Motors between 15 and 5,000 horsepower are eligible," with a disclaimer that "Some motors may not be able to qualify as a green rewind due to extenuating 4 https://pubs.acs.orddoi/abs/ I 0. 1 02 I /acs.est.6b065 I 4 STAFF COMMENTS 16 AUGUST 20,2OI9 circumstances, such as a damaged stator or rotor." Staff notes that apart from motors that have been rendered completely inoperative, this criteria could apply to virtually any motor, regardless of its efficiency prior to a rewind. The links provided to Staff in response to Production Request No. l4 did not provide any additional insight into the criteria used to determine motor eligibility. The Company provided a 2012 repair specification prepared by the Green Motors Practices group that outlined procedures for repairing a motor and calibrating motor repair equipment, but this specification provided no guidance for determining whether or not the motor should be rewound, or whether or not it qualifies under the GMI. Staff does not doubt that under certain circumstances a Green Rewind can result in energy savings; however, given the limited information provided by the Company, Staff was unable to determine whether or not the Company's participation in the GMI actually benefits the Company's customers. Staff recommends that the Company provide more detailed information about criteria for participation in GMI and cost-effectiveness of the initiative in next year's DSM report. Marketing Idaho Power continues to find new ways to engage with customers regarding its energy efficiency programs using a wide variety of media and marketing materials. The Company's marketing campaign consists of web, social media, and television commercials, the use of public radio, print media, bill stuffers, and advertising at events within its service territory. The Company also creates newsletters, brochures, and flyers to send directly to contractors, customers, and property managers. The Company states that approximately 25 percent of its social media content promoted energy efficiency, encouraging energy efficiency behavior adoption, program enrollment, and customer engagement. Idaho Power also continued with #TipTuesday posts on Facebook and Twitter, but stated that changes to Facebook algorithms have made it more difficult to engage with and gain new followers without paid advertising. Staff reviewed Google analytics information provided by the Company to better understand how online ads may be driving customers to Idaho Power's energy efficiency program websites. The information suggests most customers arrive at the energy efficiency program websites from search engines (Google, Yahoo, Bing), but many also arrive from Facebook, Lowes, Home Depot, and local news sites. However, Google Analytics cannot STAFF COMMENTS 17 AUGUST 20,2OI9 provide information for customers browsing on certain phones, using apps, or while browser privacy settings are enabled. Although Staff requested the Google Analytics data to better understand the evidence behind the marketing data reported in the DSM report, the DSM report marketing data was not based on the Google Analytics provided to Staff. Because the two data sets did not align, many questions remain unanswered about how customers find Idaho Power's energy efficiency program websites and engage with online ads. Staff will continue working with ldaho Power's marketing, web design, and analytics resources to better understand how the Company's online ads are directing customers toward the Company's energy efficiency websites and how customers are engaging with the Company's paid ads and social media to maximize program participation. Staff believes this is important in order to ensure that the Company continues to improve customer outreach through ad campaigns, build more meaningful customer engagement, and ensure advertising expenditures effectively drive program participation. STAFF RECOMMENDATIONS Staff recommends the Commission find that the Company prudently incurred DSM- related expenditures of $40,712,164. This amount consists of $33,560,433 in Idaho Energy Efficiency Rider expenses and $7,151,730 of demand response program incentives. Staff also recommends that the Commission decline the Company's request to rely on the total resource cost perspective for its long-term resource planning. Respectfully submitted this )-r#day of August 2019 Matt Hunter Deputy Attorney General Technical Staff: Stacey Donohue Cassie Koemer Brad Long Michael Morrison i:umisc/comments/ipce 19. I I mhckblmm comments STAFF COMMENTS l8 AUGUST 20,2OI9 Attachment A: Report in Compliance with Commission Order No. 34141 In Order No. 34141, the Commission ordered that the Company, Staff, and ICL each filed a report addressing how the EEAG considered a number of recommendations from Staff and ICL regarding Idaho Power's DSM programs. The following document summarizes each issue, how it was addressed and considered by the EEAG, and whether the issue was resolved by stakeholders. a. Rigorously examine the potential for expanded demand response in the 2019 IRP Staff expressed concern in 2018 DSM Comments that expanded demand response had not been considered alongside supply-side options as a resource to meet future capacity deficits in the IRP. Though there has not been an immediate capacity deficit projected and the size of the demand response programs was initially limited by the settlement approved in Order No. 32923, the settlement states that the value of demand response should be re-evaluated in future IRPs. During the January 23,2019 EEAG meeting, Idaho Power presented an overview of its demand response programs and information that was shared in a January IttP demand response presentation. The EEAG presentation explained how demand response had been incorporated into the Company's long-term capacity expansion model, allowing it to be compared along with other supply-side options. The group also discussed what demand response program expansion could mean for customers in terms of responses to cycling events, potential for additional costs from these programs, and the expansion of overall event hours. Some EEAG participants were concerned about the inconvenience to customers and willingness to tolerate expanded event hours. The 2019 IRP model expanded demand response by incrementally incorporating demand response in 5 MW increments, starting in2l23-though the conclusions and findings are currently being reviewed for accuracy. Staff appreciates the Company's efforts to include demand response as a resource modeled simultaneously with supply-side resources in the 2019 IRP. b. Reconsider the June 2017 discontinuation of the Home Improvement Program Both ICL and Staff s DSM comments in20l7 and2018 questioned Idaho Power's decision to close the Home Improvement program, a residential energy efficiency program which at the time of the decision had a UCT of 7.7. lnresponse to that concern, the Commission directed the Company through the EEAG to "reconsider the June 2017 discontinuation...". But Attachment No. A Case No. IPC-E-19-11 Staff Comments 08120119 Page I of 1 instead of reconsidering that decision as instructed by the Commission, the Company instead merely discussed with the EEAG ways to improve communication and transparency in the Company's decision-making process about future closure of existing programs. The Home Improvement Program remains discontinued. During the January 23,2019 EEAG meeting, the Company presented additional information regarding the cost-effectiveness of the Home Improvement Program and its measures from the TRC perspective, repeating the discussion of how the program failed to pass the TRC for multiple years. Staff does not believe this meets the Commission directive and reiterates its concern that the Company discontinued a program that is cost-effective from the perspective of the utility and all of its customers. Staff is concerned that the Company will use this approach to discontinue cost-effective programs in the future. Staff notes that the Home Improvement Program is an important component of the Company's energy efficiency portfolio because it is one of the few residential programs that does not depend on lighting for the majority of its savings-thus providing savings past the expected savings cliff when Phase 2 of the EISA lighting standards, which predominantly effects residential lighting measures, goes into effect in2020. The issue remains unresolved. c. Explore small business program design options. Staff has been concerned for several years that the Company has not implemented a small business program specifically designed to overcome the barriers these customers face when implementing energy efficiency measures. In response to Staff concems, the Commission ordered the Company to explore small business program design options with the EEAG. During the October 30,2078 EEAG meeting, the Company explained that it would pursue an RFP for a small business direct-install program while simultaneously launching a small business Energy Savings Kit. Staff continues to support this development, but remains concemed that the Company took so long to explore options for a program that other utilities have found to be cost-effective. Staff notes that both Avista and Rocky Mountain Power launched, successfully executed, and after exhausting the potential in this segment, are now sun- setting their small business programs before Idaho Power has launched a similar program. Attachment No. A Case No. IPC-E-19-11 Staff Comments 08120119 Page 2 of 7 d. Work with the EEAG to ensure that Energy Independence Security Act program savings remain healthy beyond 2020, Staff has been concerned that EISA, which will increase the baseline efficiency of most residential lightbulbs by 60 or 70 percent beginning January 1,2020, will have detrimental effects on Idaho Power's energy efficiency programs because up to 90 percent of the Company's residential program savings come from lighting. Those savings will continue to appear on the grid once the new lighting standards are in place, but utilities will no longer be able to claim those savings and there will be a drastic savings reduction in residential programs. In order to continue providing cost-effective programs for residential customers, the EEAG discussed the potential of partnering with other utilities to identify new energy efficiency programs, as well as looking at other utilities for creative solutions. The EEAG also discussed the many remaining, but currently underserved, residential markets such as rural, low-income, and elderly customers. Additionally, the EEAG will continue to monitor and provide feedback on the best approaches to market the Company's existing measures, such as insulation and windows, to generate maximum savings. Staff understands that EISA will negatively impact the Company's savings, but expects the Company to rigorously investigate additional potential in order to uphold its commitment to pursue all cost-effective energy efficiency. e. Consider a more frequent evaluation schedule and follow the industry norm of two to three years for both impact and process evaluations for each program. Staff raised concern that some of the Company's large energy efficiency programs were only being evaluated every four to six years, when the industry standard for program evaluation is every two or three years. The Company's discussion in the EEAG focused on the need to contain costs, and explored options such as multi-year evaluation contracts with a single evaluator. The Company also explained that some programs might have longer gaps between impact evaluations because those programs have either deemed savings from the RTF or have been consistently operated with high realization rates over many years. The Company explained its need to balance cost of evaluations against the frequency of evaluations, especially for smaller programs. Staff understands this consideration, but wants to ensure that programs remain effective by conducting sufficient evaluations. Attachment No. A Case No. IPC-E-19-l I Staff Comments Ogl2)llg Page 3 of 7 The Company and Staff held a conference call on February 27,2019, and the Company agreed to create a two-year, forward-looking schedule of evaluations in the DSM Annual Report. This will give Staff and other stakeholders visibility into the Company's planned evaluation schedule and help determine the need for additional or more frequent evaluations. Staff believes this is a reasonable solution and will continue monitoring the evaluation schedule. e. Consider tailoring the Company's marketing efforts to achieve the micro-targeting proposed by the Company's evaluator Staff believes micro-targeting could be an effective way for the Company to tailor its marketing to specific customer segments more likely to engage in energy efficiency programs. Discussion has focused the Company's Rebate Advantage Program, but Staff believes this marketing tool could also be applied to many of the Company's programs. In the EEAG, the Company provided an overview of micro-targeting and how a hybrid approach that combines micro-targeting with the current marketing methods could improve outreach for the Rebate Advantage program. Generally, group dynamics differ based on the target group-requiring companies to tailor marketing efforts to groups within specific programs. Digital media provides new opportunities for the Company to develop micro- targeting strategies, and then observe and track ad consumption, website traffic, and patterns of engagement on social media platforms to gauge its effectiveness. Staff believes significant opportunity remains and encourages the Company to continue developing its micro-targeting efforts. f. Explore opportunities to engage customers in energy efficiency when they sign up for myAccount. Staff believes there are opportunities for the Company to more effectively engage customers in energy efficiency when customers sign up for myAccount. During the October EEAG meeting, the Company demonstrated a function in the myAccount signup process that allows customers to request information on energy efficiency by email. Although this is an interesting feature, EEAG participants questioned whether customers noticed or understood this option while signing up for their account because the Company had little information about how many customers requested email notifications through this option. Without that information, it is impossible to know if this function is reaching customers. Attachment No. A Case No. IPC-E-19-l I staff comments 08120119 Page 4 of 7 While Staff believes this moves towards permission marketing and is a step in the right direction, EEAG participants suggested an additional approach might be to highlight the direct benefits delivered to customers through energy efficiency programs on the myAccount login page. Similar to feedback in Staff comments, EEAG participants recommended more specific strategies and messages tailored towards energy efficiency, which could include linking the myAccount page to the Company's energy efficiency program websites. Staff encourages the Company to continue expanding its efforts to engage customers in energy efficiency through its myAccount adoption campaign. g. Not over-emphasize the results of its empowered community surveys when designing programs for all customers. In the 2018 DSM Comments, Staff raised concem that the Company had over- emphasized the empowered community survey data when designing its energy efficiency programs. Because the empowered community self-selects to participate in the surveys, they may not be an accurate representation of Idaho Power's customers. In addition, their survey answers may show a preference for program options that are more familiar, rather than those which are more effective. This question was addressed at the October 30,2018 EEAG meeting, and several EEAG participants shared Staff s concerns. In response, the Company explained that the empowered community was only one of several methods it uses to inform program design. In addition, the Company committed to clearly identifying the source of survey data and the composition of survey groups. When identifying the source of survey data, the Company should include at least information to show the composition of the communities, plus how and when they were used in the program evaluation. Staff appreciates the Company's efforts to increase transparency and believes it will help the EEAG understand program design decisions. Staff believes this issue will be satisfactorily resolved by providing this additional information in future reviews. h. Include attic insulation in the multifamily housing program ICL's 2018 DSM Comments recommended that the Company add the attic insulation measure, which was demonstrated to be cost-effective in the recently cancelled Home Improvement Program, to the Multifamily Energy Savings program. At the October 30, 2018 meeting, the Company presented measure combinations of windows and insulation that could be included in the program and the necessary conditions to make each cost-effective. The Company Attachment No. A Case No. IPC-E-19-l I Staff Comments 08/20119 Page 5 of 7 agreed to add attic insulation as a measure to the Multifamily Energy Savings program in2019 and to continue to look for additional cost-effective measures, such as weather stripping and door sweeps. Staff appreciates the ICL's insight on this issue, the Company's work to add these measures, and believes this issue will be sufficiently addressed. i. Work with the EEAG and other experts to devise strategies and tactics that lead to energy savings The ICL's 2018 DSM comments raised concern that the Company was too narrowly focused on customer satisfaction with the Company's energy efficiency offerings rather than adopting strategies and tactics that drive savings. The ICL questioned whether satisfaction and participation rates are meaningful metrics, and instead recommended focusing on energy savings acquisition instead. Staff agrees with ICL that customer satisfaction is important, but is not on its own a sufficient metric of success. The problem with satisfaction analytics is that customers may be satisfied with the current offerings because they are not aware that other, perhaps better options, exist. The EEAG addressed this topic in combination with the discussion about how to maintain healthy program offerings and savings after the Phase 2 EISA implementation. The Company and EEAG agreed that this issue will require continued collaboration and work. j. Expand cohort group partnerships with municipalities and school districts. Staff and ICL have supported the Company's cohort programs for municipal water, wastewater, and schools. These programs are apaft of the Company's C&I programs and offer peer-to-peer training opportunities that help facilities save energy through low or no-cost operational (i.e. behavioral) changes and identifying cost-effective capital improvement projects that may qualifu for Idaho Power incentives. ICL believes the programs are working well, and as a result would like to see the offering expand to other customers and customer segments. In response to the request for expanded cohorts, the Company stated that no industry standards exist for reporting savings or cost-effectiveness. The Company also explained that it is collaborating with other regional utilities and the RTF to establish clear standards for calculating cost-effectiveness. EEAG participants were hesitant to move forward with significant program expansion without a standard method for calculating savings and cost-effectiveness. Staff appreciates the discussion and looks forward to continuing this work in future EEAG meetings. Attachment No. A Case No. IPC-E-19-l I Staff Comments OBl2Ollg Page 6 of 7 k. Appty the UCT, not the TRC, as the best measure of the costs and benefits of efficiency programs as a resource. Staff and the ICL have both maintained that the UCT, not the TRC, is the best measure of costs and benefits of energy efficiency as a resource. In response to this concern, the Company explained its position during the January 23,2019 EEAG meeting. Although it was not reflected in the Company's report, Application, or testimony in this case, there was widespread consensus among EEAG members that the UCT, not the TRC, is the appropriate test for resource planning. The Company's position is that "for long-terrn resource planning, the Company should focus on obtaining the lowest cost resource when considering the cost to all customers, (which includes participating customer costs)." Aschenbrenner Exhibit No. 1 at I l. The UCT does, in fact, include the costs that will be collected in rates for all customers, both participants and non- participants. No other utility resource in the IRP includes the costs of the resource that do not flow through rates to all customers. The EEAG strongly disagreed with the Company's position to use the TRC for long-term resource planning. Even after a long discussion, many EEAG participants could not understand why it was reasonable to include non-utility costs in the utility resource planning process. When faced with unified opposition from its advisory group, the Company responded that it has a "philosophical difference of opinion" on the matter. Staff and participants continued to stress the importance of acquiring resources that lower the utility's system costs. Staff is very concerned that the Company has ignored the feedback from the EEAG and key stakeholders on this issue. This 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. Attachment No. A Case No. IPC-E-19-11 Staff Comments 08120/19 Page 7 of 7 CERTIFICATE OF SERVICE I HEREBY CERTIFY THAT I HAVE THIS 2OTH DAY OF AUGUST 2019, SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO. IPC-E-19-11, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWNG: LISA D NORDSTROM REGULATORY DOCKETS IDAHO POWER COMPANY PO BOX 70 BOISE rD 83707-0070 E-mail : lnordstrom@ idahooower. com dockets@idahopower.com BENJAMIN J OTTO ID CONSERVATION LEAGUE 7IO N 6TH STREET BOISE ID 83702 E-mail: botto@idahoconservation.ore CONNIE ASCHENBRENNER IDAHO POWER COMPANY PO BOX 70 BOISE rD 83707-0070 E-mail: caschenbrenner@,idahopower.com ABIGAIL R GERMAINE BOISE CITY ATTORNEY'S OFFICE PO BOX 500 BOISE ID 83701-0500 E-MAIL : agermaine@cit),ofboise.org . Jr- ,42rr-, SECRETARY CERTIFICATE OF SERVICE