20201030Final_Order_No_34827.pdf

ORDER NO. 34827 1

Office of the Secretary
Service Date
October 30, 2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR A
DETERMINATION OF 2019 DEMAND-SIDE
MANAGEMENT EXPENSES AS
PRUDENTLY INCURRED
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CASE NO. IPC-E-20-15

ORDER NO. 34827

On March 13, 2020, Idaho Power Company (“Company”) applied to the Commission for
an order finding that the Company’s demand-side management (“DSM”) expenses for 2019 were
prudently incurred. The Company requested the Commission find the Company prudently incurred
$45,079,479 in deferred costs for 2019 DSM programs, which included $38,083,244 in Idaho
Energy Efficiency Rider expenses, and $6,996,236 in demand response (“DR”) program
incentives. The Application summarized the Company’s 2019 DSM program performance,
expenses, adjustments, cost effectiveness, evaluations of the program, and input from stakeholders.
The Company requested its Application be processed via Modified Procedure.
On April 6, 2020, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Idaho Conservation League, Idaho Irrigation Pumpers Association, Inc.,
Industrial Customers of Idaho Power, and City of Boise City (“Boise City” or “City”) petitioned
to intervene.
On May 6, 2020, the Commission issued a Notice of Modified Procedure setting an August
13, 2020 public comment deadline and an August 27, 2020 Company reply deadline. Order No.
34660. A technological glitch caused a delay in discovery. In order to allow the parties adequate
time to review the delayed discovery and compile comments, the Commission amended the
original comment deadlines. On August 3, 2020, the Commission issued Order No. 34739
extending the comment deadline to August 27, 2020 and the reply deadline to September 10, 2020.
Comments were received from Commission Staff and Boise City. The Company filed reply
comments.
Having reviewed the record, the Commission now issues this final Order.
BACKGROUND
“DSM” generally refers to utility activities and programs that encourage customers (i.e.,
on the “demand-side” as opposed to the “generation side”) to use less overall energy or use less
ORDER NO. 34827 2

energy during peak usage hours. The Commission has “consistently stated that cost-effective DSM
programs are in the public interest and has admonished electric utilities operating in the State of
Idaho to develop and implement DSM programs in order to promote energy efficiency.”
Application at 2 (quoting Order No. 32113 at 8). To further the Commission’s stated objectives,
the Company asserted it “implements and manages a wide range of opportunities for its customers
to participate in DSM activities, to be informed about energy use, and to use electricity wisely.”
Id. The Commission will allow the utility an opportunity to recover its DSM expenses through
rates if the Commission finds the Company prudently incurred those expenses. However, if the
Commission finds the Company did not prudently incur DSM expenses, then it will not allow the
Company to recover them through rates and the disallowed expenses will be borne by the utility’s
shareholders and not by customers. See Order No. 29103.
THE APPLICATION
The Company stated its 2019 DSM efforts included Northwest Energy Efficiency Alliance
(“NEEA”) market transformation activities, energy efficiency programs, DR programs, and
educational initiatives. Application at 2-4. The Company stated it achieved 203,041 megawatt
hours (“MWh”) of incremental annual energy efficiency savings on a system-wide basis in 2019.
Id. at 4. The Company noted its energy efficiency programs saved 184,933 MWh1, including
40,380 MWh from the residential sector, 134,435 MWh from the commercial/industrial sector,
and 10,118 MWh from the irrigation sector. Id. Additionally, the Company achieved 18,108 MWh
of energy efficiency market transformation savings through NEEA initiatives. Id.
The Company funds its energy efficiency programs through the Idaho Energy Efficiency
Rider included on customer bills at 2.75% of base rate revenues. Id. at 5. DR incentives are
tracked through the annual Power Cost Adjustment. Id. With this Application, the Company asked
the Commission to find that the Company prudently incurred $45,079,479 in system-wide
expenditures related to its DSM programs in 2019. Id. The Company stated these expenses include
$38,083,244 in Idaho Energy Efficiency Rider expenses and $6,996,236 in DR program incentive
payments. Id. In 2019, the Company corrected its books to credit the Idaho Energy Efficiency
Rider account for $13,264 in costs from the Oregon Multifamily Energy Savings Program that the
Company had inadvertently charged to Idaho. Id. at 5-6.

1 The savings from Idaho Power’s energy efficiency programs in 2019, excluding the NEEA savings, represented a
17% increase over 2018 savings.
ORDER NO. 34827 3

The Company’s Application describes the Company’s evaluation of its DSM programs and
whether they were cost effective in 2019. Id. at 6. The DSM Report discusses the cost effectiveness
of the Company’s DSM programs and energy efficiency programs. Id. In support of its
Application, the Company submitted the prefiled testimony and exhibits of Pawel Goralski, its
annual DSM Report, and the results of its cost-effectiveness analysis. Id. 3, 6.
The Company explained it uses three tests to determine whether its energy efficiency
programs were cost effective: (1) the total resource cost test (“TRC”); (2) the utility cost test
(“UCT”); and (3) the participant cost test (“PCT”).2 Id. at 6. The Company reports that its overall
energy efficiency portfolio was cost effective in 2019, passing the TRC, UCT, and PCT, with ratios
of 2.72, 2.12, and 2.79, respectively. Id. Of the Company’s 16 Idaho energy efficiency programs,
11 programs passed the TRC and UCT. Goralski Direct Testimony at 17, Table 3. Further, all
energy efficiency programs with customer costs passed the PCT. Goralski Direct Testimony
Exhibit No. 2. Five programs were not cost effective under either the TRC or UCT, or both. The
Company intends to continue to work towards greater cost effectiveness for the Weatherization
Assistance for Qualified Customers program, Weatherization Solutions for Eligible Customers
Program, Energy House Calls, Residential New Construction Pilot Program, and the Heating and
Cooling Efficiency Program, because they offer benefits that are difficult to quantify. Goralski
Direct Testimony at 20-25; Application at 7-8.
As directed in Order No. 34469, the Company will begin using the UCT as the primary test
for evaluating energy efficiency cost effectiveness in the 2021 Integrated Resource Plan (“IRP”).
Id. at 6. These changes will occur during the 2020 program year to synchronize with the
Company’s annual planning cycle. Id.
The Company did not calculate a benefit/cost ratio when assessing whether its DR
programs were cost effective. Id. Rather, the Company determined those programs’ cost
effectiveness based on the $16.7 million DR portfolio value specified in Commission Order No.
32923. The system-wide operating cost for the Company’s three DR programs was $8.3 million,

2 The three tests examine a program’s cost-effectiveness from different perspectives. In summary, the TRC compares
program administrator costs and customer costs to utility resource savings. It demonstrates the full incremental cost
of the measure to both participants and the utility in the service territory. The UCT compares program administrator
costs to supply-side resource costs, assessing costs and benefits to the utility and its ratepayers. The PCT compares
the costs and benefits of the customer installing the measure and assesses whether program participants will benefit
over the measure’s life. The Company cannot use the PCT for programs with no customer costs.

ORDER NO. 34827 4

of which $7.8 million can be attributed to the Idaho-only jurisdiction. Id. The Company estimates
the three DR programs would have cost about $11.5 million on a system-wide basis had the
programs been dispatched for the full 60 hours permitted by Order No. 32923. The costs are less
than the $19.8 million value of the demand as calculated in the 2017 IRP. Id.
The Company stated independent, third-party consultants provide impact and process
evaluations to verify that program specifications were met, recommend improvements, and
validate program-related energy savings. Id. at 9. In 2019, third-party consultants provided two
combined program impact and process evaluations, two program option impact evaluations, two
program summary analyses, a savings estimate analysis, and a demand reduction analysis. Id.
The Company proposed to eliminate the Flex Peak reporting requirements required by
Order No. 33292. Id. at 10. The Company stated that the reporting requirement could be
streamlined if eliminated because the Company already provides the required information for the
Flex Peak Program in Supplement 2 in its DSM Annual Report. Id.
THE COMMENTS
Commission Staff and Boise City filed timely comments to which the Company replied.
These comments are summarized below.
A. Staff Comments
Following its review of the Company’s Application, prefiled testimony, the 2019 DSM
Annual Report, and the Company’s Production Responses, Staff recommended the Commission
find the Company prudently incurred $45,028,314 in 2019 DSM related expenses. This amount
consists of $38,032,079 in Idaho Energy Efficiency Rider expense (this includes an adjustment
made by Staff)3 and $6,996,236 in DR incentives (as proposed by the Company). Staff’s general
recommendation to approve the 2019 DSM expenses included concerns regarding the value of the
Company’s DR programs it argued needed to be reevaluated.
Staff’s analysis included (1) Financial Review; (2) DSM Labor Expense; (3) Energy
Efficiency; (4) Other Energy Efficiency Programs; (5) Demand Response; and (6) Flex Peak
Reporting Requirement.
1. Financial Review
Staff noted the Company’s DSM expenses were well documented and included controls
the Company could adjust as needed to regulate proper payment of incentives. Staff noted two

3 Staff’s expense calculation and recommendation included adjustment of $51,165 for DSM total labor expense.
ORDER NO. 34827 5

adjustments (1) in 2018 the Company incorrectly charged Idaho’s tariff rider $13,264 for the
Oregon Multifamily Energy Savings Program. The Company and Staff acknowledged this
accounting error in Case No. IPC-E-19-11 and the correcting entry occurred in 2019 to accurately
reflect the Company’s 2019 DSM expenses; and (2) an internal audit revealed $122 overpayment
that occurred in 2018. The Company corrected the tariff rider balance by adjusting the tariff rider
in 2020 and it will be reflected in the 2020 prudency case according to Staff.
2. DSM Labor Expense
In Order No. 33908, the Commission approved a 2% cap on labor expense increases in the
DSM rider. The following year in Case No. IPC-E-18-03, Staff discovered the Company incurred
a 6.44% increase in total labor expense. The Company contended that the 2% cap should apply to
the average wage expense per full-time-employee (“FTE”) equivalent. The Commission agreed
and accepted the Company’s method for calculating the 2% cap.
Staff noted the Company’s prudency request for rider-funded labor expense here
contradicts the Company’s method approved and request made in Case No. IPC-E-18-03. See
Order No. 34141.The Company’s total labor expense for 2019 was 1% more than its 2018 total
labor expense. But because FTEs slightly decreased, the Company’s labor expense per FTE
actually rose by 3.6%.4 According to Staff, the 2018 labor cap method from Case No. IPC-E-18-
03 would require that $51,165 in 2019 total labor expense be disallowed here. Staff thus
recommended removing $51,165 in 2019 labor expenses from the DSM rider account.
3. Energy Efficiency
Staff reviewed the Company’s energy efficiency programs and confirmed the Company
exceeded the 2019 energy efficiency resource acquisition target. Staff stated the Company’s total
energy profile had a UCT of 2.72 and a TRC of 2.12. Staff commented that 95% of the Company’s
energy efficiency measures had a UCT above 1.0.
Staff highlighted the Company’s Custom Projects measure in the Commercial and
Industrial Energy Efficiency program increased its energy efficiency savings by 50% over 2018
and contributed 38% of the total kWh savings. Over 90% of the Company’s large-power service
customers have participated in the program. DSM Annual Report at 114.

4 In its Response to Production Request No. 5, the Company indicates that it applies the 2% cap as a perpetual annual
2% increase in the labor expense per FTE, using the 2016 level as a baseline. According to Staff, it is not clear, based
on Order No. 33908, that this is the proper application of the 2% cap.

ORDER NO. 34827 6

Staff mentioned the Company’s Irrigation Efficiency Rewards program dropped by 47%
from 2018. This was largely due to a decrease in deemed savings from the Regional Technical
Forum (“RTF”)—although the program still passed the UCT with a ratio of 2.44. Since the RTF,
the Company has worked to ensure the deemed savings are accurate.
Staff noted 14 of the Company’s programs (about 5% of the Company’s total DSM
programs) had UCT ratios below 1.0:
• Energy House Calls (10 programs)
• Smart Thermostats (1 program)
• Irrigation Efficiency Rewards Sprinkler Replacement (1 program)
• Outdoor LED Lighting (2 programs)
Staff believed the Energy House Calls programs were critical and should be considered
going forward. Staff noted this year was atypical for Energy House Calls because Energy House
Calls had process and impact evaluations in 2019, which raised the programs’ expenses by 13%.
Staff suggested the Energy House Call programs would have passed the UCT without the added
evaluation expenses.
4. Other Energy Efficiency Programs
Staff analyzed the Company’s Residential New Construction Pilot program, Energy
Independence and Security Act (“EISA”), and the Small Business Direct Install (“SBDI”).
Staff noted the Residential New Construction Pilot program launched in 2019, replacing
the ENERGY STAR Homes Northwest program, and that the new program had 5% more
participants in 2019 than the old program had in 2018. Staff added that the Company adjusted its
incentive levels in early 2020, replacing a single incentive with a tiered incentive structure.
Staff worried about the potential effects of Phase II of EISA, if implemented. According
to Staff, lighting comprised 67% of total residential savings in 2019. Staff mentioned that if EISA
Phase II is implemented, then savings from general-use bulbs could decrease between 75-90%
from current levels. Staff supported the Company’s decision to use pre-EISA savings until
lightbulb requirements change. Staff also encouraged the Company to prepare for its claimed
energy savings from lighting to decrease if the new EISA standards become effective.
Staff also mentioned the Company launched the SBDI in November 2019 but suspended it
in March 2020 due to the Covid-19 health emergency. Staff noted the suspension occurred before
the Company could expand the SBDI program to larger markets, and Staff understood the program
may not yield actionable data until 2021.
ORDER NO. 34827 7

5. Demand Response
Staff verified the Company implemented the minimum required DR events for the calendar
year, properly accounted for all costs, and incurred reasonable expenses based on past assumptions
for calculating costs and benefits. Staff identified two concerns with how the Company calculates
the DR programs’ cost effectiveness. First, Staff questioned whether the Company overstated
Value of Demand (“VOD”). Second, Staff questioned whether the Company could meet coincident
peak if the Company were capacity deficient.
i. Overstatement of VOD
Staff believed the VOD benchmark amount under the current method for calculating the
avoided cost of capacity and the avoided cost of energy may be overstated. Staff explained the
VOD equation’s fixed-value assumptions5 improperly account for the avoided cost of capacity
because they: (1) rely on outdated assumptions about the value of a single cycle combustion turbine
(“SCCT”) operating in the Company’s system; and (2) overstate the avoided cost of energy
compared to actual program performance.
Staff noted the Company relied on outdated assumptions about an SCCT’s value in the
Company’s system. Specifically, the avoided cost of energy in the VOD used fixed-value
assumptions that do not match actual operation. This includes fixed values for providing 390 MW
of peak-system demand reduction for the full 60 hours permitted for the DR program season. Staff
noted, however, these values were fixed in 2013.6 Staff said the Company should regularly update
the values to reflect how the Company operates the DR program within the Company’s system.
Staff noted that, since 2014, the DR program has provided less demand reduction in the amount
of energy based on the 390 MWs of peak-system reduction, for fewer program hours, than
authorized. Staff recommended the Company calculate the avoided cost of energy to reflect the
limited use of the programs until the Company requires their full utilization.
ii. Inability to meet coincident peak when capacity deficient
Staff was concerned the Company’s DR program would not consistently provide 390 MW
of peak-system demand reduction if the Company became capacity deficient and had to fully
dispatch the program.

5 P. 8 of Staff’s comments includes a diagram of the VOD calculation.
6 See Order No. 32923.
ORDER NO. 34827 8

6. Flex Peak Reporting Requirement
Staff did not oppose the Company’s request to eliminate the Company’s end-of-season
Flex Peak Program reporting requirement. Staff stated the Company reports on Flex Peak and other
DR programs in its DSM Annual Report, typically filed with the Commission in March, along
with its DSM prudency application.
B. Boise City Comments
Boise City filed comments supporting the Company’s DSM programs and efforts to ensure
the programs reach areas and people where they will have the greatest impacts. The City requested
the Commission support adequate funding for the Idaho Energy Efficiency Rider and opportunities
to expand existing, and develop new, energy efficiency and DSM programs. Boise City stated its
interest in the Company’s energy efficiency programs partially arises because DSM aligns with
Boise’s goal of using 100% clean energy community-wide by 2035.
Boise City supported the Company’s potential efforts to adjust the cost recovery amount
to adequately fund the Idaho Energy Efficiency Rider. The City reasoned this would enable the
Company to implement existing DSM programs and possibly deliver new programs.
Even though the Weatherization Assistance for Qualified Customers and Weatherization
Solutions programs did not achieve UCT or TRC ratios greater than 1.0, the City supported
continuing the existing programs and developing more programs to create opportunities for
customers to conserve energy.
Boise City encouraged the Company to identify opportunities to expand existing and
develop new energy efficiency and DSM programs that emphasize whole home and building
efficiency where more than one energy source is utilized. The City stated this is an opportunity to
coordinate and deliver energy efficiency and DSM programs with other utilities. The City also
supported pilot programs that target customer behavior changes.
C. Company Reply Comments
The Company replied to Staff’s recommendation to decrease the 2019 DSM labor
prudency request by $51,165, and Staff’s concerns with the Company’s DR programs.
The Company disagreed with Staff’s recommendation to decrease labor expense. The
Company stated it determined the maximum allowable 2019 DSM labor expense consistent with
the Commission’s decision in Order No. 33908; Case No. IPC-E-17-03. The Company clarified it
quantified maximum allowed labor expenses by escalating the dollars per FTE by 2% starting with
ORDER NO. 34827 9

2016 baseline dollars per FTE. The Company stated this method conformed with Order No. 34141
where the Commission found the Company’s 2% annual labor expense calculation was prudent,
and explained it would be reasonable to look at the Company’s methods of calculating the 2% rate
cap in the next general rate case. The Company said it could modify its method for calculating the
cap going forward if Staff’s interpretation followed the Commission’s intent.
The Company also indicated it did not oppose working with Staff to better understand
Staff’s concerns and recommendations for potential adjustments to the Company’s DR programs.
COMMISSION DISCUSSION AND FINDINGS
The Company is an electrical corporation as defined by Idaho Code § 61-119 and a public
utility subject to the Commission’s jurisdiction under Idaho Code § 61-129. Based on our review
of the record, the Commission finds that the Company prudently incurred $45,028,314 in deferred
costs for its DSM programs—including $38,032,079 in Idaho Energy Efficiency Tariff Rider
expenses and $6,996,236 in DR program incentives.
The Commission notes the Company’s DSM labor expenses in 2019 exceeded the 2% cap
on actual wage increases. The Commission thus finds it reasonable to disallow the amount above
the cap—$51,165—of the Company’s 2019 DSM total labor expenses. We disallow this amount
to be consistent with our decisions in Case Nos. IPC-E-17-03 and IPC-E-18-03.
In Case No. IPC-E-17-03, the Commission stated “[r]ather than establishing a cap on the
rider-funded labor expense at 2016 levels, [it is] reasonable to include actual wage increases up to
a 2% cap in the DSM rider.” See Order No. 33908. In Case No. IPC-E-18-03, the Commission
expanded upon the permissible DSM actual labor increase, stating “the Company argued the 2%
cap should apply to wages per FTE” (emphasis added). The Commission then approved the
Company’s labor expenses based on the wages-per-FTE calculation. Order No. 34141. In both
cases, the Commission noted that it would consider the method for calculating the 2% cap in the
next general rate case.
Here, the Company’s 2019 DSM labor expense calculation violates the 2% cap approved
in Order No. 33908. The Company’s labor expense calculation also contradicts the application of
the 2% cap to wages-per-FTE as argued for by the Company and accepted by the Commission as
just and reasonable in Case No. IPC-E-18-03. See Order No. 34141. The Company’s total wage
expense per FTE in 2019 increased by 3.61%. The Commission agrees with Staff that the 2% cap
should be applied to wages-per-FTE, not total wages.
ORDER NO. 34827 10

Until the Company’s next general rate case, when the Commission can consider the method
for calculating total DSM labor expenses, the Company should continue to calculate its total DSM
labor expenses under the previously accepted wages-per-FTE, keeping the annual wage increase
per FTE at or below the 2% cap.
Finally, the Commission finds it reasonable to eliminate the requirement that the Company
file an annual Flex Peak Program report. The data contained in this report is provided to the
Commission through other filings made by the Company.
The Commission appreciates the Company’s and the Energy Efficiency Advisory Group’s
(“EEAG”) efforts to identify, select, and offer DSM programs that offer value to customers and
increase the DSM savings available to the Company. The benefits of DSM depend on constantly
evaluating opportunities and identifying ways to improve available programs. We encourage the
Company and EEAG to continue working together to offer the most cost-effective programs to the
Company’s customers.
ORDER
IT IS HEREBY ORDERED that the Company’s total 2019 DSM expenditures of
$45,028,314, consisting of $38,032,079 in Idaho Energy Efficiency Tariff Rider expenses and
$6,996,236 in DR program incentives, are approved.
IT IS FURTHER ORDERED that the Company stop filing its annual Flex Peak Program
report.
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 regarding any matter
decided in 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.
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ORDER NO. 34827 11

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 30th
day of October 2020.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-20-15\orders\IPCE2015_final_dh.docx