20101014Grayson Di.pdf

BEFORE THE REeE
zoin OCT 14 PM I: 35
IDAHO PUBLIC UTILITIES COMMISSI~~HO PUBLIC~.. r..
UTILITIES CClAi",t;;;';!¡j¡'l
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP DBA ROCKY MOUNTAIN ) CASE NO. PAC-E-10-07
POWER FOR APPROVAL OF CHANGES )
TO ITS ELECTRIC SERVICE SCHEDULES )
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DIRECT TESTIMONY OF GARY GRAYSON
IDAHO PUBLIC UTiliTIES COMMISSION
OCTOBER 14,2010
1 Q.Please state your name and business address for
2 the record.
3 A.My name is Gary Grayson and my business address
4 is 472 West Washington Street, Boise, Idaho.
5 Q.By whom are you employed?
6 A.I am employed by the Idaho Public Utilities
7 Commission as a Utilities Analyst.
8 Q.What is your educational and professional
9 background?
10 A.I received a Bachelor of Arts Degree in Business
11 Management from Fresno Pacific College in 1986 and have
12 completed advanced training from Michigan State and New
13 Mexico State Universities regarding utility regulation,
14 forecasting, planning, operations, and energy efficiency
15 program evaluation. I was employed by Southern California
16 Edison as an Energy Efficiency Program Manager and Major
17 Accounts Executive from July of 1982 to March of 1997. I
18 also worked for a consulting firm responsible for the
19 design and delivery of energy efficiency programs from
20 April of 1997 to September 2005. Most recently, I was
21 employed by the Idaho Office of Energy Resources as an
22 Energy Specialist from September of 2008 until I began my
23 employment with the Idaho Public Utilities Commission in
24 April of 2010. My duties at the Commission currently
25 include the review of prudency and the evaluation of
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 1
STAFF
1 electric utility demand-side-management (DSM) programs and
2 analysis of utility incentive programs. I currently
3 represent Staff at the Northwest Energy Efficiency
4 Alliance i s Cost-Effectiveness Committee, Avista Utilities'
5 External Energy Efficiency Board, Idaho Power i s Energy
6 Efficiency Advisory Group, the Northwest Power and
7 Conservation Council's Regional Technical Forum, and the
8 Avista Evaluation, Measurement and Verification
9 collaborative.
10 Q.What is the purpose of your testimony in this
11 case?
12 A.The purpose of my testimony is to assess Rocky
13 Mountain Power's contention that its demand-side-management
14 (DSM) expenses and efforts for 2008 and 2009 were prudently
15 incurred. I will also provide observations regarding the
16 enhancement of Rocky Mountains' programs in the future.
17 Q.Please describe the Company's portfolio of
18 programs, expenditures for each program, and how these
19 expenditures are recovered by the Company.
20 A.Currently, Rocky Mountain Power offers seven DSM
21 programs in Idaho as the least cost alternative to the
22 acquisition of new supply-side resources. These programs
23 encompass all major customer classifications including
24 residential and low- income, commercial, industrial, and
25 irrigation. Addi tionaiiy, the Company contributes to the
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 2
STAFF
1 Northwest Energy Efficiency Alliance's efforts to transform
2 energy markets in the region. All of the costs associated
3 with programs are eligible for recovery through the
4 Customer Efficiency Service Rate Adjustment (Schedule 191)
5 wi th the exception of the Load Control Service Credits
6 which are recovered through base rates. Annual
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expendi turesfor each program were derived from the
Company's 2008 and 2009 annual Demand-Side-Management
reports and are shown below (rounded to nearest dollar) :
2008
Program Expendi tures
Irrigation Load $8,908,216Control(includesparticipationcredits)
Low Income $164,578Weatherization
Refrigerator $113,296Recycling
Home Energy $490,101Savings
Energy FinAswer $121,192
FinAswer $1,302,858Express
Agricul tural $268,068Energy Services
Northwest Energy $317,339EfficiencyAlliance
2009Expeñeures
$11,140,894
$197,819
$108,126
$593,564
$358,426
$263,904
$807,238
$287,190
Totals $11,685,648 $13,757,163
CASE NO. PAC~E-10-0710/14/10 GRAYSON, G. (Di) 3
STAFF
1 Q.Why are formal evaluations of energy efficiency
2 programs important?
3 A.Credible and transparent program evaluations are
4 crucial for the optimization of program performance and for
5 assurance to all stakeholders that actual program results
6 are as claimed. Unlike energy consumption, energy
7 efficiency program results cannot generally be metered.
8 Instead, their impacts can only be estimated through a
9 combination of engineering measurements, deemed values,
10 verification of installations, assumptions made, and
11 overall program evaluation. Programs that are not properly
12 evaluated will suffer from unreliable cost-effectiveness
13 estimates and will not likely be administered and improved
14 to their optimum performance levels.
15 Q.How are energy efficiency programs evaluated?
16 A.Energy efficiency programs are evaluated using a
17 cost and benefit analysis viewpoint and cost-effectiveness
18 calculations from four maj or perspectives. These
19 perspectives include the participant, Ratepayer, Utility,
20 and the Total Resource Cost. The results of each
21 perspective are expressed in several ways including a
22 cost/benefit ratio and net present value of program impacts
23 over the lifecycle of the energy efficiency measures.
24 These tests are not intended to be used in isolation but
25 should be compared to one another in an effort to gain a
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 4
STAFF
1 comprehensive, multi-perspective of each measure/program
2 and the portfolio as a whole. Evaluation results should be
3 used to both refine pre~program estimates of cost-
4 effectiveness from all perspectives and to find ways to
5 further improve programs as they mature.
6 Q.Has the Company provided sufficient evidence of
7 evaluations of its programs for 2008 through 2009?
8 A.Over the past several years, there developed an
9 apparent disconnect between what Staff viewed as sufficient
10 evaluations and what Rocky Mountain Power and other
11 utilities viewed as sufficient. On October 5, 2009, Staff
12 convened a workshop to fully vet the issues of evaluations
13 and cost-effectiveness expectations. With utility input,
14 Staff hired a nationally-respected energy efficiency
15 program evaluation expert to facilitate the workshop.
16 Several representatives from the Staff and representatives
17 from Idaho Power, Avista Utilities, and Rocky Mountain
18 Power, participated in the workshop. The result was a
19 Memorandum of Understanding (MOU) signed by each of the
20 utilities agreeing to formally evaluate all of their
21 programs on regular, multi-year cycles and to report the
22 results of those evaluations in their annual DSM reports
23 that are filed with the Commission. In exchange for the
24 utility commitments, Staff agreed that if the evaluation
25 and reporting commitments are fulfilled and if there is no
CASE NO. PAC-E-10 - 0710/14/10 GRAYSON, G. (Di) 5
STAFF
1 evidence of imprudence, then, when requested by the
2 utilities, Staff would recommend that DSM expenditures be
3 found prudent by the Commission. Although the Company has
4 not yet achieved all of the established goals as outlined
5 in the MOU, Staff believes the Company has made significant
6 progress and is on a reasonable pathway to achieve these
7 goals moving forward.
8 Q.Have you reviewed the cost-effectiveness and
9 prudency of expenditures regarding Rocky Mountain Power's
10 demand-side-management programs for 2008 and 2009?
11 A.Yes, I have.
12 Q.What were your findings?
13 A.As indicated in the Company's 2008 and 2009
14 annual DSM reports and the testimony of Brian Hedman from
15 the Cadmus Group, all programs appear to have met three of
16 the four cost-effectiveness tests with the exception of the
17 2009 Agricultural Energy Services program which passed only
18 two of the four tests. The Irrigation Load Control program
19 however, passed all four tests including the very difficult
20 Ratepayer Impact Measure (RIM) test, meaning that it
21 results in lower electricity rates as well as providing a
22 net system benefit. In total, the Company's DSM programs
23 in 2009 have produced an estimated $17.1 million in net
24 benefits over the life of the savings compared to gross
25 costs of $13.7 million.
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 6
STAFF
1 Q.Based on your overaii assessment, does it appear
2 that the Company's DSM program expenses for 2008 and 2009
3 were prudently incurred?
4 A.Yes. After review and verification of all
5 available program results, and considering progress made
6 toward meeting the guidelines set forth in the MOU, Staff
7 believes that Rocky Mountain Power's demand-side-management
8 programs and efforts in 2008 and 2009 were generally
9 prudent and cost-effective.
10 Q.Are there any other issues you would like to
11 address in your testimony?
12 A.Yes. I would like to address issues related to
13 customer segment equity and the Customer Efficiency
14 Services Rate (Schedule 191).
15 Customer Segment Equity - Although this market
16 segment has shown to be extremely cost-effective, there is
1 7 a huge disparity between the resources provided to the
18 irrigation segment as compared to the other customer
19 segments. The data provided by the Company in their 2009
20 Annual DSM report shows 81% of total DSM expenditures were
21 allocated to the Irrigation Load Control program while
22 only 6.5% was provided to the residential market, 4.5% to
23 commercial/industrial, 5.9% to agricultural and 2.1% to
24 market transformation. These totals include $7.3 million
25 provided in load control credits to irrigators which are
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 7
STAFF
1 recovered through base rates. In the future, the Company
2 should endeavor to find ways to pursue all cost-effective
3 DSM while striving toward greater balance with regard to
4 customer segment equity.
5 Customer Efficiency Services Rate (Schedule 191)
6 The Customer Efficiency Services rate or "tariff rider" was
7 established in 2006 (Order No. 29976) at a time when the
8 Company was increasing its commitment to pursue DSM
9 initiatives. The Tariff Rider was designed to provide
10 Rocky Mountain Power front-end financing for its DSM
11 programs and to enable them to better manage those programs
12 rather than having to continually adjust its programs to
13 match budgets. The rider appears on customer bills as an
14 unbundled charge based on a percentage of the customers'
15 monthly bill. The rider was established at 1.5% and raised
16 to 3.72% in 2008.
17 In February 2010, the Company applied to the
18 Idaho Public Utilities Commission (Case No. PAC-E-10-03)
19 for approval to raise the Customer Efficiency Services Rate
20 (Schedule 191) from 3.72% to 5.85%, an increase of 2.13%.
21 The increase was requested in an effort to decrease the DSM
22 balancing account deficit from $3.5 million to $2.25
23 million by April, 2011, and to provide an estimated $8.25
24 million per year toward the Company's DSM initiatives. The
25 Commission approved an increase of 1.0% (Final Order
CASE NO. PAC-E-10 - 0710/14/10 GRAYSON, G. (Di) 8
STAFF
1 No. 32023), raising the collection rate from 3.72% to 4.72%
2 for all customers subj ect to Schedule 191. The approved
3 rate will provide an estimated $6.86 million in DSM funding
4 for program year 2010 at the Staff proposed revenue
5 requirement. Staff believes that this level of tariff
6 rider funding is not sufficient to reduce existing DSM
7 deficit balances and could actually increase the deficit
8 balance at the expected level of DSM expenditures.
9 When the rider was originally introduced, Staff
10 believed an unbundled charge on the customer bill would
11 help notify customers of available energy efficiency
12 programs and provide an additional layer of transparency
13 regarding Company DSM initiatives. As a line item on the
14 customers' bill, the Customer Efficiency Services charge
15 does draw the attention of customers, particularly those
16 who do not participate in any of the Company's DSM
17 programs. Non-participants do not see how DSM programs
18 personally benefit them, since they perceive a bill
19 increase rather than a bill reduction. Most customers are
20 not familiar with the rationale justifying implementation
21 of energy conservation and efficiency programs, with its
22 long term focus on keeping energy rates lower than they
23 would be otherwise if load growth was served with higher
24 cost supply-side resources. As the amount invested in DSM
25 has grown, the tariff rider percentage has increased and so
CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 9
STAFF
1 has customer opposition. Moreover, not all customers are
2 subj ect to the tariff rider. Special contract customers
3 pay for DSM when the expenses are collected through base
4 rates but do not when costs are recovered through the
5 tariff rider. The Commission may need to reconsider
6 whether the Tariff Rider, in its current form, should be
7 continued. Staff believes alternative recovery mechanisms
8 for Company DSM expenditures should be explored, including
9 the possibility of expensing DSM expenditures in base
10 rates.
11 Q.Does this conclude your direct testimony in this
12 proceeding?
13 A.Yes, it does.
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CASE NO. PAC-E-10-0710/14/10 GRAYSON, G. (Di) 10
STAFF
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF OCTOBER 2010,
SERVED THE FOREGOING DIRECT TESTIMONY OF GARY GRAYSON, IN CASE
NO. PAC-E-1O-07, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
TED WESTON
ID REGULATORY AFFAIRS MANAGER
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
(FED EX)
E-MAIL: ted.weston(ipacificorp.com
E-MAIL: ONLY
MARK C MOENCH
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
E-MAIL: mark.moench(ipacificorp.com
daniel.solander(ipacificorp.com
RANDALL C BUDGE
RACINE OLSON NYE ET AL
PO BOX 1391
POCATELLO ID 83204-1391
(FED EX)
E-MAIL: rcb(iracinelaw.net
E-MAIL: ONLY
JAMES R SMITH
MONSANTO COMPANY
E-MAIL: iim.r.smith(imonsanto.com
ANTHONY Y ANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44140
(FED EX)
E-MAIL: tony(iyanke1.net
PAUL J HICKEY
HICKEY & EVANS LLP
1800 CAREY AVE., SUITE 700
PO BOX 467
CHEYENNE WY 82003
(FED EX)
E-MAIL: phickey(ihickeyevans.com
E-MAIL: ONLY
KATIE IVERSON
BRUBAKER & ASSOCIATES
E-MAIL: kiverson(iconsultbai.com
ERIC LOLSEN
RACINE OLSON NYE ET AL
PO BOX 1391
POCATELLO ID 83204-1391
(FED EX)
E-MAIL: elo(iracinelaw.net
CERTIFICATE OF SERVICE
TIM BULLER
JASON HARRS
AGRIUMINC
3010 CONDA RD
SODA SPRINGS ID 83276
(FED EX)
E-MAIL: tbullerCiagrium.com
jaharis(iagrium.com
BENJAMIN J OTTO
IDAHO CONSERVATION LEAGUE
710 N 6TH STREET
PO BOX 844
BOISE ID 83702
(HAND CARRIED)
E:..MAIL: bottoCiidahoconservation.org
E-MAIL: ONLY
DR. DON READING
E-MAIL: dreading(imindspring.com
MELINDA J DAVISON
DAVISON VAN CLEVE, P.C.
333 SW TAYLOR, SUITE 400
PORTLAND, OR 97204
(FED EX)
E-MAIL: mjd(idvclaw.com
RONALD L WILLIAMS
WILLIAMS BRADBURY, P.C.
1015 W HAYS STREET
BOISE ID 83702
(HAND CARRIED)
E-MAIL: ron(iwillamsbradbury.com
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
(HAND CARRIED)
E-MAIL: bmpurdy(ihotmail.com
-.~SECRETxRY .
CERTIFICATE OF SERVICE