20130930C.Drake DI.pdf

DAVID .J. MEYER ; .:
VICE PRESIDENT AND CHIEF COUNSEL OF
REGULAToRY & GoVERNMENTAL AFFATRS ;:;:' ; -] :,"r ,'.: ii-:: I l
AVTSTA CORPORATTON j ,P.O. BOX3727 .,;'ri...
1-411- EAST MISSION AVENUE
SPOI(ANE, WASHINGTON 99220 -3727
TELEPHONE: (s09) 495-43L6
EIIAIL : david. meyer@avistacorp . com
BEFORE THE IDNIO PUBIJIC UTILITIES COMMISSION
rN THE IqATTER OF THE APPLICATION ) CASE NO. AVU-E-B-O6I
oF AVISTA CORPORATTON FOR A ) CASE NO. AVU-G-13-D2-
FINDING OF PRUDENCE FOR 2O]-O -20L2 )
EXPENDTTURES ASSOCIATED V{ITH )
PROVIDING ELECTRIC AIiID NATURAL GAS ) DIRECT TESTIMONY
ENERGY EFFICTENCY SERVICE IN THE ) OT
STATE OF IDAHO ) CURIS D. DRAKE
)
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
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I.IIITRODUCTION
O. Please state your name, employer and businesg
addrese.
A. My name is Chris Drake. I am employed by Avista
as Manager of Demand Side Management (DSM) Program
Delivery. My business address is East 74L1- Mission
Avenue, Spokane, Washington.
O. Would you pleaee describe your education and
bueiness e:<perience?
A. I graduated from Gonzaga University in L992 with
a Bachelor of Arts degree in Communications. I completed
my Project Management certificate in 2005 from Washington
State University and Gonzaga University.
I joined the Company in 1,995 in the Hydro Licensing
and Safety Department. In 1-999 I accepted a program
coordinator position and later became a program manager
within the Marketing Department in 2000. After the 2001
energy crisis, I assumed responsibilities for the majority
of the residential portfolio that included prescriptive
rebate offerings and later became responsible for the Low
Income Weatherization program. I began my current position
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in August of 2OlO. I am responsible for design and
implementation of in-house and third-party implemented
program delivery which includes Avista's prescriptive
residential and some commercial and industrial DSM program
offerings.
Prior to joining Avista, I served as an Infantry
officer in the United States Army from 1,992 until L995,
finishing my service as the battalion logistics officer
deployed to Panama.
A. What is the Ecope of your testimony in this
proceeding?
A. I will provide an overview of the Company,s DSM
program offerings available to Idaho customers in the
201-0-201-2 program years. I will also respond to the
results from the third-party evaluation, measurement and
verification (EM&V) memo specific to non-residential
process evaluatj-on.
O. Are you sponsoring any exhibits to be introduced
in this proceeding?
A. Yes. f am sponsoring Exhibit No. 2, Schedules 1
and 2. Schedule l- illustrates programs offered during
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20L0-201-2, along with program descriptions, eligibility
reguirements,incentive amounts and significant
implementation changes made during this time period. Also
included in this schedule are total savings, cost-
effectiveness, non-energy benefits when applicable, net-
to-gross values, discount rates, total expenditures by
incentives and non-incentive utility cost, and a 11st of
measures with energy savj-ngs, and measure 1ives.1 Schedule
2 is the Cadmus 201,2 Process Evaluation Memorandum dated
August 2, 20:-.3.
II. OVERVIEW
O. TIouId you pleaee provide a brief overview of
Avigta's DSM programs?
A. Yes . Avista' s core obj ective has historj-ca1Iy
been to provide customers with cost-effective energy
efficiency services. Avista is in its 35th year of doing
so. Avista's approach is to use the most effective
"mechanism" to deliver energy efficiency services to
customers. These mechanisms are varied and include: 1)
' Labor is included within non-incentive utility cost. DSM labor is charged at a multi-state and fuel level,
rather than a program level, and allocated to the individual states. The "labor" distinction or coding is
dropped during this allocation process. For purposes of Exhibit No. 2, Schedule l, non-incentive utility
cost expense is allocated based on an avoided cost.
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prescriptive programs (or "standard offers" such as high
efficiency applj-ance rebates); 2) site-specific or
"customized" analyses at customer premises; 3) "market
transformational, " or regional, efforts with other
utilities through NEEA; 4) low-j-ncome energy efficiency
services through IocaI Community Action Agencies; 5) low-
cost/no-cost advj-ce through a multi-channel communication
effort; and 5) support for cost-effective appliance
standards and building codes. I will be describing all of
these program delivery mechanisms as they apply to
residenEial, nonresidential and Iow-income customers later
in my testimony.
A. How doeg Avista make avaiLable its DSM program
offerings and educat,e customers about energy savings?
A. Avista continually provides opportunities for
customers to learn about 1ow cost/no cost ways to manage
their home and busj-ness energy usage. The "Every Little
Bit" Campaign has been the primary drlver of this effort.
We also provide tips through the Avista Utilities website,
on billboards, as well as radio and television spots
throughout both the heating and cooling seasons. A
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variety of tips are provided throughout the year to help
encourage efficient use of space heating and cooling,
appliances and electronj-cs as well as linking to and
promoting related rebate opportunities as applicable. The
campaign is reinforced by website tools and information
including a comprehensive online Home Energy Analyzer
where customers can see a representation of how their
energy is being used and sign up for savings plans that
fit, their lifestyles. Similar broad-based techniques are
used for both residential and nonresidential.
In addition, both residential and nonresidential
cusEomers have access to direct outreach activities.
Avista offers energy fairs for residentlal customers, with
emphasis given to low-income customers. Direct outreach
for nonresidential customers is delivered through account
executj-ves and efficiency engineers who provide on-site
information regarding energy savings opportunities and
available program information.
III. DSM PROGRAI{ O\IERVIEW
A. Please deecribe the residential DSM progr€rm and
offerings provided in 2010 through 20L2.
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A. The Company's residential portfolio provides a
varj-ety of measures, through different delivery channels,
offering energy efficiency improvement opportunities to
Avista customers. The maj ority of t,he residenti-aI
portfolio is implemented through prescriptive rebates and
processed in-house by Avista. New construction and
existing residential homes (up to four-p1ex) that heat
with Avista electric or natural gas, select from a list of
energy efficiency measures with rebates for consideration
of installation in their homes. Customers must purchase
and install the eguipment or qualifying energy efficiency
measure and submit a rebate application with the
appropriate documentation within 90 days of installation
in order to receive an incentive.
In the 20L0-20L2 program years Avista offered the
following residential programs to Idaho electric and/or
natural gas customers noted in Illustration L:
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Illugtration No. 1:
RESIDENTIAI,
High Efficiency Furnace/aoiler
High Efficiency Heat Pump
Ductless Heat Pump
Aj-r Conditj-oner Replacement
High Efficiency Variable Speed Motor
High Efficiency Tanked and Tankless Water Heater
Space Heat Conversion (Direct Use of Natural Gas)
Water Heat Conversion (Direct Use of Natural Gas)
Multifamily Natural Gas Market Transformation (Direct
Use of Natural Gas)
Ceiling, Attic, F1oor, WaI1 Insulation
Window Replacement
Fireplace Damper
ENERGY STAR@ Homes
ENERGY STAR@ ApplJ-ances
CFL (and CFL Recycling) Promotionsrrsecond" Refrigerator/tr'reezer Recycling Program
Community Events and lr'Iorkshops
Low- cost/no- cost j-nformation
On-1ine Home Energy Audits and Analysis
Simple Steps Smart Savings (Cf'f,s and Showerheads)
CFL Direct Mail
The residential programs shown above are primarily
standard offerings, otherwise known as prescriptive
programs.
Idaho residential customers also received Avista-
sponsored programs in the form of manufacturer buy-downs
for compact fluorescent lighting and Iow-f1ow showerhead
measures. These products have a lower retail prj,ce point
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at the time of purchase and are usually part of a
regional, multi-state program offering.
O. Please degcribe the nonregidential DSM offerings
provided during thie time.
A. Within the nonresidential segment, programs are
offered to retail electric and natural gas customers
through a combination of prescriptive rebates and site
specific assessments. PrescrJ-ptive rebates are geared
toward relatively uniform measures, applications and
energy savings. This delivery method reduces
implementation expense while simplifying participation for
both customers and trade a11ies. The sj-te specific
offerings are available for all other efficiency measures
and applications. In these situations, each energy
efficiency project is individually analyzed based on the
measure being installed and consj-ders other variables that
may be present in the building or in the process
operation.
Illustration No. 2 below includes a list of
nonresidential rebates available for electric and/or
natural gas customers in the 2010-20L2 program years:
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Illugtration No. 2z
NOIIRESIDENrIAL (COMMERCIAIJ & MDUSTRIAL)
EnergySmart Grocer
Power Management for PC Networks
Premium Efficiency Motors
Food Service Eguipment
Commercj-a1 HVAC Variable Frequency Drives
Retro-Commissioning
Commercial Clothes Washers
Vending Machine Controllers
Lighting and Controls
Green Motors Rewind Program
Commercial Natural Gas HVAC
Commercial Windows and Insulation
Standby Generator Block Heater
Demand Controlled Ventilation
Steam Trap Repair/Replacement
LEED Certificati.on
Refrigerated Warehouse Program
Side Stream Fi-ltration
LED Traffic Signals
Electric to Natural Gas Water Heater Conversi-on
Program
Site Specific Offerings in Various End Uses
Avista offers site-specific incentives for commercial
and industrial customers for custom projects. The sj-te-
specific program provides incentives on cost-effective
commercial and industrj-aI energy efficiency measures that
meet required simple payback and measure life
reguirements. This is implemented through on-site audits
and analyses, customized project evaluation, and dual fuel
incentive calculators for energy savings generated
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specific to the customer's premise or process ("proiect").
Incentives were offered for any measure that had greater
than a one-year and less than an eighE-year simple payback
for lighting measures or less than a thirteen-year simple
payback for non-lighting measures.
O. How does Avista address energy efficiency
progrErma for low-income cuetomerE?
A. The residential Iow-income program is comprised
primarily of site-specific offerings delivered by 1oca1
Communj-ty Action Agencies (CAA) to benef it income-
gualified, residential customers. Avista contracts with
agencies to utilize existing infrastructure currently in
place as a result of delivering the Federal Weatherization
Assistance and Low Income Home Energy Assistance Programs
(LIHEAP). The customer intake process includes potential
consideratj-on of participation for energy assistance and
other income-qualified programs that can also serve as
referrals for weatherization services.
Low-income efficiency measures are similar to
measures offered under the traditional residential
prescriptive programs .
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The program targeted to 1ow-income customers is
provided by the Community Actj-on Partnership of Lewiston.
The agency receives a set amount of funding each year to
make energy efficiency improvements to income-gualified
homes that are heated by Avista electric or natural gas
servj-ces (natural gas funding for low- income programs was
suspended at the end of 201-2). These improvements may
include upgrades to heating and water heating eguipment,
ceiling, wa1I and floor insulation, replacement of
windows, doors, and conversions from electric heating to
natural gas heating.
A. Have you reviewed the Staff's commente in the
CommiEsion'B inquiry into cost-effectivenesE and funding
of low income weatherization and energy conEervation
programs?
A. Yes. In the "fnquiry j-nto Cost-ef fectiveness
and Funding of Low rncome,"2 the Commission initiated
workshops to provide a forum for the exploration of issues
related to the cost-effectiveness of low-income
weatherization in Idaho. The Company replied with comments
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filed December 7 , 201-2 and January 4, 20L3 to the
Commission Staff's draft report supporting Staff's
recommendations related to Avista.
Subseguently, the Company has identified more
opportunj-ties to provide programs related to the direct
use of natural gas for Idaho Iow-j-ncome customers through
the CAA, such as electric to natural gas space and water
heater conversions. Natural gas fuel conversion tends to
be a more cost-effective measure with higher TRC results.
The Company believes if more of these measures were
implemented by the CAAs, it would improve cost-
effectiveness for the overall 1ow-income portfolio.
The 2OL2 results included the effects of recent
efforts to identify electric to natural gas conversions
along with several non-energy benefits being applied in
addition to the doI1ar-for-do11ar non-energy benefit
assumed for health and human safety. These contributed to
a successful TRC of 1.07 for the electric Iow-income
program.'
3 Natural gas
programs are
low-income was less than 1.0
currently suspended in Idaho.
TRC; all natural gas DSM
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O. In light of declining electric avoided costs,
what program modificationE do you anticipate making to
assiEt with the low-income programs' continued cost-
effectiveness?
A. The 20L2 Iow-income weatherization electric
programs were cost-effective. As stated earlier, 2012 did
include the additional emphasis on electric to natural gas
conversions that t,he agency is continuing to pursue.
While the most recent year was cost-effective, whether
enough conversions can be identified and completed to
offset lower avoided costs continues to be a challenge.
The delivery of low-j-ncome programs by the Community
Action Agency is an important area of management focus.
O. P1ease provide an overview of the two new
programs launched in 2011 and 20L2.
A. Among several new program offerings, in 20L1-,
Avista distributed via US Postal Service boxes of energy
efficient compact fluorescent light (CFL) bulbs to all
residential and small commercial customers on an "opt-out"
basis. In total, 745,455 bulbs (93,1-82 boxes) were
distributed to Idaho residential and smal1 commercial
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customers with verified first-year savings of 1,3,290 MWh4.
Subsequent process evaluation conducted by a third-party
demonstrated high satisfaction with the program as well as
a high level of awareness of energy efficiency programs.
Durj-ng 20J-2, the Company leveraged regional and
national efforts to accelerate the conversion of Tl2
fluorescent lighting fixtures to higher efficiency T8
fixtures. Avista's conversion program was specifically
designed to target the replacement of existing operational
T1-2 fixtures. The program featured a prescriptive
incentive available for a limited period of time, BD
application process specific to the needs of this program
and a coordinated outreach program focusing the customers
attention on the need to take action by a pre-specified
deadline. The program reguired customers to submj-t their
rebate applications between ,January 1-, 201-2 and December
31, 20l.2.
CusEomer participation significantly exceeded
expectations with a total of 1,500 rebates being issued
o These verified savings are higher than
Forum's (RTF) deemed 15 kWh/year/mailed
independent analysis of room distribution,
commercial run-times, in-service rate, eEc.
the Regional Technical-
CFL based on Cadmus
residential and sma11
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during this time with an estimated savings of 15 million
kWhs. Participation was heavily weighted towards the last
month of that program, indicating the value of the pre-
specified program deadline and further defining a
potentially replicable approach to replace-before-burnout
efficiency opportunities in the future.
rv.EVAIJUATION, MEASI'REMETIT AND IfERIFICATION
O. Would you please deecribe the engagement of
Cadrnus for Avista's evaluation, measurement,, and
verification (EM&v) ?
A. Yes. A central component of Avista's EM&V
Framework and Annual EM&V Plan is independent, or third-
party, verification of the Company's claimed efficiency
savings.Cadmus was retained, af ter a competit j-ve
Request-for-Proposal process, to perform impact and
process evaluations. Impact evaluation independently
estimates and/or measures realized savings at the customer
premises through a variety of means, including metering
equipment, billing analyses and quantitative methods.
Process evaluations examine potential for program delivery
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improvements based on participant and nonparticj-pant
surveys, among other means.
a. With regard to the impact evaluation, what is a
realization rat,e and how doeg this affect cLaimed savings?
A. Energy efficiency savings are estimated based
on the per-measure or unit (e.9., T-8 commercial lighting,
ENERGY STAR@ Dishwashers, or ceiling insulation) accepted
value multiplied by the number of units installed.
Thereafter, the number of units installed is verified for
accuracy and proper installation and the act,ual savings
value per measure and operation can be tested by data
loggers, billing analysis and other analytical means. If
the realized or verified savings estimate per measure are
confirmed without change and if the number of
installations, upon verj-fication, are found to be properly
installed and equal to those claimed, then the realj.zation
rate j-s L008. If the actual savings 1evel per measure is
less or if the installed units are less, then the
realization rate would be 1ess.
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As noted in the Cadmus' memo at page 18, Avista's
realization rate showed significant improvement from 2OLl
Lo 2OL2.
A. The Cadmus' 20L2 Procegs Evaluation Memorandum
dated Auguet 2, 20L3, makes a series of recommendationE
regarding procesa improvements to Avista's DSM progr.rmE.
What iE the Company's reaponae to thege recommendations?
A. First, the purpose of a process evaluation is
for cont j-nued program j-mprovement. The Company has
historically reviewed and modified its DSM programs for
improved use of customer funds and better service to
customers. Cadmus' approach is to provide real-time
feedback to allow for continuous improvements and course
corrections as needed. I address specific areas for
modification to Avista's systems later in my testimony.
a. Do you agree with Cadmus' conclusions and
recommendationg regarding the large project review?
A. Yes. At page 17 of the memo, Cadmus notes "the
20LL Large Project Review process was not i-mplemented
successfully..." Specifica11y, Cadmus had several
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recommendat,ions to assist Avista
implementation, and an effective process:
o Effectively communicate the new
process to all key team members;
with successful
project review
Ensure Ehere are clear protocols
addressing issues ident.ified during
place for
review and
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in
the
spot-check;
Establish a goal for the number or percentage of
projects that should undergo a random spot-check;
Establish a reasonable goal for how long t,he review
process should take;
Consider adopting a tiered approach to the review so
that larger, high-risk projects receive more scrutiny
before contracts are issued and j-ncentj-ves are paid;
and
o Consider structuring random spot-checks , or "audits, "to occur at various times of the process.
Consequently, we began establishing a new procedure
and program implementatj-on to assure that ful1
documentation was in place at various stages of
nonresidential site-specific projects. For example, two
checklists, one prior to contracting and one prior to
payment, were developed and implemented mid-20L3 and
accompany all site-specific projects for documentation and
review purposes. This was coincident with a "ro1es and
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responsibilities" initiative to assure accountabilities
will be properly aligned and communication channels
clearly open. These actions are intended to be responsive
to Cadmus' recommendations on the Large Project Review
Process.
O. The CadmuE memorandum noteg data entry errorg, and
provides recommendatione for improving the database entry
accuracy and proceEsea. Do you agree with these findings?
A. Yes. Specifically, on page L9 of the memo,
Cadmus recommends:
Continue to move forward implementing the new
review process to identify and resolve savings
calculatJ-on errors;
Clearly document legacy projecLs or market
transformation projects in Saleslogix; and
Continue to improve data entry in Saleslogix to
reduce missing or incorrect fields and enhance
the comprehensive dataset.
The Company agrees there are improvements that should
be made to data entry accuracy, BS well as processes and
procedures around efficient and consistent use of the
database.For example,there were instances of
installation dates that preceded payment dates due to
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incorrect entry into sales-1ogix.
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verification dates may precede payrnent dates, for example,
where the payment date is the date the check is cut and
the verification date is coincident with the verification
confirmation and hand delivery of the actual check.
Avista agrees that documentation improvements within
our nonresidential database should be made and these
improvements are in progress.
Areas of emphasis are exist,ing database fields that
are used differently by different programs and work
groups. Fields will be reviewed to confirm they are a
value-added field for reporting and evaluation,
consistently used by all work groups, or eliminated if
appropriate. The goal, again, is to improve documentation
and data fields in order to further ease reporting and
evaluation.
Another example is the post-verification date fieId,
which includes prescriptive projects that are randomly
sampled for post-verification, customers who did multiple
insLallations of similar measures and a percentage of like
measures that were post-verified, as well as users who
documented post-verification in notes or attachments
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rather than the data fie1d. Avista acknowledges that we
need to clarify our procedures around installation
verifications and ensure that documentation (e.9. pictures
and dates) are consistently recorded within the
nonresidential database .
A. Tablee 2 & 3 from the CadmuE' memorandum
illuetrate prescriptive projects on a system bagig that
exceeded the simple payback periods and 50t cap. Can you
e:<plain why these projects were provided incentives?
A. Yes. Prescriptive programs a11ow the Company to
offer a fixed amount for the installation of predetermined
efficiency measures without the need for individualized
calculatj-on of the rebate or the signature of a pre-
project agreement. This approach is critical to the
efficient marketing and administration of programs
promoting these measures. Prescriptive programs have been
a critical element to the Avista DSM portfolio for many
years.
As stated in the Cadmus memo at page 5, "the sample
size for manual review was not large enough to extrapolate
findings to the fu11 population. However, based on these
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findings, it is probable that a large proportion of the
projects in Table 2 involved T12 to T8 conversions. .".
The memorandum's assumption is correct; the
prescriptj-ve lighting projects included market
transformation T1-2 conversj-ons that were designed Eo
exceed the 50? cap guidelines to accelerate conversions.
The Company's tariff did not reguire prescriptive
projects to be subject to the simple payback period and
incentive cap restrictions at the time of rebate
application approval. Avista filed tariff revisj-ons (Case
No. AVU-E-13-04), as noted in Company witness Mr. Folsom,s
direct testimony, ofi ,June 25, 2013, to include additional
Ianguage to provide greater clarity of how these programs
are offered. The following tariff language was approved by
the Commission on August 22, 201-32
Incentive Ievels for these programs are based on
market conditions at the time of program design and
are not dependent on actual project cost relative
to incentive caps. Incentives sha1l not exceedproject costs.
A11 site- spec j-f ic, nonresident j.a1 pro j ects met
applicable simple payback and 50? funding cap
requirements.
Drake, Di 22
Avista Corporation
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A. What efforts are being made to improve project
documentation related to nonreEidential programa?
A. Avista agrees that process improvements can be
made in its nonresidential project documentation as noted
by Cadmus. In an effort to address this finding, two
checklists have been implemented prior to the contracting
of projects and the payment of incentives for
nonresidential site-specific projects in an effort to
ensure consistent and comprehensive project documentation
and application of the Company's tariff Schedules 90 and
L90 (Electric and Natural Gas Energy Efficiency Programs).
Cadmus recommended additional notatj-on of "Iegacy" or
"market transformation" type projects wit,hin the database
for ease of access, reporting and evaluation. These
classifications arose from unigue circumstances where
particular tlpes of measures were affected by code changes
or projects reguiring transitj-on management due to tariff
updates. Avista will carefully consider identification of
such items in order to accommodate ease of reportj-ng and
evaluating when these unique situations occur in the
future.
Drake, Di 23
Avista Corporation
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O. Do the findings of the Cadmue Report suggest
that the energy-effieiency programa operated by the
Company are not cost effective or are imprudently managed?
A. No. For over 35 years Avista has had a
significant and consistent commitment to energy
efficiency. The Company's energy efficiency programs have
been very successful offering a broad array of efficiency
measures. The energy efficiency program is designed and
implemented, with input from the Advisory Group, to
provide customers with the means to effectively implement
meaningful energy efficiency measures, in a cost-effective
manner. Participating customers have benefited through
lower bi11s. Non-participating customers have benefited
from the Company having acquired lower cost resources in
the form of DSM, as well as maintaining the energy
efficiency message and j-nfrastructure for the benefit of
our service territory.
The purpose of the Impact and Process evaluation is
intended to independently verify "claimed" savings and
review procedures and implementation of programs for
continual improvement. Avista has made, and will continue
Drake, Di 24
Avista Corporation
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to make, improvements in its
based on the recent, and future
A. Doeg this complete
teatimony?
A. Yes.
energy efficiency programs
EM&V evaluations.
your pre-filed direct
Drake, Di 25
Avista Corporation