20161216Rivas Direct with Exhibit 401.pdf

Benjamin Otto (ISB No. 8292)
710 N 61h Street
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
[e-mail]
Attorney for the Idaho Conservation League
Pt:CEIV ED
""·':( [r '6 P' 12 07 L . ..:iU it.v t i :
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF INTERMOUNTAIN )
GAS COMPANY FOR THE )
AUTHORITY TO CHANGE ITS RATES ) CASE NO. INT-G-16-02
AND CHARGES FOR NAUTRAL GAS )
SERVICE TO NATURAL GAS . )
CUSTOMERS IN THE STATE OF )
IDAHO )
DIRECT TESTIMONY
DIEGO RIVAS
DECEMBER 16, 2016
1 Q. Please state your name, affiliation, and reason for this testimony.
2 A. My name is F. Diego Rivas, and I am a Senior Policy Associate with the NW Energy Coalition
3 and based in Helena, MT. The reason for my testimony is to encourage implementation of smart
4 rate structure and program design to maximize the use of energy efficiency as a resource.
5
6 Q. Please list the topics you will cover as a witness.
7 A. My testimony covers the proposed Demand Side Management programs (pages 1-9), the
8 Fixed Cost Collection Mechanism (pages 10 -13), and rate design issues for the Residential and
9 General Service classes (pages 13 -18).
10
11 DEMAND SIDE MANAGMENT
12 Q. Intermountain Gas proposes a suite of Demand Side Management programs. Do you have
13 any general comments on this proposal?
14 A. Yes -an effective Demand Side Management (DSM) program is a critical element of any
15 utility's supply portfolio. The northwest region has prided itself on making energy efficiency the
16 primary resource and nearly all regulated utilities in the region use DSM programs as a means of
17 keeping costs low.
18 As such, it is encouraging to see Intermountain Gas Company's (IGC) interest in offering
19 a DSM program. However, the program as presented in the testimonies of Allison Specter and
20 Cheryl Imlach -and supported by the testimony of Dan Kirschner -falls more in the category of
21 a fuel-switching incentive program than a true DSM program. IGC does not hide from the fact
22 that the intent of the program is to encourage fuel-switching, stating, "Conservation incentives
23 associated with high-efficiency natural gas space and water heating equipment would provide the
24 Company with the two-fold benefit of acquiring essential DSM resources while allowing natural
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1 gas to serve the role it performs best, as a direct space and water heating fuel." (Spector, page 4, ln
2 2 -6).
3 While there may be some savings to be had in encouraging fuel switchers to purchase
4 more efficient appliances, the Company is ignoring large segments of their customer base and
5 should be looking more broadly in the development of their DSM program.
6
7 Q. Should natural gas utilities be actively promoting fuel-switching?
8 A. The merits of fuel-switching continue to be debated. The Northwest Power and Conservation
9 Council ( Council) re-studied the topic of direct use of natural gas in the development of the 7th
10 Northwest Power Plan 1• They concluded that there may be some economic benefit for
11 households to convert from electricity to natural gas and that "natural gas will continue to gain
12 space and water heating market share while electricity's market share of these end uses will
13 continue to decrease.2" The Council, however, while recognizing the potential economic benefits,
14 does not include fuel-switching in their definition of conservation.
15 IGC's assertion that the direct use of natural gas is inherently more efficient than
16 electricity generation from natural gas depends on the precise generation mix of the electric
17 utility. Looked at in isolation, direct use of natural gas for heating in a modern furnace is more
18 efficient than generating electricity in a modern combined cycle gas turbine and using electric
19 resistance for heating. But this theoretical look at a single fuel and single heating equipment type
20 is incomplete. Heat pump type heaters can have higher resource efficiency than gas furnaces.
21 Utilities with large hydroelectric resources generate electricity without relying on outside fuel
1 Seventh Northwest Conservation and Electric Power Plan, Appendix N: Direct Use of Natural
Gas, Northwest Power and Conservation Council.
http://www.nwcouncil.org/ media/7 l 49904/7thp lanfinal_appdixn_ d uofnatgas. pdf
2Seventh Northwest Conservation and Electric Power Plan, Appendix N: Direct Use of Natural
Gas, Northwest Power and Conservation Council. Page 12.
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1 sources, which is largely the case in IGC's service territory. For example, in 2015 natural gas made
2 up only 14.3% of Idaho Power's supply portfolio, while hydroelectric power made up 41.5% and
3 renewable energy sources adding roughly another 10%3• Also within IGC's service territory are
4 rural electric coops and municipal utilities that are customers of Bonneville Power
5 Administration (BPA), whose portfolio is 85% hydroelectric generation.
6 While IGC claims, and we agree, that natural gas is more efficient as an end use product,
7 they provide no cost-justification for fuel-switching from hydro based utilities. Company witness
8 Kirsh en er on page 5 of his testimony states, "natural gas generation can be expected to replace
9 some portion of regional coal retirements because it is dispatchable, economic and a cleaner
10 generation resource." However, the Northwest Power and Conservation Council's th Northwest
11 Plan states, "Only low to modest amounts of new natural gas-fired generation is likely to be
12 needed to supplement energy efficiency, demand response, and renewable resources ... 4"
13 Furthermore, should natural gas be used to provide more electricity in northwest markets, the
14 price of natural gas would undoubtedly increase, leaving the economics of fuel-switching further
15 up for debate.
16 Instead of justifying natural gas conservation programs on the basis of savings in the
17 electricity system, gas DSM programs must be justified by avoiding the costs of gas service.
18 Because of this ICL and NWEC strongly support gas DSM programs that encourage customers to
19 use gas efficiently rather than merely encouraging fuel switching. Fuel switching may result in
20 greater efficiency in specific applications under certain conditions, but conserving fuel is what
21 benefits customers.
22
3 Idaho Power Company, Resource Portfolio Fuel Mix-2015
https://www.idahopower.com/ AboutUs!EnergySources/FuelMix/resourcePortf olio _2015. cfm
4 Seventh Northwest Conservation and Electric Power Plan, Page 1-6
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1 Q. Should natural gas utilities be able to claim energy savings from fuel-switching activities?
2 A. Yes, if energy savings are also being achieved through other utility sponsored DSM programs.
3 Due to the economics of natural gas versus electricity, the Northwest Power and Conservation
4 Council expects natural gas water and space heating appliances to naturally increase market
5 share. As more households choose natural gas applications in their home, it will become
6 increasingly important for natural gas utilities to offer incentives for customers to not only install
7 efficient equipment, but use gas efficiently in homes and businesses through improving building
8 envelops and enacting conservation behaviors.
9 As market share of natural gas end uses increase throughout the region, so too will
10 aggregate gas demand. Under familiar concepts of supply and demand, we can expect the cost of
11 natural gas supply to increase. Furthermore, rising gas demand will eventually trigger the need
12 for infrastructure investments putting upward pressure on rates for customers. To the extent fuel
13 switching causes rising gas demand and therefore rising gas costs, incentives to use gas more
14 efficiently in homes and businesses help offset the increase in initial cost to the customer, and can
15 provide downward pressure on rates for all utility customers.
16 A DSM program based solely on providing incentives for fuel-switching customers could
17 have the opposite effect. While some "savings" are achieved if a customer installs a more efficient
18 appliance model as compared to the assumed baseline of the least cost models, overall natural gas
19 obligation for the utility would actually increase. Again, this could end up having upward
20 pressure on rates.
21 The real savings from fuel-switching programs fall on the electricity side. Dual-fuel
22 utilities are more likely to offer fuel-switching incentives, relieving pressure on their electric
23 system. However, as electric applications become increasingly efficient, the price of natural gas
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1 increases, and the electric grid becomes increasingly reliant on clean, renewable energy, we expect
2 fuel-switching programs to be less popular.
3
4 Q. IGC uses the Utility Cost Test to compare the costs and benefits of proposed DSM measures
5 (Spector at p.9 ln 2-3). Do you support this methodology?
6 A. In regards to Intermountain Gas operations in Idaho, I do support using the Utility Cost Test
7 to ensure cost effective DSM programs. The Idaho Commission, like most other state
8 commissions, utilities, and industry experts, look at a variety of cost-benefit tests for DSM
9 programs. While the Total Resource Cost (TRC) is typically the primary test, the Utility Cost Test
10 (UCT) is also commonly used, and the Idaho Commission recently approved "utilization of the
11 UCT as a threshold test for the proposed [gas conservation] DSM programs." (Order No. 33444,
12 at 9, AVU-G-15-03). Under the TRC, the utility and stakeholders compare the avoided energy,
13 capacity, and quantifiable non-energy benefits against the costs to the utility and the program
14 participant. Importantly, this test includes the program participant's incremental costs to
15 purchase the equipment eligible for a rebate. However, these participant's costs are never borne
16 by other ratepayers or shifted onto society, therefore it is not clear what roll these costs play in
17 policy making. Meanwhile, the Utility Cost Test compares the avoided energy and capacity costs
18 against the utility costs to administer and incent conservation measures. This comparison is a
19 traditional role for policymakers, comparing the utility's costs and benefits to ensure fair-priced
20 energy. As long as the benefits to the utility, which flow to customers by reducing or avoiding
21 energy and capacity costs, exceed the costs to administer programs, policy makers can feel
22 confident utilities are prudently spending ratepayer dollars.
23
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1 Q. Intermountain Gas Exhibits 25 and 26 outline the proposed DSM measures. Do you have
2 any comments?
3 A. The proposed measures are consistent with IGCs desire to encourage fuel-switching. As stated
4 in IGC's response to Staff Request No. 158, "All participants in the Residential Space Heating
5 Equipment Rebate under current rate schedule ER were new heating customers." In an apparent
6 effort to continue this trend, all six measures in Exhibit 25 are incentives for high capital cost
7 equipment targeting new customers. Absent from the portfolio are low-cost, easy to install
8 measures targeting customers already using natural gas for water or space heat, as well as
9 complimentary measures, such as weatherization, for new and existing customers.
10
11 Q. Intermountain sets their DSM target based on a "programmatic potential." Have you seen
12 this level of refinement used before?
13 A. Having reviewed conservation potential assessments for multiple utilities and rural electric
14 coops, I have never before seen the term programmatic potential used to determine DSM targets.
15 In almost all cases, utilities use the achievable potential as the basis for setting their annual DSM
16 goals. There is clearly value in determining what a programmatic potential is but it seems to be
17 grossly misused in IGC's DSM determination.
18 First, we object to the definition of achievable potential given by Company witness Allison
19 Specter. On page 13 of her testimony, she states that achievable potential "asks 'how much
20 savings will result from this portfolio of utility rebate measures based on real-world conditions in
21 Intermountain's service area, and customer awareness?"' This level of refinement -with a focus
22 on "this portfolio" -more accurately depicts programmatic potential. Achievable potential does
23 not take into account a utility's DSM program, but rather asks how much cost-effective DSM
24 available in the service territory can a utility realistically capture over a set period of time. Or as
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1 stated in the Cascade Natural Gas 2016 Integrated Resource Plan, "While technical and economic
2 potential are both theoretical limits to energy savings, achievable potential embodies a set of
3 assumptions about the decision consumers make regarding the efficiency of the equipment they
4 purchase."5 Utility programs should then be designed to influence these decisions towards
5 conserving energy in order to achieve the cost effective potential. By starting with the energy
6 savings a suite of programs may deliver, a utility hamstrings the effort to pursue all cost effective
7 energy efficiency.
8 Generally speaking, the floor for achievable potential in utility conservation potential
9 assessments is around 70% of economic potential. The Northwest Power and Conservation
10 Council uses a 0.85 multiplier to get from economic to achievable.
11 Using the Company definition of achievable potential, IGC claims that only 97,825 out of
12 2,446,984 economically available savings-four percent -were achievable in 2016 (Company
13 Exhibit 25). We contend that this number actually represents programmatic potential-97,825
14 represents the total number of therms available to be captured based on the fuel-switching
15 portfolio IGC has put forward. Instead, using the low of 70% as a multiplier, no less than
16 1,712,888 therms were achievable in 2016 utilizing a well-deigned DSM portfolio.
17
18 Q. Do you propose a different or complementary suite of measures?
19 A. Yes, along with the proposed incentives targeting fuel-switching, IGC should include low-cost
20 measures such as low-flow showerheads and faucet aerators. These measures are most effective as
21 direct install applications, often occurring during a home or business energy audit. IGC should
22 also target energy savings from weatherization measure incentives, such as insulation and
23 windows. These measures provide additional benefit by increasing the health and comfort of the
5 Cascade Natural Gas, 2016 Integrated Resource Plan, Section 7 Demand Side Management. Page
7-9
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1 utility customer household and as such would likely pass both the utility cost test and total
2 resource cost test.
3 Q. Do you recommend any DSM programs for low-income residential customers?
4 A. Yes, a low-income program is crucial for our support of a decoupling mechanism. Increases in
5 rates due to investments in DSM can disproportionately impact low-impact customers if they are
6 unable to participate in energy efficiency measures due to the initial cost barrier. We have
7 discussed this issue with CAP AI and support their proposal. Absent immediate development of a
8 low-income program, we cannot support the FCCM.
9
10 Q. Intermountain proposes DSM programs for residential customers only. Do you propose
11 DSM measures for other customer classes?
12 A. Yes. Consistent with the practices of other natural gas utilities throughout the region -
13 including IGC's sister company, Cascade Natural Gas-IGC should develop and implement a
14 DSM program for the GS-1 General Service rate class. Also, consistent with other natural gas
15 utilities, the savings potential per customer is significantly greater, allowing the utility to capture
16 more energy savings at lower costs.
17 The average annual RS-2 (space and water heat) consumption was 718 therms annually
18 (Blattner, p. 20). Within the GS-1 rate class: 37.5% of customers -nearly 12,000 accounts -use
19 between 1,200 and 20,000 therms each year; roughly 570 accounts use between 20,000 and 60,000
20 therms; and roughly 100 accounts use over 60,000 therms per annum (Blattner, p 24). These
21 numbers indicate the potential for large therm savings per customer.
22 In order to quickly capture significant energy savings, I have attached Exhibit 401 to my
23 testimony-a description of the incentives Cascade Natural Gas offers for Commercial and
24 Industrial customers in Washington-as a good starting point of the types of DSM measures IGC
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1 should implement now. We recommend that going forward IGC should conduct an end-use
2 study for its GS-1 customers and implement a more robust DSM program based on those
3 findings.
4
5 FIXED COST COLLECTION MECHANISM
6 Q. Have you reviewed Intermountain's proposed Fixed Cost Collection Mechanism?
7 A. Yes. IGC proposes to break the link between the sale of natural gas therms and revenue,
8 thereby ensuring the collection of fixed costs necessary to maintain and expand the distribution
9 system. This is known as revenue regulation, though more commonly referred to as decoupling
10 (decoupling can take on different forms as well). The FCCM will also remove the disincentive for
11 IGC to pursue cost-effective DSM, theoretically allowing the company to treat DSM without
12 prejudice in its requirement to reliably serve its customers. It is important to note that the FCCM
13 would apply to the new RS (residential) and GS-1 (small commercial) rate classes, as well as the
14 interruptible snowmelt rate classes.
15
16 Q. Do you have any recommendations for the FCCM?
17 A. I have both policy and technical recommendations. Generally speaking, ICL and NWEC
18 support revenue regulation. This form of decoupling is typically adopted for utilities with known
19 track records of DSM programs that cause identifiable impacts to fixed cost collections. The
20 reasoning is that decoupling should address foregone fixed cost recovery attributable to utility
21 actions to promote conservation. Foregone fixed cost revenue attributable to weather, economic
22 conditions, or customer behaviors not influenced by IGC, while a feature of allocating fixed costs
23 into variable bill components, are a normal risk to utility operations.
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1 IGC proposes the FCCM without this track record of DSM accomplishments.
2 Accordingly, at least in the early years of the DSM program ramp-up, most of the fixed cost
3 volatility comes from factors outside Intermountain's control. And, because much of
4 Intermountain's proposed DSM portfolio focuses on switching customers from electric to gas
5 instead of gas conservation, even in later years the fixed cost volatility attributable to utility
6 sponsored DSM, under the current proposal, is minimal to nonexistent. ICL and NWEC's
7 support for the FCCM is directly tied to the quality of the proposed gas conservation programs;
8 to the extent they focus on conservation for Residential, General Service, and Low Income
9 customers, our support grows. However, without a robust DSM program that targets existing
10 customers and DSM efforts beyond fuel switching and without a substantial low-income
11 program, we cannot support the FCCM.
12 If the Company's DSM proposal is improved, and the FCCM considered, we offer the
13 following recommendations on the technical side. Overall, we encourage the Commission and
14 IGC to keep the decoupling mechanism as simple as possible during the early stages. Adding
15 nuanced detail to the mechanism increases the likelihood that it will not accomplish its intended
16 goals. Below we propose five changes to the structure of the FCCM.
17
18 Cap Rate Increase
19 Similar to the decoupling mechanisms used by Idaho Power and A vista, any increase in
20 rates should be capped at no more than three percent annually. Research done by Pamela
21 Morgan shows that "64% of all adjustments are within plus or minus 2% ... [and] almost 75% are
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1 within plus or minus 3%6." Capping rate increases at 3% limits potential extreme rate volatility
2 due to factors outside ofIGCs control, factors for which customers should not be penalized.
3
4 Per Customer Reconciliation
5 "Per customer" decoupling has seemingly become the preferred method of ensuring
6 adequate fixed cost recovery for natural gas utilities. These utilities generally have robust DSM
7 programs, limiting the long-term environmental and economic impacts of providing service to
8 existing and new customers. The addition of a handful of new customers might warrant the need
9 to ensure fixed cost recovery, especially considering that growth is likely to occur on the fringes of
10 its distribution system.
11 It this case, however, IGC proposes a DSM program largely based on encouraging
12 households and businesses to become new customers. These new customers will have access to
13 DSM incentives and new, highly efficient appliances. They are, therefore, in a less risky position
14 with regard to rate increases due to under-collection of fixed costs. While natural gas rates may
15 increase to recover fixed costs, these new, fuel-switching customers inherently use gas more
16 efficiently and as a result, rate impacts will have less impact on them.
17 Current existing customers, however, without access to DSM measures enabling them to
18 purchase high-efficiency appliances or weatherize their home or business, will necessarily be in a
19 position to pay higher rates and higher bills.
20 Without the presence of DSM measures for existing customers, total utility natural gas
21 sales will likely increase rather than decrease due to fuel-switching new customers. Fixed cost
22 recovery contained within volumetric sales should therefore not be an issue. These customers are
23 also more likely to be located well within IGC's current distribution system, limiting fixed-cost
6 Morgan, Pamela. A Decade of Decoupling for US Energy Utilities: Rate Impacts, Designs and
Observations. 2012
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1 needs. Because of this dynamic, per customer reconciliation would likely lead to over estimation
2 of the revenue requirement and higher than necessary rates for customers.
3 The Commission could opt to use the attrition method to periodically adjust base rates
4 for certain changes including number of customers. This could occur during the annual
5 reconciliation process as proposed below. Conversely, NWEC and ICL would support use of the
6 per customer method with inclusion of a more robust DSM program.
7
8 Per Month Reconciliation
9 Similarly, per month reconciliation is unnecessary at this time. As pointed out by Janine
10 Migden-Ostrander and Rich Sedano of the Regulatory Assistance Project, "More frequent
11 adjustments ... can expose consumers to volatility from such factors as swings in the weather that
12 can cause unusually high or low revenues ... 7" Low-income and fixed income customers can be
13 particularly burdened by these swings in rates. Utilizing a cap on rate increases will help alleviate
14 the impacts of these swings, though not eliminate them entirely. Calculating rates on a monthly
15 basis is also an administrative burden, utilizing resources that could be better served by
16 strengthening I GC' s DSM program. A 2009 study by Pamela Lesh of Graceful Systems, LLC
17 found that of 25 decoupled natural gas utilities, 19 of them used an annual rate true-up method.
18 Only four used a monthly method while two used a semi-annual/quarterly method.8
19 NWEC and I CL propose removing the per month reconciliation provision of the FCCM
20 and use total annual fixed cost calculations to set rates under the FCCM. If IGC or the
7 Migden-Ostrander, J., and Sedano, R. (2016). Decoupling Design: Customizing Revenue
Regulation to Your State's Priorities. Regulatory Assistance Project. http://www.raponline.org/wp­
content/ uploads/2016/ 11 /rap-sedano-migdenostrander-decoupling-design-customizing-
reven ue-regulation-state-priorities-2016-november. pdf
8 Lesh, P. (2009), Rate Impacts and Key Design Elements of Gas and Electric Utility Decoupling: A
Comprehensive Review. Page 6.
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-~~~-----------------------------------------------
1 Commission determine after a period of time that fixed cost recovery calculations are not
2 adequate on an annual basis, the issue could be revisited.
3
4 Removal of Largest Customers in GS Rate Cass
5 Intermountain states, "the largest GS-1 customers are similar to many Industrial LV-1
6 customers, and [ are] very different from most GS-1 customers" (Blattner, p. 25). Ms. Blattner's
7 testimony includes Table B.7 on page 25 that shows the largest 50 customers use 135,585 therms
8 per year whereas as all other GS customers use 3,052 therms per year, a very large disparity. This
9 disparity has the ability to disproportionately affect smaller GS users under the proposed FCCM.
10 For example, if one large user were to drastically reduce natural gas consumption for any number
11 of reasons -energy efficiency, the economy, change of business plan, etc -rates would necessarily
12 increase for all other users in order for Intermountain to collect the required revenue. Again, a
13 cap on rate increases could help alleviate some of these concerns but we question if a small
14 business should have rates increase 3% due to the decisions made by a handful oflarger
15 businesses.
16 NWEC and ICL propose removing the largest 50 customers from the GS-1 rate class and
17 the FCCM mechanism. Reducing the threshold for qualification in the LV-1 rate class could be
18 considered as could a separate rate class for these customers (GS-2).
19
20 RATE DESIGN
21 Q. Does ICL and NWEC have an overall objective regarding rate design?
22 A. Yes, we believe all rate designs should send a meaningful price signal to encourage the efficient
23 use of energy resources. This is one of Bonbright's rate design principles (Blattner p 19, ln 16-
24 pl 0, ln 7). This is also reflected in Idaho state policy that prioritizes cost effective energy
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1 efficiency and instructs all state agencies "to consistently reinforce and support state objectives
2 regarding energy efficiency." (State Energy Plan page 8-9.). Because Bonbright's principles
3 include other important criteria -like simplicity, effectiveness, stability, and fairness -ICL and
4 NWEC submit that rate design is an important area for the Commission and other stakeholders
5 to balance policy objectives.
6 ICL and NWEC believe Idahoans are best served by sending price signals that encourage
7 customers to use capacity and energy efficiently. We are concerned that Intermountain's rate
8 design proposals reduce the commodity price signal in order to increase the customer charge. We
9 believe this proposal is out of balance.
10
11 Q. Intermountain proposes changes to the Residential rates. Please comment.
12 A. Intermountain proposes to combine two current residential classes into a single residential
13 class. (Blattner p 21, ln 9-p22, In 8) IMG also proposes to eliminate the seasonally differentiated
14 rates, which in the winter increase the customer charge and reduce the gas distribution
15 component of the per therm charge. ICL and NWEC agree with these proposals because they
16 match cost causation, simplify rates, and maintain price signals for efficiency.
17
18 Customer Charge:
19 Intermountain also proposes to increase the monthly customer charge from a seasonally
20 differentiated $2.50 summer and $6.50 winter monthly charge to a flat $10 per month. (see
21 Exhibit 31, Sheet 1, note this increase was not covered in the testimony). This increase comes
22 predominately from reducing the commodity costs. ICL and NWEC oppose this change for the
23 following reasons.
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1 First, to the extent the increased customer charge reduces the commodity charge, this
2 change dilutes an important price signal for customers. Individual customers have no ability to
3 affect the monthly customer charge. So while a relatively steep monthly charge maybe provide
4 stability to utility collections, it sends no price signal to be more energy efficient.
5 Second, high monthly fixed charges disproportionately hurt low-income households
6 because energy bills represent a larger portion of these households' monthly expenses. While it
7 can be argued that rate increases due to DSM activities under the FCCM could also hurt low-
8 income households, there is at the very least the opportunity to participate in energy savings
9 measures under properly designed utility DSM and low-income weatherization programs. There
10 is no opportunity to reduce a monthly fixed charge through either equipment or behavioral
11 changes.
12 Third, the proposed FCCM would address the same issue that raising the customer charge
13 is intended to address -fixed cost recovery through volumetric sales. ICL and NWEC believe that
14 proper rate design incudes a low monthly customer charge along with a decoupling mechanism.
15 Because it maintains a commodity price signal, is more fair to customers, and addresses revenue
16 stability ICL and NWEC support a properly designed FCCM instead of increasing the monthly
17 customer charge.
18
19 Q. What do you recommend for the RS class rate design?
20 A. Jim Lazar and Wilson Gonzalez of the Regulatory Assistance Project recently produced a paper
21 that updates the Bonbright principles. In Smart Rate Design for a Smart Future, Lazar and
22 Gonzalez define a customer charge as "a fixed charge to customers each billing period, typically
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1 to cover metering, meter reading, and billings costs that do not vary with size or usage."9 They
2 also state that customer charges "should not exceed the customer-specific costs associated with
3 an additional customer, such as the service drop, billing and collection."10
4 Based on these principles, we recommend setting the customer charge at $3.50 per month
5 and adjusting the per therm charge to recover the remaining revenue requirement. This amount
6 is derived from numbers in Company Exhibit 21, Class Cost of Service -Account Detail.
7
8
9
10
11
12
13
Customer Account Subtotal, Residential, page 10: 7,246,763
Customer Service and Information Subtotal, Residential, page 10: 183,418
Customer Account Subtotal, Residential, page 16: 3,911,317
Total: 11,341,498
Divided by total residential customers (302,790): 37.45
Divided into twelve months: 3.12
14 The Idaho Commission has approved similar customer charges for Idaho's other investor
15 owned utilities not based on cost of service, rather on principles of fairness to customers and
16 maintain the ability to send commodity price signals.
17 A quick survey of other northwest natural gas utilities indicates a mean of $7.68 and
18 median of $7.37. At $10.00, Intermountain would have the second highest of the surveyed
19 utilities, falling slightly behind Puget Sound Energy at $10.34. Despite these higher customer
20 charges at other utilities, Intermountain's sister company, Cascade Natural Gas, is a decoupled
21 natural gas utility operating with a $3.00/month residential fixed charge.11
9 Lazar, J. and Gonzalez, W. (2015). Smart Rate Design for a Smart Future. Regulatory Assistance
Project. http://www.raponline.org/document/download/id/7680. Page 83.
10 Lazar, J and Gonzalez, W. Page 65.
u Utilities surveyed include Cascade Natural Gas, NW Natural-OR, NW Natural -WA, Puget
Sound Energy, Avista-ID, OR and WA, and NorthWestern Energy.
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1 We also recommend the Commission direct Intermountain to work with stakeholders to
2 propose tiered, inclining block, commodity rates to further refine the balance between setting
3 rates that reflect costs and sending a strong price signal for conservation.
4
5 Q. Intermountain proposes changes to the General Service rate design. Please comment.
6 A. Intermountain proposes three changes to the GS rate design -eliminating the seasonally
7 differentiated customer charge, increasing the monthly customer charge and adding a fourth
8 block to the per therm charge.
9 With regard to the customer charge, NWEC and ICL take a similar position as to the RS
10 rate class. We have no objection to the elimination of seasonal rates as there is no cost or policy
11 justification to have two different rates. However, the substantial increase in the customer charge
12 severely diminishes the price signal sent to GS-1 customers to be more energy efficient. As with
13 the RS rate class, Intermountain should consider lowering the customer charge and increasing
14 the per therm charge in order to better establish this price signal. Following the same steps as
15 with the residential class, we recommend the GS-1 customer charge be set at $10/month (actual
16 calculation came to $8.23/month). Intermountain should also quickly roll out a commercial
17 DSM program in order to assist small businesses in becoming more energy efficient.
18 The addition of a fourth declining block to the per therm charge exacerbates an archaic
19 form of rate design that encourages consumers to use more energy. This proposal directly
20 undercuts Intermountain's argument that the FCCM will allow the utility to effectively promote
21 energy conservation. On the contrary, the largest users of the GS class will find minimal benefit in
22 energy efficiency upgrades, and could potentially see bill increases due to these investments. A
23 quick survey of natural gas utilities in the northwest region found that only A vista in Idaho uses a
24 declining block rate structure for the GS rate classes.
INT-G-16-02
Rivas, Di
ICL-NWEC
December 16, 2016
17
1 The better policy option is to use inclining block rates, charging customers more -not
2 less -per therm as they use more energy. Inclining rates send a strong price signal to customers
3 that they should invest in energy efficiency, significantly reducing the payback time for these
4 investments. If inclining block rates are not feasible, a flat per therm rate would achieve greater
5 conservation impact than declining rates.
6 Q. Does this conclude your direct testimony?
7 A. Yes.
INT-G-16-02
Rivas, Di
ICL-NWEC
December 16, 2016
18
Benjamin Otto (ISB No. 8292)
710 N 61h Street
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
[e-mail]
Attorney for the Idaho Conservation League
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF INTERMOUNTAIN )
GAS COMPANY FOR THE )
AUTHORITY TO CHANGE ITS RATES ) CASE NO. INT-G-16-02
AND CHARGES FOR NAUTRAL GAS )
SERVICE TO NATURAL GAS )
CUSTOMERS IN THE STATE OF )
IDAHO )
DIRECT TESTIMONY
DIEGO RIVAS
EXHIBIT 401
CASCADE NAUTURAL GAS DSM INCENTIVES FOR COMMERICAL AND INDUSTRIAL
CUSTOMERS
DECEMBER 16, 2016
Warm Air Furnaces -$3.00/kBtu/hr
High Efficiency Condensing Furnace-Min 91 % AFUE
HVAC Unit Heater -$1.50/kBtu/hr
High Efficiency Non-Condensing Min-86% AFUE
HVAC Unit Heater -$3.00/kBtu/hr
High Efficiency Condensing Min-92% AFUE
Radiant Heating -$6.95/kBtu/hr
Direct fired radiant heating
Boiler -$4.00/kBtu/hr
High Efficiency Condensing Boiler
Min 90% Thermal Eff & 300 kBtu input
Boiler Vent Damper -$1,000
Min 1,000 kBtu input
Boiler Steam Trap' -$125
Min 300 kBtu in; steam pressure at 7psig or >
Domestic Hot Water Tanks3-$2.50/kBtu/hr
Condensing tank, Min 91 % Thermal Eff
Domestic Hot Water Tankless Water Heater3 -$60/gpm
ENERGY STAR® .82 EF
Attic Insulation -(retrofit only)
Tier 1: Min R-30 -$0.50/sq ft
Tier 2: Min R-45 -$0.65/sq ft
Motion Control Faucet3 -$105
Maximum flow rate of 1.8 gpm
WaterSense® Certified and Below Deck Mixing Valve
Clothes Washer3 -$180
Commercial gas washer-1 .8 MEF
Gas Convection Oven -$450
ENERGY STAR®
~42% Cooking Eff/ ~13,000 Btu/hr Idle Rate
Gas Griddle -$350
ENERGY STAR®
~38% Cooking Eff/ ~2650 Btu/hr sq ft Idle Rate
Gas Conveyor Oven -$600
Greater than 42% tested baking efficiency
Connectionless 3 Pan Gas Steamer -$850
ENERGY STAR® or CEE/FSTC Qualified
~38% Cooking Eff / ~2,083 Btu/hr/pan Idle Rate
Connectionless 6 Pan Gas Steamer -$1,200
ENERGY STAR® or CEE/FSTC Qualified
~38% Cooking Eff / ~2,083 Btu/hr /pan Idle Rate
Double Rack Oven -$2,000
FSTC Qualified
~50% Cooking Eff / ~3,500 Btu/hr /Idle Rate D Rack
ENERGY STAR® Gas Fryer -$600
Door Type Dishwasher Low Temp Gas3 -$650
ENERGY STAR®
~.6 kw Idle Rate/ ~l .18 gallon/rack
Roof Insulation -(retrofit only)
Tier 1: Min R-21 -$0.60/sq ft
Tier 2: Min R-30 -$0.80/sq ft
Multi-Tank Conveyor Low Temp Dishwasher3 -$1,000
Gas Main w/Electric Booster ENERGY STAR®
Wall Insulation' -(retrofit only)
Tier l : Min R-1 l -$0.50/sq ft
Tier 2: Min R-19 -$0.56/sq ft
Energy Savings Kits3 -FREE
~2.0 kw Idle Rate; ~ 0.50 gallons/rack
Recirculation Controls3 -$100
Continuous Operation DHW Pump
Pre-Approval required.
Demand Control Ventilation• -$12/nominal ton
A: Kitchen Pre Rinse Spray Valve & Bath Aerators
8: Low Flow Showerhead
5 tons ~ Unit Cooling Capacity ~ 20 tons. Pre-Approval
Required.
Ozone Injection Laundry3 -$2,500
Venturi injection or bubble diffusion -Min l 25 lb. total
washer /extractor capacity. Pre-approval required.
If you ore planning equipment or building upgrades that do not fit within the standard incentives, but significantly reduce
natural gos consumption, please coll 866.450.0005 to learn about custom project opportunities.
Mixed purpose facilities that include buildings on both Residential Rote Schedule 503 and qualifying Rote Schedules
504, 505, 51 l, 57 0, and 577 as port of the some Cascade Natural Gos customer account shall also be eligible for
custom conservation incentives.
1 This measure will only be allowed where the customer agrees to regular trap maintenance and replacement every
seven (7) years.
2 Minimum value of R-l l applies only where existing walls hove no internal insulation cavities.
3 Incentive eligibility contingent upon use of natural gos fired domestic hot water serving the specified measure
equipment or fi xture.
4 For Existing Packaged HVAC Units equipped with Gos Fired Furnace and Direct Expansion Cooling Sections. DCV Unit
Controller must meet Joint Utility Advanced Rooftop Control Guidelines
Updated 09 /16
Who is eligible to participate?
• Must be a new or existing commercial or industrial customer of CNGC on one of five qualifying rate
schedules: 504, 505, 51 l, 570 or 577.
• Incentives apply on qualified high-efficiency natural gas equipment such as heating, insulation, water
heating systems, cooking equipment installed as replacement, retrofit as well as new installation in
place of standard efficiency equipment. If the equipment installation, replacement, or retrofit provides
significant increase over existing high-efficiency equipment, and is not listed here please contact
program representative for potential custom incentive.
Insulation must be installed in an existing building, heated by natural gas, without functional insulation.
Eligible measures installed are subject to the available incentives coinciding with the date of the
installation as outlined in CNGC's tariff.
Customers requesting incentives for site-specific energy efficiency measures must submit estimated costs
and natural gas savings associated with the project. Natural gas savings are to be calculated using
standard engineering practices. CNGC will review the natural gas savings calculations, and reserves
the right to modify energy savings estimates.
How to qualify for Cascade Natural Gas incentives
1 Establish your eligibility. Call l .866.450.0005 or visit www.cngc.com /conservation for
program requirements.
2 Install energy-efficient upgrades. Contact a participating Trade Ally contractor or licensed contractor
to install eligible measures.
3 Get the application, available online at www.cngc.com/conservation.
4 Sign and submit the following forms:
Send forms to:
C&I Standard Incentive application • W9 form •
Invoice/Quote for equipment installation • Manufacturer's spec sheet
Mail: Cascade Natural Gas Corporation, c/o Lockheed Martin Energy and Environmental Services
22121 20th Avenue SE, Bothell, WA 98021
Fax: l .877.671.2998
Upon receipt of completed application, please allow six weeks for processing and payment.
Get started today!
To apply for an incentive, apply online or download a PDF application at www.cngc.com/conservation and
return it by fax or mail.
II Qeest;oo, oo food sec,ke, lodg;og o, heolth co,e pmjects? Coll BUI Pdllomoo, 503.278.3078
Updated 09/16
CERTIFICATE OF SERVICE
I hereby certify that on this 16th day of December 2016 I delivered true and correct
copies of the foregoing DIRECT TESTIMONY OF DIEGO RIVAS to the following persons via
the method of service noted: ~ ~
Hand delivery:
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise, ID 83702-5983
(Original, 9 copies, 1 cd-rom)
Electronic Mail Only:
INTERMOUNTAIN GAS
Ronald L. Williams
Williams Bradbury, PC
1015 W. Hays Street
Boise, ID 83702
Phone: [phone]
[e-mail]
Michael P. McGrath
Director -Regulatory Affairs
Intermountain Gas Company
55 S. Cole Road
PO Box 7608
Boise, ID 83707
Phone: [phone]
[e-mail]
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
BradM Purdy
Attorney at Law
2019 N. 17th St.
Boise, ID 83702
Phone: [phone]
[e-mail]
Benjamin J. Otto
NORTHWEST INDUSTRIAL GAS USERS
cl o Edward A Finklea
Executive Director
545 Grandview Drive
Ashland, OR 97520
Phone: [phone]
efink:[e-mail]
Chad M. Stokes
Tommy A Brooks
Cable Huston LLP
1001 SW Fifth Ave., Suite 2000
Portland, OR 97204-1136
Phone: [phone]
[e-mail]
[e-mail]
Michael C. Creamer (ISB No. 4030)
Givens Pursley LLP
601 W Bannock St.
Boise, ID 83702
Phone: [phone]
[e-mail]
THE AMALGAMATED SUGAR CO. LLC
Peter Richardson
Gregory M. Adams
Richardson Adams PLLC
515 N. 2ih St.
Boise, ID 83 702
[e-mail]
[e-mail]
Scott Dale Blickenstaff
The Amalgamated Sugar Company LLC
1951 S. Saturn Way, Suite 100
Boise, ID 83709
[e-mail]
SNAKE RIVER ALLIANCE
Ken Miller
Snake River Alliance
223 N. 61h St. Suite 317
P.O. Box 1731
Boise, ID 83701
[e-mail]
FEDERAL EXECUTIVE AGENCIES
Andrew J. Unsicker
Lanny L. Zieman
Natalie A. Cepak
Thomas A. Jernigan
Ebony M. Payton
AFLOA/JA-ULFSC
139 Barnes Dr., Suite 1
Tyndall AFB, FL 32403
Andrew. [e-mail]
Lanny .zieman. l @us.af.mil
[e-mail]
[e-mail]
[e-mail]