20160812Spector Direct.pdf

Ronald L. Williams, ISB No. 3034
Williams Bradbury, P.C.
1015 W. Hays St.
Boise, ID 83702
Telephone: [phone]
Email: [e-mail]

Attorneys for Intermountain Gas Company

BEFORE THE IDAHO PUBLIC UTILITES COMMISSION

IN THE MATTER OF THE APPLICATION OF
INTERMOUNTAIN GAS COMPANY FOR
THE AUTHORITY TO CHANGE ITS RATES
AND CHARGES FOR NATURAL GAS
SERVICE TO NATURAL GAS CUSTOMERS
IN THE STATE OF IDAHO

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Case No. INT-G-16-02

DIRECT TESTIMONY OF ALLISON SPECTOR

FOR INTERMOUNTAIN GAS COMPANY

August 12, 2016

Spector, Di 1
Intermountain Gas Company
I. INTRODUCTION 1
Q. Please state your name and business address. 2
A. My name is Allison A. Spector. My business address is 400 North Fourth Street,
Bismarck, ND 58501. My e-mail address is [e-mail].
Q. By whom are you employed and in what capacity?
A. My corporate role is Manager of Conservation Policy as a shared employee of the
Montana-Dakota Utilities Group of which Intermountain Gas Company is a part. I am
actively providing Demand Side Management program development support to IGC
and am additionally responsible for support and development of policy, and standards
and guidelines regarding Intermountain’s environmental and conservation efforts.
Q. How long have you been employed by the Utility Group? 11
A. I have been employed within the Utility Group since June 2008 where I served as a
Conservation Analyst, then Conservation Manager, then Manager of Energy
Efficiency and Community Outreach for Cascade Natural Gas Corporation. In June
2014, I took on the role of Manager of Demand Side Management for Montana-
Dakota Utilities. In January 2016, I was offered the role of Conservation Policy
Manager for Cascade and was additionally tasked with providing support services to
Intermountain in matters related to Demand Side Management. Prior to joining
MDU, I was employed by the National Association for State Community Services
Programs (NASCSP) in Washington, DC. I served NASCSP as a Program Assistant,
later as a Program Coordinator, and lastly as the Associate Director of Weatherization
Services.
Q. What are your educational and professional qualifications?

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Intermountain Gas Company
A. I graduated from Goucher College 2005, with a Bachelor of Arts degree in
Communications and Media Studies with an emphasis in policy communications; and
a Bachelor of Arts degree in Political Science, degree of distinction.
I have eight years’ experience designing and implementing utility-run energy
efficiency programs, and an additional three years in energy policy & advocacy.
I am experienced in the design and implementation of viable, cost-effective
Demand Side Management (DSM) portfolios. I have performed analysis of the cost
effectiveness of DSM portfolios under both the Utility Cost Test and Total Resource
Cost Test. I have designed conservation rebate programs at all stages from planning
through implementation; designed tariff filings in support of these programs; selected
and hired program implementation staff; developed requests for proposals for
program delivery and evaluation contractors; and have developed and filed annual
program performance reports.
I also co-authored a peer-reviewed paper published by the American
Association for an Energy Efficient Economy titled, “Natural Selection: The 15
Evolution of DSM Valuation and Use of the UCT” which discusses the importance of
natural gas demand side management efforts and optimal methods of program
valuation. The paper also addresses the importance of applying a relevant discount
rate to any DSM analysis performed.
II. SCOPE AND SUMMARY OF TESTIMONY
Q. What is the purpose of your testimony in this docket?
A. My testimony will cover four primary areas. First, I will define the purpose of natural
gas Demand Side Management and the current conditions influencing Intermountain

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Intermountain Gas Company
Gas Company’s decision to engage in DSM. Second, I will describe the modeling
utilized by the Company to assess its DSM potential and the development of
associated targets. The third section will describe how Intermountain’s conservation
rebate portfolio was designed and how appropriate rebate levels were determined. In
the last section I will present Intermountain’s targeted approach to program delivery
and implementation, as more fully described in the testimony of Ms. Imlach.
Q. Are you sponsoring any exhibits in this proceeding?
A. Yes. I am sponsoring the following exhibits, which are described in my testimony:
Exhibit 25 Demand Side Management Potential Assessment
Exhibit 26 Portfolio Design Analysis
III. PURPOSE OF NATURAL GAS DEMAND SIDE MANAGEMENT
Q. What is the purpose of Demand Side Management?
A. Demand Side Management (DSM) is a strategy used by utilities in order to optimize
their consumers’ energy use. When paired with supply side resources, demand side
management helps ensure reliability and affordability of a resource.
In the case of a natural gas local distribution company like Intermountain Gas
Company, DSM means finding opportunities to purchase therms through
conservation as opposed to purchasing through a natural gas supplier. This transaction
considers both commodity and transportation costs and includes encouraging
voluntary reductions to natural gas usage by offering conservation incentives to its
customers.
As stated in the earlier testimony provided by Mr. Kirschner, Natural gas is an
abundant, affordable, and clean burning resource. Using this 90% efficient resource

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Intermountain Gas Company
directly for space and water heat end use applications in the residential sector is the
most efficient application of natural gas. Conservation incentives associated with
high-efficiency natural gas space and water heating equipment would provide the
Company with the two-fold benefit of acquiring essential DSM resources while
allowing natural gas to serve the role it performs best, as a direct space and water
heating fuel.
Oak Ridge National Laboratories, and others have acknowledged the value of
Demand Side Management as a best-cost resource for utilities. Intermountain will be
utilizing this resource to operate a program whose ultimate intent is to produce energy
savings that result in lower overall rates than if the program were not in place.
Q. Does the Company intend to file for approval to recover the costs associated with 11
a natural gas Demand Side Management Program with the Idaho Public Utilities 12
Commission? 13
A. Yes. The Company is seeking approval of a new Energy Efficiency Rebate Program
in support of its DSM efforts, and has submitted proposed Original Tariff Sheet No.
16 (DSM Tariff), which is supported by the testimony of Company witness Imlach.
This proposed DSM Tariff sheet is part of Exhibits 30 and 31 sponsored by Company
witness Michael McGrath.
The Company is simultaneously seeking recovery in the form of a fixed cost
collection mechanism (FCCM), which will accompany its Demand Side Management
program. More information regarding this mechanism can be found in the testimony
of Mr. McGrath.

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Intermountain Gas Company
Finally, the Company intends to submit a filing following program approval to
obtain deferred treatment of incremental staffing expenses (salaries associated with
employees that would not otherwise have been hired in the absence of a DSM
program) and administrative/outreach costs resulting from operation of a Company
run Demand Side Management Program.
Q. Please summarize the type of program you are proposing to operate.
A. Intermountain is proposing to operate a natural gas conservation incentive program
for residential customers. This program will provide rebates for the installation of
high-efficiency natural gas equipment, and natural gas ENERGY Star certified
homes. The rebates will help bridge the up-front cost of higher efficiency equipment
and thus optimize the amount of energy being used in participants’ homes.
Q. Why is this program focused on residential equipment rebates and ENERGY 12
Star homes? 13
A. Rebates have been proven to be an effective means of encouraging the use of energy
efficient equipment in the residential sector, and for the construction of energy
efficient natural gas homes.
As the region’s local distribution company that is providing fuel for space and
water heating applications, it is intuitive that the Company focus on natural gas space
and water heating equipment, and ENERGY Star homes in the residential sector. As
described in both this testimony, and the testimony of Ms. Imlach, the Company is
well positioned to leverage existing experience in the operation of an equipment
rebate program, and build partnerships with builders and contractors for the purpose
of introducing them to the value and benefits of energy efficiency.

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Intermountain Gas Company
Likewise, Intermountain’s conservation potential modeling has demonstrated
that focusing on the residential sector is a viable strategy for the Company to achieve
meaningful energy conservation results. The program will therefore allow the
Company to effectively engage in utility-operated DSM efforts.
Q. Are other Idaho utilities successfully using rebate programs in support of their 5
Demand Side Management efforts? 6
A. Absolutely. Both Avista and Idaho Power offer rebates for high-efficiency residential
equipment, and other energy conservation measures. Both programs are filed with the
Idaho Public Utility Commission and are ratepayer recovered. Both programs result
in energy savings for their companies and customers.
Intermountain Gas reviewed the design of both of these Idaho-focused
programs, and examined their associated efficiency and rebate levels. This
information was taken into account as IGC developed its potential assessment. The
Company also solicited employee feedback, and gathered other IGC specific research
to refine its conservation portfolio and gauge program feasibility and value to
Intermountain’s service area.
Q. Will the Company consider expanding measure offerings and sectors served at a 17
later time? 18
A. Absolutely. Intermountain intends to treat DSM ramp-up as a phased approach, with
its first priority being conservation achievements in the residential sector. Following
the successful launch of its residential conservation program, the Company will
develop efforts including a targeted rebate portfolio of prescriptive conservation
measures for its commercial sector customers. 23

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Intermountain Gas Company
Q. What does the Company anticipate as the benefits of engaging in natural gas 1
DSM at this time?
A. The Company sees natural gas DSM as a natural fit for the utility, its customers, and
the surrounding community. A conservation incentive program utilizing rebates for
high-efficiency natural gas equipment offers an environmentally beneficial, cost-
effective supplement to supply side resources, while optimizing regional energy
usage through the direct use of natural gas.
With Idaho regulators now accepting the Utility Cost Test (UCT) as a viable
method of program valuation, and with growing in-house expertise in this area, the
Company is positioned to offer cost-effective rebates to its customers.
Ultimately, everyone benefits when utilities acknowledge the environmental
and economic importance of allowing natural gas to do what it does best—provide a
fuel for space and water heat directly in customers’ homes— as efficiently as
possible. The full benefit of using natural gas directly for space and water heat is
described in detail in the testimony of Mr. Kirschner.
Q. Are there any rate impacts associated with the operation of a DSM program?
A. A Demand Side Management program operated through rebates for energy efficient
space and water heat equipment is a strategic investment in energy resources that
would otherwise be wasted through inefficiency. As described earlier, the direct use
of natural gas for space and water heating is an efficient application of this resource.
Achieving DSM in combination with direct use increases the value of the Company’s 21
investment in this effort. The Company’s DSM program is designed to maximize the 22

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Intermountain Gas Company
potential of the natural gas on its system to serve as many homes as possible as cost
effectively as possible.
It is Intermountain’s goal to cost-effectively acquire demand side resources
based on Intermountain’s most recently acknowledged avoided costs. This provides
value to both the Company and its ratepayers. Rates will be influenced by two factors
associated with the program: the recovery of fixed costs, and the recovery of
administrative program expenses.
Rate impacts associated with the recovery of fixed costs will be carefully
designed as to make the Company whole for reductions to usage associated with the
implementation of a DSM program.
Administrative program expenses related to the operation of the Company’s 11
DSM effort have been designed as not to exceed the threshold past which such an
investment would not be cost-effective to the Company and its customers.
Q. Can you please elaborate on what you mean by “fixed cost recovery?” 14
A. Gladly. In this case Intermountain is filing for fixed cost recovery to mitigate losses
to margin resulting from its conservation efforts. This mechanism will allow the
Company to remain whole as it actively pursues cost-effective forms of conservation
to maximize natural gas efficiency and bring value to its customers.
Q. Can you elaborate on what you mean by “administrative program expenses?” 19
A. There will be reasonable costs associated with the operation of Intermountain’s DSM
program. The Company anticipates an initial budget of approximately $225,000,
which will include funding for program outreach; and for the hiring of a dedicated
staff for program support and implementation. The Company will also leverage

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Intermountain Gas Company
existing staff resources, which will not be included as part of its program delivery
budget. Intermountain’s rebate portfolio has been designed to shoulder these costs
while still maintaining cost effectiveness under the Utility Cost Test (UCT). The
Company anticipates that rebate payments will be in the range of $200,000 -
$600,000 in the first program year based on customer interest and the effectiveness of
its program outreach efforts. 6
As stated earlier, it is the Company’s intention that DSM effort procure
therms through investment in natural gas molecules and their associated
transportation costs at a cost lower than that of alternative resources. Therefore, the
program design will ensure that energy efficiency purchased by the utility through
DSM efforts will result in lower overall rates to customers than would be experienced
if the program was not in operation.
Q. Does the Company intend to file a follow-on application to seek recovery of 13
program expenses? 14
A. Yes. It is the Company’s intention to file a follow-on application to seek recovery of
all rebate costs associated with its DSM effort, as well as its program delivery budget
and the salaries of staff that would have not otherwise been hired without the
presence of the Company’s Demand Side Management rebate program. Program
expenses have been balanced against the associated therm savings of the rebate
portfolio and have been assessed as cost effective under Exhibit 26 associated with
this filing.
Q. Have you prepared an exhibit summarizing the fixed cost collection mechanism 22
accompanying the design of your DSM program? 23

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Intermountain Gas Company
A. Yes. Details and exhibits supporting the FCCM can be found in the testimony of Mr.
McGrath.
Q. What are the benefits to ratepayers if the Commission approves this recovery of 3
programmatic expenses, including the staff positions you describe?
A. A well-designed DSM program, like the one the Company is proposing, results in
both electric and natural gas savings. Electric savings comes from the customers’ 6
decision to use natural gas directly for space and water heating, as opposed to the
reduced efficiency of using natural gas to generate the electricity to power equipment
for the same end use. As the testimony of Mr. Kirschner has indicated, by the time a
customer turns on an electric appliance, up to 62% of the energy from the original
fuel has been lost. The full fuel cycle efficiency of natural gas equipment is about
92%. Therefore using natural gas space and water heating equipment directly, as
opposed to using electricity for these end uses, results in meaningful conservation of
energy resources. Natural gas savings is then achieved through Intermountain’s
program by providing rebates for extremely energy-efficient models of natural gas
space and water heating equipment. The installation of high-performance natural gas
equipment and proliferation of ENERGY Star natural gas homes results in a carbon
footprint reduction, which is good for the environment, and the entire community.
The program is beneficial to all ratepayers because it secures a long-term
supply (16-30 years) of demand side resources in the form of quantifiable natural gas
conservation. This resource helps supplement traditional supply side resources at a
cost equal to or lower than traditional supply when factoring for both the avoided

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Intermountain Gas Company
molecule cost and the transportation to deliver the resource. It also helps mitigate
future capacity constraints to ensure ongoing reliability.
Intermountain’s program is beneficial from a customer standpoint, because it
helps mitigate the upfront cost of high-efficiency equipment run on natural gas— a
clean-burning, reliable, and affordable resource. By incentivizing for high
performance natural gas equipment and ENERGY Star Homes, the Company is
working to ensure that natural gas is being used as efficiently as possible within that
customer’s home. This provides economic savings for the customer.
IV. DMS POTENTIAL ASSESSMENT 9
Q. Could you please describe the contents of Exhibit 25 “Demand Side 10
Management Potential Assessment” of your testimony? 11
A. Absolutely. Exhibit 25 provides an examination of the total demand side
management potential available to Intermountain’s residential sector. This was
modeled through an analysis tool called TEAPot, which was developed by Nexant for
IGC’s sister company, Cascade Natural Gas Corporation in 2014. TEAPot refers to
the acronym, Technical, Economic, and Achievable Potential. The model
incorporates an analysis of available technologies, climate zone, load forecasts, and
market segments.
Intermountain utilized the TEAPot tool in order to better understand the DSM
potential in its service area under both the Utility Cost Test (UCT) and the Total
Resource Cost (TRC) test.
Based from Intermountain’s data for both usage and premise counts, the
TEAPot was first run with the following assumptions: 3.69% discount rate; 1.0 cost

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Intermountain Gas Company
benefit ratio; 2.60% inflation rate. Two separate scenarios were modeled, gauging
potential under both the Utility Cost Test (UCT) and Total Resource Cost (TRC) test.
All scenarios were operated using a portfolio of energy efficient natural gas
DSM measures. The resulting analysis provides the Company with a range of therm
savings under the lens of Technical, Economic, and Achievable potential. This has
allowed the Company to better understand the total conservation potential associated
with its proposed portfolio of high-efficiency residential equipment measures.
Q. What data was input by the Company in order to operate the TEAPot model? 8
A. Intermountain specific assumptions programmed into the TEAPot modeling tool can
be found on Exhibit 25.
Q. Who ran the TEAPot model and from where were the inputs derived? 11
A. The TEAPot modeling tool was operated by Intermountain staff for the purposes of
assessing the Company’s DSM potential and assisting in the design of the measures
comprising the proposed conservation rebate portfolio. Inputs were derived from
Intermountain’s data as described above.
Q. Can you please describe the difference between Technical, Economic, 16
Achievable, and Program Potential? 17
A. Technical Potential refers to the savings that could be achieved if all homes
theoretically eligible to receive high-efficiency natural gas equipment did so without
regards to economics or personal preference. If the Company could make all qualified
homes upgrade to all possible measures, the Technical Potential would be the result.
The only limitation is technical feasibility and the applicability of the measure to be
installed.

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Intermountain Gas Company
Economic Potential examines the savings that could be achieved through
measures that pass a cost effectiveness test. It considers what would be achieved if
everyone who could theoretically afford to install pre-screened high-efficiency
natural gas equipment did so without regards to personal preference or alternative
priorities. In other words, economic potential looks at a high-level cost-effectiveness
under current economic conditions, but does not consider customer interest, priorities,
or perceptions of energy conservation.
Achievable Potential further refines the Company’s understanding of DSM
potential by examining it under the lens of economic and social realities. It asks
“how much savings will result from this portfolio of utility rebate measures based on
real-world conditions in Intermountain’s service area, and customer awareness?”
There is also a fourth level of potential, which is not directly modeled under
TEAPot, but has been considered by the Company, called Programmatic Potential.
Programmatic Potential further refines Achievable Potential by examining what level
of savings can be realistically accomplished within the current staffing, budgetary,
and regulatory parameters of the utility operating the program.
While the model is unable to examine this final level of potential, Nexant, the
architects of the TEAPot model, recognized its significance. In the written narrative
provided for the study that was performed for Cascade in 2014, they stated that
“Program Potential reflects the realistic quantity of energy savings the utility can
realize through DSM programs during the horizon defined in the study. Savings
delivered by program potential is often less than achievable potential, due to real-
world constraints, such as utility program budgets, cost-effectiveness thresholds,

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Intermountain Gas Company
regulatory and policy statements, and decisions on which subset of cost-effective
measures a utility ultimately decides to include in its portfolio” (Assessment of 2
Achievable Potential & Program Evaluation, V2, Section 2.2, p15).
Intermountain has therefore developed initial programmatic targets as a
number blended between the Achievable Potential estimates modeled in its analysis,
and further refined by in-depth discussions with IGC distract staff regarding the on-
the-ground realities of Intermountain’s service area.
Q. What measures were included in your analysis, and why were these selected? 8
A. Intermountain’s analysis included a range of high-efficiency residential sector
measures including ENERGY Star certified homes, energy efficient natural gas
furnaces, fireplace inserts (an important air-quality and woodstove replacement
measure), and water heaters. The Company examined several efficiency ranges,
eventually narrowing in on the highest tiers available within the market in which
Intermountain operates and for which it had valid data.
The Company examined the viability, and associated energy savings potential,
of portfolio measures under several conditions including: (1) conversions from non-
gas to high-efficiency natural gas equipment, as well as installations in the new
construction sector; (2) replacement of broken lower-efficiency natural gas equipment
with high efficiency natural gas equipment; and (3) replacement of functioning lower-
efficiency natural gas equipment with high-efficiency natural gas equipment before
the end of the measure’s useful life. Analysis concentrated on space and water heating
applications in new and existing construction, as well as on the viability of rebates for
ENERGY Star homes.

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Intermountain Gas Company
Q. Could this analysis be further refined or expanded to other measures at a later 1
date, if warranted? 2
A. Absolutely. The Company intends to explore a range of conservation options on an
ongoing basis, continuing to expand and refine its analysis based on available
resources.
V. CONSERVATION REBATE PORTFOLIO
Q. What circumstances have changed that has resulted in the Company’s interest 7
and ability to develop a conservation rebate program? 8
A. Three primary factors have precipitated the Company’s interest in achieving demand
side management through the use of a conservation rebate program.
First, I read the Commission’s Order No. 33444 in Avista’s 2015 general rate 11
case as sanctioning Avista’s proposal to adopt the Utility Cost Test (UCT) as a
reasonable method of valuation of natural gas DSM. Following that lead,
Intermountain has utilized the UTC alongside other tests, which has allowed the
Company to assess the viability of natural gas DSM options, identify multiple cost-
effective measures that would attain greater DSM value clarity, and result in a more
viable DSM portfolio under the Utility Cost Test (UCT). The UCT reflects the
Company’s perspective as an investor-owned LDC, and results in the identification of
a robust portfolio of natural gas DSM measures.
Second, conservation is an issue of public importance. This means conserving
electricity through the direct use of natural gas for space and water heat, as well as
maximizing the efficiency of natural gas equipment used in residential customers’ 22

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Intermountain Gas Company
homes. The Company continues to promote the direct use of natural gas and supports
the adoption of energy conservation and DSM programs.
Third, Intermountain has the opportunity to positively influence the energy
mix in its service area to ensure that natural gas is being used with maximum
efficiency as a space and water heating fuel in the residential sector. Pairing direct use
with high-efficiency natural gas equipment is a win-win for the Company, the
environment, and ratepayers. Intermountain is glad to have the opportunity to pursue
a program to encourage responsible use at this time.
In light of the above, the Company has developed in-house expertise
necessary to fully assess its DSM potential, viable conservation measures, and to
support the design and implementation of a fully articulated energy-efficiency
residential rebate program. Company staff will continue to perform this work and will
be actively engaged in supporting this program on an ongoing basis and ramping up
additional staffing resources as cost-effective and appropriate.
Q. Could you please further elaborate on how a rebate program results in DSM and 15
the efficient use of natural gas directly for space and water heat applications? 16
A. Rebates will result in the efficient use of natural gas directly for space and water
heating applications by driving the sales of high-efficiency natural gas equipment and
ENERGY Star natural gas homes. Natural gas fired energy efficiency upgrades from
standard efficiency (code level) equipment results in a reduction to the amount of
therms utilized for a given end use. This savings will then be recorded as energy
conservation attributable to this program. The direct use of natural gas further reduces

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Intermountain Gas Company
the strain on electric load which could better be applied to alternative end uses in a
home.
Q. Has Intermountain developed an exhibit detailing the rebate program portfolio 3
it has developed? 4
A. Yes. A full summary of Intermountain’s rebate portfolio and associated details can be
found in Exhibit 26: “DSM Rebate Program Analysis,” which offers the full cost
analysis that went into the Company’s program design.
Q. Can you please further describe how your rebate program will operate? 8
A. Gladly. As explained in greater detail in the testimony of Ms. Imlach, the Company’s
conservation rebate program will be open to all customers on its residential rate
schedule. Intermountain will be providing rebates for a range of cost-effective natural
gas high-efficiency HVAC and water heat equipment, as well as for ENERGY Star
natural gas homes.
There will be two tiers of rebates—one for upgrades from standard efficiency
to high-efficiency natural gas equipment. The second tier will provide incentives for
natural gas ENERGY Star homes, and for upgrades from standard electric to high-
efficiency natural gas equipment. Rebates will be administered by the Company and
issued in the form of a check following receipt of a completed and valid rebate
application; which includes proof of sale and installation of associated equipment, or
certification documentation in the case of Energy Star homes. Rebates will be
advertised via bill inserts, through education to area contractors, via programmatic
and district staff, and through other media as appropriate.

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Intermountain Gas Company
An annual report of expenditures, activities, therm savings, and overall cost
effectiveness will be provided at the end of each program year.
Q. What measures will be included in the Company’s rebate portfolio and how 3
were they selected? 4
A. The Company is proposing a rebate portfolio comprised of the following measures:
ENERGY Star Certified Natural Gas Homes
($1,200 rebate)
95%+ AFUE Natural Gas Furnace
Tier 1: ($350 rebate), Tier 2: ($500 rebate)
High Efficiency 90%+ Natural Gas Combo Radiant Heat System
Tier 1: ($1,000 rebate), Tier 2: ($1,200 rebate)
80%+ AFUE Natural Gas Fireplace Insert
Tier 1: ($200 rebate) Tier 2: ($250 rebate)
70%+ FE Natural Gas Fireplace Insert
Tier 1: ($100 rebate), Tier 2: ($200 rebate)
.67+ Energy Factor Natural Gas Water Heater
Tier 1: ($50 rebate), Tier 2: ($75 rebate)
.91+ Energy Factor Natural Gas Tankless Water Heater
Tier 1: ($150 rebate) Tier 2, ($200 rebate)
These measures were selected based on the following factors: (1) identified viability
in the TEAPot modeling tool; (2) overall cost effectiveness when modeled in the
conservation portfolio development tool; (3) general availability of these measures in
Intermountain’s service area and an (4) opportunity for greater penetration of these

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Intermountain Gas Company
measures within IGC’s service territory as demonstrated through both TEAPot and
observed directly by the Company’s staff operating the field at the district level and; 2
(5) the presence of similar measures in established natural gas conservation programs
in the Northwest.
Q. Why is the Company proposing two levels of rebates? 5
A. Intermountain is proposing two cost-effective tiers of rebates: one for converting
from standard to high efficiency natural gas equipment, and one for converting from
standard electric to high efficiency natural gas equipment. A higher incentive will be
provided for electric-to-gas equipment upgrades in acknowledgement of the higher
up-front equipment costs and logistical costs of conversion. The program will begin
with the baseline assumption of a 25% cost increase between gas and electric
equipment measures of the same end use. Rebates will be set at as close to 30% of
incremental cost as possible without exceeding levelized cost thresholds.
Intermountain agrees with the testimony of Mr. Kirschner that the direct use of
natural gas for space and water heating is the best application of this fuel source. The
higher-level rebate acknowledges this value, while helping a small increase in rebate
amount to further bridge the incremental cost difference between electric and natural
gas equipment. 18
Q. Can you please describe the assumptions utilized in the development of your 19
rebate portfolio?
A. Yes. A description of each assumption used to model the viability of Intermountain’s 21
conservation portfolio has been outlined in detail below:

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Intermountain Gas Company
Therm Savings: Therm savings inputs were based from the zonal assumptions
coded into the model which fall within the average of Intermountain Gas Company’s 2
Eastern and Western climate zones. Current assumed therm savings are in the
conservative range and are based upon an averaged savings resulting from the
installation of measures within new construction, existing construction,
manufactured, replacement, and as a turnover measure.
Conservation Targets: After careful consideration, and guidance from both the
TEAPot model and Company personnel, Intermountain is setting a program year
target of 65,000 therms, reflecting the Achievable Potential that can be acquired
through Intermountain’s proposed portfolio of conservation measures. It was
developed by running the TEAPot model with IGC forecasting data, assessing the
volume of incentives needed to achieve the various potential levels, and reviewing the
outcomes with district staff. More details behind the conservation targets can be
found in Exhibit 25.
Basing Intermountain’s portfolio design from a target of 65,000 therms
ensures that the Company is able to maintain cost-effectiveness upon a strong
foundation of realistic expectations. That said, it is also the Company’s desire to push 17
beyond the existing market and drive positive change in equipment purchasing
behavior within Intermountain’s communities. The Company is therefore setting a
“stretch” goal of 97,825 therms based on its TEAPOT modeled Technical Potential,
which is aspirational rather than achievable. Because IGC is not certain this stretch
goal is realistic, program cost-effectiveness is not dependent upon this aspirational
target, but rather upon the realistic achievable target developed by the Company.

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Intermountain Gas Company
However, Intermountain will aspire to achieve this goal with planned staffing and
budget levels, in order to attain the greatest value possible for the Company and its
customers, through the Company’s investment in DSM.
Target Levelized Cost: The Company has developed a levelized cost target of
$0.531 which was based from the following inputs:
Commodity Cost of Gas (WACOG) = $0.32764
Fixed Cost of Gas (Pipeline + Storage Fixed + Commodity Costs) = $0.20418
These two numbers added together equal $0.53182, which is the threshold
used in determining which measures would be cost-effective to include in
Intermountain’s program. Intermountain will reassess avoided costs on an ongoing
annual basis to ensure that the cost-effectiveness threshold is up-to-date and reflects
the current avoided costs of the Company.
Program Expenses: The Company anticipates a programmatic budget of
$225,000 for program outreach and operational expenses including two FTE staff to
deliver the program. This is a preliminary estimate of the Company’s staffing and
administrative needs, and it is subject to change as necessary to ensure appropriate
program delivery and cost effectiveness. However, any adjustments made to this
original assumption will be placed within the confines of the program’s cost-
effectiveness modeling to ensure the portfolio does not exceed the $0.531 threshold.
Anticipated total rebate expenditures for the program year will vary based upon the
measures that drive customer participation. However, preliminary estimates are in the
$200k - $600k range for rebates paid in association with the portfolio of measures

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Intermountain Gas Company
pre-screened from program cost effectiveness and modeled under the associated
spreadsheets.
Rebate Levels: Rebate levels were based on similar natural gas offerings and
equivalent electric measures within IGC’s service areas and surrounding regions.
Rebate levels have been set to be as close to 30% of incremental cost as possible, and
higher where cost-effective, in order to ensure that they are sufficient to attracting
customer interest and avoiding free ridership. Thoughtfully constructed incentive
levels will help kick-start natural gas DSM efforts in Intermountain’s service area and 8
drive customers towards environmentally beneficial equipment choices while
mitigating the risk of free ridership.
Incremental Costs: Incremental cost levels were shaped by the baseline market
assumptions developed during the design of the TEAPot model, and refined with on-
the-ground market research performed by the Company. Intermountain will be
monitoring installed measure costs on an ongoing basis and will make adjustments to
these assumptions as appropriate.
Measure Life: Measure life assumptions were based from the figures utilized
by Nexant in its modeling tool, engineering best practices, and the standard measure
life assumed for the same piece of equipment in comparable utility programs. 18
Discount Rate: The model utilizes a 20-year mortgage rate reflecting the
averaged lifespan of the measures within Intermountain’s rebate portfolio with an
APR of 3.69%. This approach acknowledges the low-risk, long-term value, and
reliability of home-based energy efficiency investments. It likewise acknowledges the

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Intermountain Gas Company
utility’s investment in demand side resources through a long-lived energy efficiency
portfolio as a viable supplement to supply side resources.
The Company shall regularly monitor, and update program variables on an
annual basis, in order to make adjustments, as appropriate to the program design.
Q. Is the Company considering cost effectiveness at the individual measure level, 5
the portfolio, or both, and why was this approach taken? 6
A. The Company is considering cost-effectiveness at the portfolio level. In addition, the
discrete measures within the Company’s proposed conservation portfolio are
generally viable at the individual level, with minor variations in cost effectiveness
taking place from measure to measure.
All measures within the portfolio developed by the Company have strong
UCT results and were screened via the TEAPot model. The Company is confident
that the real world application of its rebate portfolio is cost effective.
Q. Under what cost test/s are these measures deemed to be cost effective and 14
what were the underlying inputs that lead to that conclusion? 15
A. The proposed conservation program portfolio as designed is cost-effective to the
Company under the Utility Cost Test.
The main drivers of cost-effectiveness of the Utility Cost Test are utility
rebate payment levels and administrative expenses which are balanced out against
total energy savings. This approach treats supply and demand side resources as
equally valuable. Under the UCT, the customer is seen as a supplier from which the
Company is purchasing natural gas. The Company “purchases” unused therms and
their associated transportation costs from customers resulting from the use of

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Intermountain Gas Company
Company-driven purchases of energy-efficient natural gas equipment. A cost
effective DSM rebate program under the UCT must ensure that the Company pays the
same amount or less for demand side resources as it does for supply side resources. In
the case of Intermountain’s proposed portfolio, the UCT result is below the $0.531 4
levelized cost threshold, meaning that the portfolio is cost effective since it cost the
same or less to “purchase” unused therms, with their associated transportation costs, 6
from the customer via IGC’s conservation portfolio than it does to purchase energy
from traditional suppliers.
The Company also performed analysis of its proposed conservation portfolio
under the Total Resource Cost Test. The main drivers of the TRC are the cost of the
energy savings equipment purchased by the customer and the Company’s associated 11
administrative costs, balanced against the total energy savings. The test scrutinizes
the customer’s purchasing decision, focusing on whether the investment in energy 13
savings yields adequate payment to the customer under current energy prices.
However, this level of analysis is not typically conducted when assessing a supplier
from which natural gas will be purchased. And the customer from which DSM is
purchased may see additional benefits and value beyond energy savings that, when
paired with the rebate offered by the utility, may motivate them to purchase high-
efficiency natural gas equipment.
Furthermore, lower natural gas costs today will not necessarily translate into
lower natural gas costs in the future. It is when natural gas is the lowest priced that
consumers are more likely to be driven towards use of the product. Encouraging
conservation during lower natural gas costs by providing an additional economic

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Intermountain Gas Company
motivation through rebates, is essential to proper management of this precious natural
resource and to maintain reliability for the Company. Therefore, even though the
TRC result does exceed the Company’s levelized cost threshold, Intermountain
believes that portfolio is still cost effective, and worth pursuing.
Q. Will the Company be utilizing the same discount rate for the development of its 5
conservation portfolio as it did for its DSM potential analysis? 6
A. Yes. Intermountain’s program design was informed by its TEAPot DSM analysis and
all inputs have been synchronized accordingly.
Q. Does the Company intend to calculate total annual therm savings achievements 9
on a net or gross basis?
A. The Company intends to calculate savings on a gross basis, based on the program’s 11
deemed therm savings.
Q. Please describe the ways the Company intends to mitigate free ridership as part 13
of this program? 14
A. The Company will be working to mitigate free ridership in several ways through the
development and implementation phases of its program.
First, Intermountain has taken free ridership risks into account in the
development of its program portfolio. For example, the Company had initially
considered lower efficiency levels for furnace and water heat incentives. However,
after consulting with district staff throughout IGC’s service area, Intermountain’s 20
DSM development team learned these measures were already being sold without the
need for further incentive. The Company took this feedback seriously as measures
were selected.

Spector, Di 26
Intermountain Gas Company
Second, the Company is following guidance developed by Nexant during the
development of the TEAPot model that suggests rebate levels of at least 30% of the
incremental cost of a measure are more likely to result in program participation.
Intermountain will bring out rebates as close to, or higher, than these levels as
possible while maintaining program cost-effectiveness.
Third, the Company will gather information, where available, on the
efficiency levels of equipment installed in customers’ homes pre and post program 7
implementation where available, to determine the influence the program has on
customer purchasing decisions.
Fourth, the Company will make program updates on an ongoing basis to
ensure that rebates are only provided for measures that are not already saturating the
market so that they serve their intended purpose—as an incentive that drive positive
consumer behavior.
Finally, it is important to note that in addition to free ridership, there will be a
certain percentage of homeowners that will purchase Energy Star homes and high-
efficiency natural gas equipment as a direct result of Company marketing and
outreach that will not apply for a conservation incentive. This will result in therm
savings directly attributable to Intermountain’s program that is left unquantified.
However, the Company believes that both these savings, and free ridership will likely
be minimal.
Q. Are there any other energy benefits associated with this program? 21
A. Yes. Utilizing high performance natural gas equipment in place of electric equipment
results in the direct use of natural gas, which is a more efficient use of the resource

Spector, Di 27
Intermountain Gas Company
for providing home space and water heating. The Department of Energy recognizes
source efficiency as the optimal measure of efficiency, and therefore electric savings
resulting from the use of energy-efficient natural gas equipment should be considered
when evaluating the merits of a natural gas DSM program.
Q. What actions will the Company take to help ensure the program operates as 5
anticipated? 6
A. Intermountain has developed a cost-effective, low risk conservation portfolio. The
Company has selected proven measures with known therm savings values and has
estimated program participation levels via the TEAPot model which has been updated
with Intermountain specific inputs. Intermountain further refined this figure with
direct input from district staff to provide the most realistic estimate possible for therm
savings achieved during its ramp-up phase. In addition, IGC developed a modest, but
realistic budget, minimizing sunk costs to two FTE employees in order to balance
having adequate staff to deliver the rebate program, and cautiously managing
program expenditures prior to demonstrated performance.
Quite simply, the Company has planned its portfolio design to ensure
customers are offered an attractive, well-staffed, and successful program. Rebates
have been set at levels designed to drive customer interest, while balancing against
the law of diminishing returns. If the program does not perform as anticipated,
Intermountain will examine the root cause of this underperformance and will adjust.
The Company is confident that in the event of unforeseen problems, the program
could withstand lower than anticipated participation, or the need for additional
expenditures if absolutely necessary.

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Intermountain Gas Company
Q. What impact will failing to achieve annual therm savings targets have on 1
program cost effectiveness and operation? 2
A. If the Company fails to achieve its annual therm savings targets, the overall cost
effectiveness of its program portfolio will be lowered. However, the conservation
portfolio was designed to withstand lower participation levels if necessary. This was
done by prudently budgeting program ramp-up costs, while maintaining rebates at
levels comparable to other natural gas utility programs. In the event that program
participation was low enough to result in cost-effectiveness below Intermountain’s
$.531 threshold, the Company would reexamine its rebate levels, portfolio design,
and outreach strategy for following years.
Q. What impact will exceeding annual therm savings targets have on program cost 11
effectiveness and operation? 12
A. If the Company were to exceed its annual therm savings targets, the portfolio as a
whole would become even more cost effective than anticipated since more therms
would be saved for the same budgeted level of investment. In such a case, the
Company would assess if participation levels were sustainable, and if so, would work
within the parameters of its TEAPot analysis and feedback from district staff, to
expand its program and raise associated targets as appropriate.
VI. PROGRAM DELIEVERY AND IMPLEMENTATION
Q. Can you describe how the conservation/DSM program proposed by the 20
Company will be implemented?
A. Absolutely. With this general rate case, the Company seeks to implement its first ever
Demand Side Management Program (DSM) for the residential sector with a request

Spector, Di 29
Intermountain Gas Company
for cost recovery to be filed pending approval of the DSM program. This program
will be implemented in-house, and led by Intermountain’s Manager of Energy
Utilization. The Company anticipates that two additional positions will be developed
in association with this program. This includes an FTE position designed to process
and verify rebates, perform all required data tracking and reporting, and to serve as an
energy advisor to IGC customers. The second anticipated position would provide
deeper analysis of energy conservation measures and potential and would support
training and technical assistance to area HVAC contractors in regards to
Intermountain’s program, and would perform quality control inspections as needed.
The Company will also leverage existing staff resources such as its Consumer Sales
Representatives who are positioned to reach out directly to customers to encourage
program participation.
The Company also intends to reach out to local builders and contractors to
introduce them to high-efficiency natural gas equipment options and increase the
proliferation of these technologies in the communities served by IGC.
Intermountain’s goal will be to build a robust Trade Ally network comprised of
carefully screened equipment dealers and installers whom it will work with to
encourage greater participation in this program.
Additional detail regarding program structure and delivery can be found in the
testimony of Ms. Imlach.
Q. How will the Company publicize and promote its DSM rebate program?
A. The Company intends to publicize and promote its DSM program through as many
channels as possible, which may include: bill inserts; utility newsletter messaging;

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Intermountain Gas Company
information on the Company’s website; word-of-mouth by existing Consumer Sales
Representatives; flyers and brochures; co-op advertising with local contractors;
billboards; home and garden shows; home builder association meetings; radio, print,
and television ads; and other media and methods as cost-effective and appropriate.
Q. Will the Company consider expanding its program, or adding additional 5
measures following program ramp-up? 6
A. Yes. As stated earlier, it is the Company’s intention to explore additional DSM 7
opportunities following its initial ramp-up. Program changes and expansions will be
based from the on-the-ground results of its DSM program, as well as ongoing
feedback from district staff, area contractors, and Intermountain’s customers.
Q. Does this conclude your testimony?
A. Yes it does.