20181204Comments.pdf

EDITH PACILLO
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5430
IN THE MATTER OF ROCKY MOUNTAIN
POWER'S APPLICATION FOR A
DETERMINATION OF 2016 AND 2017
DEMAND.SIDE MANAGEMENT EXPENSES AS
PRUDENTLY INCURRED
ftTJEIVED
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. PAC.E.I8.O7
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Edith Pacillo, Deputy Attomey General, submits the following comments.
BACKGROUND
On August 70,2018, Rocky Mountain Power applied for an Order establishing that it
prudently incurred demand-side management (DSM) expenditures in 2016 and20l7 of
$8,539,263. Application at 1. "DSM" refers to utility activities and programs that encourage
customers to use less overall energy or use less energy during peak usage hours.
STAFF ANALYSIS
Rider Balance and Expenses
Staff audited the Company's DSM expenses and internal processes for paying incentives
to customers. Staff determined that the Company documented expenses correctly and instituted
controls designed to eliminate improper payment of program incentives. Additionally, the
Company's internal review process identified and corrected mistakes prior to the filing of its
ISTAFF COMMENTS DECEMBER 4, 2018
DSM reports. Based on Staff s audit, the Company's DSM rider expenses appear to be prudent
with one adjustment to expenditures, discussed below. Staff recommends that the Commission
order that the Company prudently incurred 54,491,122 in20l6 and $4,038,931 in 2017 DSM
tariff rider expenses.
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 Company's Utah DSM program. On November 26,2078, the Company
notified Staff that all three expenses would be removed from its Idaho DSM program
expenditures.
Staff has reviewed the Company's reconciliation of year-end expenses for 2016 and2017
and accepts the prudently incurred expenses during those years as $4,491 ,122 and $4,038,931,
respectively. These match the request from the Company in its Application, except for a
reduction of $9,210 in20l6, mentioned above.
Table 1: Customer Efficiency Services Tariff Rider Balance - Cash Basisr
2016 2017
BEGINNING BALANCE
TARIFF RIDER REVENUE
CARRYTNG CHARGES
DSM EXPENDITURES
EXPENDITURE ADJUSTMENTS
ENDING BALANCE
(7L4,687\
4,995,753
(1,977)
(4,473,431)
9,210
(r85,732)
(185,732)
5,210,303
8,756
(3,996,866)
1,136,461
Table 1 shows the Company is currently over-collecting in the tariff rider. On November
9,2018, in Case No. PAC-E-18-I2, the Company filed for approval to decrease its Customer
Efficiency Services Rate from 2.7 percentto 2.25 percent, 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 level will be
determined through Case No. PAC-E-I8-12.
I The expenses listed in Table 1 and used to calculate the tariffrider balance differs from the amounts in the Company's DSM Prudency
Application because ofthe timing difference between accrual and cash accounting. The Company reports Customer Efficiency TariffRider
expenses on an accrual basis in its annual reports.
2STAFF COMMENTS DECEMBER 4, 2018
Energy Savings
Rocky Mountain Power uses its energy efficiency tariff rider to fund programs for
approximately 77,600 customers in eastern Idaho. During 2016 and20l7, 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. Table 2 shows the
annual savings, IRP targets, expenditures, and cost-effectiveness ratios for Rocky Mountain
Power's Idaho DSM portfolio for 2016 and2017.
The Company failed to achieve the IRP savings target in20l7, but only fell short by 56
MWh. Staff discussed this shortfall with the Company at its stakeholder meeting, but did not
receive a clear explanation regarding the cause of or solution to the shortfall. Because the
shortfall was relatively small compared to the entire portfolio, Staff believes the Company will
not have difficulty correcting this problem in the future. However, Staff encourages the
Company to ensure it meets its efficiency targets in all future years.
Table 2. Rocky Mountain Power's Idaho DSM Portfolio,2016 and2017
METRIC 2016 2OI7
SAVINGS
IRP TARGET (AT GENERATOR)
EXPENDITURES
UTILITY COST TEST (UCT)
TOTAL RESOURCE COST TEST (TRC)
19,450 MWh
15,800 Mwh
$4,500,332
2.22
1.59
15,830 MWh
17,570 MWh
$4,038,931
2.19
1.71
Residential Programs
The Company offers a variety of energy efficiency programs for its residential customers.
During 2016-2017, these programs were the Home Energy Reports program, which sends
monthly energy usage reports to participants, the Home Energy Saver program, which provides
energy starter kits and incentives for residential construction and appliances, the Residential
Refrigerator Recycling program, which recycles customer's secondary refrigerators, and the Low
Income Weatherization Program, which provides weatherization services to income qualifying
customers.
JSTAFF COMMENTS DECEMBER 4, 2018
Rocky Mountain Power's residential portfolio savings decreased 35 percent between
2015 and 2016. This was attributable to a significant reduction in lighting savings in the Home
Energy Saver program and elimination of the Residential Refrigerator Recycling program. The
2016 residential expenditures of $974,004 were cost effective with a 1.29 UCT and 1 .95 TRC.
Total savings increased slightly in2017 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.
Although energy savings increased rn2017, cost-effectiveness for the year decreased.
The Company stated this decline was due in part to evaluation costs, all of which were included
in the cost-effectiveness calculation for 2017.
Staff recognizes the cost-effectiveness of small programs can be particularly impacted
when evaluation costs are included in the cost-effectiveness calculations in a single year. In
order 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 recommends the
Company adopt, for the cost-effectiveness calculation, one of the two following solutions: 1)
average the cost of evaluations over the two or three years between evaluations or 2) spread the
cost of evaluations proportionally by kWh over the Company's entire DSM portfolio. This
practice aligns with Avista's method for including evaluation costs in its cost-effectiveness
calculations and is similar to the Commission's approved method for including evaluation
expenses in low-income program cost-effectiveness.
As Staff noted in its prudency comments in Case No. PAC-E-16-14, the Company was
forced to discontinue its Residential Refrigerator Recycling program in March 2016, following
the unanticipated closure of the only cost-effective third-party program implementer in
December 2015. As expected, the loss of this program caused total residential savings to
decline. Although the abrupt ending of this program was unfortunate, Staff believes it may have
been discontinued within the next few years anyway as the second-refrigerator market has been
largely transformed.
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 South Eastem Idaho Community Action Agency.
4STAFF COMMENTS DECEMBER 4, 2018
Despite decreased avoided cost and ever-increasing labor and materials costs, the Company
reported that the program was almost cost-effective in 2016 with a ratio of 0.962 and cost-
effective in 2017 with a ratio of L41 . Staff notes that these cost-effectiveness results differ
significantly from what other utilities report. Staff will continue to monitor this program, but
believes the Company has prudently managed its low income program and recognizes that most
utilities have cost-effectiveness challenges with programs serving this customer segment.
Staff believes the Company should consider the recommendation of its low income
program evaluator, Opinion Dynamics, to examine market penetration in the region to assess
successes and future need. Staff also believes that the Company should explore the need for and
possibility of fund sharing between the two CAP agencies. This may be beneficial if one CAP
does not have the capacity to complete weatherization projects and the other CAP has expended
its annual weatherization budget.
Non-Residential Programs
Rocky Mountain Power's non-residential portfolio consists of commercial, industrial, and
agricultural energy efficiency programs through a single program called wattsmart Business.
The program acquires energy savings through direct installation of lighting, HVAC, and other
equipment as well as improved facility management through process analysis.
Total non-residential program savings increased 88 percent from 201 5 to 2016, resulting
in 14,188 MWh savings in2016. This increase was driven by the dramatic decline in LED costs
that occurred during that time. Total2016 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 percent
due to commercial HVAC and lighting program changes discussed below, but still remained high
compared to previous years.
In order to address the rapid shift to more efficient LED technologies, the Company
adjusted lighting incentives in2017. 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 of the savings
associated with per-bulb incentives. With these changes, the wuttsmart Business program
2 Commission Order No. 32788 specifies how utilities should calculate cost-effectiveness for Low Income
programs.
5STAFF COMMENTS DECEMBER 4, 2018
generated 10,507 MWh savings in2017 and remained cost effective with a 2.92UCT and2.02
TRC.
The Company's non-residential programs are administered by two third party companies,
Nextant and Cascade, who work with trade allies, process incentives, analyze custom projects,
and verify project installations. Project managers within Rocky Mountain Power provide
customer outreach and education with the Company's large account customers and engineering
firms that oversee more complex projects with long timelines. Following the 2014-2015
program evaluation, Rocky Mountain Power adopted Cadmus' recommendations and initiated
changes to trade ally partnerships to improve program outreach and raise participant
requirements. Staff recognizes the Company's dedication to program improvement and its
responsiveness to evaluator recommendations.
Staff is particularly impressed with the Company's wattsmart Small Business Direct
program. Many small business owners do not have the time to investigate and participate in
standard commercial DSM programs. Small business programs work to overcome these barriers
with "direct install" programs. Direct install programs typically hire contractors to reach out to
individual small business owners, offer free audits, and provide installations of streamlined and
discounted energy efficiency projects in order to make participation as easy and cost-effective as
possible for the business owner.
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. Staff believes this success is a testament to the Company's
program implementation and acknowledges the Company for this achievement.
Marketing
The Company's broad-based wattsmart marketing campaign continued to innovate in
2016 and20l7 with new marketing methods and customer outreach strategies. In20l7, the
Company created several new marketing products, including TV and radio commercials as well
as digital and print ads. The Company continued to expand its online outreach through Google,
Facebook, and Twitter along with banner ads on local sites. Online communications were
improved by adding a typography overlay in order to engage customers when videos are muted.
6STAFF COMMENTS DECEMBER 4, 2018
Additional ads used geo-targeting to reach small business customers to encourage lighting
upgrades. Staff appreciates the Company's ongoing attention to marketing improvements aimed
at reaching different populations on a variety platforms to create demand for its energy efficiency
programs.
Cost-Effectiveness
In the 2019Integrated Resource Plan (IRP) Conservation Potential Study, Rocky
Mountain Power adopted Staff s recommendation to use the utility cost test (UCT) in its resource
planning process. In addition to using the UCT as the threshold test for post-implementation
cost-effectiveness tests, Staff believes this approach better reflects the value of energy efficiency
as a resource for customers and appreciates the Company's decision to move in that direction in
its IRP.
Idaho Stakeholder Meetings
In past years, the Company met with Commission Staff twice ayear to provide DSM
program updates. But recently, the Company has only scheduled one meeting per year, and that
meeting lasts less than half a day. This very limited amount of time does not provide adequate
time for a full discussion and updates on program accomplishments and challenges. Staff
recommends the Company resume meeting with Idaho stakeholders at least twice annually to
allow Staff, and other stakeholders who may wish to attend, sufficient time to discuss its DSM
programs.
RECOMMENDATION
Staff recommends that the Commission rule that the Company prudently incurred
$4,49I,122 in2016 and $4,038,931 in 2017 DSM tariff rider expenses.
7STAFF COMMENTS DECEMBER 4, 2018
Respectfully submitted this
Technical Staff: Brad lverson-Long
Cassie Koerner
i : umisc/comments/pace I 8-Tepblckrk comments
4b o^rof December 2018
Pacillo
Deputy Attorney General
8STAFF COMMENTS DECEMBER 4, 2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 4th DAY OF DECEMBER 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-18-07, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
ROCKY MOUNTAIN POWER
I4O7 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I 16
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@pacifi corp. com
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
PO BOX 388
BOISE ID 83701
E-MAIL: [e-mail]
ELECTRONIC ONLY
KYLE WILLIAMS
BYU IDAHO
E-MAIL: [e-mail]
RANDALL C BUDGE
THOMAS J BUDGE
RACINE OLSON PLLP
PO BOX 1391
POCATELLO ID 83204
E-MAIL: [e-mail]
[e-mail]
ERIC L OLSEN
ECHO HAWK & OLSEN
PO BOX 6119
POCATELLO ID 83205
E-MAIL : elo(@echohawk.com
DANIEL E SOLANDER
MICHAEL S SNOW
ROCKY MOUNTAIN POWER
1407 WN TEMPLE STE 320
SALT LAKE CITY UT 84I 16
E-MAIL: [e-mail]
michael. snow@oacificorp. com
ELECTRONIC ONLY
JIM DUKE
IDAHOAN FOODS
E-MAIL: [e-mail]
ELECTRONIC ONLY
VAL STEINER
NU-WEST INDUSTRIES INC
E-MAIL: [e-mail]
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD
#140
CHESTERIIELD MO 63017
E-MAIL: [e-mail]
kiverson@consultbai. com
[e-mail]
ANTHONY YANKEL
UNIT 2505
I27OO LAKE AVENUE
LAKEWOOD OH 44107
E-MAIL: [e-mail]
.1, /rZ^
sEC[EaAl&
CERTIFICATE OF SERVICE