20140912Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: SEPTEMBER 12, 2014

SUBJECT: AVISTA CORPORATION’S APPLICATION FOR A DETERMINATION
OF 2013 DEMAND SIDE MANAGEMENT (DSM) EXPENSES AS
PRUDENTLY INCURRED, CASE NOS. AVU-E-14-07 AND AVU-G-14-02

On August 12, 2014, Avista Corporation (“Avista” or “Company”) submitted an
Application seeking a determination by the Commission that the Company’s electric and natural
gas energy efficiency expenditures from January l, 2013 through December 31, 2013 were
prudently incurred. The Company’s Application consists of a cover letter and the testimony and
exhibits of Chris D. Drake, Bruce W. Folsom, and M. Sami Khawaja.
AVISTA’S APPLICATION
The Company included a cover letter requesting a Commission determination of
prudency of their DSM programs and the prefiled testimony and exhibits of three Company
witnesses.
Testimony of Mr. Drake: Mr. Drake is the Manager of Demand Side Management
(DSM) Program Delivery for Avista. His testimony gives an overview of the Company’s DSM
program offerings available to Idaho customers in the 2013 program year.
In 2013, Avista offered the following residential programs to Idaho electric and/or
natural gas customers: High Efficiency Heat Pump; Ductless Heat Pump; High Efficiency
Variable Speed Motor; High Efficiency Tanked 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, Wall Insulation;
ENERGY STAR Homes; ENERGY STAR Appliances; CFL (and CFL Recycling) Promotions;
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“Second” Refrigerator/Freezer Recycling Program; Community Events and Workshops; Low-
cost/no-cost information; On-line Home Energy Audits and Analysis; Simple Steps Smart
Savings (CFLs and Showerheads); manufacturer buy-downs for compact fluorescent lighting and
1ow-f1ow showerhead measures (Avista sponsored) (Simple Steps Smart Savings).
Avista offered the following non-residential (commercial and industrial) programs to
Idaho electric and/or natural gas customers: EnergySmart Grocer; Power Management for PC
Networks; Premium Efficiency Motors; Food Service Equipment; Commercial HVAC Variable
Frequency Drives; Retro-Commissioning; Commercial Clothes Washers; Vending Machine
Controllers; Lighting and Controls; Green Motors Rewind Program; Commercial Windows and
Insulation; Standby Generator Block Heater; Site Specific Offerings in Various End Uses.
Avista offered the following low-income programs to Idaho electric and/or natural
gas customers: weatherization assistance and Low Income Energy Assistance Program
(LIHEAP).
For program evaluation, measurement and verification, Avista states that it employed
Cadmus after a competitive request for proposal (RFP) process. Avista employs an
implementation team made up of program managers, coordinators, engineers, account
executives, and analysts. Mr. Drake asserts that the Company has provided all necessary
verification of installation and project invoices.
Testimony of Mr. Folsom: Mr. Folsom is employed by Avista as Director, Products
and Services. His testimony focused on providing an overview of the Company’s recent Idaho
DSM portfolio results and expenditures for electric and natural gas efficiency programs; Avista’s
involvement with the Northwest Energy Efficiency Alliance (NEEA); an update on the
Company’s university research and development activities; status of the Company’s suspended
natural gas DSM programs; overall evaluation by Avista’s third-party contractor, Cadmus; and
stakeholder involvement. Mr. Folsom attached two exhibits to his testimony depicting a
summary of 2013 research and development projects funded by the DSM tariff rider, and
Avista’s 2013 Annual Report-Demand-Side Management, Idaho, summary of DSM energy
savings and levelized costs, a summary of electric DSM cost-effectiveness; and a summary of
natural gas DSM cost-effectiveness.
Mr. Folsom noted that the Company achieved Idaho energy efficiency savings for
2013 of 25,899, 21,999 MWh net savings, first-year MWh. This represents 136% of the
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Company’s target savings of 19,009 MWh dictated by Avista’s IRP for this period. Avista has
achieved over 189 aMW of cumulative savings through its energy efficiency efforts in the past
36 years. 122 aMW of DSM is currently in place on the Company’s system, with approximately
36 aMW in the Idaho service territory. Current Company-sponsored conservation reduces retail
loads by 10.6 percent. Additionally, 51,772 therms of residual first year efficiency savings were
achieved from January 1, 2013 through December 31, 2013.
Avista spent $7,634,864 on Idaho electric and natural gas DSM programs, of which
64% was paid out to customers in direct incentives pursuant to the cost-effectiveness tests shown
in Exhibit No. 1. This does not include additional benefits such as technical analyses provided to
customers by the Company’s DSM engineering staff.
Regarding Avista’s participation and funding of Northwest Energy Efficiency
Alliance (NEEA) programs, Mr. Folsom states that the levelized cost of resources acquired
through Avista’s Idaho participation was 1.8 cents per kWh. This compares with $141 per first-
year MWh for Avista-funded 1oca1 energy efficiency programs in Idaho. During 2013, Avista’s
Idaho-related NEEA funding was $801,838.
On August 30, 2013, Mr. Folsom recounted that Avista filed a request with the
Commission to authorize up to $300,000 per year of Schedule 9, DSM Tariff Rider revenue to
fund applied research at Idaho’s universities through a “call for papers” approach. The intent of
this initiative is to supplement the pipeline of emerging technology. Mr. Folsom stated that the
Idaho electric and natural gas tariff rider balances were $3,459,189 (underfunded) and $674,059
(overfunded), respectively.
Avista states it intends to reinstate its natural gas efficiency programs in Idaho as
soon as they are “cost-effective,” as verified through the application of the Total Resource Cost
(TRC) test. Mr. Folsom alleges that Idaho’s electric programs are cost-effective according to the
TRC, benefit to cost ratio of 1.23, and Program Administrator Cost (PAC), benefit to cost ratio
of 1.86, tests.
Testimony of Mr. Khawaja: Mr. Khawaja is employed as an executive consultant
for Cadmus and testifying on behalf of Avista, presenting the findings of the Cadmus
evaluations. His prefiled testimony includes Exhibit 3, Avista 2013 Idaho Electric Impact
Evaluation Report. Cadmus conducted impact and process evaluations of the electric and natural
gas programs in the residential, nonresidential, and low income sectors. According to Mr.
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Khawaja, although natural gas programs were suspended in Idaho prior to 2013, there were
several instances where natural gas savings were achieved due to grandfathered projects or dual
fuel saving measures. Mr. Khawaja asserted that Cadmus’s evaluations met industry standards
and protocols.
The Cadmus evaluation included 357 phone surveys conducted for the residential
measure verification and over 2,000 general population surveys. The process evaluations
included 357 residential participant, 2,160 residential general population, 201 non-residential
participant, and 140 non-residential non-participant surveys. The evaluations also included 20
contractor interviews, as well as interviews with several implementation contractors, Avista
PPA, and implementation staff.
Mr. Khawaja believes that the Avista evaluation addresses all 13 measurement and
verification needs in accordance with 14 industry and regulatory standards. Impact evaluation on
the 2013 program years verified electric savings exceeding IRP and Avista Business Plan goals.
He believes that the process evaluations reveal that the programs are run efficiently while some
areas for improvement exist.
COMMISSION DECISION
1. Does the Commission wish to issue a Notice of Application and Notice of
Modified Procedure?
2. Does the Commission wish to issue a deadline for intervention of 14 days?

M:AVU-E-14-07_AVU-G-14-02_np