ipce997.BPL.doc

BRAD PURDY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3472

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY TO OFFSET 1998 AND 1999 NORTHWEST EFFICIENCY ALLICANCE PAYMENTS AGAINST RESERVED FUNDS. )
)
)
)
)
)
CASE NO. IPC-E-99-7

COMMENTS OF THE COMMISSION STAFF

COMES NOW THE Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Brad Purdy, Deputy Attorney General, and in response to the Notice of Application and Notice of Modified Procedure issued September 2, 1999, submits the following comments.

Background
On October 13, 1998, in Case No. IPC-E-98-12, Idaho Power Company (Idaho Power; Company) filed an Application for an Order authorizing the Company to use a portion of its 1997 revenue sharing balance to fund the Company’s 1997 and 1998 payments to the Northwest Energy Efficiency Alliance (NEEA). In that case Staff filed Comments supporting Idaho Power’s recovery of its 1997 NEEA payments but recommended that the Commission defer judgment on the Company’s 1998 payments until more evidence relating to prudence became available. In general, Staff sought evidence of Idaho Power’s active and effective participation in NEEA, both within NEEA’s board of directors and within the Company’s service area. Staff also wanted to see the final report of an operational audit conducted by Pricewaterhouse Coopers (PWC) and a financial audit of 1998 NEEA operations. Given the nature of regional market transformation, Staff recognized that reliable evaluations of cost-effectiveness of programs would be impossible to produce on a short-term basis, but that by monitoring the geographic distribution of programs, Idaho Power’s level of participation, and NEEA’s program design, implementation and evaluation, the Commission should be able to judge whether Idaho Power’s customers are likely to get their money’s worth. Finally, Staff suggested that the NEEA board of directors should be expanded to include customer representation.
On January 21, 1999, the Commission issued Order No. 27877 authorizing Idaho Power to recover its 1997 NEEA expenditures, but deferring judgment on the Company’s 1998 expenditures. That Order specifically mentioned that the Commission wanted the PWC audit report to be available as well as sufficient evidence regarding the prudence of the Company’s participation in NEEA for 1998 before it would allow rate recovery (Order, p. 10).
Staff notes that Avista Utilities’ participation in NEEA for 1997 and 1998 was found to be prudent and of benefit to its Idaho customers in Order No. 28097 dated July 29, 1999 (Order, p. 34).

Staff Conclusions and Recommendations
From its inception in 1996, Staff has observed NEEA board meetings and workshops and has reviewed project proposals, implementation and evaluations. Our conclusion is that at least through 1998 NEEA has shown itself to be an effective organization for increasing the efficiency of electricity usage through its projects that seek to transform markets.
Staff supported Idaho Power’s participation in NEEA in Comments filed in the Company’s initial NEEA cost recovery case (IPC-E-96-26), but cautioned that there was potential for Idaho Power customers’ to receive inadequate benefits, in particular if the Company was not an active and effective participant. Staff believes the Company’s Application and Appendices in this case present sufficient evidence of the prudence of Idaho Power’s NEEA expenditures for 1998.
The PWC operational audit report (Appendix 3 to the Application) concludes that while there are areas in which NEEA should try to improve, its fiduciary processes are sound and it is generally effective and efficient in carrying out its stated purposes and objectives. Idaho Power also submitted as Appendix 4 an independent financial audit report of NEEA dated April 29, 1999, issued by Moss-Adams LLP, which found no major deficiencies in NEEA’s financial controls for its 1997 and 1998 operations and said that NEEA’s financial statements are accurate.
Idaho Power’s Application describes NEEA’s program evaluation process. Appendix 5 lists 31 NEEA market and project evaluation reports that the Company says support adaptive management processes and assess existing markets and NEEA’s progress toward changing those markets. (Rather than provide these reports, the Company noted that they are available on NEEA’s website [www.nwalliance.org].) Idaho Power’s Application states that significant effort is spent to develop and revise cost effectiveness of the electricity savings resulting from NEEA’s programs and it includes Appendix 6 to show program participation and current and estimated electricity savings in Idaho and in the region through March 31, 1999. Staff notes that the table presented in Appendix 6 shows total Idaho numbers rather than Idaho Power service area numbers. Appendix 8 to the Application is a special “fact sheet” produced by NEEA that details Idaho specific NEEA activities, again at the state level rather than within Idaho Power’s service territory.
Idaho Power’s Application describes in detail its proactive participation in NEEA, both at the board of directors’ level and through workshops and demonstrations held within Idaho Power’s service territory. The Company explained how it has utilized its internal network of customer representatives in promoting NEEA projects and participation by Idaho customers. The Company said it formed an Alliance Advisory Group last year to maximize the return on NEEA’s expenditures for its customers and uses its internal and external publications to promote participation in NEEA programs.
Staff notes that on June 30, 1999, NEEA announced that its board of directors had voted to add up to two customer representative seats to its board, and that one of those seats would be filled by the current director of purchasing at Boise Cascade Corporation.
Based on Staff’s observation of NEEA at its board of directors meetings and workshops and our review of NEEA programs and reports, Staff believes NEEA is an effective organization for transforming electricity efficiency markets in the Northwest. Further, we believe Idaho Power has demonstrated that for 1998 its customers have received their money’s worth of benefits through its active participation on the NEEA board of directors as well as through its local push of NEEA projects.
Staff notes, however, that Idaho Power’s August 10, 1999 application requests that the Commission find that its entire 1998 and 1999 payments to NEEA be found prudent, nearly five months before the end of 1999. Staff believes as a matter of principle that the Commission can find utility costs to be prudent only after the utility demonstrates that such costs were reasonably and actually incurred.

Staff has verified the dollar amounts paid to NEEA and recommends that the Commission authorize Idaho Power to offset its 1998 NEEA expenditures of $1,615,831.93 with funds from its revenue sharing reserved amounts. However, Staff does not recommend similar treatment for 1999 NEEA payments ($7,92,586.72 through August 10, 1999) until after NEEA’s financial audit for 1999 is completed and the Company has shown that these payments are prudent. To demonstrate prudence, Staff believes that Idaho Power must show that it continues to be active and effective in assuring that its customers benefit from NEEA programs and that NEEA continues to be an effective and efficient organization.

DATED at Boise, Idaho, this day of September 1999.

________________________
Brad Purdy
Deputy Attorney General

Technical Staff: Lynn Anderson
LA:va:word:i/umisc/comments/ipce997.BPL
COMMENTS OF THE 1 September 22, 1999
COMMISSION STAFF