20200121Final_Order_No_34536.pdf

Office of the Secretary
Service Date
January 21,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN )CASE NO.INT-G-19-04
GAS COMPANY'S APPLICATION FOR )DETERMINATION OF 2017-2018 ENERGY )ORDER NO.34536
EFFICIENCY EXPENSES AS PRUDENTLY )INCURRED )
On August 9,2019,Intermountain Gas Company ("Company")applied to the Commission
for an order designating its 2017-2018 residential Energy Efficiency Program ("EE Program")
expenses as prudentlyincurred.The Company requested that its Application be processed under
Modified Procedure.
On September 17,2019 the Commission issued a Notice of Application and Notice of
Modified Procedure setting public comment and Company reply deadlines.Order No.34440.
Commission Staff filed comments and supported the Company's Application.One set of public
comments was received.The Company did not reply to either set of comments.
Having reviewed the record,we approve the Company's Application as discussed below.
BACKGROUND
In Case No.INT-G-17-03,the Commission authorized the Company to implement:1)
Rate Schedule EE-Residential Energy Efficiency Rebate Program,outliningthe offerings of the
EE Program;and 2)Rate Schedule EEC-EnergyEfficiency Charge ("EE Charge"),establishing
a per therm charge to fund the EE Program.See Order No.33888;Application at 4.The EE
Program is funded by customers via the EE Charge.Application at 5.Both Schedules became
effective October 1,2017.Id.at 4.The initial period for both Schedules ran from October 1,2017
through December 31,2018 ("Initial Period").Id.
2017-2018 EE PROGRAM EXPENSES
The Company asked the Commission to find the Company prudentlyincurred $1,496,198
in EE Program expenses during the Initial Period.Id at 5,8.Of these expenses,$1,227,650,or
82%,was spent on rebates paid directly to customers.Id.at 5.The remaining $268,548 was
incurred for labor,EE Program delivery,and a Conservation Potential Assessment ("CPA").Id.at
6.The $0.00367 per therm EE Charge established in Order No.33888 generated $1,185,328 for
the EE Program during the Initial Period.Id.at 5.For the Initial Period,expenditures exceeded
revenues collected through the EE Charge by $310,870.Id at 6.In Case No.INT-G-19-05,the
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Company separately asked the Commission to adjust the EE Charge going forward effective
October 1,2019,and for permission to recover the deferred expenses from October 1,2017 through
June 30,2019 for its EE Program.
COMMENTS
L Commission Staff
Staff examined the Company's Application,work papers,2018 Energy Efficiency Report,
exhibits,Conservation Potential Assessment ("CPA"),and production responses.Staff Comments
at 2.Based on its review of these documents,Staff recommended the Commission approve the
Company's EE Program expenses of $1,496,198 as prudently incurred.Id.Staff also noted,
however,that the Company should reevaluate several of the initial assumptions about EE Program
savings and incentive levels as soon as possible.Id.Staff also made recommendations that
addressed the Company's EE Program financials;EE Program offerings;avoided costs;
Evaluation,Measurement,and Verification ("EM&V");CPA;and other issues.Id.
A.Financial Review
Staff reviewed transactions across the Company's EE Program.Id.at 3.Staff verified the
Company had sufficientlydocumented the expenses and had internal controls to prevent improper
incentive payments and to properly record EE Program expenses.Id.Staff also verified that labor
expenses were prudentlyincurred and similar to those incurred for energy efficiency programs
offered by other Idaho utilities.Id.
B.DSM Program Assessment
1.Whole Home Program--Staffhad several concerns with the Whole Home Program.
Id.at 4-7.Staff was concerned that the Company's deemed savings estimate of 204 therms did not
accurately reflect natural gas savings achieved by the incentive.Id.at 5.Staff also noted that the
Company's work papers did not support the Company's 204 therm savings value.Id.at 7.Staff
believed the Whole Home Program's actual therm savings could be determined by comparing
actual billed consumption for a sample of homes receiving a Whole Home Program rebate to actual
billed consumption for a sample of similar new homes that did not receive a rebate.Id.Staff also
opined that the Company needed to update its energy savings values and incentive levels as soon
as possible,and that a third-partyEM&V study should be completed.Id.Staff recommended that,
I In Order No.34454 the Commission approved the Company's Application to revise the EE Charge rate to $0.02093 per thermfromtheinitialchargeof$0.00367 approved in Order No.33888.This amount was allowed to permit the Company to recover the
deferred balance of its EE Program,including that from the Initial Period.Order No.34454 at 4.
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until a third-party EM&V study could be completed,the Company should compare bill
consumption and update its actual therm savings and incentive levels.Id.
Staff also recommended that a third-party evaluator reevaluate the Home Energy Rating
System ("HERS")threshold of 75 or less.Staff's concern was that 1,035 nonparticipating homes
had an average HERS score of 64 versus an average score of 61 for participating Whole Home
Program homes.Id.at 5.Staff noted that 94.7%of nonparticipating homes that received a HERS
score2 WOuld have qualified for the Company's Whole Home Program.Id.Staff believed a HERS
score of 75 was a reasonable starting point,but that the score should be reevaluatednow that the
Company has acquired adequate data.6-7.
2.Space heating,fireplace inserts,and water heating measures-Staff reviewed the
space heating,fireplace,and water heating incentives and installations and believed that all energy
savings and incentive levels should be reevaluated and updated as soon as possible,with one
exception.Id.8-9.Staff supported the Company's stated desire to discontinue the 80%Annual
Fuel Utilization Energy condensing fireplace incentive.3 Id.at 8.
C.Avoided Cost
Staff raised several concerns with the Company's avoided cost calculations.Id.at 9.Staff
stated the Company's avoided cost calculations should have excluded base rate embedded
distribution costs because costs that are alreadyincurred and embedded in rates cannot be avoided.
Id.
Staff also believed the Company's avoided commodity cost forecast was unreasonably high
and exceeded the costs the Company could avoid.Id.at 10.Staff excluded embedded distribution
costs and recalculated the Utility Cost Test ratios for each of the six incentives offered by the
Company that were utilized by customers.Id.Staff's updated calculations suggested that the
Whole Home and High Efficiency Natural Gas Furnace incentives were no longer cost-effective.
Id.at 9-10.Staff believed it was likelythat a review of the Company's avoidedcosts would identify
and quantify capacity contributions for some of the Company's EE Program measures.Id.Staff
recommended the Company and its Energy Advisory Group review its avoided cost calculations.
Id.at 12.
2 Not every new home constructed during the initial period received a HERS evaluation.Because this evaluation is voluntary,Staff suggests the results from HERS score comparison is not dispositive of ineffectiveness of the incentive.
3 Because zero customers elected to use this incentive,the Company and Staff both agree it should be discontinued.
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D.EM&V
The Company's EE Program has been underway for over two years,and Staff noted several
concerns about the savings associated with the Company's Whole Home Program and other EE
Program incentives.Id.Staff offered that the Company should conduct an EM&V study to verify
the savings achieved by each incentive as a baseline for its EE Program updates.Id.Staff
recommended that the Company develop a plan to complete an EM&V study within two months
of a Commission's final order in this case.Id.Staff recommended the plan outline when requests
for proposals must be submitted,how and when a contractor would be selected,and how the
Company would use the findings to evaluate and update its EE Program.Id.
E.Marketingand Outreach
Staff believed that the Company demonstrated innovative and cost-conscious marketing
strategies,although Staff did not believe that all information was clearly related to the Company's
EE Program.Id.at 13.Staff saw an opportunity for the Company to refocus its EE Program
marketing on available incentives.Id.Staff believed the Company could improve its marketing as
it developedits understanding of the target population and tailored its message to specific customer
segments.Id.
II.Public Comments
The Commission received one public comment.The comment urged the Commission to
deny the Company's Application until a third-party evaluation has been completed detailing
whether the EE Program is cost-effective based on the National Action Plan for Energy Efficiency
standards.The commenter hoped the evaluation would at least show the Company planned and
managed its EE Program with a reasonable expectation that the EE Program would be cost-
effective.
COMMISSION DISCUSSION AND FINDINGS
The Company is a gas corporation under Idaho Code §61-117,and a public utility under
Idaho Code §61-129.The Commission has jurisdiction over the issues in this case under Title 61
of the Idaho Code,including Idaho Code §§61-301,501,502,and 503.The Commission has
reviewed the record.Based on that review,the Commission finds the Company prudentlyincurred
$1,496,198 in EE Program expenses from October 1,2017 through December 31,2018.
While we approve the Company's EE Program expenses as prudentlyincurred,it is with
several required conditions attached.We acknowledge that the Company has made a good-faith
ORDER NO.34536 4
effort with its initial incentive offerings,and laud the Company's effort to create a functional EE
Program.But the Company must still strive to better align the incentives offered with energy
efficiency outcomes sought by the Company and this Commission.We find it reasonable to direct
the Company to commission a third-partyEM&V study for all EE Program incentives.We agree
with Staff's suggestion that the Company should,within two months of this Order,develop a plan
for having an EM&V study completed.The study will serve as a foundational steppingstone for
determining which EE Program incentives are economical or uneconomical,and which
modifications should be made.We also find it appropriate for the Company and its Energy
Advisory Group to review the Company's avoided cost calculations concurrentlywith the EM&V
study.
Regarding the Company's EE Program,we see room for the improvement of all incentives
offered as best practices are developed.The Company should update all incentive levels as soon
as possible and should also continuouslyreevaluate and update those incentives.
An area of specific concern is the Whole Home Program.First,the Company's 204 therm
deemed savings value should be reevaluated as soon as possible.The deemed savings value should
be based on a comparison of actual billing data from similar new homes constructed which
received the rebate and ones that did not receive the rebate.We feel the Companynow has adequate
data to accurately update this value.With an updated deemed savings value,the Company should
have sufficient information to update this incentive before the EM&V study is completed.Second,
we are unsure if the HERS threshold of 75 is still a reasonable threshold for the Whole Home
Program.After the EM&V study is completed,we encourage the Company to consider modifying
the HERS threshold of 75 for the Whole Home Program.
We also agree with the Company and Staff's recommendation that the Company
discontinue the 80%Annual Fuel Utilization Energy ("AFUE")condensing fireplace incentive.
Overall,we believe the Company is headed in the right direction with its EE Program,and
we look forward to seeing the EE Program evolve.Conducting the EM&V study,updating the
avoided cost,and reevaluating all continuing incentives should provide a baseline for the future of
the Company's EE Program.We encourage the Company to collaborate with Commission Staff
and appropriate advisory groups to tailor its EE Program incentives to attract customers and
developers and offer cost-effective energy efficiencymeasures for the Company.
ORDER NO.34536 5
ORDER
IT IS HEREBY ORDERED that the Company's Application is granted.The Company
prudentlyincurred $1,496,198 in EE Program expenses from October 1,2017 through December
31,2018.
IT IS FURTHER ORDERED that within two months of this Order,the Company shall
develop a plan to have an EM&V study completed for its EE Program.The EM&V study will be
used to assess and modify the incentives offered through the EE Program.
IT IS FURTHER ORDERED that the Company shall review avoided costs and update its
avoided cost calculations based on the review,as noted above.
IT IS FURTHER ORDERED that the Company immediately and continuouslymonitor,
evaluate,and update its EE Program incentives with the best available data.
IT IS FURTHER ORDERED that the Company may discontinue the 80%AFUE fireplace
insert incentive.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
ORDER NO.34536 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this a sé
day of January 2020.
PAUL KJEL AND ,PRESIDENT
KRIS IÑE RAPEÃ,COiÏÑÌSSÌONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\GAS\lNT-G-19-04\Orders\INTGl904final_dh.docx
ORDER NO.34536 7