BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING ) ) ) ) APPEARANCES

Transcription

1 BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING IN THE MATTER OF THE APPLICATION OF ROCKY MO{JNTAIN POWER FOR APPROVAL OF A 3 YEAR DEMAND SIDE MANAGEMENT PLAN ) ) ) ) DOCKET No EA-17 (RECORD No ) APPEARANCES For the Applicant, Rocky Mountain Power (RMP or the Company): DANIEL E. SOLANDER, Senior Counsel, Salt Lake City, Utah. For the Intervenor, Wyoming Industrial Energy Consumers (WIEC): ABBY BRIGGERMAN, and MICHELLE KING, Counsel, Holland & Hart, LLP, Greenwood Village, Colorado. For the Intervenor, Office of Consumer Advocate (OCA): CHISTOPHER LEGER, Counsel, Cheyenne, Wyoming. HEARD BEFORE Chairrnan WILLIAM F. RUSSELL Deputy Chair KARA BRIGHTON FORNSTROM Commissioner ROBIN SESSIONS COOLEY STEVE MINK, Assistant Secretary, Presiding pursuant to a Special Order of the Commission. MEMORANDUM OPINION, FINDINGS OF FACT, DECISION, AND ORDER (Issued July 24, 2018) This matter is before the Wyoming Public Service Commission (Commission) upon the Application of RMP requesting authority to implement a 3-year Demand-Side Management (DSM) plan; and on the interventions of OCA and WIEC. The Commission, having reviewed the Application and attached exhibits, the Parties' prehearing filings, the evidence intoduced at the Public Hearing held on May 8, 2018, its files regarding R?MP, applicable Wyoming utility law, having heard the arguments of the Parties, and otherwise being fully advised in the premises, FINDS and CONCLUDES: Introduction and Course of Proceedings l. RMP is a division of PacifiCorp, an Oregon corporation, engaged in the business of supplying electric utility service to customers throughout its six-state service territory, including customers in Wyoming. (Ex. 1.0, p. l). PacifiCorp provides electric service to retail customers through RMP in Wyoming, Utah, and Idaho, and through its Pacific Power division in Oregon, Califomia, and Washington. (Id.'). -1- DOCKET No EA-17

2 2. RMP is a public utility, as defined in Wyo. Stat. Fg (a)(vi)(C), providing retail electric public utility service under certificates of public convenience and necessity issued by the Commission. RMP is subject to the Commission's jurisdiction pursuant to Wyo. Stat. E,) OnSeptember28,2017,RMPfileditsApplicationrequestingauthoritytoapprove: [i] a 3-year plan for DSM Acquisition; [ii] the cancelation of Electric Service Schedule Nos. 111, 118, and 140; [iii? modifications to Electric Service Schedule No. 191, including adjusting Category l and 2 rates to 1.21 percent and percent, respectively; and, [ivl a three year planning cycle for DSM targets and budgets, and capitalization and amortization of Category 3 Demand- Side Management expenditures. (Ex. 1.0, p. 13). In support of its application, RMP also submitted several exhibits without testimony. (Exs ). 4. RMP states in its Application that it engaged in a series of communications with members of WIEC, the OCA, Southwest Energy Efficiency Project (SWEEP), the University of Wyoming, Merit Energy, and Commission Staff to discuss the current DSM programs, tariff modification processes, and other concerns with respect to a 3-year DSM Plan. (Ex. 1.0, pp. 3-4). s. OnOctober2,2017,theCommissionissueditsSu.saperision0m'ersuspendingthe proposed filing for investigation and further action for the initial six-month period pursuant to Wyo. Stat (c), which commences after the 30-day notice term provided in subsection (b). (Ex. 101). 6. OnOctoberll,2017,theOCA,aseparate,independentdivisionoftheCommission charged with representing the interests of Wyoming citizens and all classes of utility customers, filed its Notice of Intervention pursuant to Wyo. Stat. 8, (Ex. 102). 7. On October 26, 2017, the Commission issued a Notice oj'application, which generally described the Application and provided a deadline of November 2 7, 2017, for interested persons to file a statement, intervention petition, protest, or request for a public hearing. A public notice was published in newspapers in RMP's service territory. (Ex. 103). 8. On October 31, 2017, WIEC, an unincorporated association comprised of large industrial customers, filed a Petition to Intervene and Request for Hearing (Ex. 104), which was granted by Order of the Commission on December 20, (Ex. 106). 9. On December 11, 2017, the Commission issued a Notice Setting Scheduling Conference. On January 18, 2018, the Commission issued a Scheduling Order establishing the procedural schedule and setting a Public Hearing to commence on May 8, (Ex. 107). 10. OnDecember20,2017,theCommissionissuedaSpecia/Order,4uthorizingC)ne Commissioner and/or Presiding Ofjicer to Conduct Public Hearing. (Ex. 105). 11. OnJanuaryl2,2018,RMPfiledthetestimonyandexhibitsofitswitnessesWilliam J. Comeau, Director of Customer Solutions, (Exs ); Esther Giezendanner, Manager of Customer Solutions for Procurement and Compliance, (Exs ); and, Terrell H. Spackman, Manager of Revenue Requirements, (Exs. 4.0 and 4. l). 2- DOCKET No EA-17

3 12. OnMarchl5,2018,WIECfiledthetestimonyandexhibitsofitswitness,KevinC. Higgins, Principle in the Firm of Energy Strategies, LLC. (Exs ). 13. OnMarchl6,2018,theOCAfiledthetestimonyandexhibitsofitswitness,Bryce J. Freeman, Administrator. The OCA filed corrected testimony and exhibits on April 16, (Exs ). 14. On April 6, 2018, RMP filed the rebuttal testimony and exhibits of Mr. Comeau (Exs. 2.6 and 2. 7), and Mr. Spackman. (Exs. 4.2 and 4.3). On the same day, WIEC filed the crossanswer testimony of Mr. Higgins. (Ex. 302). 15. On April 9, 2018, the Commission issued a Notice and Order Setting Public Hearing for May 8, A public notice was published in newspapers in RMP's service territory. (Ex. 108). 16. OnMay8,2018,theexhibitconferencewasheldandthefollowingexhibitswere received into evidence: RMP's Exhibit Nos. 1.0 through 12.0 and (Tr., p. 6). Commission Exhibit Nos. 101 through 108. (Tr., p. 8). OCA Exhibit Nos. 200 through 201. (Tr., p. 8). WIEC Exhibit Nos. 301 through 310. (Tr., p. 7). 17. The Public Hearing was held May 8, 2018, pursuant to the Wyoming Administrative Procedure Act (WAPA), Wyo. Stat. FB et seq., in the Commission's hearing room in Cheyenne, Wyoming. RMP, WIEC, and the OCA appeared and participated fully in the hearing. At the conclusion of the Public Hearing, the Commission invited the Parties to submit briefs. 18. On May 29, 2018, the Parties filed their briefs and on June 26, 2018, the Commission held public deliberations pursuant to Wyo. Stat. e) The Commission unanimously approved the Application, with some conditions, and directed the preparation of an order consistent with its decision. Summary of Decision 19. The Commission approves the Application subject to the following conditions: First, the Company will provide actual notice to its Category 3 customers describing the capitalization of DSM expenditures, and advising those customers of their right to request a rehearing within 30 days. Second, Category 3 revenues and costs will be tracked and fenced from Category 1 and 2 customers. DSM costs that cannot be recovered from Category 3 customers who leave the system shall be borne by the remaining Category 3 customers or the Company's shareholders. Third, in every application for a change to the DSM plan, the Company will demonstrate that the treatment of Category 3 customers will not harm Category 1 and 2 customers. -3- DOCKET No EA-17

4 Issue 20. Whether it is appropriate and in the public interest for the Company to capitalize and amortize Category 3 DSM expenditures? Background Findings of Fact 21. Pursuant to a Stipulation entered into between the parties in Docket No EA-16 (OCA was not a party to the case), RMP engaged interested persons in an effort to create a 3-year prospective DSM plan. RMP held two collaborative meetings in May and June RMP continued to correspond and meet with stakeholders individually throughout the summer of These efforts resulted in a Memorandum of Understanding (MoU) between RMP and WIEC setting forth the terms and conditions for the capitalization of DSM expenditures and a three-year DSM planning cycle. The OCA did not participate in the MoU. The Application at issue in this case is the result of the collaborative process and the MoU. (Ex. 2.0, pp. 3-5; Ex. 303, p. 8; Tr., p. 18). The Proposal 22. On September 28, 2017, RMP filed its Application requesting authority to implement its proposed 3-year DSM plan. (Ex. 1.0; Tr., p. 18). The proposal includes a 2018 through 2020 plan for DSM acquisition, the cancellation of Schedules 111, 118 and 140, and the modification of Schedule 191. The proposal also adjusts Category 1 and 2 rates, introduces capitalization and amortization of Category 3 DSM expenditures, and sets an ongoing three-year planning cycle for DSM targets and budgets. (Tr., pp ). The proposal also requires RMP to seek input from stakeholders when expenditures are projected to exceed the budget by more than l 0%, and work with WIEC to maintain the Category 3 rate at or below a non-binding target of 1.6%. (Ex. 2.4, p. 3). 23. WIEC supports RMP's proposal, but suggested three adjustments. First, the accumulated deferred income taxes should be treated as an offset to the Category 3 deferred balance to which carrying charges are applied. (Ex. 301, p. 13). Second, the amortization should account for the first three years of surcharge revenues collected from Category 3 customers as an offset to the remaining balance. (Ex. 3 01, p. 14). Third, WIEC recommended that carrying charges be calculated on a monthly basis, rather than on an annual basis. (Ex. 301, pp ). RMP agreed to these suggested changes in its rebuttal testimony. (Ex. 4.2, p. 2). 24. The OCA recommends approval of the 3-year DSM plan. However, it opposes the capitalization of Category 3 expenditures. The OCA recommends that R?MP set the Category 3 surcharge to 1.95% until the Company develops and proposes an optional DSM capitalization tariff in a new docket. (Ex. 200, pp. 6; 19-20). 25. The OCA's opposition to the mandatory capitalization of Category 3 expenditures is largely based on the following three concerns: a) RMP's agreement with WIEC would commit all Category 3 customers to the capitalization of DSM expenditures even though most of those customers were not represented -4- DOCKET No EA-17

5 by WIEC when the agreement was negotiated or during the hearing. (Ex. 200, p. 6). While WIEC members represent approximately 75% of the Category 3 load, they represent less than 20% of Category 3 customers. (Tr., pp. 130; 146). b) The potential for large industrial customers to reduce their load, or leave the system entirely, could strand unamortized DSM expenditures to the detriment of other Category 3 customers. (Ex. 200, p. 15). c) There is a risk of free ridership caused by the effort to maintain the Category 3 surcharge at or below l.6%. Unless a similar cap is proposed for Category 1 and 2 customers, they could bear a disproportionate share of system costs while receiving fewer benefits. (Ex. 200, p. 18; Tr., pp ). 26. RMP opposes an optional tariff because it was not discussed during the collaborative process, nor has any research or analysis been conducted, and an optional tariff may create a number of technical complexities and unforeseeable problems. (Ex. 2.6, p.5; Tr., pp ). Discussion 27. All Parties generally agree the 3-year DSM Plan should be approved. The only remaining issue is whether Category 3 DSM expenditures will be capitalized and amortized rather than expensed. The OCA raised a number of concerns regarding representation of Category 3 customers, the potential for stranded costs, and free ridership. We share those concerns. 28. However, the Commission favors giving the capitalization of Category 3 expenditures an opportunity to succeed and believes that if the Company can implement its new DSM program subject to three conditions, it would satisfy the public interest. In the alternative, we would approve the 3-year DSM Plan without the capitalization of Category 3 expenses and the Category 3 surcharge would be adjusted from. 79% to l.95%, as the Company indicated would be necessary. (Tr., p. 26). The conditions are as follows: a) To address representation of Category 3 customers, upon publication of this Order, RMP shall provide actual notice to all Category 3 customers clearly describing the capitalization of DSM expenditures and advising the customers of their right to request a rehearing within 30 days. Both WIEC and RMP represented their belief that Category 3 customers will either support or remain indifferent about the capitalization of such expenses. (Tr., pp. 54; 80-81). The proposed notice shall be reviewed by the Commission prior to service upon the Category 3 customers. b) To address the potential for stranded costs, RMP shall publish and employ accounting procedures to ensure Category 3 expenditures and revenues are fenced and segregated from all other customers. Each Category 3 customer will pay its fair share of DSM costs. If that fails, any stranded costs will be borne by the remaining Category 3 customers. If that fails, or the Commission finds that some or all of the stranded costs are too burdensome, or otherwise result in unjust and unreasonable rates, the stranded costs will be borne by shareholders. Assigning the ultimate risk of stranded costs to shareholders is fair because the shareholders also enjoy the benefit of carrying costs. The OCA also raised the possibility of large customers leaving RMP's system -I- 5- DOCKET No EA-17

6 after receiving DSM incentives. (Tr., p. 111). We think this concern is alleviated by RMP's testimony indicating that, should a customer leave the system, that customer is required to repay a portion of the incentive under the Company's DSM agreement. (Tr., pp ). c) To address the possibility of free ridership, with every application for a change to the DSM plan, RMP shall affirmatively demonstrate that the treatment of Category 3 DSM expenditures will not have an adverse impact on Category 1 and 2 customers. Additional Discussion Issues 29. The OCA indicated that during its analysis, it experienced difficulty with the Company model until RMP provided additional instructions in a discovery response. (Ex. 201, pp. 2-3; Tr., pp ). The Company agreed to include any instructions necessary to operate its models in the future. (Tr., p. 64). 30. In Tariff Sheet 191-2, directly underneath the bolded,?dsm Balancing Account Category 3", the first paragraph reads: "A balancing account shall track DSM program costs for Categories 1 and 2." The Company agreed to change that to read: "Balancing accounts shall track DSM program costs for Categories l and 2." (Tr., pp ). 31. RMPproposedtocancelScheduleslll,119,andl40,andcommunicateitsDSM incentives and qualifications via updates on its website and contact with stakeholders. The Company stated it would honor its advertised incentives based upon the purchase date of the appliance so long as that purchase date was between 30 and 90 days of the change in the incentive amount, or a change in qualifying appliances. (Tr., pp ). We find this acceptable, as it will allow RMP to maintain its DSM programs efficiently by allowing the Company to account for market offerings and continuously changing appliance standards. 32. Wyo. Stat states: Principles of Law All rates shall be just and reasonable, and all unjust and unreasonable rates are prohibited. A rate shall not be considered unjust or unreasonable on the basis that it is innovative in form or in substance, that it takes into consideration competitive marketplace elements or that it provides for incentives to a public utility. * * * The commission may determine that rates for the same service may vary depending on cost, the competitive marketplace, the need for universally available and affordable service, the need for contribution to the joint and common costs of the public utility, volume and other discounts, and other reasonable business practices. * * * 33. The Commission has broad powers to inquire into the facts surrounding the determination of rates. They include Wyo. Stat , which articulates the "used and useful" test and allows wide latitude in the Commission's investigation of rate-related matters. It states, in part: In conducting any investigation pursuant to the provisions of this act the commission may investigate, consider and determine such matters as the cost or value, or both, of the -6- DOCKET No EA-17

7 property and business of any public utility, used and useful for the convenience of the public, and all matters affecting or influencing such cost or value, the operating statistics for any public utility both as to revenues and expenses and as to the physical features of operation Wyo. Stat requires the Commission to afford due process in its cases, stating, in part: No order, however, shall be made by the commission which requires the change of any rate or service, facility or service regulation except as otherwise specifically provided, unless or until all parties are afforded an opportunity for a hearing in accordance with the Wyoming Administrative Procedure Act. 35. Wyo.Stat givestheCommissionlatitudetodeterminetheactualrates to be charged by a utility, stating, in part: If upon hearing and investigation, any rate shall be found by the commission to be inadequate or unremunerative, or to be unjust, or unreasonable, or unjustly discriminatory, or unduly preferential or otherwise in any respect in violation of any provision of this act, the commission... may fix and order substituted therefor a rate as it shall determine to be just and reasonable, and in compliance with the provisions of this act. 36. Wyo.Stat (a)reinforcestheCommission'sabilitytoexerciseitssound informed discretion in rate making cases. It states: In determining what are just and reasonable rates the commission may take into consideration availability or reliability of service, depreciation of plant, technological obsolescence of equipment, expense of operation, physical and other values of the plant, system, business and properties of the public utility whose rates are under consideration. 37. Wyo. Stat (b) gives similar necessary latitude to the Commission regarding utility services, stating: If, upon hearing and investigation, any service or service regulation of any public utility shall be found by the commission to be unjustly discriminatory or unduly preferential, or any service or facility shall be found to be inadequate or unsafe, or any service regulation shall be found to be unjust or unreasonable, or any service, facility or service regulation shall be found otherwise in any respect to be in violation of any provisions of this act, the commission may prescribe and order substituted therefor such service, facility or service regulation, as it shall determine to be adequate and safe, or just and reasonable, as the case may be and otherwise in compliance with the provisions of this act, including any provisions concerning the availability or reliability of service. It shall be the duty of the public utility to comply with and conform to such determination and order of the commlsslon. 38. The Wyoming Administrative Procedure Act at Wyo. Stat sets parameters for due process in Commission cases, including the giving of reasonable notice. In 7- DOCKET No EA-17

8 accord are Wyo. Stat. Fge) , , and See also, Commission Rule Chapter 2, Sections s and The public interest must come first in Commission decisions and, as the Wyoming Supreme Court has stated, the desires of the utility are secondary to it. Mountain Fuel Supply Co. v. Pub. Serv. Comm 'n, 662 P.2d 878 (Wyo. 1983). Constniing Wyo. Stat. Fg , which requires rates to be reasonable, the Court in Mountain Fuel, supra, at 883, commented that: This court cannot usurp the legislative functions delegated to the PSC in setting appropriate rates, but will defer to the agency discretion so long as the results are fair, reasonable, uniform and not unduly discriminatory. Later, 662 P.2d at 885, the Court in Mountain Fuel observed that: We agree that if the end result complies with the 'just and reasonable' standard announced in the statute, the methodology used by the PSC is not a concern of this court, but is a matter encompassed within the prerogatives of the PSC. In accord are Great W Sugar Co. v. Wyo. Pub. Serv. Comm'n and MDU, 624 P.2d 1184 (Wyo. 1981); and Union Tel Co. v. Pub. Serv. Comm'n, 821 P.2d 550 (Wyo. 1991), wherein the Supreme Court stated, 821 P.2d at 563, that it "... has recognized that discretion is vested in the PSC in establishing rate-making methodology so long as the result reached is reasonable." Read in part materia, these statutes articulate the basic mechanism of the public interest standard which the Commission must follow in its decisions. 40. In defining the standard of proof in adjudicatory hearings, the Wyoming Supreme Court has stated: The language of the [Wyoming Administrative Procedure Actl does not expressly provide a standard of proof in contested case hearings. See Wyo. Stat. Ann. FS) (c). We have previously recognized that the standard applicable to an adjudicatory hearing before an agency, unless otherwise stated, is the "preponderance of the evidence" standard customarily used in civil cases. Willadsen v. Christopulos, 731 P.2d 1181, 1184 (Wyo. 1987). 41. Because the evidentiary standard in this matter is not specifically stated in Wyo. Stat. F: , or elsewhere in the Public Utility Act, the burden of proof must be met by the preponderance of the evidence standard, which is defined as "proof which leads the trier of fact to find that the existence of the contested fact is more probable than its non-existence." Judd v. State ex rel. Wyo. Workers ' Safety & Comp. Div., 2010 WY 85, jl31, 233 P.3d 956, 968 (Wyo. 2010). Conclusions of Law 42. RMP is a public utility as defined by Wyo. Stat. F (a)(vi)(C), providing retail electric service pursuant to Certificates of Public Convenience and Necessity issued by the Commission. RMP is subject to the Commission's jurisdiction pursuant to Wyo. Stat. Fg DOCKET No EA-17

9 43. The contested case hearing, including proper notice to all interested persons, was conducted pursuant to the Wyoming Administrative Procedure Act, Wyo. Stat. EgFg through 203, and applicable sections of the Commission's Rules. 44. The Commission's decision is supported by the evidence presented in the record of this case. We conclude that the effects of our decision will produce rates that are just and reasonable and will not result in undue burden upon RMP's customers. Likewise, the tariff cancellations and tariff modifications approved herein are just and reasonable. 45. RMP's proposed 3-year DSM Plan, as modified herein, serves the public interest and should be approved. 46. The Commission's conclusions are supported by a preponderance of the evidence. NOW THEREFORE, IT IS ORDERED: 1. Pursuant to the Commission's deliberations held on June 26, 2018, Rocky Mountain Power is authorized to implement a 3-year Demand Side Management plan subject to the conditions detailed in paragraph 28 of this Order. 2. This Order is effective immediately. MADE and ENTERFF,D at Cheyenne, Wyoming, on July 24, PUBLIC SERVICE COMMISSION OF WYOMING? WILLIAM F. RUSSELL, Chairman f:l'a% ICE C, '],' OFRCIAL S,'%' 1. SEAL i M'<?"!x?.? OHTON FORNSTRO) GHTON FORNSTROM, Deputy Chair RO SESSIONS COOLEY, om assioner Attest:,?X' -'7? STEVE MINK, Assistant Secretary -9- DOCKET No EA-17