2001021628646.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF AVISTA CORPORATION DBA AVISTA UTILITIES—WASHINGTON WATER POWER DIVISION (IDAHO) FOR APPROVAL OF REINSTATEMENT OF NATURAL GAS ENERGY EFFICIENCY PROGRAMS (TARIFF SCHEDULE 190) AND A RELATED SURCHARGE (TARIFF SCHEDULE 191). )
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CASE NO. AVU-G-01-1

ORDER NO. 28646

BACKGROUND
On January 8, 2001, Avista Corporation dba Avista Utilities—Washington Water Power Division (Idaho) submitted a tariff advice for Schedules 190 and 191 – Natural Gas Energy Efficiency Programs. The tariff filing proposes reinstating the Schedule 190 natural gas energy efficiency programs that were in place in 1995 and 1996. The programs were suspended when the natural gas avoided cost dropped to the point where the programs were no longer cost effective. The funding for the programs is proposed through a Schedule 191 distribution surcharge of 0.5% on retail therm sales service. No surcharge is proposed for transportation customers. The estimated annual funding level for Idaho through the surcharge will be approximately $307,000. Revenue will be dedicated exclusively to natural gas energy efficiency programs and associated program administration. Funding distribution for the energy efficiency programs is as follows:
Residential
Commercial-Industrial
Regional
Site Specific Service Agreements $137,000
75,000
20,000
75,000
$307,000
The proposed programs fall into three categories.
Standard Offers—those measures traditionally associated with utility conservation or Demand Side Management (DSM) programs. These services include weatherization, appliance efficiency, process improvements, and control technologies for both residential and nonresidential customers.
Limited-Income Energy Efficiency Assistance.
Market Transformation through codes and dealer channels. Potentially incorporated into this package is an internet-based (IBA) auction mechanism.
Avista proposes the program under the oversight of the Company’s External Energy Efficiency (Triple-E) Board. The Triple-E board is made up of industry, regulatory and consumer assistance groups and should be an impartial group of qualified individuals to perform this function. All expenditures made under Schedule 190 will receive a complete calculation of their energy impact and cost-effectiveness.
The Company has requested an effective date of February 15, 2001.
On January 25, 2001 the Commission issued a Notice of Filing in Case AVU-G-01-1 and established a comment deadline of February 12, 2001. The Commission has received comments from ten individuals, four associations and Commission Staff. The commenting associations were the Idaho Chapter of International Conference of Building Officials, the Idaho Community Action Association, the Kootenai Environmental Alliance, and the Northwest Energy Coalition, filing comments on behalf of itself, Idaho Rivers United, and the Idaho Chapter of the Land and Water Fund of the Rockies (LAW Fund). The comments can be summarized as follows:
Individual Comments
Many of the commentors view the Schedule 191 surcharge as another rate increase and believe that it makes no sense to force all ratepayers to subsidize conservation and assistance programs. Most of those submitting comments oppose the tariff filing. One commentor states “Avista’s less than prudent forecasting and energy planning should require the costs of any conservation program be absorbed by the Company.” A concern was expressed that the Company’s proposal lacks substance and requires further review through pubic hearings. It was also suggested that the proposed funding level was woefully inadequate and is evidence of a lack of meaningful commitment to conservation on the part of Avista.
Idaho Chapter of International Conference of Building Officials (IABO)
The Idaho Association of Building Officials supports reinstatement of the natural gas energy efficiency program. The IABO has worked diligently to encourage Idaho cities and counties to adopt energy conservation codes. “This tariff", it states, “will provide some assistance in transforming the market through codes. We believe that without this and other conservation efforts we will continue to face an energy crisis over and over again.”
Idaho Community Action Association (ICA)
The Idaho Community Action Association supports reinstatement of the natural gas energy program. ICA further states, “Our association members serve the low-income families in Idaho. In the recent energy crisis we have seen the need for more funds to go to both weatherization and energy assistance programs. This is during a time when these types of programs are being cut back… We appreciate the recognition on the part of Avista that these programs can and do help.”
Kootenai Environmental Alliance (KEA)
KEA supports the Company’s proposal. Energy conservation, it states, is the quickest, most economic and practical response to immediate pressure on supply. KEA believe that through prudent conservation measures initiated and directed by utilities, the burden on the utilities to provide for all customer needs will be alleviated.
Northwest Energy Coalition (Idaho Rivers United, and the LAW Fund of the Rockies)
We are heartened, the Coalition states, that Avista is proposing to restore its natural gas energy efficiency investments to near previous levels. However, we believe that the current and forecasted price of natural gas calls for greater action.
The Coalition makes the following observations and recommendations:
The Company and Commission should take this opportunity to ramp up Avista’s gas DSM tariff level, since more efficiency measures will be cost-effective if gas prices stay high.

We recommend that site-specific service agreements be utilized to explore unique circumstances and efficiency opportunities.

The Coalition believes that if a measure is cost-effective, but can be captured only with a 100% incentive, it remains cost-effective.

The Coalition recommends that, at a minimum, low-income residential incentives be allowed to go up to 100% of project costs. The Company’s proposal, it states, does not adequately explain how caps are consistent with acquiring conservation in this cash-strapped sector.

The Coalition is concerned that there are no funds specifically allocated to low-income residential energy efficiency.

The Coalition is also concerned about the discrepancy between dollars expected to be collected from and spent in the residential sector.

The Coalition supports the Company’s proposed experiment with an internet-based auction approach but is concerned about making cost-effective lost-opportunity projects go through a competitive process.

Staff Comments
Staff notes in its analysis that although the Natural Gas Energy Efficiency Program comes at a cost, it can help consumers cope with the increased gas rates by assisting them in reducing consumption while decreasing the overall demand and price for natural gas.
Staff notes that the Company has not provided specific information such as participant financial qualification requirements, project minimum therm saving requirements, program notification methods, or residential or education project specifics. Such information, the Company states, will be developed as appropriate projects are defined and implemented. Staff believes program flexibility is important.
Although Staff contends that the Company has a continuing responsibility to assess projects prior to implementation, Staff has reviewed the Company’s cost benefit analysis data and has found that the calculations are dependent on assumptions regarding program participants and therm savings. The best that can be concluded now, Staff states, is that the program appears to have a projected positive cost benefit ratio. Staff recommends that the Company be required to file annual project and program evaluation reports with the Commission.
Staff is concerned that, while it may be reasonable to combine gas and electric programs to provide economies of scale in areas such as program management and overhead, it might prove difficult to separate the costs and benefits of these type of activities between electric and gas programs.
Staff is concerned that the proposed allocation schedule does not match or distribute funding according to the contributions of customer group nor is the funding level based on any specific program or therm savings. Staff recommends that the Company maintain appropriate sub-accounts by class for each program to assure that customers who pay for the programs have an opportunity to participate in and have received benefit from the DSM programs. Staff suggests investigating a low interest loan program to improve customer participation. A loan combined with a strong education program can be very cost effective for the Company and significantly increase participation opportunity.
In this filing, the Company proposes to continue the accounting treatment previously ordered for its Schedule 190 and Schedule 191 Demand Side Management revenues and expenses. In that Order, the Commission allowed the Company to recognize revenues and expenses as they occurred instead of amortizing a regulatory account. This method allows the Company to timely recover expenses and avoid the indefinite accumulation of a sizeable balance to be recovered through future rates. Staff agrees that this accounting method should continue. (Reference Case No. WWP-G-94-05, ON 25917).
Staff is concerned that the Company in this filing is proposing to remove the interest mechanism portion for the tariff rider. Staff believes that removing the interest component reduces the accountability of the Company. Staff recommends that interest be calculated for this program on the customer deposit rate, currently 6%, for both over-collected and under-funded account balances.
COMMISSION FINDINGS
The Commission has reviewed the filings of record and submitted comments in Case No. AVU-G-01-01. The Commission continues to find it reasonable to process this case under Modified Procedure. Reference IDAPA 31.01.01.204.
The Commission notes that Avista, by letter dated February 14, 2001, indicates its general agreement with Staff comments. The Company states that it is striving to make natural gas energy efficiency programs available to as wide a spectrum of customers as possible. The Company commits to fully consider Staff’s suggestions regarding program design and low-interest loans. The Company accepts Staff’s recommendations regarding interest on deferral amounts as well as requested reporting requirements.
The Commission finds that re-initiation of the Schedule 190 Demand Side Management and Energy Efficiency Program is a responsible action on the part of the Company. Participating customers will benefit through conservation and actual reductions in demand. Non-participating customers will benefit through a lower level of purchased gas costs. We find it reasonable to accept the Company-proposed program (Tariff Schedule 190) and the related 0.5% surcharge (Tariff Schedule 191) with Staff recommendations.

CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Avista Corporation dba Avista Utilities—Washington Water Power Division (Idaho), a gas utility, pursuant to the authority and power granted under Title 61, Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing and as more particularly described and qualified above, IT IS HEREBY ORDERED that Avista Corporation dba Avista Utilities—Washington Water Power Division be authorized to reinstate its tariff Schedule 190 Natural Gas Energy Efficiency Programs and to fund the Schedule 190 programs through an authorized tariff Schedule 191 0.5% surcharge on retail therm sales.
IT IS FURTHER ORDERED and the Company is directed to:
Provide annual tariff Schedule 190 program evaluation reports and cost benefit analyses.

Maintain Schedule 190 program funding sub-accounts by class for each program.

Calculate interest on both over-collected and under-funded Schedule 190 program account balances at the Commission established customer deposit rate, currently 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 February 2001.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:AVU-G-01-01-sw2

ORDER NO. 28646 1

Office of the Secretary
Service Date
February 16, 2001