20200326Settlement Comments.pdf

STAFF COMMENTS IN SUPPORT 1 MARCH 26, 2020
OF SETTLEMENT AGREEMENT
EDWARD JEWELL
MATT HUNTER
DEPUTY ATTORNEYS GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]/ [phone]
IDAHO BAR NOS. 10446/ 10655

Street Address for Express Mail:
11331 W CHINDEN BVLD, BLDG 8, SUITE 201-A
BOISE, ID 83714

Attorneys for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION FOR A
DETERMINATION OF 2016-2017 ENERGY
EFFICIENCY EXPENSES AS PRUDENTLY
INCURRED
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)
)
)
)
)

CASE NO. AVU-E-18-12

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION FOR A
DETERMINATION OF 2014-2017 NATURAL
GAS ENERGY EFFICIENCY EXPENSES AS
PRUDENTLY INCURRED
)
)
)
)
)
)

CASE NO. AVU-G-18-08

COMMENTS OF COMMISSION
STAFF IN SUPPORT OF
SETTLEMENT AGREEMENT

STAFF OF the Idaho Public Utilities Commission, by and through its Attorneys of
record, Edward J. Jewell and Matt Hunter, Deputy Attorneys General, submits the following
comments.

BACKGROUND
On November 16, 2018, Avista Corporation (“Avista” or "Company") filed two
applications with the Commission. The first application, Case No. AVU-G-18-08, requested the
Commission determine whether the Company prudently incurred $2,899,525 in natural gas
energy efficiency expenses from January l, 2014 through December 31, 2017. The second
RECEIVED
2020 March 26,PM12:35
IDAHO PUBLIC
UTILITIES COMMISSION
STAFF COMMENTS IN SUPPORT 2 MARCH 26, 2020
OF SETTLEMENT AGREEMENT
application, Case No. AVU-E-18-12, requested the Commission determine whether the
Company prudently incurred $22,719,204 in electric energy efficiency expenses in 2016 and
2017.
The Commission issued Notices of Application and set intervention deadlines for both
cases in December 20l8. See Order Nos. 342l0 and 34222. During the ensuing months,
Commission Staff worked closely with the Company to understand its data and processes.
On September 17, 2019, the Commission issued Notices of Modified Procedure, setting a
November 18, 2019 comment deadline and a December 2, 2019 reply comment deadline in both
cases. Order Nos. 34446 and 34444.
On October 29, 2019, Staff notified the Commission that, per Commission Rule 272
(IDAPA 31.01.01.272), it would begin settlement negotiations with Avista in both cases. At the
request of Staff, the Commission extended the comment deadlines for both cases to December 9,
2019 for comments and December 23, 2019 for reply comments. See Order Nos. 34487 and
34489.
On December 9, 2019, Staff filed comments in both cases. Staff stated it had settled with
the Company in principal and that it believed the settlement would be ready to file soon. Staff
recommended that once the settlement was filed with the Commission, the Commission should
set new comment deadlines to allow public input on the settlement.
On February 18, 2020, Avista filed a Settlement Agreement for Commission
consideration.
The proposed Settlement Agreement addresses reporting and program management
issues identified by Commission Staff that have made the Company’s prudency cases
challenging for several years. The Company agrees to review its internal process and provide the
results to Staff by specific dates. The Company will also evaluate how its reports to the
Commission are prepared, engaging with Staff as part of this evaluation.
The Company and Staff agree to adjust the energy efficiency rider accounts to correct
costs that were incorrectly assigned.
The Proposed Settlement Agreement states that if the Commission “rejects any part or all
of [the Settlement] or imposes any additional material conditions on approval of [the
Settlement],” each party reserved the right to withdraw from the proposed Settlement
Agreement. Settlement Agreement at 9.
STAFF COMMENTS IN SUPPORT 3 MARCH 26, 2020
OF SETTLEMENT AGREEMENT
STAFF REVIEW
Staff has reviewed the Settlement Agreement and asserts it resolves the issues discovered
in the current case and previous demand side management (“DSM”) prudency reviews. Staff
believes the Settlement Agreement is in the public interest and is a just, fair, and reasonable
compromise that should improve the quality of the Company’s DSM processes and reporting,
and therefore recommends it be approved by the Commission.
Staff conducted an intensive evaluation of Avista’s DSM programs. The investigation
included two on-site audits in Spokane, over 70 production requests, monthly phone calls with
the Company, and several conference calls to confer with the Company’s third-party Evaluation,
Measurement, and Verification (“EM&V”) evaluator, Nexant. After a meeting in Boise in
November 2019, the Company and Staff agreed that a settlement would provide the best
outcome to improve the Company’s processes and reporting while also reducing costs to
customers.
Staff believes that the Company continues its commitment to energy efficiency, but its
processes and reporting must be improved. Staff comments dating back to 2014 have
consistently focused on the lack of proper documentation, inaccuracies in reporting, and
insufficient information describing how programs are operated—especially in the portrayal of
expenses and the cost-effectiveness of Idaho programs. Staff did not identify any formal or
informal processes for using third-party evaluation results to identify problem areas or find
improvement opportunities for its programs. Staff’s analysis also revealed the Company was not
using impact evaluation results to appraise program effectiveness or measure cost effectiveness.
The Settlement Agreement documents Staff’s concerns in further detail and identifies
specific, measurable, action items for the Company to complete to address these shortfalls. Staff
asserts these actionable steps will improve the processes and program in quantifiable ways.

The Settlement Agreement
The parties agreed to several quantified adjustments in the Settlement Agreement to
address Staff concerns and fix accounting errors discovered during the audit. The Settlement
Agreement includes zero cost recovery for the fees paid by the Company for Nexant’s reports for
2016-2017 because Staff determined the reports were not used nor useful. The reports contained
significant errors—including but not limited to incorrect tables, typographical errors, and other
STAFF COMMENTS IN SUPPORT 4 MARCH 26, 2020
OF SETTLEMENT AGREEMENT
deficiencies. Further, the information in the reports was not being used to improve the
effectiveness of the programs, as intended. The total disallowance for Nexant reports was
$374,934, which includes $287,172 electric evaluation adjustments and $87,762 gas evaluation
adjustments. The Settlement Agreement provides that the Company will review its previously
submitted 2018 Annual Conservation Report to ensure that it complies with the terms of the
Settlement Agreement. Additionally, the Company will work with its third-party EM&V
evaluators to ensure future work also conforms with the Settlement Agreement.
Per the terms of the Settlement Agreement, the Company has made several commitments.
The Company will hold one or more business process improvement (“BPI”) workshops
facilitated by internal BPI experts. The Company’s Internal Audit Department will perform an
audit of the energy efficiency processes for adequacy of controls and adherence to industry best
practices. Additionally, the Company will review, hire, or develop staff expertise and reassign
roles and responsibilities to ensure that performance meets Commission Staff’s expectations.
The outcomes of the BPI workshops and internal audits will be provided to Staff no later than
August 1, 2020.
As in a traditional prudency case, Staff performed an audit of the Company’s DSM
expenses, sampling and reviewing transactions across the Company’s programs. The audit
uncovered some accounting errors in the energy efficiency tariff rider accounts. A total of
$41,625 in adjustments were either booked to the wrong account or the incorrect fuel source.
Parties agree Avista will restore these adjustments to their respective tariff rider balances.
Parties agreed that the Company needed to take a more proactive approach to support the
overall prudence of Avista’s energy efficiency expenditures and to manage its third-party
evaluator. The Settlement Agreement states action items and a schedule that the Company must
achieve to avoid an additional $84,000 penalty to the electric and natural gas tariff riders, which
would not be recoverable from customers. Staff believes this delayed penalty, above and beyond
the quantified adjustments, was necessary to effect lasting programmatic changes. However, the
Company may avoid incurring this additional penalty by working with Staff to implement the
action items and submit reports based on the agreed upon schedule set forth in the Settlement
Agreement. Staff has seen progress, as noted in the Settlement Agreement, as the Company has
worked to address Staff’s concerns.

STAFF COMMENTS IN SUPPORT 5 MARCH 26, 2020
OF SETTLEMENT AGREEMENT
PUBLIC COMMENTS
The Commission received one public comment on the Settlement Agreement. The
commenter claimed that failure to holistically and comprehensively address the identified
deficiencies will delay the potential benefits of the desired improvements and expressed concerns
that Staff will have to revisit these topics again in the future. The commenter also expressed
concerns about the Company’s EM&V processes and requested additional independence
between the Company’s evaluation team and program management team, both of which report to
the same director.

STAFF RECOMMENDATION
The parties agree that the Settlement Agreement is in the public interest and that its terms
are fair, just, and reasonable. Staff believes this Settlement Agreement addresses long-standing
concerns and implements recommendations that have been clearly articulated on a documented
timeline. Thus, Staff recommends:
1. The Commission approve the Settlement Agreement in its entirety, without any
material change or condition.
2. The Commission find that the Company’s demand-side management expenses, with
the exception of those identified in the above section and Settlement Agreement, were
prudently incurred for electric accounts between 2016 and 2017 (AVU-E-18-12) and
between 2014 and 2017 for natural gas (AVU-G-18-08).

Respectfully submitted this 26th day of March 2020.

________________________________
Edward J. Jewell
Deputy Attorney General

________________________________
Matt Hunter
Deputy Attorney General

i:umisc:comments/avue18.12_avug18.8ejmh settlement comments
CERTIFICATE OF SERVICE
CERTIFICATE OF SERVICE

I HEREBY CERTIFY THAT I HAVE THIS 26th DAY OF MARCH 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
SUPPORT OF SETTLEMENT AGREEMENT, IN CASE NOS. AVU-E-18-12 AND
AVU-G-18-08, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:

LINDA GERVAIS
MGR REGULATORY POLICY
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220-3727
E-MAIL: [e-mail]
[e-mail]

DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220-3727
E-MAIL: [e-mail]

/s/ Reyna Quintero __
SECRETARY