20111028Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 6864
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP DBA ROCKY MOUNTAIN )
POWER TO SUSPEND FUTURE PROGRAM )
EVALUATIONS OF SCHEDULE 21, LOW )
INCOME WEATHERIZATION SERVICES )
OPTIONAL FOR INCOME QUALIFYING )CUSTOMERS )
)
CASE NO. PAC-E-l1-13
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Neil Price, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Intervention Deadline in Order No. 32284
issued on June 30, 2011, submits the following comments.
BACKGROUND
On April 29, 2011, PacifiCorp dba Rocky Mountain Power ("Rocky Mountain" or
"Company") fied an Application with the Commission seeking an Order suspending the
Company's future obligation to perform program evaluations of its Schedule 21 Low Income
Weatherization Services Optional for Income Qualifying Customers Program. Rocky Mountain
attached a copy of an evaluation, conducted by The Cadmus Group, Inc., of its Schedule 21 Low
STAFF COMMENTS 1 OCTOBER 28,2011
Income Weatherization Services Optional for Income Qualifying Customers to its Application. The
evaluation was based on program activities for the time period of2007 through 2009.
Rocky Mountain states that, due to many factors, the evaluation reveals that the program is
not cost-effective. As such, the Company seeks an acknowledgement from the Commission that the
program is an acceptable par of Rocky Mountain's program portfolio, as well as a finding that it
should be allowed to continue. The Company believes that futue administrative costs associated
with the program could be lessened by the removal of the Company's obligation to perform future
program evaluations.
Rocky Mountain partners with the two non-profit community action partnership agencies
(CAPs)) that install energy effciency measures in income-eligible households at no cost to
residents. During the three year evaluation period, the Company reimbursed CAPs for 75% of the
cost of installng approved measures, with the remaining 25% of costs covered by funds obtained by
the CAPs from federal sources. Rocky Mountain also provides CAPs a 15% reimbursement for
administrative costs. An anual cap of $150,000 per year in program funding was in effect over the
three year period. The program evaluation performed by The Cadmus Group, Inc., includes process
and impact evaluations. The impact evaluation uses a biling analysis to estimate the kilowatt-hour
(kWh) savings achieved by the program. Estimates for non-energy benefits produced by the
program are also quantified by the impact evaluation.
Rocky Mountain argues that its entire portfolio of energy efficiency programs is cost-
effective. However, the Company states that its low income weatherization program is not cost-
effective when viewed from the Total Resource Cost (TRC), Utilty Cost (UCT) or Ratepayer
Impact (RIM) perspectives. However, the program is cost-effective under the TRC test if non-
energy benefits are factored into the analysis. Rocky Mountain's analysis included only the
Company's costs of administering the Program and did not include any funds the CAPs may have
received from federal sources.
STAFF REVIEW
The Idaho PUC has a long history of support for utility-fuded low income weatherization
programs. These programs, however, have characteristics that make program oversight and
i The two non-profit agencies that serve Rocky Mountain's customers are the Eastern Idaho Community Action
Parership (EICAP) based in Idaho Falls and the Southeastern Idaho Community Action Agency (SEICAA) based in
Pocatello.
STAFF COMMENTS 2 OCTOBER 28,2011
evaluation more diffcult compared with other utilty-funded energy efficiency programs.
Determining program cost-effectiveness is paricularly challenging.
As previously discussed above, utilties contract with CAPs to deliver weatherization
services to low income customers. These same agencies also deliver weatherization services
through the federally-funded Weatherization Assistace Program (WAP) under a contract
administered by the Idaho Deparment of Health and Welfare. With one exception2, the CAPs also
manage the Low Income Home Energy Assistance Program (LIHEAP), a federally-funded bil
payment assistance program.3 Low income applicants who own or rent single family, multi-family,
or manufactured homes that qualify for LIHEAP funding automatically qualify for WAP.
Experience in running multiple energy-related benefit programs, the abilty to determine income
eligibility, and the capacity to deliver services to low income clients makes the community action
agencies uniquely qualified to administer utilty-funded programs targeting low income customers.
Although in many ways a mariage of convenience, this arangement has worked well in the
past with respect to program delivery, but changing circumstances have raised some concerns. In
December 2009, a "Memorandum of Understanding for Prudency Determination ofDSM
Expenditures" (MOU) was signed by the Commission Staff and Rocky Mountain, Avista, and Idaho
Power. The MOU at page 6 addresses utilty anual DSM reporting requirements and consideration
of requests for prudency determination:
By performing within these guidelines, assuming there is no evidence of
imprudent actions or expenses, the utilty can reasonably expect that in the
ordinar course of business Staff will support full cost recovery of DSM program
expenses.
Attachment NO.1 to the MOU at page 9 lays out Staffs expectations for Cost-Effectiveness
Tests, Methods and Evaluations. It states:
. . . Staff believes that prudent DSM management requires that cost-effectiveness
be analyzed from a wide variety of perspectives, including the ratepayer impact
perspective, and that all programs and individual measures should have the goal
of cost-effectiveness from the total resource, utilty, and participant perspectives.
. . . If a paricular measure or program is pursued in spite of the expectation that
it wil not, itself, be cost-effective from each of those three perspectives, then the
anual DSM report should explain why the measure or program was implemented
or continued.
2 In Canyon County, the Western Idaho Community Action Partership manages the energy assistance program
(LIHEAP) and the Canyon County Organization on Aging administers the weatherization program (W AP).
3 15% of LIHEAP funds can be spent for low income weatherization.
STAFF COMMENTS 3 OCTOBER 28,2011
Subsequently, the Commission has placed greater emphasis on the need for evaluation,
measurement and verification ofDSM programs, which has sharened utilties' focus on cost-
effectiveness. In tum, this has created a perceived increased risk on the part of utilities with respect
to recovery of expenditures for programs that may not be cost-effective using standard cost-
effectiveness tests. Last year, the Commission increased low income weatherization funding for
both Rocky Mountain and A vista, which increased the amount of money that utilties may consider
to be at risk. This year, the Community Action Partnership of Idaho (CAP AI), acting on behalf of
the community action agencies it represents, has renewed efforts to get additional program fuding,
in par due to anticipated substantial decreases in federal fuding.
In an effort to reduce administrative complexity, Rocky Mountain, Avista and Idaho Power
have structured their low income weatherization programs to dovetail with the U.S. Department of
Energy's requirements for WAP. Within the framework provided by DOE, each state receiving
W AP fuding must establish eligibilty criteria, an approved process by which to determine energy
savings and cost-benefit ratios, and audit procedures to verify compliance with various laws, rules,
and standards. Although WAP and utilty-funded programs share a common goal of saving energy,
different yardsticks are employed for justifying expenditures on energy-saving measures.
Unfortnately, there is no consensus among utilities, regulatory commissions, or other stakeholders
on what factors should be considered, how factors selected should be measured and verified, or how
to value factors that are not easily quantified.
In 1989, the Commission indicated:
. . . (W)e see potential benefits for utilties in low-income-targeted conservation
programs. Among these are capabilty building, improved image/reputation,
market development, reduced uncollectibles, and avoided costs. . . . We intend to
look favorably on proposed tariffs incorporating low-income-targeted
conservation programs . . . A liberal valuation of intangible benefits of "low
income customer" paricipation should be included in economic analyses of
capabilty building/maintenance programs.
Case No. U-1500-165, Order No. 22299, p. 25.
More recently, the Commission has supported increased fuding of low income programs,
including Rocky Mountain's program. In 2010, the Commission stated:
Addressing the continued needs in RMP's Idaho service territory of the low-
income sector, we find that the record reflects there is a five-year backlog of
homes that need and are eligible for weatherization in Idaho. We find that RMP
does not dispute the cost-effectiveness of its Schedule 21 weatherization program
STAFF COMMENTS 4 OCTOBER 28,2011
for low-income customers. We find it reasonable to increase RMP's curent
anual fuding level for low-income weatherization in this case from $150,000 to
$300,000 and increase the dollar amount of RMP funds available for each
individual project from 75% to 85% of total eligible costs. The Company
indicated that an impact evaluation of the LIW A program would be completed by
year-end 2010, and the results provided to the Commission in early 2011. This
study will provide information that may be used to propose furher changes to the
program in the future.
Case No. PAC-E-I0-07, Order No. 32196, pgs. 61 & 62.
Rocky Mountain is the first utilty to submit a third-party evaluation of its low income
weatherization program to the Commission, presenting Staff with its first opportunity to review the
program in detaiL. Regarding Rocky Mountain's specific request in this case, Staff does not agree
that the Company should discontinue all future evaluation of its low income weatherization
program. The 2009 MOU requires that all DSM programs be evaluated and does not include an
exception for low income programs or any other program. Evaluations becomes more, not less,
importt in the context of a program which may be under-performing. Evaluations are not only a
way to judge program success, but also a method for making ongoing improvements, adapting to
changing circumstances, and gauging progress towards program goals.
Staff is unwiling to use the results of the Cadmus evaluation to approve Rocky Mountain's
request to find its current low income program an acceptable part of its portfolio. While the
Cadmus evaluation was generally in line with industry standards for low income evaluations, its
analysis was inconclusive in several areas, primarily because Rocky Mountain failed to collect
detailed data from the CAPs which could inform measure-level implementation decisions. Broader
issues regarding disparate views on how to measure energy savings, and therefore cost-effectiveness
remain unesolved, which underscores the challenges of low income program implementation and
cost-effectiveness. Despite Staffs concerns about cost-effectiveness, Staff encourages the
Company to maintain the program in the near term. This wil give Staff and the Company time to
discuss, explore, and attempt different implementation tactics to improve cost-effectiveness and
program delivery.
In the meantime, Staff understads Rocky Mountain's difficult position regarding the risk of
cost recovery for a Commission-ordered program which may not be cost-effective and is also not
directly administered by the Company. This situation is paricularly challenging since there is no
STAFF COMMENTS 5 OCTOBER 28,2011
clear path forward to achieve cost-effectiveness. Utilties across the state, region, and country are
facing a similar dilemma.
One aspect of the industry-wide dilemma is how to measure energy savings of low income
weatherization programs. For example, all three investor-owned utilties in Idaho measure the
energy savings generated by low income programs differently, using billng analysis, deemed
savings per measure, or energy audit analysis. Each of these methods results in dramatically
different results, but each method can be justified.
Estimating "whole house,,4 energy savings by adding up the savings of each installed
measure, while reasonable, may produce a less accurate savings estimate because it does not
account for the interaction among measures. As a result, the energy savings from a whole house
weatherization project is not necessarily equal to the sum of estimated savings for each individual
measure.
Rocky Mountain determines savings for this program through a pre- and post- biling
analysis. While many utilties use this method for evaluating low income energy savings because it
can capture the effects of multiple measures simultaneously, biling analyses are more accurate
when applied to an industrial or commercial setting in which the pre- and post- conditions can be
closely controlled. In Rocky Mountain's case, a biling analysis was applied five years apart (one
year of biling data on either end of the three year period selected) to low income customers who
move much more frequently than regular-income residential customers. Cadmus reported that 38%
of the program paricipants moved between the pre- and post-periods. It is impossible to accurately
determine savings when the pre- and post-occupants may be different people with different energy
consumption habits, and more importantly, a different number of people in the household.
Moreover, biling analyses are rarely used for other residential programs. There is a clear need to
determine some standardization of energy savings estimates so that utilties understand what
benefits their low income programs provide.
In the Cadmus' evaluation, the biggest problem with the biling analysis is that it did not
distinguish between measures funded by the utilty and measures funded by another source. The
biling analysis captured 100% of the savings, even though Rocky Mountain only paid for 75% of
4 Because homes, once weatherized using low income weatherization program funds, are usually not eligible to receive
additional benefits under the program, CAPs target all weatherization measures, along with any necessar repairs or
replacements and home improvements necessar for the health and safety of occupants, when weatherizing a house.
STAFF COMMENTS 6 OCTOBER 28, 2011
the energy efficiency measures installed during the life of this program. Correcting this over-
estimation by claiming 75% of the savings would fuher hur the cost-effectiveness of this program.
Overstating the percentage of savings as compared to investment is inconsistent with the
practices of other Idaho utilties. A vista pays 100% of the measures installed and claims 100% of
the savings. Idaho Power also claims a percentage of energy savings equal to its investment. The
percentage of energy savings claimed as compared to program costs is critical to establishing cost-
effectiveness. Establishing an accepted standard on this point is very important.
The lack of consensus extends to cost-effectiveness calculations. Idaho Power claims 80%
net to gross (NTG) ratioS, which is standard for residential programs. Avista claims 100% NTG on
the basis that low income customers would not install any energy efficiency measure without
external fuding. Rocky Mountain compares the biling analysis between participants and non-
paricipants to determine what energy savings would have occurred in the absence of the program.
Rocky Mountain and A vista add a 10% conservation preference factor to their cost-effectiveness
calculations, but Idaho Power does not. These fundamental discrepancies dramatically affect cost-
effectiveness. Staff understands and anticipates the need for flexibilty between utilties, but these
differences are too substantial for programs implemented so similarly. Staff canot make a
reasonable comparison of the cost-effectiveness of Rocky Mountain's low income weatherization
program with similar programs when such disparate approaches to energy savings measurements
and cost-effectiveness calculations exist.
The Cadmus evaluation indicates that Rocky Mountain's low income weatherization
program is not cost effective unless non-energy benefits (NEBs)6 are included. The NEBs
quantified and included by Cadmus are: (1) reduction in arearages of paricipants; (2) job creation;
and (3) economic impacts. Other NEBs were discussed but not quantified, and so did not have an
impact on cost-effectiveness calculations. Although NEBs are important factors to be considered in
evaluating low income weatherization programs, quantification and assignment of value frequently
becomes the subject of debate. In Staffs opinion, it is premature to discuss non-energy benefits in
any detail before the fudamental inputs for cost-effectiveness have been established.
5 The net to gross ratio is a factor representing net energy savings for a program (savings attributable to the program)
divided by gross energy savings (changes in energy consumption due to actions taken by program participants
regardless of the extent to which the program influenced those actions). The ratio is applied to gross program nnpacts
to convert them into net program load impacts.
6 Non-energy benefits do not produce energy savings, but have positive impacts on program participants, utilty
customers, utilties or society in general. Non-energy benefits mayor may not be quantifiable.
STAFF COMMENTS 7 OCTOBER 28,2011
As with any DSM program, comprehensive data collection is critical for making
implementation decisions. Rocky Mountain missed a major opportunity for program analysis by
not capturing all the relevant data reported to it by the CAPs. When a CAP installs a suite of
measures in a residence, it records and reports to Rocky Mountain the number of measures installed
and the cost of each measure, but Rocky Mountain does not capture this data in its database.
Lacking this basic information makes it nearly impossible to make detailed recommendations about
how to make the program more cost-effective. Rocky Mountain would be in a much stronger
position to improve program cost-effectiveness through modification of the list of approved
measures if the relevant data was collected. Lack of pertinent data for the program years evaluated
is another reason why Staff canot make a conclusion on cost-effectiveness based on the Cadmus
evaluation.
Clearly, there is a lack of consensus on how to appropriately evaluate low income
weatherization programs. The lack of consensus stems from the fact that these programs are
inherently different from standard residential programs and should be evaluated using criteria that
differs from criteria used for programs not targeted to low income customers.
For a variety of reasons, low income customers are less likely to participate in energy
effciency programs targeted to residential customers in general. Incentives canot overcome the
lack of available funds to invest in energy-savings measures or purchase more effcient appliances.
Low income housing tends to be less energy-effcient and more likely to need repairs or additional
work before weatherization measures can be installed, such as repairing a roof before installng
ceilng insulation. Additional steps may need to be taken to improve the health and safety of
occupants, such as installng adequate ventilation. These bariers to participation and the need for
additional investments that do not directly produce energy savings led to the creation of separate
low income weatherization programs. Now that the methodologies used to evaluate these programs
are being more closely scrutinized, there is a greater need to find a way to value these programs
correctly.
STAFF RECOMMENDATIONS
Given Staffs concerns about the measurement of energy savings and the cost-effectiveness
calculations for Rocky Mountain's low income weatherization program, Staff recommends that the
Company continue to evaluate the program on the two to three year schedule outlined by the 2009
DSM MOU. These evaluations should continue to be provided to the Commission and be available
STAFF COMMENTS 8 OCTOBER 28, 2011
for public review. Funding for the program should continue at existing funding levels until such
time as the Commission authorizes a change.
To improve the quality of its data and subsequent reports, Rocky Mountain should improve
data compilation so that all available information provided by SEICAA and EICAP is captured.
Staff recommends that Rocky Mountain facilitate implementation of electronic fie transfer
capabilty so that information can be transmitted electronically from the agencies to Rocky
Mountain and retained for future analysis.
Staff believes that low income weatherization programs are unique and should be evaluated
using criteria that differ from energy efficiency programs not targeted to low income customers.
The importance of program oversight and attention to cost-effectiveness is not diminished,
however, by the fact that a program is targeted to low income customers. Staff recommends that
Rocky Mountain explore other metrics for evaluating its low income program. One means of doing
so would be to participate in a workshop as further described below.
Staff fuher believes there needs to be a common understanding and approach with respect
to how utilities implement, evaluate, measure and verify programs targeted to low income
customers. The Commission Staff, utilties, stakeholders, and other interested parties would greatly
benefit from such an understanding. Similarly, interested paries could come to agreement with
respect to how utilties should manage programs and what degree of oversight is necessary.
In pursuit of this, Staff recommends that the Commission host an informal workshop as soon
as possible so that all interested paries can paricipate in a collaborative discussion about the issues
surrounding low income weatherization programs. Workshop objectives include developing a
deeper understanding of the issues, explore ways to resolve those issues, and finally, developing an
action plan that creates greater certainty regarding the implementation and evaluation of low income
weatherization programs. This workshop wil allow Rocky Mountain and the other utilties to
consider ways to enhance the cost-effectiveness of existing low income programs and/or create new
programs that target low income customers. At the conclusion of the workshop, Staff wil provide
the Commission with a report which will, at a minimum, identify the agreements reached and
recommendations for future Commission action.
STAFF COMMENTS 9 OCTOBER 28, 2011
Respectfully submitted this
Technical Staff: Stacey Donohue
Beverly Barker
i:/umisc/comments/paceI1.3npsdbab comments
STAFF COMMENTS
;1~y of October 2011.
~
Neil Price
Deputy Attorney General
10 OCTOBER 28,2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 28TH DAY OF OCTOBER 2011,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. PAC-E-11-13, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
TED WESTON
ID REGULATORY AFFAIRS MGR
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: ted.westonCfpacificorp.com
DANIEL E SOLANDER
REGULATORY COUNSEL
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
E-MAIL: daniel.solanderCfpacificorp.com
E-MAIL ONLY:
DATA REQUEST RESPONSE CENTER
dataequestCfpacificorp.com
BRAD MPURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE ID 83702
E-MAIL: bmpurdyCfhotmail.com
SEcll~-
CERTIFICATE OF SERVICE