20130930L.Hermanson DI.pdf

DAVID ,J. MEYER
VICE PRESTDENT AND CHTEF COT]NSEL OF
REGULAToRy & GoVERNMENTAL AFFATRS :iil SI:= 3.1 r ii iil: I?
AVISTA CORPORATION
P.O. BOX 3727
L4L]- EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]]-G
EI,IAIL : david. mever@avistacorp . com
BEFORE THE IDNIO PUBI.IC UTII.ITIES COMMISSION
rN THE MATTER OF THE APPLICATION ) CASE NO. AW-E-13-
OF AVISTA CORPORATION FOR A ) CASE NO. AW-G-].3-
FINDING OF PRUDENCE FOR 2OIO-20I2 )
EXPENDITURES ASSOCIATED WITH )
PROVIDING ELECTRIC AND NATURAL GAS ) PTNECT TESTIMONY
ENERGY EFFICTENCY SERVICE IN THE ) OT'
STATE OF IDAHO ) LORI B. HERI,IANSON
)
FOR AVTSTA CORPORATION
(ELECTRIC A}ID NATURAL GAS)
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I.IIITRODUCTION
O. Please state your name, employer and busineEs
addrese.
A. My name is Lori Hermanson. I am employed by
Avista as a Senior Resource Analyst. My business address
is 141L East Mission Avenue, Spokane, Washington.
a. Would you please describe your education and
buEinesE e:qlerience?
A. I graduated from Wal1a Walla University in L994
with Bachelor of Science in Business Administration with a
concentration in Accounting. I received a Masters in
Business Administration from Eastern Washington University
in L999.
I joined the Company in 1,997 in the Budget,
Forecasting and Analysis Department. My duties included
work assocj-ated with corporate Operations and Maintenance
as well as Capital budgets. In 2000, I transferred to the
Energy Delivery Accounting department where my
responsibilities included financial and accounting
supervision for Demand-Side Management (DSM) among other
operational areas of the company. I oversaw the Company's
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Avista Corporation
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miscellaneous billing and damage claims uncollectibles,
plant amortization and corporate revenue. I joined the
DSM team in June 2004 to assist in cost-effectiveness and
related analyses and reporting. I am now managing
external evaluation, measurement and verification (EM&V)
activities to include process, impact and market studies
including, but not limited to, conservation potential
assessment studies. I was employed by the ,foint Center
for Higher Education beginning in 1995 until joining the
Company in 1-997.
O. What ie the scope of your testimony in this
proceeding?
A. I will report on program cost-effectiveness for
20L0-20L2 as well as the retentj-on and management of
external Evaluation, Measurement and Verification (EM&V)
activities and result j-ng reports. The evaluated savj-ngs
(claimed savings adjusted by the realization rate) are
used in the attached exhibit and analyses. The process
reports are an annual evaluation of the current operations
of DSM programs.
Hermanson, Di
Avj-sta CorporatJ-on
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O. Are you sponeoring any exhibits to
in this proceeding?
A. Yes. I am sponsoring Exhibit No.
which summarizes Idaho DSM energy savings
be introduced
3, Schedule 1
and levelized
costs. Schedule 2 pages L and 2 are a summary of Idaho-
specific cost-effectj-veness by regular and 1ow-income
programs for 2010-20L2. Additional EM&V reports are
included as Exhibit No. 3, Schedules 3, and 4. These are:
1) Avista 20L2 Idaho Electric fmpact Evaluation (August
30, 2OA3 prepared by Cadmus) and 2) Avista 20L2 Idaho Gas
Portf o1j-o Impact Evaluation (,Ju1y 30, 20L3 prepared by
Cadmus). The 2010-201-2 DSM Annual Reports have previously
been filed with the Commission as well as impact and
process reports on previous program years. External EM&V
reports on the Company's DSM activities completed each
calendar year were included in the appendix of each DSM
Annual Report.
II. COST-EFFECTIVENESS
O. Would you please sumrnarize the Company's ldaho
energy efficiency expenditures for 2010-2OL2?
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Avista Corporation
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A. Yes. During 201-0 -20L2, the Company incurred
over $20.0 million in electric expenditures and nearly
$5.4 million in natural gas expenditures, for a total of
over $25.3 million supportj-ng energy efficj-ency. Of this
amount, more than $1.7 million was contributed to the
Northwest Energy Efficiency Alliance (NEEA) in support of
its market transformation ventures. Approximately, 63* of
electric expenditures and 58? of natural gas expenditures
were returned to ratepayers in the form of incentives.
Over $1 mi11ion, ot 4 percent of Idaho energy efficiency
expenditures, was spent on evaluation of our energy
efficiency programs during these years in an effort to
contJ-nua11y improve on the design and implementatj-on of
our program offerings.
Table No. 1 - Summary of Idaho DSM Expenditures
(2010 -20]-2)
Hermanson, Di
Avista Corporation
Total
Expenditures
NEEA Loca!
Expenditures
EM&V EM&V as
Percent of
Total
Electric
Proorams
$20,010,255 $1,771,6U $18,238,621 $730,090 3.90%
Natural Gas
Proorams
$5,370,602 nla $5,370,602 $314,514 5.90%
Total $25.380.857 $1.771.6U $23.609.223 $1.044.604 4.1Oo/o
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O. Would you please srmmarize the Company'e energy
efficiency-related savings for 2010-20L2?
A. Yes. As shown in Exhibit No. 3, Schedule 1-,
Lines 13 and a4, from,January L, 2O1,O through December 31,
201-2, over 109,L00 first-year MWhs and 95O,822 first-year
therms of energy savings were acquj-red from Idaho DSM
projects. This includes the Company's Idaho portion of
NEEA savings f or 20L0-20L2 of 1,2 ,6L4 MWh. A11 1ocaI
acquisition amounts included in the exhibits are evaluated
(verified) gross savings estimates. Gross savings are the
reduction in energy consumption resulting from energy
efficiency programs, updates in codes and standards, and
naturally-occurring adoption.
On a net basis, electric programs achieved 81,5L0 MWh
and natural gas programs achieved 632,380 therms in first-
year savings f or this t j-me period. Net savings are
reductions in energy consumption that is attributable to
an energy efficiency program, net of customers who would
have participated in the energy efficiency upgrades
without the presence of the utility's programs.
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Avista Corporation
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Table No. 2 - First Year Energy Savings (2010-20L2)
the
for
* Includes L2,614 Mwh
Pagesland2of
energy savings by
both Idaho electric
from NEEA
Exhibit No. 3, Schedule 2 details
regular and 1ow-income portfolios
and natural gas DSM programs based
on verified savings.
O. Were the Company'E DSM programs cogt-effective?
A. Yes. Idaho electric programs have been cost-
effective from both Total Resource Cost (TRC) test and
Program Administrator Cost (PAC) test perspectives. Page
l- of Exhibit No. 3 , Schedule 2 , Line 1-5 shows that the
201-0-201,2 TRC benefit-to-cost ratio of l-.91 for the Idaho
electrj-c DSM portfolio is cost-effective, with a residual
TRC benefit to customers of $29.9 million (Line l-4). The
201-0 -20L2 PAC, also known as the Utility Cost Test (UCT) ,
benefit-to-cost ratio of 3.35 (Line 28) is also cost-
effective, with a residual PAC benefit of nearly $42.4
(Line 27) miIlion. The levelized TRC and PAC costs are
Hermanson, Di
Avista CorporatJ-on
Evaluated
(cross)
Evaluated
(Net)
El-ectric Programs l_09,l_00 Mwh*81,610 MWh
Natural Gas
Programs
950,822 Therms 532,380 Therms
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$36.55 and $1-9.97 per MWh, respectively, as shown on Page
1 of Exhibit 3, Schedule 1-, Line 28 and 34. The overall
porEfolio of measures has a weighted average measure life
of approximately 1-3 years for 2010 -20L2.
Page 2 of Exhibit No. 3, Schedule 2 illustrates Idaho
natural gas DSM program portfolio cost-effectiveness under
both t.he TRC and PAC tests. The Company's 201,0-201-2 TRC
benefit-cost ratio was L.59 (Iine 15). The 20]-0-2012 PAC
benefit cost ratio is 3.33 (1ine29). Therefore, the Idaho
natural gas DSM portfolio passes the TRC and PAC tests for
201-0-2012. The levelized TRC and PAC costs are $1.13 and
52.8 cents per therm, respectively, as shown on Page l- of
Exhibit No. 3, Schedule 1. The overall portfollo of
measures has a weighted average measure life of
approxi-mat,eIy 21 years for 201-0-201,2.
For cost-effectiveness, the Company includes only
those non-energy benefits that are document,ed and
quantifiable and is, therefore, a conservative estimate.
There are a number of legitimate non-energy TRC benefits
that the Company was unable to quantify with sufficient
rigor in order to j-nclude within the cost-effectiveness
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Avista Corporation
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analysis such as changes
health.
ElecEric and natural gas
are based on evaluated savings
in comfort, product,ivity or
cost-effectiveness results
acquisition for 201-0 -201,2.
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O. Please summarize the Company's conclueions on
cost-effectiveness.
A. The Company's expenditure of tariff rider
revenue has been reasonable and prudent. The fdaho
portfolio of programs covering all customer classes has
been offered with a total savings of over 109,1-00 MWh and
950,822 therms during 20L0-201-2. This was achieved at a
Ievelj-zed TRC cost of $6.55 per MWh and $1.1-3 per therm.
The Tariff Rider and energy efficiency programs have
been successful. Participating customers have benefited
through lower energy bi1ls. Non-participating customers
have benefit,ed 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 servj-ce territory.
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Avista Corporation
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III. EVAIJUATION, MEASUREMENT & VERIFICATION
A. What evaluation of the Companyre DSM programs
have occurred?
A. As noted by Company witness Folsom, Cadmus
performed independent (or "third-party") impact and
process evaluati-on on Avistars DSM programs for the 201,0-
2012 time period covered by the Company's request in this
case. ' Impact evaluation is intended t,o verify, and
adjust as necessary, "cIaimed" savj-ngs.Process
evaluation reviews "procedures" for continual improvement.
a. What is the purpose of *Impact and ProceEE"
evaluationg?
A.Impact evaluation is intended to independently
verify "claimed" savj.ngs. This results in a realization
rate which is applied to the claimed savings resulting in
an adj ust,ed estimate of savings or evaluated savJ-ngs .
Process evaluation reviews procedures and implementation
of programs for continual improvement.
A. Please describe the evaluation activitieg that
Cadmus wae hired to conduct.
'cadmus was retained, after
process, to perform impact
a competitive Reguest- for-Proposal
and process evaluations.
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Avista Corporation
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A. Cadmus was originally hired to conduct
independent process and impact evaluations on the calendar
years 2010 and 20LL eIectric and natural gas DSM
portfolio, to evaluate the deemed savings and underlying
assumptions of the Company's TRM, and to provide a high-
leve1 assessment of the Company's EM&V resources. It was
also to provide a gap analysis of potential areas that may
need strengthening through increased evaluation in future
years. Since then, Cadmus has been retained for another
two years to conduct impact and process evaluations, as
well as some market analysis for the 201-2 and 201,3
electric and natural gas DSM portfplio. The Company chose
to extend this contact as a cost-savings measure to
Ieverage evaluation work already completed while providing
a deeper evaluation for the 201,2 and 201-3 program years.
The Company plans to issue an RFP for independent
evaluation services for 20L4 and 2015 later this year.
Cadmus' evaluation efforts included billing analysis
as appropriate and actual field measurement as necessary
and feasible. In addition, the team provided process
evaluation on the portfolio and market evaluation of some
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Avista Corporation
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key programs,
participants as
where anomalies
O. Doeg
t,estimony?
surveying of participant,s and non-
well as updates on net-to-gross in areas
existed in past studies.
that complet,e your pre-f iled direct
A. Yes, it does.
Hermanson, Di l-l-
Avista Corporation