20200827Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 837 2O-OO7 4
(208) 334-O3t2
IDAHO BAR NO. 9917
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Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, ID 83714
Attorney for the Commission Staff
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
CASE NO. IPC.E-20.15
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
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 requests the Commission find the Company prudently
incurred $45,079,479 in deferred costs for 19 DSM programs, which included $38,083,244 in
Idaho Energy Efficiency Rider expenses and $6,996,236 in Demand Response program
incentives. The Application summarizes the Company's 2019 DSM program performance,
expenses, adjustments, cost-effectiveness, evaluations of the program, and input from
stakeholders.
"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
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1STAFF COMMENTS AUGUST 27 ,2020
energy during peak usage hours. The Commission will allow the Company 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 rather than its customers.
The Company also requests authorization to eliminate the reporting requirement for the
annual Flex Peak Program. 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 setting a twenty-one (2I) day intervention deadline. Boise City, Idaho
Conservation League, Industrial Customers of Idaho Power, and Idaho Irrigation Pumpers
Association all timely petitioned to intervene in this matter.
STAFF ANALYSIS
Staff believes the Company's programs are generally well-managed and recortmends that
the Commission approve $45,028,3I4 in 2019 expenses as prudently incurred. Staff reviewed the
Company's Application and testimony of Pawel Goralski, along with the 2019 DSM Annual
Report and additional information provided by the Company. Staff recommends the
Commission make one adjustment to the Company's request, decreasing its prudency request by
$51,165 due to the company exceeding the cap on labor expense increases.
In light of Staff's general recommendation to approve the2019 DSM expenses, Staff
does have concerns with the value of the Company's demand response ("DR") programs which
warrants a reevaluation of the programs. Staff recommends that the Company work with Staff to
address these concerns. Details of Staff s concerns are fully described in the "Demand
Response" section below.
Finally, Staff does not oppose the Company's request to eliminate the Company's end-of-
season Flex Peak Program reporting requirement.
Financial Review
Staff audited the Company's Energy Efficiency Tariff Rider expenses and DR expenses,
which included sampling and reviewing more than 100 transactions across the Company's
2STAFF COMMENTS AUGUST 27 ,2020
programs. Expenses were well-documented, and controls were in place and adjusted as needed
to regulate proper payment of incentives and other costs. Staff recommends that the
Commission find that the Company prudently incurred $45,028,314 in DSM-related expenses for
2019. This total consists of $38,032 ,079 in Idaho Energy Efficiency Tariff Rider expenses and
$6,996,236 in DR incentives. DR incentives were included for recovery in the 2019 Power Cost
Adjustment. Staff calculated the DSM Rider account balance as of December 31, 2019 inTable
No. 1, below:
Table No. 1: Tariff Rider Reconciliation
20 1 9 Beginning Rider Balance--Overfunded
2019 Tariff Revenue
Interest on DSM Rider
Total2019 Funds
2019 Reported Expenses
Oregon Multifamily Correction
DSM Labor adjustment
20 1 9 Ending Balance--Underfunded
$ 5,258,957
$ 32,423,932
$ 76,046
$ 37,758,935
$ (38,083,244)
$ 13,264
$ 51,165$ (zse,880)
In 2018, the Company incorrectly charged the Idaho tariff rider $13,264 for the Oregon
Multifamily Energy Savings Program. The correcting accounting entry occurred in 2019. The
Company and Staff acknowledged the correction in Case No. IPC-E- 19- 1 1. The correcting entry
in Table No. I above reverses the tariff rider reconciliation from 2019 to accurately reflect the
Company's 2019 DSM expenses.
The Company also identified a$I22 overpayment of an incentive in 2018 while
reviewing an internal audit report during work on this case. Because the overpayment was
related to 2018 expenses and not the 2019 expenses, the adjustment is not reflected in Table
No. 1. The Company has corrected the tariff rider balance by making an adjustment to the tariff
rider in 2020, and it will be reflected in the 2020 prudency case next year. Staff appreciates that
the Company's internal controls discovered this minor discrepancy and that it is correcting this
effor.
-JSTAFF COMMENTS AUGUST 27 ,2020
DSM Labor Expense
In Order No. 33908, the Commission approved a ZVo cap on actual wage increases in the
DSM rider. The following year, in Case No. IPC-E-18-03, Staff found the Company incurred a
6.44Vo increase in total labor expense in 2017 , however, the Company contended that the 2Vo
cap should apply to the average wage expense per full-time-employee equivalent. In that case,
the Commission found that the Company's expenses were prudent and accepted the Company's
methodology for calculating the2Vo cap. The Commission further noted that the methodology
would be examined in the Company's next general rate case. Order No. 34141 at 4-5.
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. The Company's total labor expense for 2019
was a lVo increase from its 2018 labor expense. However, due to a slight decrease in FTE, the
Company's per-FTE labor expense rose by 3.6%o.r Applying the same labor cap methodology
the Company requested in IPC-E-18-03 would require disallowing $51,165 in labor expense in
2019. To be consistent with the methodology previously approved in Order No. 34141, Staff has
removed $51,165 in labor expenses from the DSM rider account.
Energy Efficiency
The Company exceeded the energy efficiency resource acquisition targetfor 2Ol9
established in the 2017 IRP. In addition to exceeding its IRP targets, the Company also
maintained cost-effectiveness ratios well above the 1.0level needed to show a net benefit. Its
total energy efficiency portfolio had a UCT of 2.72 and a TRC of 2.12. There was an increase in
kWh savings of 10 percent from 2018.
The Company's Custom Projects measure, in its Commercial and [ndustrial Energy
Efficiency Program, increased its energy savings by 50 percent over 2018 and contributed3SVo
of the total kWh savings. Custom Projects has significant penetration, with more than gOVo of
the Company's large-power service customers having participated in the program. See DSM
2019 Annual Report at II4. However, based on updates to the Company's Energy Efficiency
I In its Response to Production Request No. 5, the company indicates that it applies the 2vo cap as a perpetual
annual 27o increase in the labor expense per FTE, using the 2016 level as a baseline. It is not clear, based on Order
No. 33908, that this is the proper application of the 27o cap.
STAI]F COMMENTS AUGUST 27 ,20204
Advisory Group (EEAG) in2020, there is continued interest and participation in Custom
Projects, which pays incentives for large energy efficiency and energy management projects.
The Company's krigation Efficiency Rewards savings dropped by 47 percent, due to a
decrease in the deemed savings from the Regional Technical Forum ("RTF") in 2018. The
Company has since worked to ensure the deemed savings are accurate. Despite the reduction in
savings, almost all krigation Efficiency Rewards measures still passed the UCT in 2018 and the
entire program had a UCT of 2.42.
Only 14 of the Company's 285 measures had a UCT below 1.0, meaning their benefits to
the Company exceeded their cost. Out of those 14 failing measures, l0 were Energy House Calls
measures. The Energy House Calls program provides efficiency measures to electrically heated
manufactured homes. It is a relatively small and declining energy efficiency program, with
participation dropping by 62 percent from2012 to 2019. The entire program had a UCT of 0.96
in2019. The program had process and impact evaluations in 2019, which raised expenses by
approximately 13 percent. Excluding the evaluation expenses would have allowed the program
to pass the UCT. Staff believes that evaluations are critical and should be considered when
looking at the cost effectiveness of efficiency programs and measures but understands this was
not a typical annual expense for an otherwise cost-effective program.
Another measure that failed the UCT in 2OI9 was smart thermostats in the residential
Heating & Cooling Efficiency Program. With the support of Staff and the EEAG, the Company
adjusted the smart thermostat at the beginning of 2020, removing the requirement that
thermostats be installed by a licensed contractor and expanding the program to more models of
thermostats. Based on the Company's reports to the EEAG in2O20, these modifications have
led to an increase in participation. Staff appreciates the Company adjusting to improve programs
and will be interested in the Company's results for participation and energy savings in2O2O.
The other three measures that did not pass the UCT in 2Ol9 were an Irrigation Efficiency
Rewards sprinkler replacement measure and two outdoor LED lighting measures in the
Multifamily Energy Savings Program. The two multifamily outdoor lighting measures each had
a UCT of 0.90, and the entire Multifamily Energy Savings Program, which directly installs
energy saving products in electrically heated multi-family buildings, had a 1.15 UCT.
5STAFF COMMENTS AUGUST 27 ,2020
Other Energy Efficiency Programs
Residential New Construction Pilot
The Residential New Construction Pilot program pays home builders an incentive for
building new, all-electric single-family homes above the standard state energy code. The pilot
launched in 2018, and in 2019 it fully replaced the ENERGY STAR Homes Northwest Program,
with an increase in participation of nearly 5 percent.
The Company adjusted its incentives in early 2020, offering a tiered incentives structure
for builders who exceeded the building code efficiency. See Table No. 2 below for a list of the
old and new incentives for this program.
Table No.2: Residential New Construction Pilot Incentives
2019 incentive
207o or more above code:
2020 incentives
lO-I4.99%o above code
15-19.99Vo above code
ZOVo or more above code:
$1,500
$1,200
$1,500
$2,000
EISA Impacts on Lighting Savings
Staff remains concerned about the effects of Phase 2 of the Energy lndependence and
Security Act ("EISA") on the Company's energy efficiency programs if the code is enacted.
Though new standards are not yet effective as initially planned, if the regulatory environment
changes and EISA does become effective, some estimates show savings for general use bulbs
could decrease as much as 75-90 percent from current levels. Many of the Company's programs
have lighting as a significant component of their savings. For example, the residential Energy
Efficient Lighting and the lighting portion of Educational Distributions comprised 67 percent of
total residential savings in 2019.
Staff supports the Company's decision to use "period l/pre-EISA" savings until and if
more stringent lightbulb requirements go into effect. Staff also encourages the Company to
continue to pursue all available cost-effective energy efficiency measures, and to be prepared for
its claimed energy savings from lighting to decrease if new lighting standards go into effect
under Phase II of EISA.
STAFF COMMENTS AUGUST 27 ,20206
Small Business Direct Install
The Company launched its Small Business Direct Install ("SBDI") program in November
2019 in southeast Idaho. In this program, the Company fully pays for a third-party contractor to
audit and install cost-effective energy efficiency measures in small businesses. Staff had
encouraged the Company for several years to start this program, based on the successes that
Avista and Rocky Mountain Power had operating similar programs in Idaho and because small
businesses can be a hard-to-serve market for energy efficiency efforts.
As with many direct-install programs, the Company suspended the SBDI inearly 2O2O
due to the COVID-l9 pandemic. This suspension occurred before the Company could expand
the SBDI program to its more populous service territories. Staff appreciates the safety
precautions that the Company has taken in energy efficiency programs and other programs due to
COVID-I9 and understands that it may be until the 2O2I annual report that actionable data for
this program is available.
Marketing
The Company's marketing efforts include digital, social media, and television
commercials, the use of 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
customers as well as contractors and property managers. Staff appreciates the Company's efforts
to adjust and update how it communicates with customers regarding its energy efficiency
programs. Staff notes that the Company has increased its followers on Facebook and, to a lesser
extent, Twitter, and increased its presence on Linkedln to reach commercial and industrial
customers. As in previous years, close to 25 percent of the Company's social media tweets
promoted energy efficiency.
Demand Response
Staff believes the Company's implementation of Demand Response and the $6,996,236
of DR incentives paid during 2019 has satisfied the requirements as stipulated under the 2013
Agreement in Case No. IPC-E- 13-14 and therefore are prudent. Staff verified that the Company
implemented the minimum necessary DR events for the calendar year and that all costs were
STAFF COMMENTS AUGUST 27,20207
accounted for properly and the amounts are reasonable based on past assumptions used to
calculate costs and benefits.
The Company calculates a Value of Demand ("VOD") benchmark, which is the metric
used to determine the cost-effectiveness of its DR programs. The method of calculation and the
assumptions used were from a settlement in Case No. IPC-E-13-14. The formula considers both
the avoided cost of capacity (first term) and the avoided cost of energy (second term) credited to
DR. Details of the current VOD amount is shown in the formula below.
Avoided Cost of Capacity Avoided Cost of Energy
I
DVO
I/ 1..000kw 1s722 I
\L7UMW
* t,rvt, "l* xe3ohl $20390MW , uwnx 60 hr
III
).
voD = $t9,756,200
Fixed Volues
Single Cycle Combustion Turbine:
Effective Load Corrying Capocity:
Assumed Peok Demand Reduction:
Volue to shift from on-peak to off-peok:
770 MW
9i%
390 MW
s2o/MWh
All values in the equation are fixed, except the Levelized Cost of Capacity ("LCOC")
currently stated as $1221kW. This value is updated following completion of each Integrated
Resource Plan ("IRP"). Using the current LCOC method, the VOD benchmark is calculated at
$19.8 million, which is fixed until the next IRP filing. The difference infers the $8.3 million
spent in 2019 for the DR program is prudent since costs are far less than the VOD benchmark.
This supports Staff's recommendation of prudence for the DR programs in 2019.
However, Staff has identified two concerns with the future of these programs as
described in more detail below. Staff recommends that the Company work with Staff to address
these concerns.
Concern VOD is Overstated
Staff believes the VOD benchmark amount under the current methodology may overstate
both the avoided cost of capacity and the avoided cost of energy. The fixed value assumptions
used in the VOD equation above, fail to both properly account for the avoided cost of capacity
by using outdated assumptions about the value of an SCCT based on current operation of SCCTs
8STAFF COMMENTS AUGUST 27 ,2020
in the Company's system and overstates the avoided cost of energy compared to actual program
performance.
First, Staff believes the Effective Load Carrying Capacity ("ELCC") used in the VOD
formula is over-stated. The ELCC equates the capacity contribution of DR programs to 93
percent of the capacity value of a 170 MW Single Cycle Combustion Turbine for meeting peak
load. The ELCC fails to recognize the system contribution of a SCCT beyond the DR annual
program constraint of 60 hours, in the two-month period from June 15 to August 15. By
comparison,in20l9 the Company's 164 MW Bennet Mountain SCCT plant operated nearly
2,300 hours, or 38 times more than the DR program allows. This difference in utilization is not
reflected in the avoided cost of capacity for the VOD prudency benchmark.
Second, the method for calculating the avoided cost of energy in the VOD uses fixed
value assumptions that do not match actual operation. This includes fixed values for providing
390 MW of demand reduction throughout the full 60-hours of the program season. Because
these values were fixed in the 2013 Agreement, Staff believes these values need to be changed
and regularly updated to reflect how the Company actually operates the programs within its
system. The DR program in20l9 and the years since 2014, show much less reduction in the
amount of energy based on the 390 N/tW and for far fewer program hours. Until the Company
requires the full utilization of these programs when the system becomes capacity deficient, the
calculation for the avoided cost of energy should reflect the limited use of the programs.
Concern with Meetine Coincident Peak when Capaci\) Deficient
Staff is concerned with DR's ability to provide the stated 390 MW of peak-system
demand reduction on a consistent basis once the Company is required to fully dispatch the
program when the Company becomes capacity deficient.
The Company identifies DR as a peaking resource with the stated capacity of 390 MW
and equates the program to a dispatchable generating resource within the constraints of the DR
program in the IRP. However, because the Company currently has sufficient capacity of supply-
side resources, the Company can dispatch its DR programs in a limited manner: dispatching the
different programs on different days, and only dispatching participants three times per year per
as directed by Commission order. Staff believes this limited operation will not coincide with
9STAI]F COMMENTS AUGUST 27 ,2020
how the Company will need to operate the programs for coincident peak events once the system
becomes capacity deficient.
Adding to this concern, in the 2019 DSM Annual Report, the Company questions
whether participant tolerance for increased cycling during DR events would allow for increased
DR capacity.
Flex Peak Reporting Requirement
The Company requested to eliminate the requirement that it file a Flex Peak Program
report 80 days after then end of the program's season. The Commission mandated this report in
Order No.33292, Case No. IPC-E-15-03. The Company also reports on Flex Peak and other
Demand Response programs in its DSM Annual Report, typically filed with the Commission in
March, along with its DSM prudency application.
Staff does not oppose the Company's request to eliminate the Company's end-of-season
Flex Peak Program reporting requirement.
STAFF RECOMMENDATIONS
Staff recommends the Commission find that the Company prudently incurred DSM-
related expenditures of $45,028,314, including $38,032,079 in Idaho Energy Efficiency Rider
expenses and $6,996,236 in Demand Response program incentives. This accounts for the
$51,165 adjustment due to the Company exceeding the Commission authoized2%o cap for
related labor expenses. Staff will work with the Company to address its concerns with the DR
program.
STAFF COMMENTS l0 AUGUST 27 ,2020
Respectfully submitted this 21b day of August 2020.
Dayn
Deputy Attorney General
Technical Staff: Brad Iverson-Long
Rick Keller
Rachelle Farnsworth
i:umisc/commentVipce2O. l5dhblrkrf comments
STAFF COMMENTS l1 AUGUST 27 ,2020
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 27th DAY OF AUGUST 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-20-15, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
dockets @ idahopower.com
ERIC L OLSEN
ECHO HAWK & OLSEN PLLC
505 PERSHING AVE, SUITE 1OO
PO BOX 6119
POCATELLO ID 83205
E-mail: [e-mail]
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
515 N 27TH STREET
PO BOX 7218
BOISE ID 83702
E-mail: [e-mail]
BENJAMIN J OTTO
IDAHO CONSERVATION LEAGUE
710 N 6TH STREET
BOISE D 83702
E-mail: [e-mail]
CONNIE ASCHENBRENNER
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail: [e-mail]
ANTHONY YANKEL
I27OO LAKE AVE, UNIT 2505
LAKEWOOD OH 44107
E-mail: [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: dreading @mindspring.com
ABIGAIL R GERMAINE
DEPUTY CITY ATTORNEY
BOISE CITY ATTORNEY'S OFFICE
IO5 N CAPITAL BLVD
PO BOX 500
BOrSE ID 8370r-0500
E-mail: agermaine @citlzofboise.org
ARY
CERTIFICATE OF SERVICE