2000106Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
BILL EASTLAKE
RANDY LOBB
TERRI CARLOCK
WORKING FILE

FROM: BRAD PURDY

DATE: JANUARY 6, 2000

RE: CASE NO. IPC-E-99-13
IDAHO POWER’S APPLICATION FOR AUTHORITY TO FUND ITS CONTINUING PARTICIPATION IN THE NORTHWEST ENERGY EFFICIENCY ALLIANCE, INC. (NEEA)

On December 30, 1999, the Idaho Power Company (Idaho Power; Company) filed an Application with the Commission for an Order authorizing the funding of Idaho Power’s continued participation in NEEA.
The Commission approved the Company’s participation in NEEA for the years 1997-1999 in Order Nos. 27045, 27124, 27200 issued in Case No. IPC-E-96-26. At the time of its initial approval of the Company’s participation in NEEA, the Commission found it desirable to require that the Company defer its annual NEEA expenditures for recovery at a later date once their prudence had been demonstrated. In subsequent orders, the Commission authorized the establishment of a reserve (consisting of the Company’s accumulated revenue sharing balances) for the reimbursement of the Company’s deferred NEEA expenditures for the years 1997-1999. Reimbursement of the Company’s NEEA expenditures was authorized on a year-to-year basis as their prudence was shown.
In the present case, Idaho Power notes that NEEA now requires its participating members to sign five-year commitments. The purpose of the present Application, therefore, is to determine:
1. Whether it is in the public interest to authorize Idaho Power to commit to participation in NEEA for the years 2000-2004, and

2. If NEEA participation is in the public interest, then how should the Company’s expenditures be funded.

In its Application, Idaho Power suggests that a regional approach to DSM is preferable. In fact, the Commission has indicated agreement with this concept in past Orders where it authorized the discontinuance of Idaho Power’s own DSM system programs.
Idaho Power’s Application contained a 15-page description of NEEA programs, the processes used to monitor and evaluate those programs and Idaho Power’s general involvement in NEEA. Much of the same type of information was presented to the Commission recently in Case No. IPC-E-99-7; Idaho Power’s 1998/1999 NEEA recovery case. It will not be repeated here. Suffice it to say, that Idaho Power advocates continued participation in NEEA touting what it believes are that organization’s successes to date.
NEEA Funding
NEEA was founded on October 31, 1996. For the years 1997-1999 NEEA was funded through the contributions of Idaho Power, Avista Utilities, Bonneville Power Administration, Montana Power Company, PacifiCorp, Portland General Electric Company, and Puget Sound Energy (formerly Puget Sound Power & Light Company). According to Idaho Power’s Application, the NEEA Board of Directors has determined that NEEA is accomplishing its purpose and has requested that Idaho Power, along with the other original founders, renew their commitment to NEEA for the period 2000-2004. For that period, Idaho Power’s contribution would be reduced to $1.3 million annually on a system basis. Idaho Power characterizes it support for continued participation in NEEA as follows:
. . .in its first three years of existence NEEA is fulfilling that public purpose. In light of the uncertainties surrounding the electric industry, Idaho Power also believes that to the extent it is in the public interest for Idaho Power to engage in DSM (conservation) programs, participation in NEEA is the best way to accomplish that goal.

Application at p. 16.
Idaho Power has already signed a Memorandum of Agreement in support of NEEA and has signed the Company’s funding agreement.
The funding agreement, however, provides that Idaho Power shall not have any obligation to provide funding to NEEA if it does not receive cost recovery approval from this Commission.
Idaho Power argues that to the extent it is an enterprise engaged in selling a commodity (electricity) and to the extent it is engaged in DSM activities, it should be reimbursed for the expenditures that it makes. The Company refers to Order No. 27045 issued by the Commission in Case No. IPC-E-96-26 in which the Commission held that the Company’s ratepayers, not its shareholders should fund the Company’s participation in NEEA because of the financial benefits they reap through their reduced use of electricity and through the avoidance of new resources. Order No. 27045 at p. 5.
The Company notes that in Order No. 28041, Case No. IPC-E-98-16, the Commission specified that all revenues previously attributable to DSM activities be used to fund the amortization of Idaho Power’s deferred DSM expenditures. Consequently, there are no revenues currently being collected to fund any ongoing Idaho Power NEEA participation for the period 2000-2004. Idaho Power suggests that there are two methods by which it could be reimbursed for its NEEA contributions for 2000-2004 period: (1) the continued utilization of revenue sharing funds, or (2) a separate charge specifically dedicated to funding DSM activities.
Regarding the utilization of revenue sharing funds, Idaho Power notes that for the years 1997-1999, the Commission authorized such a methodology. That method, Idaho Power contends, is simple, straightforward and results in no changes to the Company’s retail rates. Idaho Power points out that, to date, the Company has accrued revenue sharing funds for the year 1999 in an amount that appears to be sufficient to fund Idaho Power’s commitment to NEEA for the next five years.
Idaho Power’s contribution to NEEA for the years 2000-2004 would be $1.3 million annually. The allocated share to the Idaho jurisdiction is $1,241,500 annually, or a total of $6,207,500 for the five year period. Idaho Power suggests that a reserve could be established which would accrue interest at the rates set for customer deposits established annually by the Commission. Assuming a rate of 5%, this would require $5,462,388 to be placed in the reserve. The Company suggests that as payments are made by Idaho Power to NEEA, that money could be transferred from the reserve to reimburse the Company for the period 2000-2004.
As an alternative, the Commission could authorize a specific charge dedicated to DSM activities. The Commission has already authorized a similar charge for Avista. Idaho Power agrees that this would be an acceptable method as well. In developing the charge, the Company suggests the Commission could also exclude a customer class from the requirement to pay a NEEA charge (i.e., Idaho Power’s four special contract customers). That class could then be determined to be ineligible for participation in NEEA programs if it were the desire of NEEA and/or the Commission. The Commission could also make adjustments to the rate design of the NEEA charge such as using a different allocation method or placing a per customer cap on the distribution charge. Ultimately, Idaho Power notes, the NEEA charge could be implemented as a uniform rate per kWh, a flat fee or some other pricing structure.
The Company believes that if such a NEEA charge is implemented, then customer input should be solicited in order to best determine how to structure the charge. In that vein, Idaho Power suggests a workshop as a feasible forum to discuss the matter.
In conclusion, Idaho Power proposes the reserve fund methodology.
Regarding procedure, the Company requests that its Application be processed utilizing a bifurcated proceeding. First, the Commission could make a determination regarding whether it is in the public interest for Idaho Power to continue to participate in NEEA for the years 2000-2004. If the Commission finds in the affirmative, then a separate proceeding could be conducted to determine how that participation would be funded. Regarding the first (whether Idaho Power should continue to participate in NEEA), Idaho Power proposes the use of Modified Procedure.
The Commission Staff agrees that Idaho Power’s proposed procedure is appropriate and recommends that the Commission issue a Notice of Modified Procedure soliciting written input in response to the threshold issue of whether Idaho Power continue to participate in NEEA. Once the Commission makes the final determination on that issue, then the matter of funding could be handled through a separate proceeding. Staff does not believe that either issue is of such a technical nature that would warrant an evidentiary proceeding.

COMMISSION DECISION
How does the Commission wish to process Idaho Power’s Application?

Brad Purdy

bls/M:ipce9913_bp

DECISION MEMORANDUM 4