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BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO
DOCKET NO. 07I-251G
IN THE MATTER OF THE INVESTIGATION INTO NATURAL GAS DEMAND SIDE
MANAGEMENT RULEMAKING.
REPLY COMMENTS FROM RATEPAYERS UNITED OF
COLORADO (RUC) IN RESPONSE TO NINE OTHER
ORGANIZATION COMMENTS ON 30 QUESTIONS
CONTAINED IN AN INVESTIGATORY DOCKET IN
PREPARATION FOR
RULEMAKING REQUIRED PURSUANT TO HB 07-1037
Through its Order 07-0562 dated June 27, 2007, the Commission gave notice of an inquiry
into regulatory changes required for the adoption of natural gas demand-side management (DSM)
rules as required by recently enacted House Bill 07-1037. On July 18, an all-afternoon “informal
workshop” was held to sequentially discuss most of thirty questions given below – all prepared by
Commission staff. Ratepayers United of Colorado (RUC) responded on 30 July, 2007 as did nine
other organizations. As required to provide reply comments by 10 August, he following are from
Ratepayers United of Colorado (RUC), prepared by Ronal W. Larson, PhD - a Board member of
RUC, with assistance from other members of RUC.
We try to sequentially discuss the response differences in the eight original categories, which
were:
A. Benefit to Cost Ratio (Questions 1-4)
B. General Description Questions 5-7
C. Distribution of Expenses (Questions 8-9)
D. Applicability, Methodology, and Implementation Questions 10-18
E. Customer Participation (Questions 19-22)
F. Gas Utility’s Revenues (Questions 23-24)
G. Timing (Questions 25-29)
H. Other (Question 30)
One specific interest and intent throughout the following is to be sure that certain appropriate
renewable energy technologies are treated as thermal efficiency measures, whenever they are not
electrical generation technologies. These include especially the solar, biomass, and geothermal
(ground source) categories.
The initial comments, plus other details, can all be downloaded from
http://www.dora.state.co.us/puc/DocketsDecisions/HighprofileDockets/07I-251G.htm
Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
The ten organizations responding were (broken herein into the categories of A. Gas suppliers and B.
Non-suppliers:
A. Gas Suppliers
1.Aquila, Inc. (3pp)
This group did not respond to the 30 questions but instead proposed guiding
principles in 8 major areas. Most are so general as to be non-controversial. However, RUC takes
exception to the Aquila answer on “Fuel Switching” – to which they object. We are not sure whether
they include renewable energy resources as “fuel switching” – but hope not, based on their response
on July 18 to our inquiry then. We note that they and any gas utility should welcome the chance to
add investment opportunities to their portfolio.
2 Atmos Energy Corporation (1+ p)
They state that they have read the PSCo submission of 1 August and are in general
agreement with PSCO. They note the possible exception of one point on inclusion of the GCA as
revenue. We presume the GCA is real revenue and should be included for purposes of determining
minimal DSM expenditures.
3. Colorado Natural Gas Inc.
Disagree on Answer 4 on only including direct costs – the legislation is clear on emissions,
which aren’t a direct cost. Disagree on Answers 25 (recording capital costs) and 30 (downstream
ownership).
We think they are wrong on Answers 11 (certification detail) and 20 (customer co-pay seems
beneficial to us in most cases – but accounting costs are important). We agree with the Answer 17
(benefits calculation). Many of the answers (many fewer answers than from Atmos) defer to the
PSCo submission.
4. Public Service Company of Colorado
There are two lengthy papers from PSCo – that seem to be in synch. For ease of
comparing with the other submissions, we will first discuss that of the 30 questions:
A. Benefit to Cost Ratio (Questions 1-4)
Ans 1. - RUC agrees. Mentions non-energy benefits – but lists none.
Ans 2 . - “ “ . We agree Gas DSM should look like Electric DSM. (We would like to go
further and find some way to “mandate” cooperative behaviors.)
Ans 3. - Fair response. Includes water. Missing are such topics as health costs, economic
development, and many others listed in past legislation. (see below)
Ans 4. – OK. Not clear what staff wanted here. A better question would have been (and it has
not gone away) is how benefits (not costs) are to be handled – and whether any benefits or costs can
be thought of as negative versions of the other.
B. General Description Questions 5-7
Ans. 5. OK. Not a critical topic. We would prefer to see some effort made to calculate B/C for
the indirect programs as well as the direct. These categories should not be slighted.
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
Ans. 6. Excellent response. The Commission might want to go further and explore ways that
DSM help (greatly reduced expenditures) for electric utilities could be obtained from switching
services over to the gas utilities. Electric ranges and instant electric water heaters are appliances that
require much more installed capacity than can be captured from their limited energy consumption
(and smart metering wont help). These are financial losers from a societal perspective, even if
convenient and cost-effective for the homeowner. It clearly would be in society’s interest to shift
some loads back and forth between types of utilities – as a win-win move.
Ans 7 – Excellent – seems complete.
C. Distribution of Expenses (Questions 8-9)
Ans 8. & 9: Seem very complete and non-controversial.
D. Applicability, Methodology, and Implementation Questions 10-18
Ans. 10 – 16 and 18 all look very well done. We of course like the comment in Ans 14: “…a
renewable resource may qualify…”
Ans. 17. We need more discussion of why Utility costs should be used rather than the total
(including participant) costs as required by HB 1037. This PSCo choice obviously will increase the
bonus payments – perhaps inappropriately. In part this must also include a choice on how the gross
benefits are quantified. If only utility costs are to be included, in a net benefit computation, perhaps
only utility benefits should count as well. Examples need to be worked out.
E. Customer Participation (Questions 19-22)
Ans 19, 20, and 22 all are well done.
Ans 21 has not convinced us yet on the subject of transportation only customers. PSCo says:
“Public Service does not expect that a full service customer who reduces load due to a DSM program
would then convert to gas transportation service, as the benefits, if any, of converting to gas
transportation service are more readily available to higher load customers.” We still would like to
prevent “gaming”- and still think it possible. The rationale behind this quote is not obvious.
However, this question also raises the question of how this set of rules can or should assist the
transportation companies in making a shift towards less consumption. RUC would include these
customers in the DSM programs whenever it can be shown to be in the public interest – and especially
if it leads to lower rates. For instance, suppose gas consumption for a transportation customer could be
cut in half (and monthly bills cut by 20%) with a renewable energy system with a 10% down payment
subsidy from all customers. This might pass our B/C test. If the needed 10% down payment came from
the utility’s shareholders, should there be a bonus? The answer might be yes.
F. Gas Utility’s Revenues (Questions 23-24)
Ans 23. We think PSCo is wrong in their interpretation of this simple widely-used definition –
which could come into play at some point in the future for either a gas or electric DSM computation.
Ans 24. We fail to see why a DSMCA or GRSA should be excluded – no rationale has been
offered.
G. Timing (Questions 25-29)
Ans 25. This response is disappointing in two ways and we look forward to perhaps hearing
eventually why PSCo should expect no capital expenditures and if there were, why the depreciation
period should be artificially capped at 3-5 years.
Ans 26 - OK on timing.
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
Ans. 27 - A confusing answer. We are not told how targets are to be established, but the
establishment of results will be the same and not related to the depreciation period.
Ans. 28 - OK on when to file for a bonus – but we still have zero knowledge of the PSCo approach
to establishing its magnitude.
Ans 29 - OK, but we would be perfectly comfortable with expense repayment much in advance of
the bonus – and are surprised that PSCo is willing to defer payment of expenses.
H. Other (Question 30)
Ans 30 Possibly generally OK on ownership issues – but we see no reason that PSCO could not
own certain gas DSM equipment – for example solar or geothermal hot water systems (as is already
being done by Delta-Montrose REA). These could result in benefits to both customer (reduced
consumption and lowered monthly bills) and PSCo (low-risk, appropriate return, and with bonus).
Reply on PSCo’s “Initial Comments”:
Part 1 – Targets (pp2-4). This contains the very disappointing statement (next to last sentence on
p3) that the PSCo goals are going to only be based on the HB 1037 established floor (the minimum)
of 0.5% of revenues. There is no mention here of striving to minimize revenue requirements as is
clearly implied by the law, or to maximize benefits or their bonus or anything else. PSCo has led
parties to the Electric DSM investigatory docket to believe it was going to be aggressive in its
electric DSM proposals to be filed in conjunction with it 2007 LCP. Very disappointing
Part 2. B/C ratio (pp 4- 6) Nothing new or surprising here. But the techniques are still not clear.
The Commission should examine some examples from Xcel’s gas DSM experience in Minnesota.
Part 3. Cost recovery (pp 6 – 7) All seems acceptable here – no differences from the question
answers.
Part 4 Bonus (p7) Unfortunately, this potentially crucial section doesn’t say anything informative.
The RUC position remains that a utility that achieves only the minimum expenditures required by
the law is not entitled to any bonus.
Part 5 – Filings (pp7-8) and Conclusion (p8) No new information here.
5. Source Gas
They give 5 principles, but we think the first is badly wrong where they state on p 2,
“…..SourceGas urges the Commission to adopt an interpretation that the reference to revenues
is exclusive of gas cost.” The other four principles do not help establish the means for establishing
the right incentive mechanism.
B. Non-Supplier
1. Colorado Energy Science Center
RUC found this CESC submission to be an excellent source of new information. We know
CESC to be probably the most experienced and dedicated non-profit dedicated to actual on-the-
ground energy efficiency provision in Colorado. Their Appendix, strongly critical of the 2005 report
on the PSCo electric DSM program, was a surprise that is well worth looking at in detail. We can
certainly expect some carry-over by PSCo, as they seem to have been as proud as CESC is critical.
Note that this report shows great DSM potential as the B/C ratio is allowed to get closer to unity.
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
2. Energy Outreach Colorado
RUC generally found the comments here helpful. However, there is an EOC concern
about increasing rates with which we must take some exception. We hope/think rates will go down,
but certainly the average bill will go down. And those which will go down relatively the most will
be for the low-income ratepayers whom Energy Outreach is representing. A certain way to ensure
minimum rate increase will be to do the minimum and we think that will be a huge mistake for all
ratepayers – and especially the low income – who will benefit the most from the largest possible gas
DSM program.
RUC looks forward to working with Energy Outreach to ensure that low-income ratepayers
receive the largest possible share of the benefits from the new gas DSM activities covered in this
docket.
We have reviewed another bill identified by Energy Outreach - SB 07-022, which was new
to us and we believe was not mentioned in the 18 July meeting. We look forward to working with
Energy Outreach to establish a change in rate structure to benefit low-income gas customers as
urged by SB07-022. If not already part of this docket, SB 07-022 requirements should be added
quickly.
3. Office of Consumer Counsel
There are many excellent points here. We especially like the emphasis on the existing legal
mandate that monopolies must provide least cost products – that they have no legal right to
maximize their profits through opposing efficiencies.
We also like the emphasis here on the appropriate magnitude of the bonus – and the ground
rules for establishing its magnitude. This needs much more thought. However, we are not
convinced yet that a smaller/larger bonus should follow from this one sentence: “A bonus should be
smaller for a utility that recovers more of its fixed costs via fixed charges (such as the service
and facilities charge) than for a utility that recovers less of its fixed costs via fixed charges.”
We believe most utilities will claim that the system is already perfectly balanced on fixed vs energy
charges.
4. Ratepayers United of Colorado
a. We find ourselves to have been one of only a few to mention the words “renewable
energy” – and want to reemphasize that many energy experts have found plentiful cases where a
renewable energy approach is cheaper than a competing energy efficiency approach. An example is
placement of windows on the south rather than the north side of a building – a zero cost approach to
energy reductions. Architectural design assistance has proven valuable for electric DSM and should
be replicated here as well.
b. We have found no one asking if there should be encoura gement for utility shareholder
investments - and we think such should be the case – and an appropriate added bonus if this takes them
above the floor. Such could especially apply to low income property improvement.
c. We would like to see consideration of larger incentive payments for those programs where
the customers are paying a larger share of the total. Clearly this is harder to accomplish than simply
giving everything away.
d. The most difficult decisions for the Commission will be to establish the guiding principles
for both establishing goals and the bonus. (see below)
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
e. We believe the PUC (and possibly the OCC) should collect a small additional “tax” for
one or more staff persons for evaluating the programs. Obviously evaluation should be a part of
every program – but having Commission staff being a part of that evaluation should make all
programs more cost-effective. (see below)
f. The Commission needs to look carefully at the way both B and C are handled – and urge
strongly that the methodology be the same for all Colorado utilities (and be very similar for both gas
and electric utilities). We can imagine many ways to game the system without this control. Indeed,
we cannot believe that the bonus program will be fair unless the accounting is the same for all
utilities.
g. Although we believe that global warming concerns were probably the most significant
factor behind HB 1037, a review of the renewable energy and energy efficiency literature will
provide many other rationales. All of these rationales must be included quantitatively in our
consideration of benefits. We all have heard of peak oil – but there are many experts who are
convinced that US gas supply will peak about the same time as world oil peaks (within a few years –
if we have not already passed that point in an average sense). Delaying if not stopping the inevitable
future price rise for natural gas obviously has a dollar value. Many decision-makers are favoring
RE/EE over the fossil alternatives for their jobs potential – with implications for tax collections,
welfare rolls, etc. This has a quantifiable aspect, so an effort should be made to find a dollar value
of this important non-energy impact. Health issues related to coal use should be a major decision
criterion for electric DSM – and there should be some carry-over for gas DSM, even if the dollar
benefits are much smaller. If Colorado can be a leader in this area, factories can be placed here with
their own quantifiable benefits, for products shipped out of state. Experts in economic development
should be able to place a value on this aspect of early pioneering action. (see also below on
computing benefits.)
5. Southwest Energy Efficiency Project
RUC was most impressed with the depth of the responses here and generally agrees with the
SWEEP responses. SWEEP is nationally recognized and was active in the legislation behind this
new program. Their responses should be carefully considered. In particular, of course, we like the
SWEEP support for renewable energy technologies while arguing against other forms of "fuel
switching". The SWEEP reference to the work of a Colorado consulting firm (SERA) on gas (and
other) DSM programs led us to a very useful web site, with some very interesting detailed published
results on NEBs (Non-Energy Benefits).
Among other useful information at the SERA site and their many references was a listing of
the many types of benefits mentioned by we ten responders (and others). SERA has grouped these
into three main categories: 1) Utility/ratepayer (debt collection, power quality, low-income subsidy,
etc); 2) Societal (including jobs, environment, emissions, health, etc; and 3) Participant (payments,
collection, health, comfort, maintenance, water, etc). For each, based on extensive research and
evaluation throughout the world under contract to groups like the California Energy Commission
and NYSERDA, SERA has data on both costs and benefits for all of these Non-Energy Benefits
(NEBS). I now feel confident, thanks to this SWEEP lead, that the NEBs data that Colorado needs
to do a good job is already available in Colorado
There is also reference in the SWEEP submission to a valuable several-year old SWEEP
study on a representative group of utilities (including Xcel-MN) already engaged in gas DSM. We
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
believe much can be learned from delving in detail into these lessons and comparisons (which vary
all over the place in size and apparent effectiveness).
SWEEP has provided a useful example of a stepped form of bonus payment. We note that a
continuous (which we prefer) form of the same is exactly one-third of the excess expenditures up to
the 20% maximum bonus when expenditures are 60% larger than the agreed-upon minimum (which
we would hope is well above the floor of previous year’s gross revenue). This continuous version of
the SWEEP proposal is “Bonus1” in the graph below. One way to encourage even larger
expenditures is to have a term such as {20 – 300/X} above the 60% point and to change the initial
Bonus 2 slope from one-third to one-fourth. If we wanted further to discourage using the floor as a
standard, we could establish a new initial slope of (for example) one-tenth, then a region of one-third
slope, and then a final region of continuously declining slope as shown below.
25
20
15 Bonus 1
Bonus 2
10 Bonus 3
5
0
0 50 100 150 200 250
The point is not that any of these three bonus approaches is more correct than another, but rather that
many easily computed bonus arrangements are possible.
SERA has also addressed the issue of most appropriate means of incenting utilities – such as basing
on expenditures (above), accomplishments, milestones, and retention. RUC liked this summary
partial sentence from one very helpful SERA 2005 conference paper: “….the best basic concept
may be expenditure-based awards requiring that either energy savings or progress milestones 4
be established and achieved in order to be eligible for the award. [Comparing Award
Mechanisms - What Works? (2005 IEPEC Conference Paper, Brooklyn, NY) Lisa A. Skumatz,
Ph.D., Skumatz Economic Research Associates, Superior, CO; Charles Bicknell, Skumatz
Economic Research Associates, Superior, CO]. Thus, the SWEEP-initiated figure above would be a
maximum, dependent on something more being demonstrated through evaluation. We guess that
SWEEP would concur.
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Before the Public Utilities Commission of the State of Colorado
Decision No. Error! Reference source not found. DOCKET NO. 07I-251G
Last Comment A final thought following from August 9 discussions with Dr. Lisa Skumatz,
President of SERA (but my thought, not hers) is that a most efficient means of helping all of the
Colorado gas utilities and their customers is to have SERA (or a similar firm – after bidding
competitively) serve as a third-party independent consultant to some combination of the
Commission, the OCC, and possibly the Governors Energy Office, rather than to one or more
utilities. I found huge competency here, with her easily answering all of my many questions about
all aspects of these new-to-Colorado topics of benefit and award computations. This consultancy
would not preclude any utility from proposing anything they wished. But all, including the
Commission and interveners, would know the experience at dozens of other utilities, and the
rationales for specifying a dollar cost and benefit for a proposed DSM/EE program. I think it likely
such a consultancy would be a least-cost, least-controversial approach.
Respectfully submitted 10 August, 2007 for the RUC Board by:
Ronal W. Larson; rongretlarson@comcast.net
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