20201120Petition for Clarification.pdf

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LISA D. NORDSTROT
Lead Coutpel
lnordllrom0i&hoomcr.con
November 20,2O2O
ELECTRONIC FILING
Jan Noriyuki, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A (83714)
PO Box 83720
Boise, lD 83720-0074
Re: Case No. IPC-E-20-15
2019 Demand-Side Management Expenses - ldaho Power Company's
Petition for Clarification and/or Reconsideration of Order No. 34827
Dear Ms. Noriyuki:
Attached for electronic filing, pursuant to Order No. 34602, is ldaho Power
Company's Petition for Clarification and/or Reconsideration of Order No. 34827.
lf you have any questions about the attached document, please do not hesitate to
contact me.
Very truly yours,
fr, !.2("t rr,^,
Lisa D. Nordstrom
LDN:slb
Attachment
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]
lnordstrom@ ida hopower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
!N THE MATTER OF THE APPLICATION
OF IDAHO POI/VER COMPANY FOR A
DETERMINATION OF 2019 DEMAND.
SIDE MANAGEMENT EXPENDITURES
AS PRUDENTLY INCURRED
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CASE NO. |PC-E-20-15
IDAHO POWER COMPANY'S
PETITION FOR CLARIFICATION
AND/OR RECONSIDERATION OF
oRDER NO. 34827
ldaho Power Company ("ldaho Powe/'or "Company"), petitioner herein, pursuant
to RP 33, 325, and 331, ef seg., and ldaho Code S 61-626, respectfrllly petitions the ldaho
Public Utilities Commission ("Commission") for clarification and/or reconsideration of final
Order No. 34827, dated October 30,2020, issued in Case No. IPC-E-20-15 ('Ordef)
concerning the (1) method for evaluation of the two percent Demand-Side Management
("DSM) labor cap previously ordered by the Commission,l and (2) establishment of a
new baseline necessary to comply with the Order.
1 ln the Matter of the Application of ldaho fuvwr Company for a Determination of 2016 Demand-Srde
Management Expenditurcs as Prudently lncuned, Case No. IPC-E-17-03, Order No. 33908, p. 6.
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827,1
As discussed below, ldaho Power believes Order No. 34827 disallowing $51,165
is not supported by the record in this case.
To the extent that the Commission believes the requested clarification goes
beyond the scope of a clarification, then ldaho Power respectfrrlly requests
reepnsideration of the issues identified herein. See, RP 325. This Petition is based upon
the following:
I. LEGAL STANDARD
A party must seek reconsideration prior to initiating an appeal to the ldaho
Supreme Court. ldaho Code S 61627. An issue not presented to the Commission on
reconsideration will not be considercd on appeal. KeyTrunsp. lnc. v. Trans Magic Aidines
Corp.,96 ldaho 110,524 P.2d 1338 (19741. The purpose of an application for rehearing
is to afford an opportunity to the parties to bring to the attention of the Commission in an
orderly manner any question theretofore determined in the matter and thereby afford the
Commission an opportunity to rectiff any mistake made by it before presenting the same
to this Court." Washington Water Power Co., v. Kootenai Envircnmental Alliance, gg
ldaho 875, 879, 591 P.2d 122, 126 (1979) (citing ldaho Underyround Water Users Assh
v. ldaho PowerCo., 89 ldaho 147,4U P.2d 859 (1965); Consumers Co. v. Public lJtilities
Comm'n, 40 ldaho 772, 2fi P . 732 (1 925)).
The Commission may grant reconsideration by conducting an evidentiary hearing;
by reviewing the existing record; or by the submission of briefs, memoranda, wriften
interrogatories, or written statements. RP 332; Order No. 32974, p. 11, Case No. IPC-E-
1 1-15.
IDAHO POV\'ER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 2
II. PROCEDURAL BACKGROUND
ln Order No. 33908, issued in Case No. IPC-E-17-03, the Commission established
a method for determining the appropriate level of incremental DSM-related labor to be
collected through the Energy Efficiency Rider. "Rather than establishing the cap on the
rider-funded labor expense at 2016 levels, we find it reasonable to include actualwage
increases up to a 2o/o ?ap in the DSM Rider.'z
Since that time, and in each subsequent DSM prudenoe request, the Company
has evaluated DSM labor expense on a per full-time equivalent employee ('FTE') basis
consistent with the Commission's directive. ldaho Public Utilities Commission Staff
(Staff) interpretiation in Case No. IPC-E-20-15 Comments that "in this case, the
Company's request for prudency for rider-funded labor expense is the opposite of its
request in Case No. IPC-E-18-03,'8 did not representthe methodology ldaho Power used
to evaluated DSM Iabor expense. The Company clarified in Reply Comments that it has
"annually escalated the dollars perfull-time equivalent employee ("FTE') by two percent,
as authorized by the Commission in Order No. 33908, starting with the 2016 baseline
dollar per FTE to determine the maximum allowed labor expense in a given year."a
ln Order No. 34827, the Commission determined the Company's labor expense
calculation also contradicts the application of the 2o/o ?ap to wages-per-FTE as argued
for by the Company and accepted by the Commission as just and reasonable in Case No.
tPc-E-18-03.',6
2 Order No. 33908, p. 6.
3 Staffs Comments, p.4.
a ldaho Poner Reply Comments, p. 3.
5 Order No. 34827, p. 9.
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO, 34827 - 3
III. PETITION FOR RECONSIDERATION AND'OR CLARIFICATION
ldaho Power recognizes and appreciates the Commission's desire to review and
limit labor cost increases that are charged to the Energy Efficiency Rider outside of a
general rate case when labor costs are more comprehensively revialed, The Company
also appreciates that the Commission has established an acceptable level (two percent
cap) of DSM labor cost increases, which provides for a better opportunity to maintain the
salaries of the applicable job func'tions at levels that are competitive with market over
time. However, in this case, ldaho Power does not agree the Company's labor expense
calculation "contradicts the application of the 2o/o cap to wages-per-FTE as argued for by
the Company,'nor did ldaho Power apply the two peroent cap to "total wages.'t \ rhile
ldaho Power does not oppose the Commission's overall intent in applying the two percent
labor cost cap, it appears the Commission unreasonably relied on a misunderstanding of
the Company's DSM laborexpense calculation, rendering the findings in Order No. 34827
erroneous and not supported by the record in this case.
A. The DSM Labor Method Cited in Staffs Gomments. and Referenced bv
the Commission in its Order. Does Not Reflect the DSill Labor Evaluation
iiethod as Apolied bv ldaho Power.
As noted in ldaho Power's Reply Comments, Straff incorrectly suggested the
methodology in this case difiers from the method the Company applied in Gase No. IPC-
E-18-03.7 Staff acknowledges in Case No. IPC-E-18-03 the Company contended the two
percent cap should apply to wage expenses per FTE, and the Commission found that the
6ld.
T ldaho Power Reply CommenE, p. 2.
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 4
Company's expenses were prudent and accepted the Company's methodology for
calculating the two percent cap.8
ln the present case, the Company did not change its methodology for determining
if the DSM labor expense increase was under the two percent cap. Idaho Power
disagrees with Staffs statement on page 4 of their Comments that "Applying the same
labor cap methodology the Company requested in !PC-E-18-03 would require disallowing
$51,165 in labor expense in 2019.' ln fact, applying the same labor cap methodology the
Company requested in IPC-E-I8-03 would result in no labor expense being disallowed
because the 2018 to 2019 DSM labor expense increase on an FTE basis was below the
two percent cap. To clariff, in its request for a prudence determination of 2019 DSM
expenditures, ldaho Porer follored the same, consistent approach including actualwage
increases up to a two percent cap as compared to the baseline 2016 dollars per FTE
established under Order No. 33908. ldaho Power has evaluated DSM labor expense on
a wages per FTE basis since the approach was first introduced by Staff in ldaho Power's
2011 DSM Prudence Case.e
The Company provides Chart 1 to demonstrate that while year-over-year wages
per FTE increased by 3.6 percentfrom 2018 to 2019, the wage expense per FTE remains
below the 2016 baseline after applying the approved two percent annual increase on a
cumulative basis, with the 2016 to 2019 period experiencing a 1.9 percent compound
annual grourth rate.
E Staff Comments, p. 4.
s ln the Matter of the Application of ldaho Parer Company for a Determination of 2011 Demand-Side
Management Expenditures as Prudently lncuned, Case No. IPC-E-12-15, SEff Comments, p. 8.
IDAHO POVGR COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 5
Chart 1. ldaho Power DSil $ wages/FTE evaluation
s132,000
s130,000
2OL6 - 2019 CAGR= 1.
s128,000
s129,067
lrJ
E
{t
Stzo,ooo
s124,000
s124ss3
S122,920
s122,1s0
2016 2017
a2A16 Baseline Escalated 2%
s727,O83
St24,sto
3.6%
2018
EActual DSM Labor S/FTE
S122,ooo
S120,ooo
S118,ooo
20L9
Chart 1 also highlights the additional operationalflexibilig in managing expenses
provided to the Company by evaluating annualwage increases against the 2016 baseline.
lnstead of managing annual expenses to trarget the maximum allowed annual increase of
two percent, which is a potential outcome of basing change only against the prior year,
wage growth tn 2017 was 0.6 percent, and in 2018 was 1.3 percent, saving customers
money in each of these yearc. The method applied by the Company has provided
operationalflexibility without creating perverse incentives. As highlighted in Chart 1, had
the Company applied Staffs approach to compare wages per FTE to the prior year only,
it may have been incentivized to spend an additional approximately g11O,OOO10 in those
lo2OlTBaselinexFTE:Actr13lWagesxFTE=(0124,593x26.82)-($122,920x26.82)=$44,870;ptus
2018 Baseline x FTE - Actual \Atages x FTE = ($127,085 x 26.19) - ($124,570 x 26.19) = $6S,AdB
IDAHO POWER COMPANY'S PETITION FOR CTARIFICATION AND/OR RECONSIDERATIONoF oRDER NO. 34827 - 6
two years to not lose the potential to increase an average of two percent per year.
Adopting Staffs methodology would hinder operational flexibili$.
Add itional operational flexibil ity is lost under Staff s methodology when considering
impacts from changes in the Company's DSM employee experience and seniority
composition over time. ldaho Powe/s DSM efforts have benefited from programs
managed by a highly skilled, experiened workforce. For DSM teams comprised of
mostly senior, highly-experienced staff, changes in staffing from employees retiring or
leaving the Company may lead to new staff being hired at compensation lower in the
wage range for the position reflecting the difbrence in DSM program administration
experience. As the new team member gains experience and improves productivi$ to
match prior more-senior staff, resetting the wage expense baseline upon hiring impedes
the Company from recognizing the employee's performanec through merit increases
representative of attaining performance, and the associated pay, at the previous senior
level.
This change in team composition is demonstrated in Table 1 below which
highlights a scenario where two senior team members retire and are replaced with less
senior staff, resulting in the wage baseline to be reset for the entire team under Staffs
approach. Even without considering any annual general wage adjustments for the full
team, the progress of the two new employees toward the productivity level of the senior
staff may result in exceeding the two percent cap when compared against the prior year
baseline,
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 7
DSM Emp, - miGpoinl of market | $129,067 E 3645.335snioremfuyees
5
Table 1. Change in Team Composition
Annual
Salarv Labor
ldaho of wageg notfully wages.
DSM employee represents a composite emfloyee Dased on mix of grades and amployee hours charged toldaho Energy Etrrcieney Rider in 2019.
Finally, the new method proposed by Staff could promote unintended results. For
instance, if the Company were to experienoe severe business stress in a given year,
requiring it to reduce employee wages significantly for a one-time event across the board,
and then business conditions improved in a subsequent year, Stiaffs method would limit
the Company's ability to restore wages for the Company's DSM group. ln that example,
the Company's DSM group employee wages in that subsequent year woutd be subject to
a disallowance and future wage increases would now be capped at a two percent increase
from the one-time significantly reduced level on a go forward basis.
A DSM labor rate based on actual wage increases up to a two percent cap as
compared to the baseline 2016 dollars per FTE permits ldaho Powerto efficiently manage
its year-to-yearexpenses and fosterthe valuable work provided by ats DSM professionals.
IDAHO PO\'\IER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - I
Turr rcn-sniw
emfuyesstadffirctirrres
DSM Emp. - Firct quartile of range
DSM Emp. - midaoinl of mad<et t
8109,762 2
s129,067 3
i219,524
33E7.201
21
Team Yeq3,
l&ln-grrfu
emflopesnto;w
uptomiffieof,atw
DSM Emp. - mlddle of mnga
DSM Emp. - mid-pointof mertet I
$1'16,197
$129,067
2
g
5
$232,394
s387.201
s6r9,595 s123,919
2.1nL Erceede fr.ao
B. While a General Rab Case Gontinuee to Be the Aooropriate Venue to
Reset DSM Labor Exoense Base and Cap. Order No. 31827 Should Be
Clarified to Establlsh a New Labor Base lf the Commission lntended to
Reeet the tlethod in lts Order.
The Commission previously determined the'base and cap willbe reset in genera!
rate cases,o1l and later reaffirmed the calculation methodology would be considered in
the next general rate case.i2 ldaho Power agrees that a general rate case is the most
appropriate time to reset DSM labor expense levels'and the cap.
The DSM labor expense approach outlined by Statr does not conform with the
Commission's directive and establishes a new methodology and baseline to measure
future DSM Iabor expense against. Under Staffs approach, lor 2O2O ldaho Power would
evaluate wages per FTE against a baseline of the 2019 labor expense after accounting
for the $51,165 disallowance. This sets a new baseline ceiling for future years, as each
yearwould now be measured againstthe lower of 1) the prioryear actual DSM labor plus
two percent, or 2) the prior year DSM labor deemed prudent plus two percent.
ln fiact, applying Staffs approach to set actual 2019 DSM labor after disallowance
as the new baseline, and assuming future wage increases are two percent annually for
2020 through 2022 with no change in FTEs would lead to an approximately $160,000
disallowance from establishing a new baseline alone as demonstrated in Table 2.
1r Order No. 33908, p. 6.
12 ln the Matter of ldaho Power Company's Application for a Determination of 2017 Demand-Side
Management Expanditurcs as Prudently lncuned, Case No. IPC-18-03, Order No. 34141, p. 5.
IDAHO POWER COMPANY'S PETITION FOR CI.ARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 9
Table 2. Baseline Reset lmpact
2019 Wages $/FTE $ 129,067
disallowance $ 127.62
2019 2020
2% Growth$ 131,&t8$ 129.603
2021
2% Growth$ '134,281
$ 132.195
2022
2% Grcwth$ 136,967$ 134.8392019 Waqes $IFTE after
\A/lges $/FTE above neur baseline
FTE
l/llages Above New Baseline
$2,045 $
25.52
2,096 $
25.52
2,128
25.5225.52
$ s2.189 $ s3.233 $il,297
2020 - 2022 DisallorYanco 1 718
The Company does not believe it was the Commission's intent for Staffs
methodology to establish a new labor base, as it had previously expressed that is a
determination to be made at the Company's next general rate case. However, if the
Commission truly intends the Company'keep[ing] the annualwage increase per FTE at
or below lhe2o/o cap,"S the Company requests the Commission clariff and/or affirm this
new approach considering its prior statements.
tv. coNcLustoN
The Company appreciates the opportunity to clariff the methodology it has applied
in evaluating DSM labor expense since 2017. ln this Petition, the Company seeks for
clarification and/or reconsideration of the method the Commission intends for the
Company to apply when evaluating the level of labor to be recovered through the Rider.
lf the Commission intends to establish a new methodology outside of a general
rate case, as recommended by Staff (evaluated on the change year-over-year, and not
compared to the 2016 baseline), the Company asks the Commission to ctarify their order
and direct the Company implement the new method.
13 Order No. 34827, p. 9.
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 10
tf, however, the Gommission intended for the Company to continue to apply the
method it has applied since Commission Order No. 33908 was issued (two percent
applied to the 2016 dollars per FTE baseline) in lieu of setting a new baseline outside of
a general rate case, the Company requests the Commission issue a decision
reconsidering Order No. 34827 and find the $51,165 was a prudently incurred expense.
Commission Rule of Procedure 331 requires that ldaho Power state the nature
and extent of evidenoe or argument it will present or offer if reconsideration is granted.
Should the Commission determine that either of the requested issues for clarification is
more appropriate for reconsideration, ldaho Power believes that the evidentiary recod
could be augmented, if neoessary, by written comments or ora! argument at the discretion
of the Commission.
Respectfully submitted this 20th day of November 2020.
X*!.fl,'A-+'.*,
LISA D. NORDSTROM
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO,34827 - 1'l
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 2Oh day of November 2O2O,l served a true and
conect copy of IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR
RECONSIDERATION OF ORDER NO. Y827 upon the following named parties by the
method indicated below, and addressed to the following:
Gommisaion Stafr
Dayn Hardie
Deputy Attomey General
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg No.8,
Suite 201-A(83714)
PO Box 83720
Boise, lD 83720-0074
ldaho lrrigation Pumperc Assoclation, lnc.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Suite 100
PO Box 61 19
Pocatello, lD 83205
Anthony Yankel
12700 Lake Ave. Unit 2505
Lakewood, OH 44107
InduatrialCustomep of ldaho Power
Peter J. Richardson
RIGHARDSON ADAMS, PLLC
515 N.27th Street
PO Box 7218
Boise, lD 83702
Dr, Don Reading
6070 Hill Road
Boise, lD 83703
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IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 12
ldaho Conservation teague
Benjamin J. Otto
ldaho Conservation League
710 N.6th Street
Boise, lD 83702
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City of Boise City
Abigail R. Germaine
Deputy CityAttomey
Boise City Attomey's ffice
150 N. Capitol Blvd.
PO Box 500
Boise, lD 83701-0500
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Stephanie L. Buckner
Executive Assistant
IDAHO POWER COMPANY'S PETITION FOR CLARIFICATION AND/OR RECONSIDERATION
oF oRDER NO. 34827 - 13