20181226final_order_no_34224.pdf

Office of the Secretary
Service Date
December 26,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN )CASE NO.PAC-E-18-07
POWER FOR A PRUDENCY )
DETERMINATION OF DEMAND-SIDE )ORDER NO.34224
MANAGEMENT EXPENDITURES )
On August 10,2018,Rocky Mountain Power applied for an Order establishing that it
prudently incurred demand-side management (DSM)expenditures in 2016 and 2017 of
$8,539,263,consisting of $4,500,332 in 2016 DSM expenditures and $4,038,931 in 2017 DSM
expenditures.The Commission issued a Notice of Application,and set deadlines for persons to
intervene as parties and file comments in the case.Order Nos.34175 and 34129.Staff and
PacifiCorp Idaho Industrial Customers (PIIC)filed comments.The Company filed a reply.No
other comments were received.
Having reviewed the record,we find the Company prudentlyincurred $8,530,053 in
DSM expenses for 2016 and 2017.Our decision is explained in greater detail below.
BACKGROUND
Since the 1930s,Rocky Mountain has offered a variety of DSM programs to its
customers.In 2006,the Commission approved an enhanced set of DSM programs and provided
for cost recovery of the Company's energy efficiency and DSM programs.Typically,DSM
programs have two parts.First,the utility designs and implements a variety of DSM programs to
promote energy efficiency and conservation,or reduce customer demand during periods of peak
demand and/or in times of supply constraint.Second,utilities periodically report on the
effectiveness of their DSM programs and subsequently seek permission to recover the deferred
costs of their DSM programs.
In Order No.29976,issued in March 2006,the Commission authorized Rocky
Mountain to establish a DSM tariff rate (or "rider")as a separate line item on customer bills under
tariff Schedule 191.The DSM tariff rider is the mechanism used to recover the costs of the DSM
programs.The Company was authorized to defer the costs of its DSM programs until the
"Company's DSM expenditures and programs are or will be found [by the Commission]to be
reasonably and prudentlyincurred and executed."Id.at 6.
ORDER NO.34224 1
THE APPLICATION
The Company's Application discusses the Company's energy efficiency activities,its
expenditures on those activities,and their cost-effectiveness.The Application is summarized
below.
A.The DSM Programs
During the period under consideration,Rocky Mountain offered four DSM/energy
efficiency programs,including Home Energy Saver,Low Income Weatherization,Home Energy
Reports,and Non-Residential Energy Efficiency.See Application Attachment 1 at 15-32.
B.The Deferred Expenses
Rocky Mountain asserts that the DSM programs resulted in energy savings in 2016 and
2017.The utilityreports that overall the programs were cost effective.Application at 5.However,
the Company states that its Low Income Weatherization Program was not cost effective under the
Utility Cost Test (UCT)in either year,but was cost effective from the PacifiCorp Total Resource
Cost test (PTRC)!in both years.Id.at 5.
Rocky Mountain requests authorization to recover $8,539,263 in DSM expenses from
the DSM rider account and asserts these expenses were "prudentlyincurred."Application at 1.
This request included $4,500,332 for expenditures made in 2016,and $4,038,931 in 2017.Id at
3.
COMMENTS AND REPLY
Staff and PacifiCorp Idaho Industrial Customer's (PIIC's)comments and the
Company's reply are summarized below.
A.StaffComments
Rider Balance and Expenses
Staff audited the Company's DSM expenses and internal processes for paying
incentives to customers and determined that the Company documented expenses correctly and
instituted controls designed to eliminate improper payments.Based on Staff's audit,the
Company's DSM rider expenses appear prudent with one adjustment to expenditures.During the
audit,Staff determined that the Company incorrectly applied three expenditures in 2016 to the
Idaho DSM program,totaling $9,210.The three expenditures were actually incurred for the
i The PTRC reflects the Commission-approved method for calculating the cost-effectiveness of Low Income programs.See Order
No.32788.
ORDER NO.34224 2
Company's Utah DSM program.On November 26,2018,the Company notified Staff that all three
expenses would be removed from its Idaho DSM program expenditures.Staff recommends that
the Commission order that the Company prudentlyincurred $4,491,122 in 2016 and $4,038,931
in 2017 DSM tariff rider expenses.
Staff stated that the Company is currently over-collecting in the tariff rider.On
November 9,2018,in Case No.PAC-E-18-12,the Company filed for approval to decrease its
Customer Efficiency Services Rate from 2.7%to 2.25%,effective January 1,2019.In that
Application,the Company stated that the balance of the Customer Efficiency Services Rate was
over-collected by $2.1 million as of September 30,2018 and it projects that over-collection to
persist and reach $2.2 million by December 31,2019.The appropriate tariff rate will be
determined through Case No.PAC-E-18-12.
Energy Savings
During 2016 and 2017,the Company offered four energy efficiency programs:Low
Income Weatherization/Low Income Education (Schedule 21),Home Energy Saver (Schedule
118),Home Energy Reports (no tariff),and Non-Residential Energy Efficiency,also known as
wattsmart Business (Schedule 140).Combined,these programs produced 35,280 MWh of savings
over the 2016-2017 period.
Staff noted that the Company failed to achieve the Integrated Resource Plan savings
target in 2017,but only fell short by 56 MWh.Because the shortfall was relativelysmall compared
to the entire portfolio,Staff believes the Company will not have difficulty correcting this problem.
Residential Programs
The Company's residential portfolio savings decreased 35%between 2015 and 2016
because lighting savings decreased in the Home Energy Saver program and the Residential
Refrigerator Recycling program was eliminated.The 2016 residential expenditures of $974,004
were cost effective with a 1.29 UCT and 1.95 Total Resource Cost (TRC).Total savings increased
slightly in 2017 while the cost-effectiveness of the residential programs declined to 0.83 UCT and
1.09 TRC.The increase in savings was partially due to the success of the wattsmart energy
efficiency starter kits provided at no charge to customers through the Home Energy Saver program.
The kits,which include EnergySTAR lighting and WaterSense products,saw a significant savings
increase that year when LEDs replaced CFLs.
ORDER NO.34224 3
Staff commented that the cost-effectiveness of small programs can be particularly
impacted when evaluation costs are included in the cost-effectiveness calculations in a single year.
To ensure that evaluation costs are fully reflected in cost-effectiveness calculations but do not
inordinately impact cost-effectiveness results from year-to-year,Staff recommended that the
Company either average the cost of evaluations over the two or three years between evaluations
or spread the cost of evaluationsproportionallyby kWh over the Company's entire DSM portfolio.
Staff noted that the Company was forced to discontinue its Residential Refrigerator
Recycling program in March 2016,followingthe unanticipated closure of the only cost-effective
third-partyprogram implementer in December 2015.Ending this program caused total residential
savings to decline.
The Company works with two Community Action Partnership (CAP)agencies in its
Idaho service territory to provide weatherization services to its low income customers,Eastern
Idaho Community Action Partnership and SouthEastern Idaho Community Action Agency.The
program was almost cost-effective in 2016 with a ratio of 0.962 and cost-effective in 2017 with a
ratio of 1.41.3 Staff believes the Company has prudentlymanaged its low income program and
recognizes that most utilities have cost-effectiveness challenges with programs serving this
customer segment.
Non-Residential Programs
Total non-residential program savings increased 88%from 2015 to 2016,resulting in
14,188 MWh savings in 2016 that were driven by a dramatic decline in LED costs.Total 2016
expenditures of $2,940,398 were cost effective with a 2.69 UCT and 1.57 TRC.However,2017
non-residential savings decreased nearly 26%due to commercial HVAC and lighting program
changes discussed below,but still remained high compared to previous years.
To address the rapid shift to more efficient LED technologies,the Company adjusted
lighting incentives in 2017.The wattsmart Business program previously incented retrofits by
fixture or bulb,but this was modified to instead focus on lighting controls along with lighting
retrofits.This lowered the incentive per kWh and eliminated some savings associated with per-
2 COmmission Order No.32788 specifies how utilities should calculate cost-effectiveness for Low Income programs.
3 As noted below,in its reply to Staff s comments,the Company clarified that the Staffhad assessed the cost-
effectiveness of the Low Income Weatherization Program under the TRC,when the Commission had directed that
program's cost-effectiveness would be assessed under the PTRC.Under the PTRC,the Low Income Weatherization
Program was effectivein both 2016 and 2017.
ORDER NO.34224 4
bulb incentives.With these changes,the wattsmart Business program generated 10,507 MWh
savings in 2017 and remained cost effective with a 2.92 UCT and 2.02 TRC.
Despite working in a rural service territory,the Company achieved savings of over
1,485 MWh through 158 projects by directly serving the cities of Ammon,Idaho Falls,Iona,
Montpelier,Preston,and Rexburg.The Company reported that demand for its small business
program in rural markets exceeded expectations,which allowed them to spend more time in each
location than originally anticipated.
B.PIIC Comments
PIIC did not dispute the prudency of the Company's DSM expenses,but stated that it
was concerned with the Schedule 191 balancing account balance.PIIC stated that the Company
over-collected DSM expenditures in 2016 and 2017.Because the Company proposed to reduce
Schedule 191 collection rates from 2.7%to 2.25%in Case No.PAC-E-18-12,PIIC opted to
address the issue in that case,if necessary.
C.Company Reply Comments
The Company provided reply comments.First,the Company clarified that the title of
Table 1 to Staff's Comments should be "Customer Efficiency Services Tariff Rider Balance -
Accrual Basis,"instead of "Cash Basis."
Second,in response to Table 2 in Staff's comments,which compared energy "Savings
(at Site)"to the "IRP Target (at Generator)",the Company reproduced that table but updated it by
adding a row for achieved energy "Savings (at Generator)":
Table 2.Rocky Mountain Power's Idaho DSM Portfolio,2016 and 2017 (UPDATED)
METRIC 2016 2017
SAVINGS (AT SITE)19,450 MWh 15,830 MWh
SAVINGS (AT 21,551 MWh 17,514 MWh
GENERATOR)
IRP TARGET (AT 15,800 MWh 17,570 MWh
GENERATOR)
EXPENDITURES $4,500,332 $4,038,931
UTILITY COST TEST 2.22 2.19
TOTAL RESOURCE COST 1.59 1.71
TEST
ORDER NO.34224 5
Third,the Company stated that it will discuss with Staff proposed solutions for ensuring
that evaluation costs are fully reflected in cost-effectiveness calculations without inordinately
impacting cost-effectiveness results.
Fourth,in response to Staff's comment that the Low Income Weatherization Program
was almost cost-effective in 2016,the Company clarified that the Low Income Weatherization
Program cost-effectiveness is determined by the PTRC per the Commission's Order No.32788.
Applying the PTRC,the program was cost-effective in both 2016 and 2017,with a PTRC of 1.04
and 1.45,respectively.
Fifth,the Company agreed to resume meeting with Staff at least semi-annually,to
discuss DSM programs.
Last,the Company stated that it discussed Staff's comments with Staff,and that Staff
supported the clarifications in the Company's reply.
FINDINGS AND DISCUSSION
The Company is an electrical corporation as defined by Idaho Code §61-119,and a
public utility under Idaho Code §61-129.The Commission has jurisdiction over the Company and
the issues in this case under Title 61 of the Idaho Code and the Commission's Rules of Procedure,
IDAPA 31.01.01.000,et seq.
Based on our review of the record,includingthe undisputed comments of the parties,
we find the Company prudentlyincurred $8,530,053 in DSM-related expenses in 2016 and 2017.
This amount consists of $4,491,122 in prudentlyincurred expenses for 2016 (reflecting the $9,210
adjustment referenced by Staff and acknowledged by the Company),and $4,038,931 in prudently
incurred expenses for 2017.Generally,we find the Company's overall portfolio is practical and
prudentlyimplemented,and that the DSM programs were cost-effective overall.
With respect to the Company's low income weatherization programs,we find it
appropriatefor the Company to consider the recommendationofits low income program evaluator,
Opinion Dynamics,to examine market penetration in the region to assess successes and future
need.We also encourage the Company to explore the need for and possibility of fund sharing
between the two CAP agencies.
ORDER
IT IS HEREBY ORDERED that Rocky Mountain's 2016-2017 DSM expenses are
approved as prudentlyincurred in the amount of $8,530,053.
ORDER NO.34224 6
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 §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of December 2018.
PAUÈ KJELL DÈ P SIDENT
KRISTINE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\PAC-E-18-07\orders\PACE1807_FINAL_epdocx
ORDER NO.34224 7