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Home My WebLink About20040622Anderson Direct.pdfECEi\!ED it, flJ 1'"""" "'1f;i'p pnll') . ~.,~ - ,:1.fw "~" '... u = . "" ,""., ~ I i ;J F t,E; Lie;'T!j IT';"' -.,.\ .'.."""'""" u! ILi i U::'J vU ('110:)1' f'l BEFORE THE IDAHO PUBLIC UTiliTIES COMMISSION IN THE MATTER OF THE APPLICATION OF A VISTA CORPORATION FOR AUTHORITY TO INCREASE ITS RATES AND CHARGES FOR ELECTRIC AND NA TU RAl GAS SERVICE TO ELECTRIC AND NATURAL GAS CUSTOMERS IN THE STATE OF IDAHO. ) CASE NO. AVU-O4- VU-O4- DIRECT TESTIMONY OF l YNN ANDERSON IDAHO PUBLIC UTiliTIES COMMISSION JUNE 21, 2004 Please state your name and business address for the record. My name is Lynn Anderson and my business address is 472 West Washington Street, Boise, Idaho. By whom are you employed and in what capacity? I am employed by the Idaho Public Utilities Commission as a Staff economist. What are your duties with the Commission? My duties include evaluating electricity, natural gas, water and telephone utility applications and customer petitions, as well as conducting generic investigations, the resul ts of which are used to make recommendations to the Commission. Would you please outline your academic and professional background? I have a Bachelor of Science degree in government and a Bachelor of Arts degree in sociology, both from Idaho State University where I also studied economlcs and architecture.I studied engineering at Northwestern University and Brigham Young University and public administration and quantitative analysis at Boise State Uni versi ty.I have attended many training seminars and conferences regarding utility regulation , operations, forecasting, and marketing. I began my employment wi th the Commission in CASE NOS. AVU-04-1/AVU-04- 06/21/04 ANDERSON (Di) STAFF 1980 as a utility rate analyst.In 1983 I was appointed to the position of telecommunications section supervisor and in 1992 I was appointed to my present position as an economist.In that capacity I have been a Staff representative to the Northwest Energy Efficiency Alliance, Avista s External Energy Efficiency Board and Idaho Power s Energy Efficiency Advisory Group.Since 1999 I have served the Commission as a policy strategist for electricity and telecommunications lssues on an as- needed bas is. From 1975 to 1980 I was employed by the Idaho Transportation Department where I performed benefit/cost analyses of highway safety improvements and other statistical analyses. What is the purpose of your testimony? The purpose of my testimony is to make recommendations regarding Avista s request that its electricity and gas demand side management (DSM or energy efficiency) expenditures be deemed reasonable and prudent.I will also present changes to Avista ' s electricity DSM funding level that the Company proposed at the May 19, 2004 meeting of its External Energy Efficiency (EEE) Advisory Board and that it reiterated to the Staff on June 2 , 2004.Finally, I will comment on Avista s proposed advanced meter reading (AMR) proposal. CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF Demand Side Management/Energy Efficiency Please describe the energy efficiency expenditures that the Company has requested be deemed reasonable and prudent by the Commission. The Company is asking that its electricity DSM expenditures from January 1, 1999 through October 31 2003, and its gas DSM expenditures from March 13, 1995 through October 31 , 2003 be found to have been prudently incurred.(Company witness Hirschkorn s pre-filed direct testimony has a slight error , showing December 31 , 2003 as the end date.As noted by Avista wi tness Brian Hirschkorn on page 44 of his pre-filed testimony, the Commission previously found that the Company electricity DSM expenditures were prudently incurred through December 31, 1998. How does Avista collect revenues that finance its energy efficiency programs? Avista collects revenues for its DSM programs from surcharges described in its tariff Schedule 91 for electricity DSM and Schedule 191 for its gas DSM. Currently, the electrici ty surcharges amount to 1. 95% of base revenue and the gas surcharges amount to 0.5% of base revenues.For 2002 these surcharges collected about $2.7 million and $279,000 per year for electricity and natural gas DSM, respectively. CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF Do you believe Avista has been reasonable and prudent in managing its DSM revenues? Yes.Through my participation in Avista s EEE Advisory Board and the Northwest Energy Efficiency Alliance (NEEA) Board and various committees, I have observed Avista s conscientious approach to obtaining energy efficiency for its customers.I have al reviewed Avista s detailed DSM cost-effectiveness reports.As stated by Mr. Hirschkorn on page 45 of his pre-filed, direct testimony, Avista estimates that its average, historical , 15-year levelized utility cost of electricity savings is 1. 4 ~ per kilowatt hour (kWh) Avista s similarly calculated utility cost of gas savlngs is 25~ per thermo (Hirschkorn erroneously states that Avista s utility cost of gas savings is 14 ~ per therm. Both the electrici ty and gas costs of energy saved are well below Avista ' s avoided costs.Although there may be room for some minor disagreements among reasonable evaluators about Avista s DSM cost-effectiveness calculations, Avista s assumptions and calculations are easily wi thin a range of reasonableness. What changes did Avista propose to its electricity DSM funding level at its May 19 EEE Board meeting and again when it met with Staff on June 2, 2004? Avista proposed reducing its electricity DSM CASE NOS. AVU-04-1/AVU-04- 06/21/04 ANDERSON (Di) STAFF surcharge from the current 1.95% to about 1.25% of base revenue s (See page 10 of Exhibit No. 132.This equates to nearly a $1 million dollar reduction.Avista also proposed that the surcharge be set on a cents-per- kWh basis rather than on a percent of revenue basis as curren t 1 Y done. Does Staff agree with Avista s proposed reduction in its DSM tariff rider? Yes, Staff is willing to accept the reduction in total DSM revenue collections contingent upon the following two conditions: 1) Assurance by Avista that the reduction in DSM revenues will not affect the Company s pursuit of cost- effective energy eff iciency measures, regardless of whether such measures resul t in Avista DSM fund balance being negative; and, 2) An increase in Avista ' s contribution to the Low Income Weatherization (LIWA) program to a level determined to be reasonable by the Commission in this rate case. Has Avista indicated agreement to those two condi t ions? Yes.Jon Powell, Avista ' s DSM manager, assured its EEE Advisory Board on May 19 that the proposed reduction in DSM tariff rider revenue will not reduce the CASE NOS. AVU-04-1/AVU-04- 06/21/04 ANDERSON (Di) STAFF availability of cost-effective energy efficiency incentives and assistance for its customers.(See pages 2 and 4 of Exhibit No. 132.Furthermore, it is my understanding that Avista will request that its DSM surcharges be increased if its surcharge balance becomes too negative for too long.Mr. Powell restated these assurances to me after other Company representatives rei terated the proposal at its meeting wi th the Staff on June 2.Mr. Powell also suggested that Avista is not opposed to a reasonable increase to its funding of LIWA. What have been the historical levels of Avista s electrici ty DSM surcharges? The DSM surcharge was initiated at 1.55% in 1995, decreased slightly to 1.503% in 1996, decreased significantly to 1.0% in 1999 due to a large balance being carried, and was increased to the current 1.95% in June of 2001 shortly after Avista had begun rapidly accelerating its DSM efforts in response to the western states energy crisis. What is the history of Avista s electricity DSM revenue collections and expenses? The table in Exhibi t No. 133 shows Avista ' s reported annual DSM revenues, expenses and fund balance. What general programs does Avista s electricity DSM surcharge fund? CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF Avista s electricity DSM surcharge funds all of the Company s own electrici ty DSM programs, about $250,000 for the Company s Idaho share of the Northwest Energy Efficiency Alliance (NEEA) market transformation efforts, and a small portion of the company s maximum allocation of $210,000 annually for the Lewiston Community Action Partnership (CAP) various low-income programs, including weatherization. Avista says that the $210,000 allocated to the CAP is funded from a combination of Bonneville Power Administration s Conservation and Renewable Discount (BPA C&RD) funds and its own electricity and gas DSM funds. Avista has also indicated that the CAP does not always spend all of the $210 000 maximum allocation. Given Avista ' s claim that its electrici ty DSM programs have bought energy efficiency at an average levelized utility cost of 1. 4~ per kWh , why is Staff willing to accept Avista s proposed reduction in its DSM surcharge? As previously described, Avista has assured Staff that the level of its DSM funding will not limit its pursuit of cost-effective energy efficiency measures. Avista s DSM surcharge historically has been increased and decreased in response to changing needs.Avista has been willing to ramp up its DSM efforts when it is cost- CASE NOS. AVU-E- 04 -l/AVU-G- 04- 06/21/04 ANDERSON (Di) STAFF effective to do so regardless of its DSM balance.Staff believes that it is important for Avista to maintain control of its DSM programs and funding levels especially given its historically good stewardship of these programs and funds.The reduction at this time better reflects anticipated DSM expenditures and also provides some rate relief as base rates will likely increase as a result of this rate case.And, in comparison to the just completed Idaho Power rate case, Avista s proposed DSM funding level does not seem unreasonable. How do Idaho Power s DSM funding levels compare to Avista ' s proposal? Idaho Power s DSM surcharge equates to about 5% of base revenues and collects about $2.7 million annually, but that Company funds NEEA ($1.2 million for Idaho) and LIWA ($1.2 million going forward) and some of its DSM general administrative costs ($0.3 million) from other sources.In total , Idaho Power will likely spend about $5.4 million annually for DSM or about 1.1% of total base revenues.Even with Avista s proposed reduction to 1.25%, its DSM revenue as a percent of base revenues would still be higher than Idaho Power Do you have a specific recommendation for Avista s level of LIWA funding? No.I am aware that Idaho Power s recently CASE NOS. AVU-04 -l/AVU-G- 04- 06/21/04 ANDERSON (Di) STAFF ordered increase to $1.2 million for LIWA for each of the next three years (exclusive of any BPA C&RD funding) equates to about $3 per Idaho Power customer ($1. million/ 400,000 total Idaho customers) Are you suggesting that Avista increase its electricity DSM funding for LIWA to $320,000 per year? I am simply stating that amount is aboutNo. equivalent, on a per customer basis, to the $1.2 million recently approved by the Commission for Idaho Power. In comparing northern and southern Idaho LIWA funding levels, it should be noted that Avista also contributes to LIWA from its gas DSM, whereas Intermountain Gas does not contribute to LIWA.And, as previously mentioned, the CAP apparently does not always spend all of the maximum $210,000 that Avista authorizes it to spend for weatherization and other programs. I anticipate that the Communi ty Action Partnership Association of Idaho (CAPAI) will recommend and support an appropriate funding level based upon a needs assessment specific to Avista s service area and the ability of the CAP office based in Lewiston and its satellite offices in Grangeville, Moscow, Coeur d' Alene and Sandpoint to efficiently and prudently increase their weatherization efforts for low-income households. You mentioned that Avista also proposed that CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF its DSM surcharge be set as a cents-per-kilowatt-hour (kWh) rate rather than being set as a percent of base revenue s Does the Staff support this change? Yes.The current DSM surcharge rates, al though set as a uni form percent of base revenue, are al so shown in the tariff as varlOUS cents per kWh by class of servlce.I believe it would be simpler for the tariff to list just the cents per kWh.Doing so would also eliminate the need to change the tariff language coincident wi th general rate changes.Exhibi t No. 134 shows the current DSM surcharges and the proportional DSM surcharges that result from a $1 million reduction. Are you recommending or suggest ing any changes to Avista ' s natural gas DSM surcharges, programs or contribution to CAP for LIWA? No. Advanced Meter Reading (AMR) Briefly describe Avista s advanced meter reading (AMR) proposal. As described in more detail in Company wi tness David Holmes ' pre-filed, direct testimony, Avista proposing to install advanced meter reading (AMR) capability over a four-year period for all of its electricity and gas customers in Idaho.Mr. Holmes says AMR will resul t in reduced meter reading operating CASE NOS. AVU-E- 04 -l/AVU-G- 04- 06/21/04 ANDERSON (Di) STAFF expenses, will provide other immediate system benefits and will provide much of the infrastructure necessary for critical peak and/or time-of-use (TOU) pricing in the future. Does Avista believe that the immediate savlngs in operating expenses after completion of the AMR proj ect will completely offset the capital costs? Not qui te.Mr. Holmes estimates the net gas savlngs to be $63,000 per year or 0.12% of $51 million in revenue (about a 7~ decrease to a $57 customer bill), but that the electrici ty net cost would be an increase of $189,000 or 0.13% of $146 million in revenue (about a 7~ lncrease to a $50 customer bill) Mr. Holmes concludes the estimated very small net revenue requirement increase is more than offset by additional system benefits that have not been monetarily quantified. Does Staff support Avista ' s AMR proposal In principle? We believe one of the most importantYes. future system benefits of AMR will be the capability to implement critical peak TOU pricing.Staff anticipates that critical peak TOU pricing will become cost-effective for Avista by about the time the AMR system is completed and that the additional components necessary for such a pricing system should begin to be installed at that time. CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF In other words , Staff believes it reasonable for Avista to consider installing just the AMR facilities without specific TOU pricing facilities at this time. Is it Staff's position that Avista s proposal should be deemed a reasonable and prudent capi tal investment? No, Staff does not have sufficient information to make a final judgment and Avista is not requesting such judgment from the Commission in this case. What is Avista requesting of the Commission regarding its four-year AMR proposal? As explained by Avista wi tness Don Falkner on page 46 of his pre-filed direct testimony, Avista wants to be able to "treat AMR investment costs as a unlque construction proj ect. "As such , Avista proposes that its AMR investment would be capitalized as construction work in progress until after the entire metering proj ect completed.At that time depreciation would begin and the investment could be included in rate base should the Company file an Application to do so. Does the Staff agree with Avista s proposed deferred accounting treatment for its four-year AMR implementation? Staff believes that Avista will begin to benefit from automated meter reading before completion of CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF the entire four-year AMR installation.Howeve r, to promote Avista s implementation of AMR at this time, Staff is not opposed to the deferred accounting treatment proposed by Mr. Faulkner. Does this complete your direct testimony? Yes, it does. CASE NOS. AVU-04-1/AVU-04-06/21/04 ANDERSON (Di) STAFF ;:E (1) rfJQ ~ ~ ~\'\,..q 0\ ~ ~ ~ ~ ~ ~ Exhibit No. 132 Case No. A VU-04- A VU -04- L. 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(1 ) C v., ) .. . . . . . ~ I N ~ tI j 0 ~ 0 ~ 0 .. . . . . . + : : : . v. , ) I ... . . . . .. . . . . . - - - Ma j o r Pr o g r a m I n i t i a t i v e s Or i g i n a l l i s t o f 5 0 co n c e p t s Cu r r e n t i m p l e m e n t a t i o n o f Ro o f t o p H V A C -- - - - - c - In d i r e c t E v a p o r a t i v e C o o li n g Re s i d e n t i a l e l e c t r i c t o g a s c o n v e r s i o n Pr e s c r i p t i v e L i g h t i n g Pr e s c r i p t i v e M o t o r s Pr e s c r i p t i v e m e a s u r e p a c k a g e f o r g r o c e r y s t o r e s Pa r t i c i p a t i o n i n D o u b l e - Y o u r - Sa v i n g s r e g i o n a l p r o g r a m Mo t o r M a n a g e m e n t t r a i n i n g Li g h t i n g S e m i n a r s e r i e s O' \ r (l t I i -- - - . P' ~ r: n :: r ' (t ) , . . . . . -- - - cr ' p. . Z ~ . (t ) 0 "' i ;, 0 8 ~~ ~ ~ ~ ~ ~ cn c C .. - t - I 0 ~ 0 H) 0 ~ ~ I ~ -- - - Ma j o r P r o g r a m I n i t i a t i v e s Al l a r e t e m p o r a r y i n i t i a t i v e s p e n d i n g f u r t h e r e v a l u a t i o n Al l p r o g r a m s h a v e A w e l l - de f i n e d o b j e c t i v e Qu a n t i f i a b l e r e s u l t s - A n ex i t s t r a t e g y Pr o g r a m s m a y b e e x p a n d e d , r e v i s e d o r c a n c e l l e d d e p e n d i n g o n pr o g r a m s u c c e s s Al l s u c c e s s f u l p r o g r a m s w i l l b e e v a l u a t e d f o r a v a i l a b i l i t y i n Wa s h i n g t o n Re s u l t s e x p e c t e d i n s i x m o n t h s t o t w o y e a r s A vista s Electricity DSM Revenues, Expenses and End-of- Year Balances for Idaho Year Revenues w.Expenses incl.End of Year Interest LIW A & NEEA Balance 1999 $ 1 640 637 $ 1 588 759 775 920 2000 $ 1 237 548 $ 2 006 370 098 2001 $ 1 672 173 $ 5 214 921 ($ 3 535 650) 2002 $ 2 660 353 $ 882 959 ($ 1 758 256) 2003 (10 mo.$ 2 236 728 $ 738 956 ($ 318 869) Exhibit No. 133 Case No. A VU-04- VU -04- L. Anderson, Staff 6/21/04 A vista s Current and Proposed DSM Surcharges in Idaho Schedule Current Rate Reduced Rate 1 residential 104~ / kWh O67~ / kWh 11 & 12 140~ / kWh O90~ / kWh 21 & 22 100~ / kWh O64~ / kWh O684~ / kWh O44~ / kWh 31 & 32 102~ / kWh O65~ / kWh 41 - 49 95% of bill 1.25% ofbill Revenue $2.7 million $1.7 million Exhibit No. 134 Case No. A VU-04- A VU -04- L. Anderson, Staff 6/21/04 CERTIFICATE OF SERVICE HEREBY CERTIFY THAT I HAVE THIS 21ST DAY OF JUNE 2004 SERVED THE FOREGOING DIRECT TESTIMONY OF LYNN ANDERSON, CASE NO. AVU-04-lIAVU-04-, BY MAILING A COpy THEREOF POSTAGE PREP AID TO THE FOLLOWING: DAVID J. MEYER SR VP AND GENERAL COUNSEL VISTA CORPORATION PO BOX 3727 SPOKANE W A 99220-3727 KELLY NORWOOD VICE PRESIDENT STATE & FED. REG. VISTA UTILITIES PO BOX 3727 SPOKANE WA 99220-3727 CONLEY E WARD GIVENS PURSLEY LLP PO BOX 2720 BOISE ID 83701-2720 DENNIS E PESEAU, PH. D. UTILITY RESOURCES INC 1500 LIBERTY ST SE, SUITE 250 SALEM OR 97302 CHARLES L A COX EVANS KEANE 111 MAIN STREET PO BOX 659 KELLOGG ID 83837 BRAD M PURDY ATTORNEY AT LA W 2019 N 17TH ST BOISE ID 83702 SECRETARY CERTIFICATE OF SERVICE