DR 98-043 New Hampshire Electric Cooperative, Inc. 1998/1999 Demand-Side Management Program Order Approving Settlement Stipulation O R D E R N O. 22,970 June 30, 1998 APPEARANCES: Dean, Rice & Kane by Anne Davidson, Esq. for the New Hampshire Electric Cooperative, Inc.; David W. Marshall, Esq. for the Conservation Law Foundation; Heidi L. Kroll for the Governor's Office of Energy and Community Services; Kenneth E. Traum for the Office of the Consumer Advocate; and Eugene F. Sullivan, III, Esq. for the Staff of the New Hampshire Public Utilities Commission. I. PROCEDURAL HISTORY On March 31, 1998, the New Hampshire Electric Cooperative, Inc. (NHEC) filed with the New Hampshire Public Utilities Commission (Commission) a petition for approval of its Demand-Side Management (DSM) Program for the program year July 1, 1998 through June 30, 1999. Included in the petition is the supporting testimony of Robert L. Reals, Jr., Manager of Energy Services, and Heather K. Saladino, Manager of Rates & Financial Analysis. NHEC proposes a 1998/1999 DSM Revenue Requirement of $1,206,059 with $827,333 allocated for residential programs and $378,726 allocated for commercial/industrial programs. The proposed overall program budget is $1,412,278 with $206,219 allocated from base rates. The approved 1997/1998 overall program budget is $1,421,159. NHEC intends to offer a program portfolio of the same ten programs approved by the Commission for the 1997/1998 program year with only minor program modifications. The programs were screened using the Total Resource Cost (TRC) test, the method approved to evaluate the cost-effectiveness of energy efficiency programs in New Hampshire, with resulting TRC ratios ranging between 1.20 and 2.16. By an Order of Notice issued April 3, 1998, the Commission scheduled a prehearing conference and a first technical session for April 29, 1998, set deadlines for intervention requests and objections thereto, outlined a procedural schedule, and required the Parties and Commission Staff (Staff) to summarize their positions with regard to the filing for the record. On April 20, 1998, the Conservation Law Foundation (CLF) filed a Petition to Intervene. On April 23, 1998, the Governor's Office of Energy and Community Services (ECS) filed a Motion for Limited Intervention. No party objected to either CLF's or ECS's petition and the Commission granted their interventions at the prehearing conference. The Office of the Consumer Advocate (OCA) is a statutorily recognized intervenor. Pursuant to the procedural schedule, NHEC, CLF, ECS, OCA and Staff engaged in formal discovery and technical sessions. On May 27, 1998, Staff filed testimony and ECS submitted written comments. On May 29, 1998, CLF filed testimony. On June 5, 1998, NHEC, CLF, ECS, OCA and Staff participated in a settlement conference. On June 10, 1998, a Settlement Stipulation was filed with the Commission signed by NHEC, OCA and Staff. On June 12, 1998, CLF and ECS filed a Written Response to the proposed Settlement Stipulation. A hearing was held on June 17, 1998 at which time testimony supporting the Settlement Stipulation was presented to the Commission. Due to the unavailability of a witness to sponsor their Written Response, CLF and ECS were afforded the opportunity to submit late filed exhibits. On June 19, 1998, CLF and ECS filed Exhibits 8 and 9, respectively. On June 22, 1998, Staff filed supplemental testimony. On June 23, 1998, NHEC submitted comments regarding CLF's and ECS's late filed exhibits. II. POSITIONS OF THE PARTIES AND STAFF A. NHEC, OCA and STAFF NHEC, OCA and Staff agreed that NHEC's 1998/1999 DSM Program, as set forth in NHEC's March 31, 1998 filing, should be approved subject to the following modifications outlined in the Settlement Stipulation filed with the Commission on June 10, 1998: 1. As proposed by Staff, one full-time equivalent position, in the amount of $53,560, will be recovered through the DSM surcharges. As a result of the recovery of the $53,560 from the proposed surcharges, the proposed DSM surcharge for the Residential Class will be $0.00159 per kilowatt-hour (kWh); the proposed DSM surcharge for the General Class will be $0.00229/kWh; and the proposed DSM surcharge for the Primary General Class will be $0.00229/kWh. NHEC's proposed DSM revenue requirement increases from $1,206,059 to $1,259,619 due to the reallocation of $53,560 to the DSM surcharges. 2. NHEC, OCA and Staff can petition the Commission to revisit NHEC's 1998/1999 DSM Program Proposal based upon the progress of the proceedings in the Restructuring Docket, DR 96-150, and the impact of that proceeding on NHEC's DSM programs. NHEC agrees that it will provide disclosure to its members concerning the proceedings in the Restructuring Docket and the resulting uncertainty of the benefit of some of the DSM programs. B. CLF and ECS CLF and ECS agreed in part and disagreed in part with the Settlement Stipulation filed by NHEC, OCA and Staff. Their position, as outlined in their June 12, 1998 Written Response, is summarized below: 1. CLF and ECS support the proposal in the Settlement Stipulation to continue to recover $53,560 in costs associated with a DSM full time equivalent through the DSM surcharges rather than through base rates. CLF and ECS also agree, in general, with that aspect of the proposed Settlement Agreement that would allow the parties to petition the Commission to revisit NHEC's 1998/1999 DSM programs based upon the progress of the Restructuring Docket. However, CLF and ECS request that permission to petition the Commission not be restricted solely to NHEC, OCA and Staff but would be extended to all interested parties, and any petition filed with the Commission should be addressed in the context of an adjudicatory proceeding in which intervenors may participate. 2. CLF and ECS do not support the proposal in the Settlement Stipulation that would allow NHEC to use the expected balance of $261,604 in underspending from program year 1997/1998 to reduce its class-specific DSM surcharges in program year 1998/1999. CLF and ECS recommend that the Commission instruct NHEC to maintain its current class-specific DSM surcharges during the period when the Energy Efficiency Working Group's recommendations are being formulated and acted upon. Furthermore, they recommend that the Commission direct NHEC to use at least some portion of the carryover of roughly $260,000 to participate in regional and national market transformation initiatives and to improve the design of its existing programs. At the hearing, CLF clarified its and ECS's position. CLF and ECS request that the Commission approve the current DSM surcharges effective through the 1998/1999 program year. The revenues generated by the current DSM surcharges at the 1998 kWh sales forecast plus the expected overrecovery of $261,604 creates a 1998/1999 program year budget of $1,327,999 (exclusive of $152,859 in base rates). Thus, CLF and ECS request an additional $68,380 beyond the revenue requirement advocated by NHEC, OCA and Staff. CLF and ECS recommend that the Commission use the $68,380 to support NHEC's involvement in five regional market transformation initiatives facilitated by the Northeast Energy Efficiency Partnerships and to increase the average customer weatherization package in the Low Income Program from $800 to $1,065 and to increase the $1,000 member cap to $1,500. III. COMMISSION ANALYSIS After careful review of the entire record in this docket, we find that the Settlement Stipulation filed by NHEC, OCA and Staff is reasonable and is in the public good. We will approve NHEC's 1998/1999 DSM Program subject to the terms outlined in the Settlement Stipulation. We believe that it is premature to order NHEC to increase its program budget and to expand its 1998/1999 DSM Program to include the market transformation initiatives proposed by CLF and ECS. In our March 20, 1998 order on rehearing in our restructuring docket, DR 96-150, we established a working group to examine a number of issues related to energy efficiency programs and to report back to us with recommendations. We further directed utilities to cap their program funding at existing levels until we have received and ruled upon the working group's recommendations. We continue to believe that is the correct approach. The Settlement Stipulation appropriately addresses NHEC's current filing. NHEC's budget is approximate to the level we approved in NHEC's 1997/1998 DSM Program docket and is consistent with our order on rehearing which caps "program funding at existing levels until we have received and ruled upon the working group's recommendations." By existing levels, we refer to the latest approved budget and not to the DSM cost recovery mechanisms which may not accurately reflect the program costs due to prior year over/underrecoveries and variances in the sales forecasts used to calculate the surcharges. The budget level of $1,412,278 is consistent with the approved budget for the 1997/1998 program year and should be achievable given NHEC's historical spending. However, we encourage NHEC to continue to find ways of obtaining its energy and capacity saving goals while spending less ratepayer funds. Finally, consistent with treatment we have recently allowed for Granite State Electric Company in Docket DR 97-211 in Order No. 22,818 (January 2, 1998), we waive the application of N.H. Admin. Rules, Puc 1203.05(a), which requires generally that rate changes be implemented on a service-rendered basis, and will allow NHEC to implement its DSM surcharges on a bills-rendered basis. This waiver, pursuant to Puc 201.05, produces a result consistent with the principles embodied in Puc 1203.05(b), which sets forth exceptions for allowing rate changes on a bills-rendered basis, and is in the public interest because it eliminates consumer confusion and reduces administrative costs. Based upon the foregoing, it is hereby ORDERED, that NHEC's 1998/1999 DSM Program is APPROVED as modified by the Settlement Stipulation; and it is FURTHER ORDERED, that effective July 1, 1998 on a bills-rendered basis, the Residential Class DSM surcharge shall be $0.00159/kWh, the General Class DSM surcharge shall be $0.00229/kWh, and the Primary General Class DSM surcharge shall be $0.00229/kWh; and it is FURTHER ORDERED, that NHEC shall file compliance tariff pages within ten days of the date of this order. By order of the Public Utilities Commission of New Hampshire this thirtieth day of June, 1998. Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary