20200220Final_Order_No_34556.pdf

Office of the Secretary
Service Date
February 20,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )CASE NO.IPC-E-19-34
COMPANY'S APPLICATION TO FUND ITS )CONTINUED PARTICIPATION IN THE )NORTHWEST ENERGY EFFICIENCY )ORDER NO.34556
ALLIANCE THROUGH THE ENERGY )
EFFICIENCY RIDER FOR 2020-2024 )
On October 21,2019,Idaho Power Company ("Idaho Power"or "Company")applied
to the Commission for an order authorizing the Company to participate in the Northwest Energy
Efficiency Alliance ("NEEA")from 2020-2024 and confirming that such participation will be
funded through the Idaho Energy Efficiency Rider ("Rider").The Company requests the
Application be processed by Modified Procedure.Application at 7.
On November 8,2019,the Commission issued its Notice of Application,Notice of
Modified Procedure and Order.Order No.34478.The Commission's Staff ("Staff')and the Idaho
Conservation League ("ICL")submitted the only comments and supported the Company's
Application.The Company did not reply.
Having reviewed the record,the Commission enters this Order approving the
Company's Application on the conditions discussed below.
APPLICATION
In its Application,Idaho Power characterizes NEEA as a non-profitorganization whose
purpose is to maximize energy efficiency in the Northwest by accelerating and adopting energy-
efficient products,services,and practices through market transformation.Id.at 1-2.Idaho Power
states NEEA is funded by utilities in the Northwest United States,including Idaho Power,the
Energy Trust of Oregon and the Bonneville Power Administration.Id.at 2.
Idaho Power began participating in NEEA in 1997.Id.The Company asserts from
1997-2018,NEEA delivered 1,740 average megawatts ("aMW")of total regional energy savings,
582 aMW of which are Net Market Effects energy savings.Id.I During this period,the Company's
allocated portion of NEEA's savings was 371,527 megawatt-hours or 42.41 aMW.Id.
'Idaho Power states Net Market Effects are savings associated with market change and not counted as locally incented
savings or baseline savings.Id.at footnote 2.
ORDER NO.34556 1
Idaho Power participates in every NEEA committee and workgroup and is represented
on the NEEA Board of Directors.2 Direct Testimony ofAdam J.Richins at p.3,11.16-18.Idaho
Power asserts this involvement enables it to leverage its market-transformation investment by
building on NEEA's pooled resources,suppliers,market research and program design in
Washington,Oregon,Montana and Idaho.Application at 2;see also Richins at p.4,11.22-24.
Further,this involvement enables Idaho Power to influence NEEA's activities for the benefit of
the Company's customers.Id.
Idaho Power asserts NEEA's 2020-2024 Strategic and Business Plans ("Plans")have
two strategic goals:
(1)transformation -sustain a portfolio of initiatives and support functions that
enable more cost-effective efficiency to occur sooner,in larger amounts and/or at a
lower cost than otherwise expected,and (2)operations -continuouslyimprove
organizational culture and performance efficacy,ensure accountability and
transparency,and strive for innovation in service to the benefit of all stakeholders.
Application at 3.Idaho Power states that,related to its transformation goal,NEEA is pursuing
market developmentinitiatives for Heat Pump Hot Water Heaters,Retail Product Portfolio,Super-
Efficient Dryers,Luminaire Level Lighting Controls,and Codes and Standards.Id.
The Company represents NEEA's Plan intends to deliver 360-500 aMW of total
regional energy savings using approximately $159.4 million invested by regional stakeholders.Id.
at 4.Based on its customer counts and energy sales relative to the region,Idaho Power represents
its funding share is about $14.7 million during 2020-2024 or 9.2%of NEEA's total budget
compared to $13,450,835 in funding it provided to NEEA or 8%of NEEA's total budget during
2015-2019.Id.at 4-5;see also Richins at p.7,Table 1 and Attachment 3 to the Application.Idaho
Power asserts its fundingfor NEEA,relative to that from other funders,has increased for 2020-
2024 because,1)two utilities that participated during 2015-2019 no longer contribute funds,and,
2)the Company's customer counts and energy sales have increased by more than all but one of
the other current funders.Richins at p.8,11.3-10.Idaho Power asserts the proposed Funding
Agreement is effective on January 1,2020,and will expire on August 1,2025.Application at 5.
Idaho Power states that since 2002,the Commission has authorized the Company to
recover its costs for Demand-Side Management ("DSM")programs and NEEA participation from
2 For example,an Idaho Power representative participates in the Cost-Effectiveness and Evaluation Advisory
Committee of NEEA.Richins at p.3,ll.20-21.
ORDER NO.34556 2
the Rider.Application at 3.The Company represents its yearly DSM Report to the Commission
will document NEEA funding amounts and annual savings resulting from Idaho Power's
participation in NEEA.Richins at p.11,11.13-16.
Idaho Power asserts it evaluated the cost-effectiveness of NEEA's Plans because the
Company must show its customers sufficientlybenefitted from NEEA before the Commission can
find the Company's participation in NEEA was a prudent use of Rider funds.Application at 4.
Accordingly,the Company had Peter Pengilly,Idaho Power's Customer Research &Analysis
Leader,analyze NEEA's claimed energy savings considering:
(1)the amount of NEEA savings attributed to codes and standards,
(2)allocation methodology of NEEA savings to Idaho Power customers,and
(3)cost-effectiveness impacts of declining avoided costs.
Id.at 5.Mr.Pengilly also evaluated if claimed savings from NEEA's 2018 initiatives would be
cost-effective under Idaho Power's standard cost-effective analysis for programs it administers
directly.Id.His assessment identified potential concerns regarding the amount of savings
attributed to codes and standards,allocation of savings to Idaho Power customers,and cost-
effectiveness impacts of declining avoidedcosts.Id;see also Direct Testimony of Peter Pengilly
at pp.2-14.Due to these concerns,the proposed Northwest Energy Efficiency Alliance Funding
Agreement ("Funding Agreement")contains provisions in §2 that would allow the Company to
stop fundingNEEA if cost-effectiveness issues affecting regulatory approval occur.Application
at 5;see also Richins at p.10,11.5-10 and Funding Agreement at pp.1-2,§2.
Idaho Power asserts going forward,there are other opportunities for the Company to
validate customer benefits from its funding of NEEA.Richins at p.10,11.I1-19.For example,
"the Company believes soliciting a third-party evaluation of NEEA savings similar to how it
performs impact evaluations on its own [DSM]programs every 2-3 years to assess program
effectiveness in achieving its claimed savings would be beneficial."Id.
The Company states "it is committed to the pursuit of all cost-effective energy
efficiency and it believes energy savings are occurring for its customers based on NEEA's efforts
in the Northwest region."Application at 8;see also Richins at pp.10-11.Further,Idaho Power
believes using Rider funds for the 2020-2024 time period is a prudent use of customer funds,and
the newlynegotiatedsafeguards included in the contract helps ensure the Company can terminate
funding for the remainder of this time period if further concerns regarding cost-effectiveness
ORDER NO.34556 3
materialize.Id.Accordingly,Idaho Power asks the Commission to authorize the Company to
continue participating in NEEA from 2020-2024,and to confirm that the Company's participation
will be funded by the Rider.Application at 8.
COMMENTS
1.Staff
Staff stated the Company's Funding Agreementwith NEEA would enable Idaho Power
to supply about $2.9 million annuallyto NEEA for five years,which is about 7%of Idaho Power's
annual DSM expenses.Staff Comments at 3.
Staff still believes NEEA provides cost-effective energy efficiency through market
transformation for customers in Idaho Power's service territory.Id.Staff recognizes NEEA's
main value is its leverage as a regional organization with large retailers,manufacturers,and federal
agencies that individual utilities or their contractors would not have.Id.Staff asserts NEEA can
offer financial incentives across a four-state market,and sometimes in coordination with
California,that retailers and manufacturers are likely to respond to by producing,stocking and
selling more energy-efficient appliances.Id.As a result,customers in the region can find and buy
higher efficiency appliance options without local utilities incurringgreater expenses to engage and
incent individual customers.Id.
Staff notes NEEA can influentiallywork with federal agencies on efficiency codes and
standards as a regional voice representing 13 million customers.Id.Staff believes enacting
efficiencyin Codes and Standards is a positive long-term outcome of a utility program -meaning
that efficient technology is so well-understood and available that it becomes the minimum
requirement,which means utilities no longer need to offer financial incentives in order to acquire
those savings.Id.at 4.
Staff also acknowledges that,while regional coordination on market transformation can
significantly benefit customers,aligning the preferences and practices of a disparate group of
funders can be challenging.Id.For example,it can be difficult for NEEA to allocate costs and
benefits in market transformation across funders with the same precision that Idaho Power can
assign costs and benefits to the Company's own programs.Id.Althoughnot ideal,Staff believes
NEEA's leverage and pooling regional resources mitigate risks for critical work in emerging
technologiesthat generally provide benefits exceeding costs.Id.
ORDER NO.34556 4
AlthoughNEEA's market-transformation work has many benefits,Staff asserts it still
must be cost-effective.Id.Staff appreciates the Company's additional cost-effectiveness analysis
on NEEA savings.Id.However,Staff notes the Company only analyzed the costs and benefits of
energy-efficient appliances sold in a single year and not the costs and benefits of energy-efficient
appliances forecasted to be sold over the program's 20-year life.Id.Staff states the savings from
appliances sold in the future because of market transformation are critical to the value that
distinguishes NEEA's work from local utility efficiency programs.Id.Staff represents it will
continue to monitor the cost-effectiveness of NEEA's initiatives in Idaho Power's service territory
and is thus not opposed to the Company independently evaluating,verifying,and measuring
NEEA's initiatives as it does for its local programs.Id.
Staff also notes the NEEA Funding Agreement includes several new provisions that
could allow Idaho Power to terminate its funding obligations if circumstances change.Id.Staff
believes these provisions are reasonable and help safeguard customer funds.Id.
Based on the foregoing,Staff recommends the Commission authorize Idaho Power's
continued participation in NEEA for the 2020-2024 time period,and that the Company's
participation be funded by the Rider.Id.at 3.
2.ICL
ICL recommends the Commission approve Idaho Power's request to continue
participating in NEEA.ICL Comments at 1.Being informed by its participation in NEEA,and
consistent with the Commission's position,ICL asserts utilities should pursue all cost-effective
conservation measures.Id.ICL states Idaho Power's collaboration through NEEA is an essential
part of this pursuit.Id.ICL asserts NEEA's national influence over product makers,distributors,
and service providers ensure Idahoans have easy and affordable access to energy-efficient products
and services.Id.ICL believes NEEA's work in testing and improving consumer marketing
practices,in close coordination with local utilities,leverages Idaho Power's other conservation
efforts.Id.
ICL asserts NEEA's expertise and impact in improving Idaho's building and energy
codes are unmatched in Idaho.Id.ICL claims NEEA's development of new conservation
measures,improvement of consumer uptake,and instillingconservation into codes can accomplish
cost-effective energy savings that a single utility could never achieve alone.Id.
ORDER NO.34556 5
ICL states because NEEA focuses upstream of the end use consumer to influence other
parts of the product and service supply chain,the energy-saving results will always differ from
results from consumer-focused programs.Id.at 2.ICL asserts the essence of market
transformation,NEEA's goal for the past 20 years,is to "fill the pipeline"with new products and
services that will deliver future energy savings.Id.ICL alleges NEEA programs succeed when
a new product or service is mature enough for local utilities to implement consumer facing
incentives and programs.Id.ICL believes NEEA's focus on upstream actors combines with local
utilities'focus on downstream programs to appropriately balance the risks and rewards of
innovation for the benefit of end consumers.Id.ICL represents it is focused on cost-effective
energy conservation.Id.Accordingly,ICL recommends the Commission approve the Company's
continuedparticipation in NEEA.Id.ICL also states the annual DSM review process helps ensure
the ongoing cost-effectiveness of all Idaho Power funded conservation activities.Id.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§61-501,61-
502,and 61-503.The Commission is vested with the power to "supervise and regulate every
public utility in the state and to do all things necessary to carry out the spirit and intent of the
[Public Utilities Law]."Idaho Code §61-501.The Commission is empowered to investigate
rates,charges,rules,regulations,practices,and contracts of public utilities and to determine
whether they are just,reasonable,preferential,discriminatory,or in violation of any provision of
law,and to fix the same by order.Idaho Code §§61-502 and 61-503.
The Commission has reviewed the Application,attachments,and the comments of Staff
and ICL.Based upon our review,we find it reasonable to approve Idaho Power's continued
participation in NEEA as requested.
In Order No.27045,Case No.IPC-E-96-26,the Commission first considered Idaho
Power's proposed participation in NEEA and found:
NEEA's role in achieving greater efficiencies in the use of electricity has been
advanced by the Comprehensive Review of the Northwest Energy System after a
year-long public debate regarding the future of energy markets in the Northwest.
The Corunission has been supportive of investments made by its regulated utilities
in conservation programs so long as those programs are prudent for
ratepayers.Prudent conservation makes sense from both a societal and an
economic perspective.We believe that it is one of the responsibilities of this
ORDER NO.34556 6
Commission to encourage and facilitate the investment by the utilities we regulate
in such programs.
Order No.27045 at p.5 (emphasis added).Consistent with those findings,the Commission
continues to encourage Idaho Power to fund cost-effective DSM and energy efficiency programs.
These findings and the forecasted energy savings and cost-effectiveness of the Plans going forward
also enable us to find it reasonable to approve Idaho Power's continued,Rider-funded participation
in NEEA from 2020-2024.See Order Nos.33210,32953,31080,29784,27877 and 27045.
As always,our approval of Idaho Power's continued participation in NEEA,and the
use of Rider funds to pay for such participation,is not a determination of prudency.See Order No.
31080 at 7;see also 33210 at 6.To obtain a future determination that the Company's use of Rider
funds was prudent,the Company must demonstrate that customers sufficiently benefit from the
Company's participation in NEEA.
Our approval is not granted without some lingering reservations.Idaho Power's
concerns about the continued cost-effectiveness of its participation in NEEA are well-taken.We
expect-andfind it reasonable to require-IdahoPower to continuallymonitor whether its funding
of NEEA is cost-effective,prudent and in the best interest of ratepayers.We appreciate Idaho
Power's inclusion of new terms in the Funding Agreement to help protect ratepayers if it appears
the Company's participation in NEEA is no longer cost-effective,prudent and in the best interest
of ratepayers.We further find merit in Staff's recommendation that the Company also analyze the
costs and benefits of energy-efficient appliances that are forecasted to be sold in future years,
particularlyfrom2020-2024,in addition to those sold in a single year.We encourage the Company
to include this expanded analysis when examining whether participating in NEEA remains cost-
effective,prudent and in the best interests of ratepayers.Should Idaho Power later conclude NEEA
is not a cost-effective resource,or if the Company decides to decrease or discontinue NEEA
funding for some other justified reason,the Company must notify the Commission as soon as
possible.
Besides concerns related to the cost-effectiveness and prudency of Idaho Power
participating in NEEA,we also are concerned about the Funding Agreement's new choice of law
and forum selection provisions.Section 11 states that Oregon law governs the Funding
Agreement.See Funding Agreementat 10,§11.Section 11 also provides that "[a]ny controversy
or claim related to this Agreement which cannot be settled amicably without court action shall be
ORDER NO.34556 7
litigated in Multnomah County,Oregon."Id.These provisions were not in the Commission-
approved funding agreement for 2015-2019.See Application,Attachment 3 Case No.IPC-E-14-
18.We question why they were inserted now,and how they further the public interest.3
Notwithstanding these provisions,Idaho Power is a public utility and the Commission will
continue to have jurisdiction over it and its practices and contracts to determine whether its
participation in NEEA is in the public interest.See Idaho Code §61-503 (Commission shall have
the power to investigate a public utility's contract and practices and to establish new contracts or
practices in lieu thereof);Bunker Hill Co.v Washington Water Power Co.,98 Idaho 249,253
(1977)(A regulated utility cannot contract away the state's right to enforce the utility's obligation
to serve the public interest);see also generally Idaho Code §§61-501 &61-502.
We understand that,in the give and take of contractual negotiations,each party will
seek to add terms that favor it while agreeing to other terms that do not.However,when a contract
like the Funding Agreement could ultimatelyaffect Idaho ratepayers,we are uncomfortable with
a provision that purports to force the parties to resolve their disputes throughanother state's laws
and courts.The Commission does not reject the proposed Funding Agreement because of these
terms at this time because,as noted above,the Funding Agreement appears to have additional
terms that mitigate harm to Idaho customers.However,we caution the parties to scrutinize foreign,
forum selection and choice of law clauses in the future and determine whether such clauses further
the public interest of Idaho ratepayers.
ORDER
IT IS HEREBY ORDERED that Idaho Power's Application is granted.Idaho Power
may continue its participation in NEEA from 2020-2024,with such participation to be funded
through the Rider and subject to a prudency review.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one(21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
3 In this regard,we note Idaho Code §29-110(1)states:"Every stipulation or condition in a contract,by which any
party ...is restricted frorn enforcing his rights under the contract in Idaho tribunals...,is voidas it is against the public
policy of Idaho."
ORDER NO.34556 8
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this day of
February 2020.
PAUL KJELL NÉ PRESIDENT
KR TI COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\lPC-E-19-34\IPCE1934_final_jh.docx
ORDER NO.34556 9