20060303final_order_no_29976.pdf

Office of the Secretary
Service Date
March 3, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OFPACIFICORPDBA UTAH POWER &
LIGHT COMPANY FOR APPROVAL OF A
NEW DSM COST RECOVERY MECHANISM
AND ENHANCED ENERGY EFFICIENCY
PROGRAMS FOR COMMERCIAL
INDUSTRIAL, AGRICULTURAL AND
RESIDENTIAL CUSTOMERS
CASE NO. PAC-O5-
ORDER NO. 29976
On September 6, 2005 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with the Idaho Public Utilities Commission (Commission)
requesting approval of a suite of energy efficiency and demand-side management (DSM)
programs for its commercial, industrial, agricultural, and residential customers in the State
Idaho. The Company also requested approval of an associated cost recovery mechanism and
related deferred accounting authorization. The Commission on January 12, 2006 in Order No.
29952 provided regulatory support for the proposed funding mechanism, conditionally approved
the Company s Application and invited the Company to file a program with a more equitable
class distribution of energy efficiency and DSM program offerings.
In our Order No. 29952 we made the following findings:
This Commission continues to support the pursuit by PacifiCorp of cost
effective DSM and energy efficiency programs. We find that cost effective
DSM provides benefits to non-participants by reducing the overall cost of
serving new load. It also benefits all Idaho customers by reducing Idaho
allocation of system power supply costs. We share, however, Staffs concern
that the DSM direct program benefits to customer classes in this Application
appear disproportionate to the DSM funds collected from each class. While
an exact revenue to program cost relationship is not required, we find the
imbalance of projected surcharge DSM revenue to be paid and programs
available to the residential class under the Company s Application proposal
to be unacceptable and inequitable. We approve the Application subject to
the filing of a specific program proposal. We encourage the Company to
develop and file this as quickly as possible. We note that the Company
existing energy efficiency and bSM programs will continue and will be
funded as previously authorized and we anticipate that an expanded program
will benefit all the Company s Idaho customers.
ORDER NO. 29976
We note for the record that this Commission has previously approved the
funding of Idaho Power and Avista s DSM and energy efficiency programs
with surcharges and tariff riders. We are prepared to adopt a one and half
percent (1.5%) tariff rider with no caps to fund PacifiCorp s energy
efficiency and DSM programs once a program plan has been filed, reviewed
and approved. We look forward to that filing and the Company s continued
commitment to provide its electric customers with increasing DSM and
energy efficiency options.
On February 3 , 2006, PacifiCorp filed a Petition with the Commission requesting
clarification of Order No. 29952 or in the alternative approval of an amended program
implementation plan.
Petition for Clarification
In Order No. 29952 the Commission stated it was "prepared to adopt a one and one-
half percent (1.5%) tariff rider with no caps to fund PacifiCorp s energy efficiency and DSM
programs once a program plan has been filed, reviewed and approved.PacifiCorp seeks the
following clarification:
I. Does the Commission s conditional approval extend to all new program
offerings in the Company s Application, or merely to the 1.5% tariff
rider?; and
2. Does the Commission s conditional approval allow the Company to
initiate new programs with the effective date of January 12, 2006 and
begin directing costs, as they occur, into a DSM balancing account for
eventual recovery through the tariff rider mechanism once implemented?
Amended Program Implementation Plan
The Company in its Petition also presents for Commission consideration a "program
plan" that describes the Company s proposed residential program offerings, provides an
equitable application of tariff funds to all customer classes, and proposes a timeline for program
implementation.
PacifiCorp s February 3 filing addresses two concerns identified in Commission
Order No. 29952, (1) customer class equity and access to programs funded by the tariffrider and
(2) a concern that the tariff rider funding might be insufficient to support the forecasted program
cost. As reflected in the original Application, business programs were forecasted to consume
approximately 87% of the available funding compared to 13% for residential programs.
Residential customers were also forecasted to contribute 39% of the tariff rider revenue for
ORDER NO. 29976
programs. Without program modification, PacifiCorp is concerned that it may not be able to
comply with the Commission s request and still effectively manage the uncertainty and market
acceptance of the programs and their associated costs. As a result, PacifiCorp recommends
changes to the original implementation plan described in the Application filed September 6
2005.
PacifiCorp in its filing submits the following amended implementation plan for
Commission consideration:
1. Defer the implementation of the Energy FinAnswer program until a later
date, relying more heavily on its companion program, FinAnswer
Express, to address the needs of the commercial and industrial customer
sectors.
Deferring the implementation of the Energy FinAnswer program, the Company contends, will
free up sufficient funding to allow for the expedited introduction of the supplemental residential
proposal, the Home Energy Efficiency Incentive program. This, the Company contends, will
provide greater flexibility in managing the overall DSM program costs and reduce non-
residential program costs to better address the disproportionate residential benefit concern.
PacifiCorp continues to believe, however, that the Energy FinAnswer program is a
solid performer and that customers would find it helpful in enabling them to meet their energy
efficiency objectives. PacifiCorp s plan is to defer, not eliminate, this program introduction into
the Idaho market. The Company intends to revisit the possible introduction of the Energy
FinAnswer program in approximately 12 months once it can better assess long-term funding
needs based on the market performance of the remaining programs.
2. Add the tariff language "subject to funds availability" to business
programs in order to better manage potential requests for services from
the business sectors that, if left unchecked, could exceed forecasts and
near-term funding availability.
3. Submit the final tariffs for the new and revised programs contained
within the Application (less the Low Income Weatherization program
tariff*) with effective dates of January 12, 2006. The revised program is
now available to customers. The final tariffs to be submitted are:
Schedule 155 - Irrigation Efficiency Program
Schedule 115 - FinAnswer Express Program
Schedule II 7 - See Ya Later Refrigerator Program
ORDER NO. 29976
Schedules 120/122 - Commercial Energy Services Programs (closing
these to new service)
*The Company notes that final drafts of the Low-Income Weatherization
program, Schedule 21 , were submitted February I , 2006 with an effective
date of January 12, 2006.
4. Accelerate the introduction of the residential Home Energy Efficiency
Incentive program from July 2006 to May 2006. PacifiCorp anticipates
filing the program for Commission review and approval in April 2006.
5. Defer the implementation of the 1.5% tariff rider from January 2006 to
May I 2006, to adjust for the delayed implementation of the overall
program portfolio and to better correspond to the timeframe when the
Home Energy Efficiency Incentive program will become available.
The Company s filing is accompanied by information on the costs and savings projections and
suite of programs proposed in its amended implementation plan. Based on the proposed changes
in the implementation plan over the first three years of the program portfolio, residential
customers are forecasted to contribute approximately 39% of the dollars and receive 36% of the
program dollars; business customers would contribute 61 % of the dollars and are forecasted to
receive 64% of program dollars. Spending over the three-year period is projected to average
1.55% of retail revenue, much closer to the 1.5% tariff rider collection rate conditionally
approved by the Commission in Order No. 29952 and within a range the Company believes it
can responsibly manage.
PacifiCorp in its filing provides the following supplemental information on the See
Ya Later Refrigerator Program and the soon to be filed Residential Home Energy Efficiency
Incentive Program.
See Ya Later Refrigerator Program
This program removes older, less efficient refrigerators and freezers from
customer homes (and the electrical grid) and recycles them to insure they are
not resold (and reconnected to the grid). Refrigerators available today use
about 40% less energy than models manufactured as recently as 15 years ago
resulting in an average per unit savings of 1 000 kWh. According to
Company survey data, 14% of Idaho s 48 000 residential customers have a
second refrigerator. The same data indicates 72% have a stand-alone freezer.
These customers may request See Ya Later Refrigerator program services by
calling a toll-free number. The third-party implementation contractor handles
all services related to picking up the equipment, recycling it and disbursing
ORDER NO. 29976
the customer incentive payment. The proposed implementation contractor
for Idaho is the same one that currently delivers the program in Utah (and has
since June 2003), where 99% of participating customers reported they were
very satisfied" or "satisfied" with program services during the most recent
evaluation. The vendor also began delivering the program within the
Company s Washington service area in April 2005 and has been met with
positive customer participation.
The benefit-to-cost ratios for this program are strong - more than $3 in
benefits are projected for each $1 in program costs. These benefit-to-cost
ratios are the highest of the proposed Idaho programs within any customer
class. Third-party evaluation results for two program years in Utah
demonstrate similar robust benefit-to-cost ratios. Other utilities that have run
or are running refrigerator retirement programs include the Los Angeles
Department of Water & Power, Southern California Edison, Pacific Gas &
Electric Company, Nevada Power Company, Puget Sound Energy, and
Snohomish County Public Utility District.
Home Energy Efficiency Incentive Program
This newly proposed program will provide a broad platform to deliver
incentives for more energy efficient products and services to be installed or
received by Idaho residential customers with a new or existing home. While
the product and service mix is undergoing comprehensive analysis, broad
categories under consideration include appliances, water heaters, lighting,
heating and cooling equipment, windows, and insulation. This program is
being designed to leverage marketing and delivery through local businesses
and service providers to minimize costs and direct the largest share of the
program budget to incentives. To this end, two incentive delivery options
will be employed: (1) a retailer buy-down for lighting equipment, resulting in
the retailer offering a lower price to the customer, and (2) a post-purchase
delivery for all other types of equipment or services. Incentives for some
measures may be offered seasonally to complement other offerings, while
others will be offered year round. Proof of professional installation will be
required where necessary to insure energy savings. Measure mix and
specifications will be reviewed and adjusted on a regular basis to reflect sales
volumes, codes and standards, and program impacts. The Home Energy
Efficiency Incentive program is currently forecasted to spend over 40% of
the three-year residential program spending estimates (for all residential
programs combined) and contribute over 50% of the residential program
energy savings (again, for all residential programs combined). The program
is on a design path to be available to Idaho residential customers in May
2006, contingent on approval of the final program by the Commission.
Additional information on the Home Energy Efficiency Incentive program and other programs
within the Company s amended implementation plan accompany the Company s filing.
ORDER NO. 29976
Commission Findings
The Commission has reviewed the filings of record in Case No. P AC-05-1 0
including our prior final Order No. 29952 and the Company s February 3, 2006 filing. The
Commission views the Company s February 3 filing as a compliance filing providing a more
equitable class distribution of energy efficiency and DSM program offerings. While we have no
reason to disagree with PacifiCorp s contention that its proposed Energy FinAnswer Incentives
program is also a good program, we note that its estimated costs are proportionately greater per
energy saved than for either the Home Energy Efficiency Incentive program or the See Ya Later
Refrigerator program. We find that PacifiCorp s proposal to defer implementing the Energy
FinAnswer Incentives program is reasonable based on its potential cost-effectiveness and the
equity in distribution of programs among customer classes.
The Commission finds the amended DSM program implementation plan presented
by PacifiCorp to be reasonable and acceptable. We note that PacifiCorp s amended Attachment
, Table 1 estimates that the newly proposed Home Energy Efficiency Incentive program in its
first two years will save more energy with slightly lower costs than its proposed See Ya Later
Refrigerator program, which the Company says provides the highest benefit-to-cost results of
any of its proposed programs. While it is obviously too early to assess cost-effectiveness of any
of the proposed programs, we believe the programs chosen show promise, based on the
Company s preliminary estimates. We find, based on Company projections, that DSM provides
a more cost-effective alternative than new supply resources. We further find that customer
participation in the DSM programs will favorably affect the Company s Idaho load requirements
and jurisdictional allocation of resource costs to Idaho.
We authorize a 1.5% DSM tariffrider for all customer classes effective May 1 2006
and direct the Company to collect same as a separate line item on customer bills. We authorize
deferral of all post January 12, 2006 DSM program costs for both new, revised and existing
DSM programs to DSM sub accounts that will track and facilitate audit of the expenditures.
We remind the Company that our approval of the amended DSM program offerings
and tariff rider is not to be construed as a Commission finding that the Company s DSM
expenditures and programs are or will be found to be reasonably and prudently incurred and
executed.It is premature to make such a determination for programs that have not been
implemented and expenses that have not yet been incurred. Although we fully expect the
ORDER NO. 29976
Company to implement and competently execute its DSM programs, we cannot speculate at this
time whether the Company will do so in a reasonable and prudent manner. We direct the
Company to file an annual report with the Commission by May 1 of each year of its Idaho DSM
activities, related revenues and expenditures, and program cost effectiveness. We expect that the
Company may have new programs to implement or may, based on its experience, recommend
changes in the programs implemented in this Order. We invite that type of analysis in the annual
report, also.
The Commission will examine the distribution of DSM program dollars both within
and among customer classes, the cost effectiveness of the programs and the reasonableness and
prudence of the Company s program management and administrative costs during general rate
cases and in all proceedings proposing an adjustment to the DSM tariff rider. Costs imprudently
incurred will not be paid by customers.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah
Power & Light Company, an electric utility, and the issues presented in Case No. PAC-05-
pursuant to the authority granted under Title 61 of the Idaho Code and the Commission s Rules
of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and the Commission does hereby approve the amended DSM
program implementation plan submitted by PacifiCorp in Case No. PAC-05-10. In accordance
with this amended plan the Company is directed to provide and file an expanded description of
its Home Energy Efficiency Incentive Program on or prior to April 30, 2006. We authorize
initiation of the other approved DSM programs described above with an effective date of January
, 2006.
IT IS FURTHER ORDERED and we hereby authorize and direct the Company to
defer and record all Idaho DSM program costs for both new, revised and existing DSM
programs, as they occur after January 12 2006, into DSM subaccounts to facilitate review ofthe
balancing account for eventual recovery through a tariff rider mechanism once implemented.
ORDER NO. 29976
IT IS FURTHER ORDERED and we hereby authorize implementation of a 1.
DSM tariff rider surcharge for all Idaho tariff customer classes as a separate line item on
customer bills for an effective date of May 1 , 2006.
IT IS FURTHER ORDERED and the Company is directed to file with the
Commission by May 1 of each year beginning May 1 , 2007, an annual report of its Idaho DSM
activities, related revenues and expenditures, and program cost effectiveness.
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. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this). n.J-
day of March 2006.
PAUL KJELLANDER, PRESIDENT
~ l\
MARSHA H. SMITH, COMMISSIONER
Commissioner Hansen s Dissent is Attached
DENNIS S. HANSEN, COMMISSIONER
ATTEST:
bls/O:PAC-OS-lO sw2
ORDER NO. 29976
COMMISSIONER DENNIS S. HANSEN
DISSENTING OPINION
CASE NO. PAC-O5-
ORDER NO. 29976
I am against approving Utah Power and Light Company s new DSM cost recovery
mechanism and enhanced energy efficiency programs, which the Company hopes to fund with
ratepayer dollars. I question the effectiveness of these proposed programs and the cost to the
customer. The proposed DSM program for residential customers is a very poor energy
efficiency program. For example, its "See You Later Refrigerator" program, costs Idaho
ratepayers an estimated $84 000 for PacifiCorp to manage, $312 000 for a third party contractor
to dispose of the refrigerators and $121 000 paid to customers for their old refrigerators. This
amounts to $517 000 that the customers in southeastern Idaho will pay for refrigerator disposal.
When a refrigerator is turned in, the customer will receive $40 for his old
refrigerator, the third party will require $120 to pick it up and PacifiCorp will add its charge to
manage the program no matter how many refrigerators are to be recycled. The cost could range
from $187 to over $300 per refrigerator, which is an outrageous amount for ratepayers to pay for
disposal of an old refrigerator.
That amount is based on the projected number of 2 600 refrigerators that PacifiCorp
estimates could be recycled. In my opinion, a more realistic number would be as low as 500.
However, if the projected number 2 600 is not reached, PacifiCorp will still receive $84 000 for
managing the program and the customer will still pay 1.5 percent of their total electricity bill into
this fund. If 500 refrigerators and freezers are recycled, then the total program cost would likely
be about $160 000 rather than the estimated $517 000. However, PacifiCorp will still collect the
5 percent from the customer.
Another point to remember is the Company has no monetary investment in making
these programs functional. Instead, the burden falls to the ratepayer. Further, the Company
states that most cost estimates are not dependent upon how many appliances are recycled. It will
cost $84 000 for PacifiCorp to manage the program regardless of the amount of refrigerators that
are recycled.
Even though PacifiCorp is in the process of seeking additional or changed DSM
resources for the residential as well as other customer classes through a RFP process, I agree
COMMISSIONER HANSEN DISSENT
ORDER NO. 29976
with the opinion of the Staff which stated "we are not able to state that the currently proposed
program portfolio, let alone a modified one, will be prudently managed or that it will result in
cost effective savings.
I cannot, in good conscience, support an additional 1.5 percent increase ($3.6 million
over two years) to Idaho customers who are already burdened with record high utility bills
resulting from the current huge increases in energy costs. Also, I cannot support this when the
record leads me to believe that it is questionable whether the program will be cost effective and
efficient or whether it will be throwing money into a black hole with the idea that if things don
work out later, the money could be retrieved and returned to the ratepayers or used for other
projects not yet approved. This proposed program is seriously flawed with no guarantees or
assurance that it will be prudently managed or result in cost effective savings.
I am concerned that with no cap on the 1.5 percent increase to a customer s total bill
this will be a tremendous burden on residential customers with total electric homes as well as
irrigation customers with pumping operations. I am in favor of a well-planned DSM program
that will ensure enthusiasm and commitment to quality rather than compliance behavior. I
believe that given more time, PacifiCorp could develop a plan that has a greater degree of
efficiency.
COMMISSIONER HANSEN DISSENT
ORDER NO. 29976