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HomeMy WebLinkAbout20161216Donohue Direct.pdfBEFORE THE F.::.C--IV D · ~.u. r ·-·: 1 6 P 1 I : " 9 L" t i.,, ·---~· l ) IN THE MATTER OF INTERMOUNTAIN GAS COMPANY'S APPLICATION TO CHANGE ITS RATES AND CHARGES FOR NATURAL GAS SERVICE. ) CASE NO. INT-G-16-02 ) ) ) ___________ ) DIRECT TESTIMONY OF STACEY DONOHUE IDAHO PUBLIC UTILITIES COMMISSION DECEMBER 16, 2016 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Please state your name and business address for the record. A. My name is Stacey Donohue. My business address is 472 West Washington Street, Boise, Idaho. Q. A. By whom are you employed and in what capacity? I am employed by the Idaho Public Utilities Commission as a Utilities Analyst in the Utilities Division. Q. A. What is your education, experience and background? I received a B.A. in History from James Madison University in 1999 and a Master's of Public Administration (M.P.A.) from Boise State University in 2010. Prior to joining the Commission Staff in 2010, I was employed as an Energy Specialist at the Idaho Office of Energy Resources where my main responsibility was managing the administration of stimulus-funded energy efficiency and renewable projects. While completing my M.P.A., I was hired by the Boise State University Department of Public Policy and Administration to conduct survey research and author a report on customer service and state-wide interagency relationships for the Idaho Transportation Department (ITD), which was presented to the ITD Board . I have attended the New Mexico State University Center for Public Utilities' course in Practical Regulatory Training, the National Regulatory Research Institute's course on "Electricity's Current Challenges," International Energy Program Evaluation Conferences, and the CASE NO. INT-G-16-02 12 /16/16 DONOHUE, S. (Di) 1 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Association of Energy Services Professional Annual Conference, as well as dozens of web trainings related to utility issues. I serve on Idaho Power's Energy Efficiency Advisory Group, Avista's Energy Efficiency Advisory Committee, the Regional Technical Forum's Policy Advisory Committee, the Northwest Energy Efficiency Alliance's Cost­ Effectiveness Committee, and Idaho Power's Integrated Resource Planning Advisory Council. I have filed comments representing Staff's position on electric and gas demand­ side management (DSM) program design and prudency, low­ income weatherization programs, demand response, fixed cost­ adjustment mechanism design and associated recovery, integrated resource plans, and most recently, community solar. In addition, I have filed testimony on DSM issues in two general rate cases. In 2015, I was recognized by the Northwest Energy Coalition with its 4 Under 40 leadership award for my work in clean energy. Q. A. What issues will your testimony address? My testimony will address Intermountain Gas Company's DSM proposal. I will focus on four particular aspects of the proposal: 1) the Company's avoided cost calculation and use of the Utility Cost Test (UCT); 2) the proposed measures, cost-effectiveness calculations, and incentives for efficiency and fuel-switching measures; 3) concerns with the Conservation Potential Assessment (CPA) CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 2 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 analysis, findings, and five year projections; and 4) recommendations for aligning the Company's portfolio with standard Idaho Commission DSM expectations. Q. A. Please summarize your testimony. I maintain that the Company's avoided cost calculation and use of the UCT are reasonable. I also believe that the cost-effectiveness calculations, sources, and assumptions for Tier 1 energy efficiency rebates are reasonable, but should be updated using a discount rate that reflects the Company's real Weighted Average Cost of Capital (WACC) rather than 20 year mortgage rates. However, I recommend removing the Tier 2 direct use incentives for all measures except for Energy STAR Certified Homes, because the Company did not provide sufficient evidence quantifying the benefit to customers. In addition, my review of the Company's CPA found that the analysis and methodology are not consistent with industry norms, which explains the very small amount of forecasted savings for the first year and for every year in the five year ramp-up period. Lastly, I propose a handful of recommendations that would align the Company's portfolio with standard Idaho Commission DSM expectations. Q. How will your testimony be organized? CASE NO. INT-G-16-02 12 /16/16 DONOHUE, S. (Di) 3 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. I will first describe the Company's proposed DSM portfolio. My testimony will then be subdivided under the following headings: 1) Avoided Cost and the UCT, p. 5 2) Proposed Measures, p. 8 3) CPA Analysis, p. 14 4) Idaho Commission's Standard DSM Expectations, p. 20 Q. Please explain the Company's DSM portfolio proposal. A. The portfolio consists of seven measures and the Company offers two tiers of incentives for each measure. Tier 1 is for "Energy Efficiency Rebates." Tier 2 is for "Direct Use Rebates," also commonly known as fuel conversions. The only exception to the two tier structure is the Energy STAR Certified Home measure -it is only available as a direct use measure. The measures in both tiers are identical; the only difference is the circumstance in which the measures are installed. Tier 1 rebates apply when a measure replaces an existing natural gas appliance (i.e. a natural gas furnace) Tier 2 rebates apply when a measure is installed during a fuel conversion (i.e. when a customer switches from electric to natural gas space). CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 4 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 As illustrated in Table 1, rebates for fuel conversions are higher than energy efficiency rebates. Table 1: Intermountain Gas's Proposed DSM Portfolio Tier 1 Tier 2 EE Direct Measure Rebate Use Rebate Energy STAR Certified Homes n/a $1,200 95% AFUE Natural Gas Furnace $350 $500 Hi-EF Combination Radiant Heat $1,000 $1,200 80% AFUE Natural Gas Fireplace Insert $200 $250 70% FE Natural Gas Fireplace $100 $200 .67 Natural Gas Water Heater $50 $75 .91 EF Condensing Tankless Water Heater $150 $200 Source: Company Witness McGrath, Exhibit 31, page 12 Avoided Cost and the UCT Q. Please explain your review of the Company's avoided cost calculation and the use of the UCT. A. The Company proposes to use a levelized avoided cost target of $0.53182 that includes a $0.32764 commodity cost and the fixed cost of gas, which the Company represents are pipeline and storage costs at $0.20418. Staff was able to closely replicate this value and confirmed that it aligns with the avoided cost methodology approved by the Commission in Order Nos. 33444 and 33464. I also agree with the Company's use of the UCT. The UCT is a test that measures the cost-effectiveness of DSM measures. As Company Witness Spector correctly states: "Idaho regulators now [accept] the Utility Cost Test (UCT) ." Spector Direct at 7. Staff has long maintained that the UCT CASE NO. INT-G-16-02 12/16 /16 DONOHUE, S. (Di) 5 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 assesses cost-effectiveness more accurately and transparently than the other cost-effectiveness tests do, because the UCT is limited to the costs and benefits that accrue to the utility, and hence, ratepayers. The Commission has ·allowed utilities to use the UCT as the threshold for determining cost-effectiveness. See Order No. 33365. All of the energy efficiency measures (incented at the Tier 1 level) are anticipated to be UCT cost-effective with levelized costs per therm ranging from $0.393 to $0.507, for an average of $0.379. About half of the direct rebate measures (incented at the Tier 2 level) are anticipated to be cost-effective under the UCT, with levelized costs ranging from $0.424 to $0.610. The Company anticipates that combined Tier 2 rebate offerings also will be UCT cost-effective, with an average levelized cost of $0.5214. Q. Although you generally agree with the Company's Tier 1 energy efficiency cost-effectiveness assumptions and methodology, are there any aspects of the methodology with which you disagree? A. Yes. Although the Company's cost-effectiveness assumptions for Tier 1 rebates are reasonable, I disagree with the Company's use of the 20 year mortgage rate as a discount rate for residential measures under the UCT. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 6 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Please explain why the 20 year mortgage rate is not appropriate for the UCT, and recommend an alternative. A. It is commonly accepted to use a 3-5% discount rate for another cost-effectiveness test, the Total Resource Cost Test (TRC). Further, I acknowledge the credible argument made by Company Witness Spector around a very low discount rate in her publication "Natural Selection: the Evolution of DSM Valuation and the Use of the UCT" that was provided in response to Staff Production Request No. 180. Nevertheless, it remains standard practice to use the WACC for the UCT. In addition, the Company's response to Staff's Production Request No. 192 indicates that Nexant, the Company's DSM consultant, applied the WACC to the UCT when it developed Cascade Natural Gas's DSM portfolio. In discussions with Staff, Intermountain Gas frequently referenced its alignment with Cascade Natural Gas's methodology in developing its DSM proposal. In this case, Staff proposes a 7.1% discount rate for the Company in Staff Witness Carlock's testimony. important to note that if approved, 7.1% would be the Company's nominal discount rate. However, I recommend It is converting this to the "real" discount rate within the cost­ effectiveness analysis in order to account for the effects of inflation. This aligns with the methods currently used by both Idaho Power and Avista. Adjusting the 7.1% nominal CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 7 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 discount rate to account for inflation at 2.6% results in a real discount rate of 3.54%. Q. Does the Company's DSM portfolio remain cost- effective using a different discount rate? A. Yes. Staff's recommended discount rate is slightly lower than the discount rate proposed by the Company, so it increases the portfolio's cost-effectiveness. Proposed Measures Q. Do you support the Company's proposal to incent the Tier 1 energy efficiency measures included in its DSM proposal? A. Yes, I support the Company's proposal to offer Tier 1 energy efficiency rebates to customers who upgrade to more efficient natural gas equipment. Q. A . Why do you support the Company's proposal? I reviewed each of the proposed measures, the assumptions the Company used in its cost-effectiveness calculations, the sources for those assumptions, the cost­ effectiveness methodology, and the results of the calculations. These assumptions generally look reasonable, but it is important to understand there is less data, and therefore less consensus, on the amount of natural gas savings per measure than for electric efficiency measures. However, Intermountain Gas has supplied savings estimates from Cascade Natural Gas, Nexant, KEMA Laboratories, the CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 8 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Consortium for Energy Efficiency, the U.S. Department of Energy, and a variety of national gas utilities which combined provide a reasonable basis from which to launch a portfolio. As is standard practice for electric DSM program, I recommend that Intermountain Gas's programs be subjected to impact and process evaluations to verify these savings and ensure that DSM is a cost-effective investment for customers. Q. Do you support the Company's proposal to incent the Tier 2 direct use measures included in its DSM proposal? A. No, I do not support incentives for Tier 2 direct use measures. I am not opposed to incentives for fuel conversions, but utilities must be able to quantify the value of the resource to its customers in order to use customer funds to acquire that resource. Company witness Kirschner's testimony provides a high-level explanation regarding the benefits of the direct use of natural gas to customers and the environment, but the cost-effectiveness analysis provided by Company witness Spector did not quantify any of those benefits as they relate to Intermountain Gas's customers. Q. Please explain the cost-effectiveness analysis Company witness Spector provided in her testimony and accompanying exhibits to justify incentives for fuel switching. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 9 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. The Company used an interesting assumption regarding conversions: instead of assuming that the efficient gas furnace installed during the conversion replaces electric/propane/wood heat, the Company assumed that the efficient gas furnace would replace an inefficient gas furnace that the customer would have installed during the conversion without the incentive. This means that Tier 1 (energy efficiency) measures and Tier 2 (direct use measures) have exactly the same amount of energy savings in the cost-effectiveness analysis. See Spector Direct, Exhibit 26. In fact, all assumptions in the cost- effectiveness calculations for Tier 1 and Tier 2 measures are identical except for the increased incentives for Tier 2. Even though the Company's cost-effectiveness calculations show the same amount of savings in both circumstances, the Company is willing to pay a greater incentive when the measure is part of a fuel conversion. Q. Is this consistent with how other Idaho utilities have valued fuel conversions in cost-effectiveness calculations? A. No. Avista also offers fuel conversions, but has a very different approach. Because electric-to-gas fuel conversions decrease electric consumption, Avista considers fuel conversions to be an electric efficiency measure and calculates the cost-effectiveness of the measure based on CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 10 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the avoided electric consumption plus the increased gas consumption. In contrast, Intermountain Gas's cost­ effectiveness calculations ignore the reduction in electric/wood/propane use and the increased consumption of natural gas that conversions generate. Instead, the Company assumes that the customer was going to convert anyway and is simply trying to ensure the conversion is as efficient as possible. While that is a laudable goal, it means that the resource the Company purchases with the incentive is the efficient furnace or water heater, not the conversion. Since the value of the resource for both stand-alone efficiency measures and fuel conversions is the efficiency of the new equipment, it is not reasonable to provide a greater incentive for conversions. Q. Why is the Company providing a higher incentive for fuel switching than for energy efficiency? A. The Company maintains that the higher incentive for direct use measures offsets the higher cost that customers incur when they convert to natural gas water or space heat. Company witness Spector attests that "A higher incentive will be provided for electric-to-gas equipment upgrades in acknowledgment of the higher up-front equipment costs and logistical costs of conversion." Spector Direct at 19. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 11 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. On what basis do you oppose Intermountain Gas paying a higher incentive for conversions, which certainly have a higher incremental cost than efficiency measures? A. It is a widely accepted industry practice to offer higher incentives as necessary for measures with higher incremental costs. An incentive to address the higher incremental cost for fuel switching measures would also be acceptable for Intermountain Gas if it had demonstrated cost-effectiveness by accurately valuing the resource deferred by the conversion (i.e. reduced electric /wood/propane consumption plus increased natural gas consumption). But since the Company only demonstrated the cost-effectiveness of the efficiency aspect of the measure, it is not reasonable to incent anything beyond the incremental cost of the efficiency upgrade. Q. The Company has stated that it needs to acquire 65,000 therms in energy savings for its DSM portfolio to be cost-effective. How will removing the incentives for fuel conversions impact this acquisition goal? For example, if incentives for half of the measures are removed, will savings drop by half (to 32,500 therms) and therefore no longer be cost-effective? A. The Company's energy savings goal (and therefore cost-effectiveness of the portfolio) should not be adversely affected by removing incentives for fuel conversions because CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 12 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the savings associated with fuel conversions and efficiency measures are exactly the same-the only difference is the amount of the incentive payment. Customers who are converting to natural gas will still receive a rebate for installing an energy efficient appliance as part of the conversion, but under my proposal they will receive the Tier 1 incentive amount rather than the Tier 2 incentive amount. It is possible that fewer people will upgrade to an efficient appliance without the higher incentive when converting to gas. However, this potential reduction in savings will likely be offset in the cost-effectiveness calculation by the reduction in expenses from removing the higher Tier 2 incentive payments. Q. Intermountain Gas already provides an incentive to customers who convert to natural gas. How is that different from the Company's proposal in this case? A. The Company's current offering has some similarities to its proposed Tier 2 rebates. The Company currently offers incentives to customers for installing high efficiency natural gas equipment when they convert to natural gas. The current offering is reasonable because incentive costs are not recovered in rates, but instead are paid for by shareholders and, therefore, are not subjected to the Commission's approval for recovery. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 13 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. What is your recommendation regarding Tier 2: Direct Use incentives? A. Because it is not appropriate to value the resource on an efficiency basis but pay the incentive based on the cost of a conversion, I recommend that the Company provide a Tier 1 rebate for each measure regardless of whether it is installed in the context of a fuel conversion or not. The Company has categorized Energy STAR Certified Homes as a direct use measure rather than an efficiency measure because it is new construction. But because the Company has only proposed one rather than two incentive amounts for this measure, the distinction is not concerning. I recommend including the Energy STAR Certified Homes incentive in the single, consolidated list of incentives. CPA Analysis Q. Let's turn now to your concerns about the Company's CPA analysis. To start, please explain what a CPA is. A. The National Action Plan for Energy Efficiency (NAPEE) guide on potential studies states that a CPA -or Conservation Potential Assessment -is "a quantitative analysis of the amount of energy savings that either exists, is cost-effective, or could be realized through the implementation of energy efficiency programs and policies." CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 14 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 See NAPEE 2007 at 2-1. CPAs are important because Idaho utilities use them to determine the amount of energy efficiency included as a resource in their Integrated Resource Plans. Q. Earlier, you stated you have some concerns with the Company's CPA, analysis, findings, and five year savings projections. Please explain your concerns. A. I have two primary concerns with the CPA conducted by Nexant for the Company: 1) the very limited number of measures analyzed for savings potential; and 2) the calculation used to estimate the portion of economic potential that is achievable potential. These shortcomings result in a very low first year achievable potential that remains low in the five year projection of DSM savings. Please elaborate. Q. A. Sure. My first concern is that the Company's CPA only analyzed the savings potential of seven residential measures that the Company already planned to include in its DSM portfolio. This is the opposite approach taken by most other CPA analyses. Usually, a CPA analysis begins by identifying and analyzing all available measures in order to determine the amount of technical, economic, and achievable energy efficiency potential in the service territory. For electric utilities, the technical potential is calculated by analyzing thousands of measures. CASE NO. INT-G-16-02 12/16/16 Fewer measures exist for DONOHUE, S. (Di) 15 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 natural gas DSM, but for comparison, Avista's 2014 Idaho natural gas CPA included one hundred measures across the residential, commercial, and industrial sectors. Intermountain also opted not to analyze several common residential measures often incented by other gas utilities. Examples of some common residential measures include replacing inefficient windows and showerheads, adding attic and floor insulation, sealing HVAC ducting, upgrading to programmable and/or smart thermostats, conducting home energy evaluations and providing reports. In addition to not analyzing these residential measures, the Company decided not to analyze any commercial or industrial energy efficiency measures. The Company maintains that it did not conduct a full CPA because it preferred to begin its DSM efforts with a limited group of residential measures with which it has direct experience. Beginning with a small subset of measures that leads to a more robust portfolio is not an unreasonable approach if there is a credible ramp-up in subsequent years. Q. A. Do you have any other concerns about the CPA? Yes. A second concern I have with the Company's CPA is the calculation used to get from economic potential to achievable potential. After identifying the technical potential, the second step in most CPAs is to calculate the CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 16 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 economic potential by determining how much of the technical potential is cost-effective after a utility's cost to incent and administer the programs are included. The economic potential is then further refined into the achievable potential, which reflects the amount of cost-effective energy efficiency that customers will acquire, often referred to as market uptake. During discussions with Staff, Intermountain explained that three levels of achievable potential were identified based on differing levels of incentives. Including incentive costs at the achievable level is not consistent with industry standards because those costs should already have been included as part of the cost­ effectiveness screening at the economic level. However, the bigger problem is that the Company's Response to Production Request No. 192 indicated that the incentive costs, but not administrative costs, were already included in the calculation of economic potential. But the Company's analysis showed a significant decrease between technical and economic potential energy savings that does not appear to be sufficiently explained if only administrative costs were included, which could mean that incentive costs were counted twice. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 17 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. You also mentioned concerns about the level of savings projected by the CPA. Please explain those concerns. A. Sure. Regardless of the details of the analysis, the Company's CPA methodology produced savings targets that are extremely low. In the first year, the Company only found 97,825 therms of achievable savings, which is a 96% reduction from the economic potential. According to the Company, that is 0.04% of residential sales (Spector, Exhibit 25) . Even after five years the achievable target only amounts to 0.19% of residential sales. To put that in context, Avista's 2016 Idaho gas target is 230,000 therms of achievable savings from 70,500 residential customers. Avista's 2014 Washington gas CPA found 275,980 therms of achievable first year savings from 141,000 residential customers. It would seem that Intermountain Gas could produce more than 97,825 therms from its 300,000 residential customers. It's also important to note that the Company's first year target is not based on the amount of achievable energy savings identified in the CPA. The first year target is actually based on a "programmatic" savings target of 65,000 therms, which means that savings as a percentage of residential sales is lower than 0.04%. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 18 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Company has explained that the 65,000 therms target is simply the minimum savings needed in order for the portfolio to remain cost-effective. It further explains that while it is committed to acquiring the achievable target, it wanted to establish very realistic programmatic targets to ensure portfolio viability in the early years. I am not opposed to early, modest goals as the Company learns how to implement a DSM portfolio, but it is important for the Company to meaningfully accelerate its acquisition into a more robust portfolio. In my discussions with the Company personnel, they have stated that this limited CPA was undertaken as a starting point that would allow them to launch their DSM portfolio without undue expense or complication. As such, they believe the 3 -5 year potential estimates understate the savings they will actually be able to acquire and have expressed a willingness to conduct a more complete CPA in the future. I recommend that the Commission order the Company to complete a CPA developed according to industry best practices to inform and be included with the Company's 2019 Integrated Resource Plan. Q. Should the Commission require the Company to implement its DSM proposal even if the Commission does not approve the Company's request for the FCCM? CASE NO. INT-G -16-02 12 /16 /16 DONOHUE, S. (Di) 19 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Yes. The Company's cost-effectiveness analysis shows that its proposal is less expensive than the supply­ side alternative. Therefore, the Company should implement it as a least cost resource. Idaho Corcunission's Standard DSM Expectations Q. Do you have any other recommendations regarding the Company's proposal? A. Yes, I recommend that the Commission order the Company to adopt standard Idaho Commission DSM requirements established for the three large electric and gas utilities. These are well-established practices, familiar to the Commission, Staff, and intervenors, and include forming an energy efficiency advisory group comprised of stakeholders, trade allies, and customers to help guide the Company's implementation of its DSM portfolio . The Company should also file an annual DSM report to document program performance, cost-effectiveness, program implementation methods, and expenditures. The Company's programs should be periodically reviewed by third-party evaluators to verify savings and confirm that delivery strategies align with industry best practices. The energy efficiency advisory group should also advise the Company on other standard expectations, including support for enhanced residential building codes, participation in market transformation efforts, the CASE NO. INT-G-16-02 12 /16 /16 DONOHUE, S. (Di) 20 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 potential for a low income offering, and establishing a tariff rider for funding all DSM programs, which the Company discussed with Staff. The advisory group could also provide input on a more complete CPA as well as program implementation practices that would help the Company ramp up to a more meaningful level of DSM acquisition in the corning years. Q. Please list all of your recommendations in this case. A. I recommend that the Commission approve the Company's proposed DSM portfolio with some important changes. First, I recommend that the Company calculate the cost-effectiveness of its portfolio using the real WACC as the discount rate. Second, I recommend the Commission direct the Company to incent all measures at the Tier 1 level only, with the exception of the Energy STAR Certified Hornes measure, which should receive the Tier 2 incentive. Third, I recommend the Commission direct the Company to conduct a CPA that meets or exceeds industry standards in the context of its 2019 IRP. Fourth, I recommend the Commission direct the Company to align with standard Idaho Commission DSM expectations, which include convening an energy efficiency CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 21 STAFF 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 advisory group comprised of stakeholders. This advisory group can help the Company consider a plan for delivering an annual DSM report, independent third-party evaluations, support for enhanced residential building codes, participation in market transformation efforts, a low income offering, and the aforementioned improved CPA. Q. Does this conclude your testimony in this proceeding? A. Yes, it does. CASE NO. INT-G-16-02 12/16/16 DONOHUE, S. (Di) 22 STAFF CERTIFICATE OF SERVICE I HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF DECEMBER 2016, SERVED THE FOREGOING DIRECT TESTIMONY OF STACEY DONOHUE, IN CASE NO. INT-G-16-02, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWING: MICHAEL P McGRATH DIR -REGULA TORY AFFAIRS INTERMOUNTAIN GAS CO PO BOX 7608 BOISE ID 83707 E-MAIL: mike.mcgrath@intgas.com BRADMPURDY ATTORNEY AT LAW 2019 N 17TH STREET BOISE ID 83702 E-MAIL: bmpurdy@hotmail.com CHAD M STOKES TOMMY A BROOKS CABLE HUSTON LLP 1001 SW 5TH AVE STE 2000 PORTLAND OR 97204-1136 E-MAIL: cstokes@cablehuston.com tbrooks@cablehuston.com BENJAMIN J OTTO ID CONSERVATION LEAGUE 710 N 6TH STREET BOISE ID 83702 E-MAIL: botto@idahoconservation.org PETER RICHARDSON GREGORY M ADAMS RICHARDSON ADAMS PLLC 515 N 27TH STREET BOISE ID 83702 E-MAIL: peter@richardsonadams.com greg@richardsonadams.com RONALD L WILLIAMS WILLIAMS BRADBURY 1015 W HAYS ST BOISE ID 83702 E-MAIL: ron@williamsbradbury.com EDWARD A FINKLEA EXECUTIVE DIRECTOR NW INDUSTRIAL GAS USERS 545 GRANDVIEW DR ASHLAND OR 87520 E-MAIL: efinklea@nwigu.org ELECTRONIC ONLY MICHAEL C CREAMER GIVENS PURSLEY LLP E-MAIL: mcc@givenspursley.com F DIEGO RIV AS NW ENERGY COALITION 1101 8TH AVENUE HELENA MT 59601 E-MAIL: diego@nwenergy.org SCOTT DALE BLICKENSTAFF AMALGAMATED SUGAR CO LLC 1951 S SATURN WAY STE 100 BOISE ID 83702 E-MAIL: sblickenstaff@ amalsugar.com CERTIFICATE OF SERVICE KEN MILLER SNAKE RIVER ALLIANCE PO BOX 1731 BOISE ID 83701 E-MAIL: kmiller@snakeriveralliance.org LANNY L ZIEMAN NATALIE A CEPAK THOMAS A JERNIGAN EBONY M PAYTON AFLOA/JA-ULFSC 139 BARNES DR STE 1 TYNDALL AFB FL 32403 E-MAIL: lanny.zieman. l@us.af.mil Natalie.cepak.2@us.af.mil Thomas.jemigan.3@us.af.mil Ebony.payton.ctr@us.af.mil ANDREW J UNSICKER MAJ USAF AFLOA/JACE-ULFSC 139 BARNES DR STE 1 TYNDALL AFB FL 32403 E-MAIL: Andrew. unsicker(a),us.af.mil CERTIFICATE OF SERVICE