Idaho Public Utilities Commission

Case No. IPC-E-12-15, Order No. 32667

October 23, 2012

Contact: Gene Fadness (208) 334-0339, 890-2712

PUC finds demand-side management expenses ‘prudently incurred’

The Idaho Public Utilities Commission has reviewed more than $42 million in expenses incurred by Idaho Power Company to promote energy efficiency and reduce demand. The commission determined that the vast majority of those expenses were prudently incurred.

That determination does not impact customer rates, but signals the commission’s approval for the expenses incurred to operate 20 demand-side management (DSM) programs funded by a 4 percent rider on customer bills. Seventeen of the programs offer customers financial incentives to use their energy more efficiently while three of the programs reduce demand on the company’s system by shifting energy use to off-peak times of the day.

The programs must pass multiple cost efficiency tests that demonstrate that DSM savings are greater than the programs’ costs. One of the tests must reflect a savings to all customers, not just those who directly participate in the energy efficiency programs. Reduced energy demand and energy used more efficiently lessens the need for Idaho Power to have to generate the power itself or acquire it from more costly resources, and it offsets the need for the utility to build new resources. The commission’s prudency review helps establish that without these programs in place, customer bills would be even higher.

During 2011, Idaho Power achieved 179,424 megawatt-hours of energy savings, or enough energy to service more than 12,900 average homes for a year. Some of the efficiency programs include financial incentives for customers to invest in efficient lighting, in Energy Star® products and heating and cooling efficiencies. The three demand-reduction programs, such as air conditioner cycling and irrigation load control, provide customers incentives to shift their energy consumption to hours of the day when demand on Idaho Power’s generation system is not as great. Those programs reduced demand by 403 megawatts, a 20 percent increase over 2010 levels.

The commission did not include about $89,600 in expense related to labor expense increases for Idaho Power employees whose salaries are funded by the energy efficiency rider. The commission did not say those expenses are not justifiable, but that they did not receive the same scrutiny that employee wages and benefits in other sectors of the company receive during a general rate case. Idaho Power was given more time to provide more information to determine whether the increase in the labor-related expense is reasonable when compared to the benefits those expenses achieve.

Also not included was $82,855 in expense related to Idaho Power’s air conditioner cycling program. Equipment and software needed to operate the program was not functioning properly and should have been more carefully monitored, the commission said.

The commission denied about $212,340 in carrying charges from interest accrued on incentive payments made to customers with custom-made efficiency programs. The amount of carrying charge allowed is an issue that should be determined in a general rate case, the commission said.

The commission also directed Idaho Power to expand participation from members of the company’s Energy Efficiency Advisory Group (EEAG), a 12-member committee representing customer groups and other interested parties that advises the company on its energy efficiency programs. The commission said the company should encourage questions and feedback from all attending stakeholders, not just EEAG members.

“DSM programs and measures are powerful tools that help customers manage their energy consumption and mitigate the impact of potential rate increases,” the commission said. “In recognition of this, we direct Idaho Power to expand participation in the EEAG.” The commission said the company should increase customer awareness of energy efficiency programs and improve “customers’ energy I.Q.”

Idaho Power’s annual report to the commission regarding the various conservation programs is available on the commission’s website at www.puc.idaho.gov Click on the electric icon, then on “Open Electric Cases,” scroll down to Case No. IPC-E-12-15 and click on “DSM 2011 Annual Report.”

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