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                                                                                 ORIGINAL
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             1           BEFORE T H E                        C S E R V I C E COMMISSION
             2
                 I N T H E MATTER OF A - N O T I C E   )        DOCKET NO. 06-004-R
             3   OF I N Q U I R Y REGARDING A          1
                 RULEMAKINC FOR D E V E L O P I N G    1        H E A R I N G PURSUANT TO
             4   AND I M P L E M E N T I N G ENERGY    j
                 EFFICIENCY PROGRAMS                   1             ORDER NO. -10
             5
             6
             7
             8   BEFORE THE     COMMISSION:
             9                     SANDRA 1. HOCHSTETTER, Chairman
                                   DARYL E . BASSETT, Commissioner
            10                     RANDY BYNUM, C o m m i s s i o n e r
            11
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                           THE ABOVE-STYLED          MATTER was r e p o r t e d by
            22         Michael Nelson, C e r t i f i e d C o u r t Re orter
            23
                                                                         7
                       No. 4 2 6 , t a k e n a t the A r k a n s a s Pub i c S e r v i c e
                       Commission,                   Room N o . 1, 1000 C e n t e r          8
                                                "&
                       S t r e e t , L i t t iieari , A r k a n s a s , commencing on
                                             l e Roc


s
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                       t h e 1 3 t h day o f December, 2006, at 9:30 a.m.



                                        Buskman C o u r t R e p o r t i n g
                                                                                             Q
                                                501.372.5115
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 1                               A P P E A R A N C E S
 2   FOR ARKANSAS E L E C T R I C ENERGY CONSUMERS, INC. AND
         ARKANSAS GAS CONSUMERS, I N C . :
 3
            BRIAN C . DONAHUE, A t t o r n e y a t L a w
 4          A r k a n s a s E l e c t r i c Energy C o n s u m e r s , I n c .
            A r k a n s a s Gas Consumers, I n c .
 5          3 2 3 C e n t e r S t r e e t , S u i t e 1230
            L i t t l e R o c k , Arkansas 7 2 2 0 1
 6
     FOR THE     ARKANSAS ATTORNEY GENERAL:
 7
            SARAH R . T A C K E R , A s s i s t a n t A t t o r n e y G e n e r a l
 8          O f f i c e of the A t t o r n e y G e n e r a l
            3 2 3 C e n t e r S t r e e t , S u i t e 200
 9          L i t t 7 e Rock, Arkansas 7 2 2 0 1
10   FOR ENTERGY ARKANSAS:
11          TUCKER RANEY, A t t o r n e y a t Law
            E n t e r g y Services , Inc.
12          P . O . Box 5 5 1
            L i t t l e R o c k , Arkansas 7 2 2 0 3
13
     FOR SWEPCO:
14
            D A V I D R . MATTHEWS, A t t o r n e y at Law
15          M a t t h e w s , Campbell, Rkoads, M c C l u r e ,
               T h o m p s o n and F r y a u f
16          119 S o u t h Second S t r e e t
            Rogers, Arkansas 72756
17
     FOR OKLAHOMA GAS AND ELECTRIC AND E M P I R E DISTRICT
18       ELECTRIC COMPANY:
19          LAWRENCE E. CHISENHALL, J R . , A t t o r n e y a t Law
            C h i s e n h a l l , Nestrud & Julian, P . A .
20          4 0 0 West C a p i t o l Avenue, S u i t e 2 8 4 0
            L i t t l e Rock, A r k a n s a s 7 2 2 0 1 - 3 4 6 7
21
     FOR   ARKANSAS E L E C T R I C COOPERATIVE CORP. AND ELECTRIC
22         COOPERATIVES:
23          STEPHEN P. WILLIAMS, A t t o r n e y at law
            Arkansas E l e c t r i c C o o p e r a t i v e C o r p o r a t i o n
24          1 C o o p e r a t i v e Way
            P . O . Box 194208
25          L i t t l e Rock, Arkansas 72219-4208

                                Buskman      Court R e p o r t i n g
                                        501.372.1125
                                                                                  3

                      ____   __

 1                                A P P E A R A N C E S
 2   FOR CENTERPOINT ENERGY:
 3          MICKEY S . MOON, A t t o r n e y at       Law
            Centerpoi n t Entergy
 4          P . O . Box 7 5 1
            l i t t l e Rock, A r k a n s a s 72203
 5
     FOR ARKANSAS WESTERN GAS:
 6
            JEFFREY L. DAMCEAU, A t t o r n e y at L a w
 7          P . O . Box 1 4 0 8
            Fayetteville, Arkansas 7 2 7 0 1 - 1 4 0 8
 8
     FOR ARKANSAS OKLAHOMA GAS CORPORATION:
 9
            S T E P H A N I E J . SELF, A t t o r n e y a t Law
10          P . O . Box 17004
            F o r t S m i t h , A r k a n s a s 72917-7004
11
     FOR NUCOR STEEL-ARKANSAS AND NUCOR-YAMATO S T E E L :
12
           MICHAEL 0 . PARKER, A t t o r n e y at Law
13         D o v e r Dixon H o r n e , PLLC
           4 2 5 West C a p i t o l A v e n u e , S u i t e 3700
14         l i t t l e R o c k , A r k a n s a s 72201-3465
15   FOR ARKANSAS COMMUNITY A C T I O N A G E N C I E S A S S N . ,       INC":
16         JERROLD O P P E N H E I M , A t t o r n e y a t Law
           5 7 Middle S t r e e t
17         C l o u c e s t e r , M a s s a c h u s e t s 01930
18   FOR WAL-MART:
19         A 1 ECKERT, A t t o r n e y A t L a w
           Q u a t t l e b a u m , Grooms, Tu71 & B u r r o w , P L L C
20         1 1 C e n t e r S t r e e t , S u i t e 1900
             1
           L j t t l e Rock, A r k a n s a s 7 2 2 0 1
21
     FOR THE PSC GENERAL STAFF:
22
           SUSAN E. D'AUTEUIL, A t t o r n e y at Law
23         LORI BURROWS, Attorney a t L a w
           A r k a n s a s Public S e r v i c e Commission
24         1000 C e n t e r S t r e e t
           L i t t l e Rock, A r k a n s a s 7 2 2 0 1
25

                              Bushman Court R e p o r t i n g
                                     SU1.372.5115
                                                                      4



1
2    OPENING STATEMENTS BY:
3          AEEC, w a i v e d
           AC, x
4          E n t e r z y , waived
           SWEPC , w a i v e d
 5         OC&E a n d Empi r e , waived
           AECC/Co-ops, w a i v e d
 6         Centerpoint, x
           AWG, x
 7         AOG, w a i v e d
           N u c o r , waived
8          ACAA, x
           Wal -Mart, w a i v e d
 9         PSC G e n e r a l S t a f f , w a i v e d
10           WITNESSES                                 D          C   COURT

11
     F o r AEEC/ACC:
12
            No L i v e Testimony
13          (Prefiled Comments p . x t h r u p .           X)

14   F o r t h e AC:
15          No l i v e T e s t i m o n y
            ( P r e f i l e d Comments p . x t h r u p . x)
16
     F o r Entergy Arkansas:
17
            No L i v e T e s t i m o n y
18          (Prefiled Comments p . x t h r u p . x)
19   For SWEPCO:
20          No L i v e T e s t i m o n y
            (Prefiled C o m m e n t s p . x t h r u p . x>
21
     F o r OC&E and Empire:
22
            No L i v e T e s t i m o n y
23          ( P r e f i l e d Comments p . x t h r u p . x)
24
25

                                Bushman Court R e p o r t i n g
                                           501.372.5215
                                                                         5



 1             WITNESSES                                0            C   COURT

 2
     F o r AECC a n d C o o p e r a t i v e s :
 3
             No Live Testimony
 4           (Prefiled Comments p . x t h r u p . x)
 5   For C e n t e r p o i n t :
 6           No L i v e T e s t i m o n y
             ( P r e f i l e d Comments p , x t h r u p . x>
 7
     Fo r AWC :
 8
             No L i v e T e s t i m o n y
 9           (Prefiled Comments p . x t h r u p . x)
10   F o r AOC :
11           No L i v e T e s t i m o n y
             (Prefiled Comments p . x t h r u p . x)
12
     F o r ACAA:
13
             No L i v e Testimony
14           (Prefiled Comments p . x t h r u p .            X)

15   F o r PSC G e n e r a l S t a f f :
16           No L i v e T e s t i m o n y
             ( P r e f i l e d Comments p . x t h r u p . x )
17
18   REPORTER'S        CERTIFICATE, page x
19
20
21
22
23
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                                   Bushman Court R e p o r t i n g
                                        501.372.5115
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 1                       E X H I B I T S
 2       EXHIBI' S                  ID'd   Offered   Rec'd
 3   None.
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                     Bushman Court Reporting
                          501.372.5125
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 1                                PROCEEDINGS
 2
 3                   CHAIRMAN HOCHSTETTER:                  Good m o r n i n g .      This
 4   h e a r i n g w i l l come t o o r d e r .
 5                   B e f o r e t h e Commission t o d a y i s D o c k e t
 6   No. 06-004-R w h i c h i s styled i n t h e m a t t e r o f a n o t i c e of
 7   in q u i r y r e g a r d ? ng a r u l emaki ng f o r d e v e l o g i n g a n d
      1



 8   implementing energy e f f i c i e n c y programs.
 9                   T h i s h e a r i n g was s c h e d u l e d by O r d e r No. 10
10   i s s u e d i n t h i s d o c k e t on September t h e 5 t h , 2006.
11                   For t h e record,          will t h e c o u n s e l p l e a s e s t a t e
12   t h e i r a p p e a r a n c e s b e g i n n i n g w i t h AEEC and A C C .
13                   M R . DONAHUE:         Madam C h a i r m a n , my name i s B r i a n
14   Donahue.        I'm r e p r e s e n t i ng A r k a n s a s E l e c t r i c E n e r g y
15   Consumers and Arkansas Gas Consumers i n t h i s m a t t e r .
16                   C H A I R M A N HOCHSTETTER:          Thank you.           Attorney
17   General's office.
18                   M S . TACKER:         S a r a h Tacker on behalf o f t h e
19   Attorney General.
20                   CHAIRMAN HOCHSTETTER:                 Th nk y o u .        Entergy
21   Arkansas
22                   MS. RANEY:          T u c k e r Raney on b e h a l f o f E n t e r g y
23   Arkansas.
24                   CHAIRMAN HOCHSTETTER:                 Thank you.           SWEPCO.
25                   MR. MATTHEWS:            D a v i d M a t t h e w s f o r SWEPCO.

                                Bushman C u u r t Reporting
                                         501,372.5115
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 1                   CHAIRMAN HOCHSTETTER:                Thank you.          OC&E and
 2   Empi r e .
 3                   MR.    CHISENHALL:         Larry Chisenhall f o r both,
 4   Madam Chai rrnan.
 5                   CHAIRMAN HOCHSTETTER:                Thank you.          AECC a n d t h e
 6   D i s t r i b u t i o n Co-ops.
 7                   MR.    WILLIAMS:        S t e v e Williams f o r b o t h , Madam
 8   C h a i rman.
 9                   CHAIRMAN HOCHSTETTER:                Thank you.          Centerpoint
10   Energy.
11                   M R . MOON:       Mickey Moon on b e h a l f o f
12   Centerpoint.
13                   CHAIRMAN HOCHSTETTER:                Thank y o u .       Arkansas
14   Western G a s .
15                   MR. DAMGEAU:          Jeff Dangeau r e p r e s e n t i n g
16   A r k a n s a s Western Gas.
17                   CHAIRMAN HOCHSTETTER:                Thank y o u .       Arkansas
18   O k l a h o m a Gas.
19                   M S . SELF:       S t e p h a n i e S e l f f o r AOG.
20                   CHAIRMAN HOCHSTETTER:               Thank you.           Nucor.
21                   MR.    PARKER:       Michael P a r k e r representing
22   Nucor-Yamato S t e e l Company and N u c o r S t e e l - A r k a n s a s .
23                   CHAIRMAN HOCHSTETTER:               Thank you.           Wal-Mart.
24                   MR.    ECKERT:      A1 E c k e r t on b e h a l f of hlal-Mart
25   Stores,

                                Bushman C o u r t Reporting
                                     501.372.5115
                                                                                             9



 1                      CHAIRMAN HOCHSTETTER:                Arkansas Community
 2   A c t i o n Agencies.
 3                  -   MR. OPPENHEIM:            J e r r o l d Oppenheim f o r ACAA.
 4                      CHAIRMAN HOCHSTETTER:                Thank y o u .        And G e n e r a l
 5   Staff.
 6                      MS.   D'AUTEUIL:         Madam C h a i r m a n , Susan D ' A u t e u i l
 7   and L o r i Burrows f o r t h e General S t a f f o f t h e Arkansas
 8   P u b l i c S e r v i c e Commission.
 9                      C H A I R M A N HOCHSTETTER:         Thank you.           A l l right.
10                      The scope o f t h i s h e a r i n g encompasses t h e
11   p r o p o s e d r u l e s f o r c o n s e r v a t i o n and e n e r g y e f f i c i e n c y
12   programs w h i c h a r e a t t a c k e d t o O r d e r No.            11 a n d w e r e
13   i s s u e d on November 6 t h , 2006, as w e l l as t h e i n i t i a l a n d
14   r e p l y comments f i l e d on November 21st, 2006, and
15   December S t h , 2 0 0 6 , i n r e s p o n s e t o t h e p r o p o s e d r u l e s .
16                      A l l p a r t i e s have w a i v e d q u e s t i o n i n g o f a l l t h e
17   sponsoring w i t n e s s e s .         A c c o r d i n g l y , a l l the s p o n s o r i n g
18   w i t n e s s e s have been excused and w i l l n o t a p p e a r t o d a y .
19                      Counsel f o r each p a r t y w i l l be r e q u i r e d t o
20   t e n d e r t o t h e c o u r t r e p o r t e r a copy o f h i s o r h e r
21   c l i e n t s ' p r e f i l e d November Zlst, 2 0 0 6 , i n i t i a l comments
22   and t h e December 5 t h , 2 0 0 6 , r e p l y comments f o r i n c l u s i o n
23   i n the o f f i c i a l h e a r i n g t r a n s c r i p t .
24                      Opening s t a t e m e n t s by t h e p a r t i e s s h a l l be
25   l i m i t e d t o a maximum         of f i v e m i n u t e s .

                                   Buskman C o u r t R e p o r t i n g
                                           501.372.5Z15
                                                                                           10

                      ..   .



                     Counsel s h a l l t e n d e r the3 r c l i e n t s p r e f i 1 e d
     i n i t i a l and r e p l y comments f o r i n c l u s i o n i n t h e h e a r i n g
     t r a n s c r i p t as t h e y a r e c a l l e d f o r w a r d t o make t h e i r
     o p e n i n g statements.
                     P u b l i c comments w i l l f o l l o w o p e n i n g s t a t e m e n t s
     as i s t h e Cornmission's custom.
 7                   A r e t h e r e any m o t j o n s o r p r o c e d u r a l m a t t e r s
 8   t h a t need t o be a d d r e s s e d a t t h i s t i m e beyond those t h a t
 9   I've m e n t i o n e d ?        A l l right.      M r . Donahue.        Yes, s i r ?
10                   MR.        DONAHUE:       T h e r e have been t o my c o u n t f o u r
11   s e t s o f comments f i l e d i n t h i s p r o c e e d i n g .          I understand
12   t h e scope of t h i s h e a r i n g i s t h e p r o p o s e d r u l e s and t h e
13   comments a s s o c i a t e d w i t h it, b u t w e ' d a l s o l i k e t o e n s u r e
14   t h a t the i n i t i a l comments f i l e d i n March and t h e comments
15   i n r e s p o n s e t o O r d e r No. 6 a r e a l s o c o n s i d e r e d by t h e
16   Commission.               Is   it   necessary t o t e n d e r those t o t h e c o u r t
17   reporter?
18                   C H A I R M A N HOCHSTETTER:            It's n o t .      It's t h e
19   Commission's p r a c t i c e t o t a k e j u d i c i a l n o t i c e o f a l l
20   t h i n g s p e r t i n e n t t o a p r o c e e d i n g , so we w i l l t a k e
21   j u d i c i a l n o t i c e o f a l l t h e comments t h a t have been f i l e d
22   i n t h i s d o c k e t i n a d d i t i o n t o t h e t r a n s c r i p t o f the
23   w o r k s h o p we had i n F e b r u a r y so t h a t a l l t h o s e m a t t e r s
24   w i l l be b e f o r e u s as we c o n s i d e r t h e r u l e s .
25                  MR. DONAHUE:               T h a n k y o u , Madam C h a i r m a n .

                                    Bushman C o u r t R e p o r t i n g
                                         502.372.5115
 1                 CHAIRMAN HOCHSTETTER:             Thank y o u .        All right.
 2   M r . Donahue, you can s t a n d back u p , I g u e s s , and come
 3   f o r w a r d a n d make y o u r o p e n i n g statement and t e n d e r y o u r
 4   comments.
 5                 M R . DONAHUE:      Arkansas E l e c t r i c E n e r g y
 6   Consumers and Arkansas Gas Consumers w a i v e o p e n i n g
 7   statement.       And t h e i n i t i a l and r e p l y comments.
 8                 CHAIRMAN HOCHSTETTER:             Okay.         T h a n k you v e r y
 9   much.    They will be a d m i t t e d i n t h e r e c o r d .
10   (WHEREUPON,      t h e prefiled comments o f AEEC and ACC was
11   e n t e r e d i n t o the record as follows.)
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                             Bushman C o u r t R e p o r t i n g
                                  501.372.5115
            BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION
                                                                          _ ,8’:       ’   -’?$
                                                                                                  $
                                                                                                      12
                                                                                   .
                                                                                       -   I

IN THE MATTER OF A NOTICE OF                  )                               ,        “.
                                                                                        .u        b
INQUIRY REGARDING A                           1
RULEMAKING FOR DEVELOPING                     )              DOCWT NO. 06-004-R
AND IMPLEMENTING ENERGY                       1    .
EFFICIENCY P R O G W S                        1

 IMTXAL COMMENTS OF ARKANSAS ELECTRIC ENERGY CONSUMERS,
INC., AND-ARKANSASGAS CONSUMERS, INC., O N PROPOSED RULES FOR
        CONSERVATION AND ENERGY EFFICIENCY PROGRAMS

          The Arkansas Electric Energy Consumers, Inc. (AEEC) and Arkansas Gas

Consumers, Inc., (AGC) respectfully submit their Initial Comments on the hkansas

Public Service Commission’s (“APSC” or “Commission”) Proposed Rules For

Conservation and Energy Efficiency Programs pursuant to Order No. 11 in this

proceeding.

PART 1.          INTRODUCTION

          Moderator Richard Sedano compiled and submitted a Report on ”A Collaborative

Stakeholder Process Addressing Energy Efficiency in Arkansas’’ to the APSC on

November 2,2006. Mr. Sedano also submitted proposed Rules for Conservation and

Energy Efficiency Programs. Those documents will be referenced as the “Report” and

“Guidelines”

          The Commission accepted the Report and adopted Mr. Sedano’sproposed

Guidelines with modifications in Order No. 11. The Commission’s revised set of

proposed Consemation and Energy Efficiency Rules wiIl be referenced as the “proposed

Rules”.

          Part I1 of these Comments will address severd problems associated with the

Collaborative Report. Part In of these Comments wiII address specific problems
associated with the Commission's proposed Rules. Part TV of these Comments will

suggest how the Commission should proceed from this point.

       AEEC / AGC recognize that numerous issues that are not immediately apparent

may be implicated by the proposed Rules. It is not possible to address all issues arising

from the proposed Rules in these Comments in the limited time availabIe under the

CoFTLITLission's rushed procedural schedule. Therefore, AEEC / AGC hereby reseme the

right to address in their Reply Comments, any issue raised by another party whether or

not AEEC / AGC originally raised it herein.

PART TI.       THE COMMISSION SHOULD REJECT THE COLLABORATXVE
               REPORT AND PROPOSED RULES

       The Report does not reflect, in any significant way however, the position of large

industrial consumers of electricity and natural gas i this state. AEEC / AGC have
                                                     n

consistently opposed implementation of any ratepayer financed energy efficiency or

demand side management (WSM') programs until such time as the Commission has

implemented appropriate cost based, time sensitive rates and eliminated any interclass

subsidies. See the Initial Comments of AEEC I AGC dated March 24,2006 AEEC /

AGC addressed these and other issues throughout the collaborative process.

       Despite AEEC / A x ' s efforts, the Report and Guidelines reflected few of these

concerns. Instead, Ms.Sedano continued the Commission's rush to implement

indiscriminate ratepayer financed DSM programs. Regularly, during the collaborative

meetings, if a party addressed an issue in terns that were not supportive of the goal of

implementing some DSM program or other at the earliest possible date, Mr. Sedano

deflected the question or comment or simply declined to w i t e the point down. Because it

omitted any serious discussion of industrid consumer concerns, the Commission should


                                             2
reject the Report, determine that it was not appropriate to implement any ratepayer

financed DSM programs on a rush basis, and reject Mr. Sedano's Guidelines.

       Further, at various times during the Coliaborative, various participants went to

amazing lengths to attempt to justify or camouflage a low income consumer

weatherization program as a lawful DSM program. Some Collaborative participants, at

one point, went so far as to suggest allowing the state's community action agencies to

administer a statewide weatherization program with the understanding that the program

would not be actively marketed to anyone other than the state's low income residents.

One supposes that these individuals reasoned that limiting information about DSM

programs to low income individuals and their professional advocates would sewe to

reserve the benefits of such programs to the state's low income population.

       AEEC / AGC note that the Commission is without authority to implement social

programs that would redistribute income among Arkansas ratepayers.' That issue was

conclusively resolved in Arkansas Gas Consumers, Ine., v. Arhznsas Public Service

Cummisssion, 354 Ark. 37, 118 S.W.3d 109 (2004). The Commission is also without

authority, under the state's constitution, to impIement any tax. All such issues would

require specific legislative authorization and should be left entirely to the General

Assembly. Therefore, the Commission is without authority to implement any

camouflaged low income consumer benefit program.

       In the end, AEEC I AGC do not support adoption of the proposed Rules. The
Commission has adopted an inherently unreasonable timehame for the development of

the proposed Rules and has exceeded its authority in an effort to establish social




                                              3
programs benefiting particular groups of ratepayers at the expense of all ratepayers. The

    Commission’s rush to act in this case has obscured its long history of consideration and

rejection of ratepayer financed DSM type programs.

PART 111.          COMMENTS O N SPECIFIC PROVISIONS OF THE PROPOSED
                   RULES

Proposed Rules Section 2: The Cornmiision’s Stated Goalsfor Energy Efficiency
Program are i namy cases ouiside the Commission’s authority.
             n

           In Section 2 of the proposed Rules, the Commission identified a number of ”goals

of the initiative” and indicated that utilities should:

           address what the balance should be among the following goals to be
           considered:

                  Energy savings. ..;
                  Long-term and permanent changes i behavior.. .;
                                                      n
              0   Permanent demand reduction;
                  Energy cost savings. ..;
                  Reliability enhancements J
                  Energy Security benefits;
                  Environmental benefits;
                  Economic deveIopment ...;
                  Increases in system-wide capacity;
              a   Accelerating the commercialization of advanced or emerging
                  technologies;
                  Improving affordability of energy for all customers;
              0   Implementing programs in an efficient manner; and
                  Any other criteria not Iisted above

           Throughout this proceeding the Commission has premised its authority to develop

DSM programs on the Energy Conservation Endorsement Act of 1977 C‘ECEA”). That

act    specifically authorized the Commission to establish energy conservation programs

that are found to benefit the state’s utiIities and their ratepayers and to encourage


1
  Industrial Consumers do not adopt the definition of “social program” used by some collaborative
participants, Le. a particular program is not a prohibited “social program” if it does not creafe a needs test
for eligibility.


                                                       4
development of alternative energy technologies. See ACA     4 23-3-402.   The ECEA does

not give the Commission authority to pursue reliability, energy security, environmental

benefits, economic development, improve affordability or anythmg else. As a result,

many of the possible goals the Commission has indicated could be served by a DSM

program are outside the scope of the Commission’s authority.

       The APSC is a creature of the Arkansas General Assembly. As such, its “power
and authority art limited to that w-hich the legislature conferred upon it.” See Arkansas

Gas Consumers, Inc., at 354 Ark. 49 and Arkansas County I, Desha Couny, 342 Ark.

I35,27 S.W.3d 379 (2000). The Commission does not have the legislative authority to

do most of the things it has identified as goals for a conservation program. Therefore, it

can not Iegitimately pursue those goals at ratepayer expense.

       The legitimate purpose of a DSM program is to encourage consumers to make the

most efficient possible use of utility capacity, or perhaps more importantly, to discourage

inefficient and wasteful use. The Commission’s authority does not include establishing

either broad social agendas or general public policy for the state of Arkansas. Those

things are not proper goals of the APSC’s utility regulation and should in any event be

stricken from Section 2 of the proposed Rules.

Proposed Rules Section 3: Defmitium Inchide Vague and Ambiguous Terms.

       Section 3 of the proposed Rules sets out a number of definitions associated with

the Commission’s concept of Energy Effciency Programs.

       A number of these definitions are unreasonably vague and ambiguous. For

example, a “Administrator” is defined as the entity responsible for creating and
          n

managing an energy efficiency portfolio. Elsewhere, Section 5 of the proposed RuIes




                                             5
provides in part that the “Administrator shall propose.. . programs, and specific

measures.’’ Section 6 of the proposed Rules states in part tha the “Administrator shall

present .. . calculations.. . and supporting testimony of the effect of the proposed

consewation and energy efficiency program.. .-* Each of these sections impIies that the

                whoever that party might be. has full responsibility, and authority to
-*Administrator”,

develop and seek approval for DSM programs. Then. we see Section 4 of the proposed

Rules which states that the Commission “may designate an administrator independent of

the utilities although the utility will ultimately retain responsibility for compliance with

these rules.”

        The term “administrator” taken in each section individuatly appears on its face to
be clear, but once the sections are viewed in conjunction, ambiguity and vagueness

appear. It is not clear from section to section who the “administrator” is or what the

administrator’s duties and authority will be. This lack of clarity makes the Proposed

Rules unreasonably vague.

       T h e Arkansas Supreme Court previously concluded that a law is

unconstitutionally vague when it does not give a person of ordinary intelligence fair

notice of what is prohibited. AP-lca~lsus
                                        Tobacco Comol Bd. v‘. Sitton, 357 Ark. 357, 166

S.W.3d 550 (2004)      It is logical then to conclude that an order. d e , or regulation issued

by an agency would be unconstitutionally vague and ambiguous if it does not give a

person of ordinary intelligence is not given fair notice of what is required in a given

situation. The proposed Rule fails this standard because it is not possible to say what and

“administrator’s rights and duties will be.




                                              6
Proposed Rules Section 3 and Section 5: The Deemed Suviplgs Coacept is not
Adequately Addressed.

       The proposed Rules describe "Deemed Savings'' as "a pre-determined, validated

estimate of energy and peak demand savings attributable to an energy efficiency

measure.. ." See Proposed Rules at Section 3, page 3. Despite this definition: the

proposed Rules do not establish any mechanism for determining what level of deemed

savings can be attributed to any particular measure. The only thing the proposed Rules

say on the subject can be found at Section 5: page 7 when the Commission indicates that

"[p]rogram plans may use any deemed savings estimates approved by the Commission."

Such imprecision would allow utilities to offer, and the Commission to approve, different

sets of Deemed Savings Ievels for each utility i the state. Further, the Commission
                                               n

provided no guidance as to Row any proposed deemed savings estimates can or should be

validated or who will conduct such senice.

       The Report suggests the development of a "Deemed Savings Manual for

Arkansas. Report at page 35. The proposed Rule however does not propose any

procedure for the development of such "Deemed Savings Manual". The proposed Rules

also do not indicate who would validate the values contained in a Manual, or how the due

process rights of parties would be protected throughout the Deemed Savings Manual

development process. Because none of these issues are addressed in the proposed Rules,

the proposed Rules are infirm.

Propused Rules Section 3 and 6: The C o M s w n ' proposed use o emf effectiveness
                                                s               f
tests are not combtent with ACA # 23-3405.

       The proposed Rules define a "cost-effective-' program as ;'one that has a high

probability of providing aggregate ratepayer benefits to the majority of utility customers."



                                             7
See proposed RuIes Section 3, at page 3, and Section 5 , at page 5 .              This definition is not

consistent with the plain language of ACA $23-3-405(a)(2) which states:

         After proper notice and hearings, the programs and measures may be
         approved and ordered into effect by the commission if it determines that
         they will be beneficid to the ratepayers of such public utilities and to the
         utilities themselves.

ACA 8 23-3-405(a)(2)(emp~is
                          added). The language of this section dearly requires

that any DSM program implemented be found to be beneficial to all of the implementing

utility's customers.* The Commission cannot legitimately implement programs that

might benefit ratepayers, or programs that will probably benefit some ratepayers at the

expense of other ratepayers. The Commission can only approve programs that y be
                                                                           i
                                                                           J

beneficial to the ratepayers and to the utilities themselves. If the General Assembly had

wanted to dlow the Commission to force some consumers to subsidize conservation

efforts by other consumers, it certainly would have said so. The legislature did not.

Therefore, the Commission cannot approve a program that forces one set of ratepayers to

subsidize another. Such result would not be consistent with the plain language of ACA 5

23-3-405(a) (2).

         As demonstrated above, the Commission can only approve a conservation

program under the ECEA if it benefits all ratepayers. Tbe Commission has, however,

indicated in Section 6 of the proposed Rules beginning at page 8, that it will rely on the

formulae found in the California Standard Practice Manual to determine whether a

program is cost effective. The Commission specifically identifies the Participant Test




* Section No. I of the Commission's current Promotional Practices Rules makes clear the Commission's
historic understanding that it may not force one ratepayer to subsidize anot!r~erwhen it states that Arkansas'
'' laws prohibit, with respect to rates and services, the granting of unreasonable preferences or advantages
to anyone. or subjecting anyone to unreasonabIe prejudice or disadvantage.''


                                                      8
                                                                                          28
CPT“),the Ratepayer Impact Test (WW),the Total Resource Cost Test (L;TRC”),and

the   Program Administrator Cost Test rPA’‘).

         ACA 0 23-3-405(a) (2) requires that there be no losers as the resuh of

implementation of a DSM program. The Commission should therefore disregard all of

the California Standard Practice tests except the Ratepayer Impact Test. OnIy the RIM

test objectively determines the impact of a DSM measure on all of a utility’s ratepayers.

T h e RIM test is the only creditable and objective way for the Commission to satisfy ACA

0 23-3-405(a) (2)’s requirement that programs and measures be beneficial to all of a
utility’s ratepayers. If a DSM program passes the RIM test, there are no losers. That is

not the case with the PC and TRC tests

         As commonly understood, the PC and TRC tests compare the costs and benefits

of a DSM progxam from the perspective of only the utility and the ratepayers that

participate in the program. These tests can probably best be understood by use of a

simplified example that shows how the tests can work in practice.

         In net present value terms, suppose a utility spends $3.00 to implement a

particular DSM program at Ratepayer A’s home and Ratepayer A will save $1 0.00 on his

electric bill because of the program. Suppose further that the savings to the utility (the

costs the utility avoids because it does not have to supply Ratepayer A with as much

electricity a before the DSM program) are $7.00. This DSM program would pass the
             s

TRC cost effectiveness test because the $7.00 in benefits to the utility is greater than the

utility’s direct project costs of $3.00. However, the utiIity’;’stotal costs are $13.00 ($3.00

for the DSM measure and $10.00 in decreased sales to Ratepayer A). Since the utility’s

savings (avoided costs) are $7.00, the utility is left with a $6.00 shortfalI ($13.00 in costs




                                              9
                                                                                                21
less $7.00 in savings). To get the $6.00, the utility would seek to raise the rates of

Ratepayers A, B and C by $2.00 each. The program also passes the PC test because the

participant' saves $10.00 on his electric bill while paying only an additional $2.00 in

higher rates.

         Proponents of h e PC and TRC tests would argue that the DSM program proposed

in the example should be implemented because the participant has benefited by $8.00 (the

difference between the customer's $1 0.00 in savings and the $2.00 in increased rates),

and "society"has benefited by $4.00 (the difference between the utility's $7.00 in savings

and $3.00 in direct program costs). They-would also contend that the $4.00 from

Ratepayers 3 and C that ended up in Ratepayer A's pocket is a "mere transfer payment"

that should be ignored. Proponents of these tests ignore the fact tJmt Customers B and C

received no benefit from the mandated DSM program but were forced to pay for it.

        If DSM programs are implemented using the PC and TRC tests, there will be

winners and losers, and they will be easy to identify. DSM program participants

(ironically, those individuals that had previously chosen not to make their own energy

efficient investments) will be the winners and the non-participants (or those that had

already made energy efficient investments) wilI be the losers. Non-participants wiIl have

higher electric bills so that program participants can have lower electric bills and valuable

improvements made to their property.

        One of the problems with this result is that there will almost certainly be more

losers than winners. Some fraction of the state's ratepayers wilI be eligible and choose to

participate in the DSM program. The majority of the utility's ratepayers will be


:
 The value to Ratepayer A of the improvements associate with the DSM program is intentionaIIy unstated
i order io simplify the example.
n


                                                  10
                                                                                             22
ineligible, will not make the effort to participate or have already implemented cost

effective and appropriate demand side measures without having required a subsidy to do

so. All ratepayers will have higher rates so that a few ratepayers can have lower bills.

This would violate ACA 5 23-3-405Ca) (2).

        Arkansas' industry, the State's job makers, will figure prominently- among the

losers. Most of the State's industries, having to compete in a global economy?are in a

never-ending quest to reduce production costs. Consequently, most have already

implemented cost-effective DSM measures on their own without the need for a state

program and subsidies. Since they will almost certainly be non-participants in any utility

or Commission DSM scheme the only thing they (and their customers) have to gain from

a DSM scheme predicated on either t h e PC or TRC test is higher rates and costs.

        Another way to look at the Commission's proposal to use any test other than the

RIM test for evaluation of resources is to realize that nonparticipating ratepayers

essentially would be taxed so that the money could be used to assist DSM program

participants. Regardless of whether one is in favor of the kind of weaIth redistribution

that is inherent in using the   other CaIifornia tests, it is clear that the proper forums for

consideration of these issues are elected legislative bodies, the Congress and the General

Assembly, not this Commission. The Commission's function is to fashion fair (just and

reasonable) cost based utility rates -- not to dictate social or environmental policies or

redistribute the wealth of Arkansans.

Rule Section 7: The Complpissiopl s cost recovery scheme is plot appropriate.
                                  '

       Section 7 of the proposed Rules allows utilities to recover costs of DSM programs

through a surcharge or rider at the utility's option to the extent the costs to be recovered




                                                 11
                                                                                          23
are 'the incrementa1 costs of providing the program that are not already included in the

then current rates of the utility." No authority exists in the ECEA for recovery of DSM

program costs by surcharge or rider outside of a general rate case.

        State law does not give the Commission the general authority to impose

surcharges on utility customers. This issue w-as addressed in detail in Arkansas G s
                                                                                  a

Consumers, Inc. v Arlcansas Public Sewice Commission, 354 Ark. 37; 118 S.W.3d I09

(2003). There the Arkansas Supreme Court stated:

        The Public Utility Code contains two statutes that deal with the PSC's
        authority to implement surcharges without filing a general rate case. ...

        In fact, the PSC's authority is nmouFly defined in the two surcharge
        statutes. An asbestos removal case, Arkansas OkIahoma Gas C0p.p. Y.
        Arkansas Public Service Comrnh, 301 Ark. 259,783 S.W.2d 350 (1990),,
        is a prime example of a proper surcharge and appears to be the only case
        decided by this court under 6 23-4-502. Asbestos removal was mandated
        by a federal regulation and related to existing facilities. The facts of
        Arkansas Okluhoma Gus Corp. clearly fit within the explicit parameters of
        4 23-4-502, and we held that the ensuing surcharge was appropriate.
        The whole focus of Act 3 IO of I98 I is to authorize surcharge authority in
        the PSC for increased costs relating to existing facilities caused by
        compliance with legislative or regulatory requirements. This is not onIy
        spelled out by the legislative intent of Act 3 10 codified i 4 23-4-501, but
                                                                    n
        also appears in the Act's Emergency CIause...

Arkansas Gas Consumers. Inc. v Arkansas Pubiic Service Commission, 354 Ark. at 52-

5 5 . The Commission should, therefore, eliminate any reference in Section 7 to allowing

the state's utilities to recover DSM costs outside a general. rate case.

        Legitimate DSM costs and investments should be treated no differently from any

other cost or investment that a utility seeks to recover in its rates. If a utility proves that

DSM costs and investments pass the traditional "pmdency" and "usedand useful" tests,

then those costs and investments should be reflected in the utility's rates. If the utility



                                               12
                                                                                      24
does not meet that burden, ratepayers should not bear the costs. As with traditional

suppIy side costs and investments, appropriately incurred fixed and variable DSM costs

should be reflected in fixed and variable rate components. Also, DSM costs should be

allocated to the appropriate customer class or classes for whose benefit the costs w-ere

incurred. Further, a utility‘sauthorized rate of return on DSM investments, as with all

utility investments, should be commensurate with the risks of the investment.

        The Commission shouId not abandon its traditional regulatory principles in the

blind hope that throwing ratepayer money at DSM will solve energy cost, scarcity,

poIIution or other problems. If DSM is being pursued for reasons other than because it is

the most   cost effective resource available, then the state or federal government should

arrange to finance those efforts using the government’s general revenues

Rule Section 8: The Commksioa Should Not Adopt any Quick Star / Pilot Program or
ComprehensiveProgram Filing Requirements at this Time.

        Section 8 of the proposed Rules requires the state’s utilities to submit appIications

for approval of certain types of programs that are “limited in nature“ no later than April

1,2007 with review to be completed no later than September I , 2007. The Commission

also instructed the state’s utiiities to choose their individual programs from a “general list

of Initid Program Categories” which the Commission provided. See proposed Rules,

Section 8 at page 1 1. Then beginning April 1,2009, each electric and gas utility will be

required to file a comprehensive set of DSM program plans w t the Commission. See
                                                           ih

proposed Rules, Section 8, page 13. These requirements are not appropriate at this time.

       The Commission should not require the state’s utilities begin to file ratepayer

funded DSM programs beginning in early 2007 because it has not yet taken the most

efficient and direct method availabk to encourage appropriate use of utility capacity.



                                             13
That is, the Commission has not implemented appropriate cost based time sensitive rates

for a11 utility customers in the state.

        Requiring implementation of cost-based, time sensitive rates ( both time-of-day

and seasonal) for all customer classes wouId clearly inform ratepayers that “on-peak”

consumption costs more than “off-peak“consumption. Implementing appropriate time

sensitive rates would encourage both conservation and strategic load growth more

effectively than would estabIishing indiscriminate DSM programs. The Commission

should not therefore, establish any blanket DSM program filing requirement until each

utility in the state implements rate scheddes which reflect appropriate “price signals” to

ratepayers.

      Y
PART J. GENERAL CONSIDERATIONS

Iproposiag Surcharges b pay fur the Commission ‘ DSMprograpns would constitute an
                       o                        s
illegal tax

       The Commission’s proposed Rule in this case would require the state’s ratepayers

to fund a state mandated program of education, energy audits, home weatherization,

heating and air conditioning inspection and tune up. lighting improvements, and

commercial and industrial process improvements and any other program for which a

utility might request approval. Ratepayers would be asked to pay for these programs

through a surcharge or rider.

       Unfortunately, the cost of the programs recovered from ratepayers would almost

certainly not be directly related to any service that any particular customer might receive.

Industrial consumers could never participate in a residential weatherization program.

Residential customers could not participate i an industrial process improvement
                                             n

program. Individuals who have already implemented their own conservation strategies,



                                             14
replaced their old inefficient lights with compact florescent lights, weatherized their own

homes, improved their own industrial processes, etc. would not benefit significantly from

further DSM efforts.

        'Ilus fact would turn the "surcharges" levied into the equivalent of taxes.

Collection of funds unrelated to services is a tax. See Tucker F H d t , 333 Ark 2 16 33

S.W.3dl10 {2000); CiEy of Lirbde Rock t' Cash, 277 Ark. 494,644S.W.2d 299 { 1983):

C i q o Little Rock v. Graham, 278 Ark 547,647 S.W. 2d 452 (1903).
       f

    Article 16 0 13 of the Arkansas Constitution provides:

    A n y citizen of any county, city or t o w n may institute suit: in behalf of
    himself and all others interested, to protect the inhabitants thereof against
    the enforcement of any illegal exactions whatever.

This self executing constitutional provision prohibits state or local governmental entities

from collecting unauthorized or illegal taxes or from paying public funds for

unauthorized or illegal purposes. See Harmick v Thome, 300 Ark. 502,780 S.W.2d 53 I

(1989); Martin v. Couey Chrysler Plymouth, he.? 308 Ark.325, 824 S.W.2d 832 (1992);

Pledger v. Feaihedite Precast Corp., 308 Ark. 124, 823 S.W.2d 852 (1 992).

        The Commission identified many possible goaIs for an energy efficiency program

in the proposed Rules. See proposed Rules, Section 2. Establishing any program in order

to provide energy security, reduce commodity-costs, reduce greenhouse gasses, or

otherwke are completely unrelated to the delivery of natural gas and electric senice to

Arkansas ratepayers. Because so many of the Commission's stated goals are divorced

from the delivery of utility services, charges to support them cannot properly be

considered to be part of a utility's legitimate rates. Rather, they would constitute a tax.
                                                                                 '      27
        The APSC has no taxing authority. "The power of taxation, whether by general

taxation or by locd assessment, is a legidative power that cannot be exercised in the

absence of stamby authority." R0bep.t D.Hobtoway. lac. v. Pine Ridge AddifionResidential

Properg Owners, 332 Ark. 450,455,966S.WZd 241,244 (1998). Further, the Legislature

can not delegate the power to tax to the Commission. Ark. Comt., AH. I1 J 23. City of

Harrison I Snyder, 21 7 Ark. 528,53 I , 23 1 S.W.2d 95.97 (1950).
          :

        AEEC I AGC recognize h a t some parties may argue that the Arkansas Supreme
Court's decision i Fern Austin
                  n              7
                                 1
                                 .   Centerhint Ener-0 Arkla. et al, - Ark,   -. -S.W.3d -,
2006 Ark. Lexis 83 (decided February 2,2004), means that a utility surcharge can never

be considered a tax. AEEC / AGC do not agree. The cases are distinguishable. Fern

Aus6ir1 involved a Commission low income gas customer service reconnection program in

which the low income customers remained obligated to pay for a11 of the services they

received from their gas suppIiers in full. They received no discounts or free services. On

the other hand, the DSM cost recovery surcharges at issue here would result from the

Commission's order that a DSM program administrator (whoever that might be) make

valuable improvements to private property at reduced or no cost to the property's owners.

Those improvements would, in the end, be paid for by ratepayers. Plainly there is a

difference in the programs.

       The Commission does not have the authority to expend public funds to make

valuable improvements to private property. Likewise, the Commission c a o t delegate

such authority to any DSM program administrator or be allowed to convert the state's

utilities into surrogate tax collectors to collect and expend ratepayer funds in that manner.




                                             16
Should the Commissim proceed with the proposed R d e s at this time?                 98
        In the mid 1990s the APSC determined in Docket 94-03 1-U that it was not

appropriate to implement any comprehensive DSM program i Arkansas. The basic
                                                        n

nature of the utility industry in this state has not changed since that time. In 1994,

Arkansas's electricity requirements were served by vertically integrated monopoly

utilities providing generation, transmission, and distribution service to Arkansas

residents. At the same time, Arkansas' natural gas requirements were served by local

distribution companies and natural gas pipelines (natural gas production was deregulated

at the federal level beginning in the 1970s). In 2006: although here have been some

changes at the wholesale level, Arkansas's electricity and naturd gas requirements are

served by essentidly the same utilities that served them in 1994.

       Inter-class rate subsidies have not been eliminated. Demand-related costs are still

not allocated or collected in the demand portion of rates. The state's utilities have not

unbundled their senices or provided nondiscriminatory transmission services, although

the gas utilities have made some progress. The Commission has not been provided with

new statutory authority authorizing it to establish and fund social programs. In short,

there has been no red change in the utility industn, justifying any material change in the

previously reached conchisions regarding DSM.

       The Commission has rushed this process unreasonably. It has apparently ignored

both its' prior precedent and'AEEC I AGC's arguments. The Commission's rush to

judgment has prevented it from reasonably considering anything which does not fit into

the apparently preconceived notion that rapid impkmentation of DSM programs is a

good thing for the state and its residents. The Commission shodd, therefore, take a time




                                             17
                                                                                    29
out from this process and decline to adopt the proposed Rules without a great deal of

additional scrutiny

PART V. CONCLUSIO3 AND RECOMMENDATIONS                            -



        Historically, the APSC has resisted the impulse to leap onto the DSM bandwagon.

This has prevented Arkansas‘ utility ratepayers from being dunned to support whatever

fad conservation program might appear attractive at the time. This restraint has, in

significant part, allowed Arkansas’ electric and gas rates to remain low.

       Implementing non-cost effective DSM programs would have substantial and long

lasting negative impact on Arkansas’ economy. In order to prevent these adverse

impacts, the Commission must focus on the proper purpose of utility regulation and

ensure that rates are properly designed to eliminate subsidies, and pass appropriate price

signals to consumers.

       The logical steps toward establishment of an efficient DSM regime are as follows:

I ) immediately implement cost-based, time-sensitive, unbundled tariff schedules; 2)

eliminate interclass rate subsidies; 3) immediate@ halt the shifting of capacity cost from

demand charges to kWh charge charges through implementation of massive energy cost

recovery rider rate increases; 4)implement an effective comprehensive resource planning

process; 5 ) provide nondiscriminatory cost-based electricity transmission service and / or

establish a meaningful dectricity buy-through service; and 6 ) if it becomes necessary

(after steps 1-5 are completed), the authorize carefully designed DSM programs for

which there is a proven economic need and which result in lower rates.

       Once utility rates have been properly structured and utilities provide reasonable

unbundled transmission service, and only then, may it be appropriate to explore




                                            18
                                                                                      30
implementing additional DSM options. including promotional practices of the sort

described in the proposed Rules. Such DSM programs should be carefully implemented

and monitored to ensure that they achieve their objectives. The Commission should not,

however, implement any DSM program until the need for such program and its benefits

have been proven and j ustified. Such need should be thoroughly documented by the

development of comprehensive utility resource plans which consider both suppIy side

and demand side alternatives.

       WHEREFORE, AEEC I AGC respectfully request that the Commission slow its

rush to judgment in this case and grant AEEC / AGC the reIief requested herein.


                                            Respectfully submitted,

                                            Arkansas Electric Energy Consumers, Inc.,
                                            and Arkansas Gas Consumers. Inc..



                                            Brian C. Donahue
                                            Arkansas Bar No. 91 I74
                                            Denise Baker
                                            Arkansas Bar No. 2002 195
                                            Tower Building, Suite 1230
                                            323 Center Street
                                            Little Rock, Arkansas 72201
                                            (50 1) 3 72-6900
                                            (501) 372-6922 (fax)
                                            bc&i-ixec-ag!c.org




                                          19
                              CERTIFICATE OF SERVICE                               31
       I, Brian C.Donahue, hereby certify that I have caused a copy of the forgoing to be
served via first class US.Mail, postage prepaid, on this 2 1ST day of November, 2006
upon the persons identified in the Commission’s Official S e n k e List maintained in t h s
proceeding.




                                            20
       BEFORE THE AIUWVSAS PUBLIC SERVICE COWMJS$€QN
                                                                                     3&
                                            ._ !,. i :                  c

                                              ;: .,u                I



IN THE MATTER OF A NOTICE OF 1
INQUIRY REGARDING A          1
RULEMAKING FOR DEVELOPING               DOCKET NO.06-004-R
AND IMPLERALENTING ENERGY    1
EFFICIENCY PROGRAMS          1

  REPLY COMMENTS OF ARKANSAS ELECTRIC ENERGY CONSUMERS,
INC., AND ARKANSAS GAS CONSUMERS, INC., ON PROPOSED RULES FOR
          CONSERVATION AND ENERGY EFFICIENCY PROGRAMS

        The Arkansas Electric Energy Consumers, Inc. (AEEC) and Arkansas Gas

Consumers, Inc., (AGC) respectfully submit their Reply Comments associated with the

Arkansas Public Service Commission’s (‘;APSC” or “Comission”) Proposed Rdes For

Conservation and Energy Efficiency Programs (“proposed Rules”) pursuant to Order No.

11 in this proceeding.

PART I.        INTRODUCTION

       AEEC / AGC have received and reviewed the Initial Comments of a number of

parties in this case. AEEC / AGC did not support adoption of the Commission’s

proposed Rules. SeveraI othergarties (e.g. Nucor and the General Staff) generally

supported adoption of the proposed Rdes with relatively limited modifications. Another

group o f parties (e.g. the Arkansas Attorney General (L‘AG’)? Community Action
                                                             the

Agencies (“CAAs”), and many utilities, including Arkansas Western Gas (“AWG“) and

Arkansas Oklahoma Gas Corporation (“AOG”)) sought wholesale revision of one sort or

another to the Proposed Rules.

       In the end, AEEC / AGC do not support adoption of the proposed Rules. The

Commission has adopted an inherently unreasonable timeframe for the development of

the proposed Rules and has exceeded its authority i an effort to establish social
                                                  n
                                                                                           33
programs benefiting particular groups of ratepayers at the expense of aIl ratepayers. The

Commission's rush to act in this case has obscured its long history of consideration and

rejection of blanket ratepayer financed DSM type programs.

         On several occasions, AEEC / AGC have identified the steps which h e

Commission should follow before it begins to consider implementing any general

ratepayer financed energy efficiency programs. The Commission, however, has not

                          n
addressed those comments i any rnemingful way, even though it continues down the

path towards implementing ratepayer financed energy efficiency programs at break neck

speed.

         If, as appears likely, the Commission is absolutely committed to implementing an

energy efficiency programs outside of a comprehensive resource planning docket and

without first ensuring that existing utility rates are appropriately cost based and time

sensitive and pass appropriate price signals through to all customer classes, then the

Commission should ensure that the costs of such programs do not exacerbate or increase

any existing interclass rate subsidies. The only way to do this is to ensure that the costs

of particular energy efficiency measures are only allocated to the members of the rate

class which is eligible to participate in them. This would prevent any customer class

from being forced to subsidize measures open only to the members of other rate classes

and would more appropriately follow principles of cost causation.

         Part II of these Reply Comments will address certain specific comments included

in the Initial Comments of a number of the parties. We note, however, that the parties to

this case have raised numerous complex issues. It has not, as a result of the scope and

complexity of these issues and the Commission's accelerated procedural schedule in this




                                             2
                                                                                           38
case, been possible for AEEC I AGC to address ever?; possible issue from every possible

angle. Therefore: silence by AEEC I AGC with regard to any partkular issue or my

party's comment should not be interpreted to mean that AEEC I AGC agree with such

position. In this case at least, silence is not consent. it is onIy silence.

PART 11.        RESPONSES TO CERTAIN COMMENTS BY THE PARTIES.

        A.      Restricting: "Ouick Start" Drograms to weatherization and education
                measures is not atmropriate.

        Arkansas Western Gas proposes to limit the "Quick Start" category programs to a

residential weatherization program and an educational program to be admhstered by the

Arkansas Energy Office. See AWG Initial Comments, Attachment B at Section 9, pages

13-14. This proposa1 is not appropriate for severa1 reasons.

        First, as conceived by the Commission, the "Quick Start" programs must be cost

effective. See generally, Proposed Rules Section 5      at page 5 .   The probIem with this is

that residentid weatherization programs are not likely to be cost effective or result in

significant efficiency benefits. Ms. Angie Klein with CenterPoint Energy Resources

confirmed this point during the Commission's February 21,2006 Workshop held in this

proceeding. She stated that a single industrkl efficiency improvement project codd

result in more energy savings than CenterPoint's "entire residential savings market," and

effective programs like those on the industrial side are required to balance ''low income"

residential type programs, which are not generally cost effective. See the Transcript of

the Workshop held in this   docket February 21 2006 at page 161.

       The CAAS' Initial Comments only reinforce AEEC IAGC's concerns. The

C M s ' Initial Comments analyze A WG's existing residentid weatherization program at

page 14. That analysis shows that AWG's residential weatherization program has a base


                                                3
    case Ratepayer Impact Measure (TIM‘‘) score of 0.74. That score is far below AWG’s

    REM estimate when the weatherization pilot program was approved. See, the Direct

    Testimony of Nice Wright dated November 29, 2005 in Docket 05-1 1 I-P at page 6 .

That testimony reflects AWG’s RIM calculation of 1.04 or I .I 2. If the actual Rim score

is only 0.74 as the C M ’ s indicate, then the Staffs concerns about the cost effectiveness

of the AWG program are ampiy borne out, and it is unlikely that any weatherization

program would satisfy any objective cost benefit test.’

           Including a “education” program to be conducted by the Arkansas Energy Office
                      n

as a “Quick Start” Energy Efficiency program is not appropriate for several reasons.

First, it is impossible to determine whether or not an education program is cost effective

or i fact provides any specific measurable ratepayer benefit. Ths problem appears to be
    n

insmountable in that the ECEA requires that any energy efficiency measure undertaken

benefit ratepayers. If it cannot be proven that an education program provides ratepayer

benefits, then the Commission cannot order a u i i y or its ratepayers to support it.
                                              tlt

          Second, an “education” program executed by a state agency is not identified in the

Energy Conservation Endorsement Act of 1977 (”ECEA”) as a type of energy efficiency

program upon which ratepayer money can be spent. The ECEA specifically allows the

Commission to

          propose, develop, solicit, approve, require, implement, and monitor
          measures by utility companies which cause the commnies to incur costs of
          service and investments which conserve as well as distribute electrical
          energy and existing supplies of natural gas, oil, and other fuels.

          ACA 0 23-3-405(a)(1) (emphasis added).

1
 AEEC / AGC recognize that the CAAs promote use of subjective societal benefits i the Commission’s
                                                                                      n
cost benefit analysis process. However. use of subjective elemen& would violate the Commission historic
practice of relying only on objective criteria for analysis of demand side programs. See APSC Docket No.
94- 19 1-P. Order No. 10 at page 6.


                                                   4
        ACA 9 23-4-207 specifically deals with advertising. That statute authorizes

utilities to advertise and the Commission to allow utilities to recover the cost of certain

types of "advertising" expenditures. Approved advertising does include hat which

"informs electric and gas consumers how they can conserve energy... reduce peak

demand for electric energy.. . [or] promote[s] more eficient use of energy .. . within this

state." ACA 23-4-207 (c) (1) and (2). However, t h e section does not authorize the

Commission to delegate any utiIity "advertising" function to a state agency or allow the

Commission to force ratepayers to support a state agency's educational activities.

       B. The Commission should delay approval of the proposed Rules and anv
          resulting e n e m effcienw roer ram.

       AOG argues on pages 8-9 of its Initial Comments that the "short tirnetabIe" that

the Commission has allotted for development of energy efficiency d e s and development

and implementation of quick start programs "negatively influenced the collaborative

process ... [and] urges the Commission to take a more measured approach". AEEC /

AGC share AOG's conclusion.

       The Commission has engaged in an unreasonabie and inadequately explained rush

to develop and implement energy efficiency programs for the state of Arkansas. The

Commission began this proceeding with the assumption that rapid implementation of

ratepayer financed energy eficiency programs is imperative. See Order No. 1. That

notice of inquiry sought input on issues associated with anergy efficiency programs.

However, despite an apparent adherence to the form of reasoned decision making, the




                                             5
                                                                                                  3?
Commission announced in Order No. 1 that "action regarding energy effxiency is

necessary.7:2

         In reality, the Commission has absohtely- abandoned the reality of reasoned

decision making in this case. After receiving comments in response to Order S o . 1 the

Commission announced that it was the "goal for this proceeding to culminate in the

adoption of rules or guidelines for the implementation of utiIity-sponsored conservation

and energy efficiency progrms". See Order No. 3 at page 1. The Commission has never

discussed the comments it received and has never made any factual findings based on

evidence in the record that implementation of ratepayer financed energy efficiency

programs was in the public interests. That failure violates ACA            8 23-2-421 (a)    which

requires issuance of detailed findings of fact supported by substantial evidence.

         The Commission's headlong rush to implement an energy-efficiency program

sooner rather than later ffies in the face of every one of the APSC's historic decisions

associated with the deveIopment of demand side programs. In the past, the Commission

has issued a number of decisions as to whether, and if so how, to implement energy

efficiency programs in Arkansas. UnfortunateIy in this case, the Commission has

abandoned any thought of consistency with its prior precedent. The Commission's

precedent includes the cases discussed below.

        APSC Docket No. 90-205-R:in 1990, the Commission concluded that its
Promotional Practice Rules had not kept pace with changing conditions in the electric and

gas utility industry and initiated Docket No. 90-205-R to consider revisions to account for




' If the Commission knew that adoption of energy efficiency programs was necessary even before soliciting
comments, what was the point of requesting comments?


                                                   6
                                                                                     38
changes in technology and conditions over time. See APSC Docket 90-205-R, Order No.

1 at page 2.

       The Commission identified a number of issues for special consideration in that

Docket, including:

            4. What special provisions, if any, should be made for promotional
           practices with regard to programs for low and moderate income
           consumers?
           5. What special provisions, is any should be made for promotional
           practices which encourage energy conservation, improved load factor,
           reductions in peak power demand, and efficient load management, as
           allowed in Ark. Code A.nn. 6 23-3-401 et seq?

           Docket 90-205-R Order 30. Appendix B, page 1.
                                    1,

After extensive proceedings, the Commission modified its Promotional Practice Rules.

Those amendments defined energy efficiency type programs as “promotional practices.--

See Promotional Practices Rules Section 2(g).

       As part of this docket, the Commission considered w-hether it should consider

“environmental externalities” as part of the demand side program evaluations. The

Commission expressly determined that it was not appropriate to consider “environmental

extedities” when evaluating demand side programs. The Commission stated:

           Environmental Externalities; The Commission has previously ruled
           that this proceeding is not the proper forum in which to consider
           environmental externalities (electromagnetic fields, emissions, land-
           use impacts, etc.) See Order No. 6 , supra. The attached proposed rules
           have been drafted consistent with this view.

           EnvironmentaI externalities may be raised and more appropriately
           considered in other Commission proceedings, Le., generic proceedings
           to address general environmental concerns associated with the
           provision of gas and or electric utility service; compIaint proceedings
           alleging specific environmentaI complaints against a specific utility
           company; integrated resource planning proceedings; or, proceedings in
           which jurisdictional utilities are seeking Commission Certificates of
           Convenience and Necessity (CCN) or Certificates of Environmental


                                            7
                                                                                 38
           Compatibility and Public ?ked (CECPN)authorizing the construction
           of new utility facilities.

           The proposed promotional practices rules and the Act, upon which the
           rules are significantly based, as well as integrated resource planning.
           have the same common goal - the most efficient use of energy
           resources. Tke exclusion of an evaluation of environmental
           externalities in the analysis of proposed promotional practices rules or
           a specific promotional practice does not result in the exclusion of such
           an evaluation in the regulatory arena. Rather, it leaves the evaluation
           of environmental externalities within more appropriate Commission
           proceedings. It should also be noted that many environmental issues
           are, in some instances, under the exclusive auspices of other state and
           federal agencies. This fact effectively precludes the correlation of
           APSC jurisdictional promotional practices issues with environmental
           issues regulated by other agencies.

           APSC Docket 90-205-R Order No. 12, pages 7-8.

       APSC Docket NO.94-031-U: On February 1, 1994: the Commission

established a docket to consider conservation and energy efficiency program standards

imposed by the Energy Policy Act of 1992 (”EPA 92”). The Commission complied with

EPA 92, but concluded (among other things) that:

          As a matter of policy, the Commission finds that the appropriate
          course for the regulation of electric and gas utilities at this time is to
          ensure that the senices provided are priced appropriateIy so that
          consumers of the services are provided with pricing information which
          will allow them to make economic choices on whether to conserve or
          cornme, and what energy source - regulated or unregulated - is most
          economic for them. As a result: it will be unnecessary for utilities and
          the Commission to make such decisions for consumers through
          regulatory-sanctioned conservation and DSM programs.

          Moreover, regulatory insistence that consumers change their behavior
          and then pay for the cost of the change through conservation or DSM
          programs strategically selected by utilities or mandated by regulators
          potentially adds economically unjustifiable costs and may diston the
          market in which energy sources are competing. E the frnal analysis,
                                                             n
          ratepayers, in the aggregate, are the losers. Thus, the Commission
          finds that the adoption of the standards is in codict with the purposes
          of PURPA to encourage equitable rates for electric and gas consumers



                                            8
           and optimize efficiency and, the adoption of the standard is
           unnecessary to encourage conservation.

           APSC Docket 94-03 1-U, Order No. 2 at pages 3-4.

       APSC Docket No,94-191-P: The Commission was asked during I994 to

consider a number of different DSM programs by Southwestern Electric Power Company

(‘iSWEPCO’’). SWEPCO proposed to cost justify these programs using a combination of

objective and subjective economic benefitkost tests including the Total Resource Cost

(‘;TRC”) Test, Participant Test, Societal Test, Utility Cost Test, and Ratepayer Impact

Measure ( T I M ) Test. After extensive proceedings, the Commission rejected

SWEPCO’s request to consider intangible subjective measures for justification of DSM

programs stating:

           The Commission reiterates its policy outlined in previous orders that
           promotional. practices must be justified using the objective criteria and,
           M e r , scrutinized to determine the effect on ratepayers and
           competing interests to assure that only programs which are i the
                                                                         n
           pubIic interest are approved.

           APSC Docket 94-191-P, Order No. 10 at page 6.

       APSC Docket No. 94-342-U: The Commission initiated Docket 94-342-U
October 5, 1994 to consider integrated resource pImning (YRP-’) and energy efficiency

investments i power generation and supply for electric utilities as required by the
            n

Energy Policy Act of 1992. In that docket, the Commission decided not to adopt the IRP

standard suggested by the Energy Policy Act of 1992. In its Order No. 4,the

Commission discussed the reasons it would not impose energy efficiency investments

standards. The Commission stated:

           The energy efficiency investments standard is better achieved through
           increasing competitive pressures on the u i i y rather than increasing
                                                    tlt
           regulatory pressures. The implementation of incentive or



                                             9
            performance-based regulation may be considered in the fume, as
            perhaps applicable during a transition to a competitive market
            industry. The standard should not be adopted now, but may be
            considered as one component of an evolving regulatory scheme at the
            appropriate time.

            In summary, the Commission finds that the competitive pressures on
            electric utilities i Arkansas are increasing in both the wholesale and
                                n
            retail markets... p ] h e Commission finds that energy efficiency
            investment will more efficiently be made through increased
            competitive pressure than increased regulatory incentive. However,
            the Commission wiII retain sufficient oversight capability to react to
            planned u i i y actions without adoption of either standard.
                      tlt

           APSC Docket 94-342-U, Order No. 4 at page 8.

        C. AprJrovalof aav ratepayer financed emerw efficiency program without a
           hearing would violate the ratepayers' due process rights.

        Entergy Arkansas proposes at pages 9 and 10 of its Initial Comments that the

Commission implement a "streamlined review-"process for "Quick Start" programs.

Interestingly, that "streamlined review" would not include a hearing on the program

unless the utility filed an application that was defective on its face. Entergy stated: "[i]f

the utility filing is prima facie in compliance with the requirements of this subsection, it

shdI be approved by the Commission without hearing." This proposal would violate the

fundarnentaI due process rights of utility ratepayers.

       Arkansas' utility ratepayers are entitled to due process under both the Arkansas

and United States Constitutions. See. Arkansas Public Service Commission v.

Continenfai Telephone Company, 262 Ark. 82 1, 56 I S.W.2d 645 (1978).

       The due process rights of A r b a s ratepayers are established in both the

Arkansas and U.S. Constitutions. The United States Constitution states i part in
                                                                       n

Amendment X I V : "nor shall any State deprive any person of life, liberty, or property,

without due process of law; nor deny to any person within its jurisdiction the equal



                                              10
protection of the laws.'' Amendment XW. US Constitution. Likewise, Article 2, Section

                                                 . .nor shall any person -.. be deprived of
8 of the Arkansas Constitution states in part: --.

life liberty or property, without due process of lam-." Plainly, in light of rhese provisions,

the APSC cannot impose upon ratepayers the costs of any energy efficiency program

without notice, an opportunity for discovery, an opporhmity to present witness testimony,

a right to cross examine opposing witnesses    and an evidentiary hearing before an

unbiased tribunal.

PART 111. CONCLUSION AYD RECOMMEK'DATIONS
        The Commission should not adopt the Proposed Rules in this proceeding because

it has not yet taken the most efficient and direct method available to encourage

appropriate use of utility capacity. That is, the Commission has not implemented

appropriate cost based, time sensitive rates for a11 utility customers in the state. it has

also to date failed to consider implementation of demand side programs as part of a

comprehensive utility resource planning process.

        Requiring impIementation of cost-based, time sensitive rates (both time-of-day

and seasonal) for all customer classes would clearly inform ratepayers that "on-peak"

consumption costs more than "off-peak" consumption. This would encourage both

energy conservation and smtegic Ioad growth more effectively than would establishing

indiscriminate energy eficiency programs. The Commission should not, therefore,

establish any blanket energy eficiency program filing requirement until each utility in

the state implements rate schedules which reflect appropriate "price signals" to

ratepayers.




                                              11
                                                                                      43
        The Commission has m h e d this process unreasonably. It has apparently ignored

both its prior precedent and any- comment so far in this case which did not support

immediate implementation of energy efficiency programs in this state. The

Commission’s rush to judgment has prevented it from reasonably considering anything

which does not fit into the apparently preconceived notion that rapid implementation of

DSM programs is a good thing for the state and its residents. T h e Commission should

therefore, take a time out from this process and decline to adopt the proposed Rules

without a great deal of additional scrutiny.

        Implementing non-cost effective energy efficiency programs outside the resource

planning process and without first getting rate signals right would have substantial and

long lasting negative impact on Arkansas’ economy. It is very likely that that is exactly

what will happen if the Commission adopts the proposed RuIes either wt or without any
                                                                     ih

of the parties’ suggested changes. In order to prevent these adverse impacts, the

Commission must focus on the proper purpose of utility regulation and ensure that rates

are propaIy designed to eliminate subsidies. and pass appropriate price signals to

consumers.

       The logical steps toward establishment of an efficient demand side management

regime are as foIlows: 1 ) immediately implement cost-based, time-sensitive, unbundled

tariff schedules; 2 ) eliminate interdass rate subsidies; 3) immediately halt the shfting of

capacity cost fiom demand charges to k w h charge charges through implementation of

massive energy cost recovery rider rate increases; 4) implement an effective

comprehensive resource planning process; 5 ) provide nondiscriminatory cost-based

electricity transmission service and / or establish a meaningful electricity buy-through



                                               12
                                                                                    41
sewice; and 6 ) if it becomes necessary (after steps 1-5 are completed), the authorize

carefully designed DSM programs for which there is a proven economic need and which

result in Iower rates.

        Once utility rates have been properly structured and utilities provide reasonable

unbundled transmission service, and only then, may it be appropriate to explore

implementing additional demand side options, including promotional practices of the sort

described in the proposed Rules. Demand side programs should be carefully

implemented and monitored as part of the utility resource planning process to ensure that

they achieve their objectives and that appropriate consideration of both demand and

supply side resources occurs. The Commission should not, however, implement any

demand side program until the need for such program and its benefits have been prow-en

and justified using objective measures.

       It appears likely that the Commission mi11 choose to implement one or more

energy efficiency program without first taking the steps identified above. AEEC i' AGC

do not concede that that result is appropriate. If the worst happens, however, then the

Commission should ensure that the costs of such programs do not exacerbate or increase

any existing interclass rate subsidies. The only way to do this is to ensure that the costs

of particular energy efficiency measures are only allocated to the members of the rate

class which is eIigibIe to participate in them. This would prevent any customer class

from being forced to subsidize measures open onIy to the members of other rate classes

and would more appropriately follow principles of cost causation.




                                             13
                                                                                  45
       WHEREFORE, AEEC AGC respectfull>-request that the Commission slow its

rush to judgment in this case, reject the proposed Rules and grant AEEC / AGC all other

appropriate relief as discussed above.


                                            Respectfully submitted,

                                            Arkansas Electric Energy Consumers, Inc.,
                                            and Arkansas Gas Consumers, Inc.!


                                            By: & C:
                                            Brian C.Donahue
                                            Arkansas Bar No. 91174
                                            Denise Baker
                                            Arkansas Bar No. 2002195
                                            323 Center Street Suite 1230
                                            Little Rock, Arkansas 7220 1
                                            (50 11 3 72-6900
                                            (501) 372-6922 (fax)


                             CERTIFICATE OF SERVICE

       I, Brian C.Donahue, hereby certify that I have caused a copy of the forgoing to be
served via hand delivery or first class U.S. Mail, postage prepaid, on this 5th day of
December, 2006 upon the persons identified in the Commission’s Official Sen;ice List
maintained in this proceeding.


                                            Brian C . Donahue




                                           14
                                                                            46



 1                 C H A I R M A N HOCHSTETTER:    A t t o r n e y General's
 2   office.
 3                 MS. TACKER:       Good morning, Madam C h a i r m a n .        I
 4   would l i k e t o move t h a t t h e i n i t i a l comments f i l e d on
 5   November 2 1 s t b y t h e A t t o r n e y General a n d t h e r e p l y
 6   comments f i l e d on December 5 t h b y t h e A t t o r n e y G e n e r a l b e
 7   admitted i n t o t h e record.
 8                 CHAIRMAN HOCHSTETTER:           They w i 11 be a d m i t t e d .
 9   (WHEREUPON,      t h e p refiled comments of t h e ATTORNEY GENERAL
10   was e n t e r e d i n t o t h e r e c o r d as follows.)
11
12
13
14
15
16
17
18
19
20
21
22
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                            Bushman Court R e p o r t i n g
                                   501.372.5llS
        BEFORE THE ARKANSAS PUBLIC SERVICE COM
                                                                     dfifl d oJO
                                                                           .          31 d8t   ’06

M THE M A T E R OF ANOTICE OF      1
INQUIRY REGARDING A RULEMAKING FOR 1                       DOCKET NO.06-004-R
DEVELOPING AND IMPLEMENTING        1
ENERGY EFFICIENCY PROGRAMS


    TNITXAL COMMENTS OF THE ATTORNEY GENER4L TO PROPOSED
                EI’WRGYEFFICIENCY GUIDELINES

       NOW comes the Consumer Utilities Rate Advocacy Division of the Arkansas

Attorney General’s Office (“AG”), which hereby submits its Initial Comments regarding

the Energy Efficiency Guidelines (“EEGs”), proposed by the Commission in Order No.

11 on November 6,2007.

GENERAL COMMENTS

       At the conciusion of all the collaborative meetings, the AG submitted a separate

Response to the filed Collabomtive Repoft (“AG Response”).’ It appears, unfortunately,
                                       <        .


that despite the concerns voiced in the AG Response, the proposed EEGS are following

the Collaborative Repart in ways that are not likely to implement energy efficiency

(“I%”) a substantive and cost-effective manner, or give ratepayers true value for my
     in

amounts they contribute towards EE in Arkansas.

       The approach encouraged by the EEGs appears to support a highly fractured EE

program design with an implementation approach that in no way, shape or form features

even the most basic foundations of economies of scale and scope. Our objection to the

proposed piece-meal, utility-by-utilityapproach throughout the collaborative process

reflects what we believe will work and not work given Arkansas’ very dispersed electric

                                               ‘. .
’ Filed November 3,2006.
                                           ,
and natural gas utility infrastructure,rudimentary c o n m e r EE awareness, diverse EE

markets, and modest economic conditions. The AG has advocated a thoughtful, strategic

approach, which focuses on key foundation or ‘‘buildingblock” programs and activities

that can be readily coordinated on a statewide basis, including an appropriate independent

administrative structure that supports well-designed cost-effective EE programs with long

lasting savings verified and measured through independent EMkV. The EEGs do not

appear to allow for this, except under the section entitled “StatewidePrograms,” on page

7. That section only allows for statewide coordination and implementation if the

Commission makes an affirmative determination that “such standardization [is] the most

cost-effective result and in the public interest.’’ This approach creates a presumption that

a statewide approach is not i the public interest -which in the AG’s view is entirely
                            n
inappropriate.

COMMENTS ON INDIVIDUAL SECTIONS OF THE EEGS

Section 2 Goals o Energy Eflcienqv Programs
        :       f

       The EEGs state that, “[wlhen proposi&%nyone or a combination of energy

efficiency programs, a utility should address .what the balance should be among the
                                         .   I   ’*.
following goals.. .” (EEGs, page 2Xemphasis added). They then list among the “gods”

both “Energy cost savings and cost-effectiveness”and “Implementingprograms in an

efficient manner.” There should not be any ‘%dancing”between those two goals on one

side and other h e f i t s listed. The Rules should mundute that all programs be

implemented “in an eficient manner’’ and that they are cost effective and result in energy

savings. These should be thresholdrequirements for all measures, programs and




                                                                                           2

                                                 ;   ;
                                                     ; ’ i .<
                                                            I   ‘
                                                                L.
                                                 .   . ’        ,
                                                                              ’   ’   49
portfolios of programs; only after the recommended measures, programs and portfolios

are shown to fulfill these requirements should any balancing take place.

Section 3: DeJnirions

       The EEGs define “Deemed Savings” as an estimate %at a utility may use instead
of energy and peak demand savings determined through measurement and verification

activities.” (EEGs, page 3). As stated elsewhere in these comments, the AG does not

accept that “Deemed Savings” should be used “instead of“actual verified savings.



Section 4: Administr&n     arid Ihplementdt’on o Energy Enciency Programs
                                                f

       The AG opposes the EEGs’ language that mandates the utilities to “propose and
be responsible for the administrationand implementation of‘ EE programs. As indicated

in our General Comments, the AG submits that it is critical that an independent

administrator control the design of EE activities and programs statewide. Under utility

out-sourcing (and under the “Independent Administrator,” as set forth i this section of
                                                                       n

the EEGs), the EE programs are generally designed by the rtfiliry p m g m administrators.

Via true third-party administration,an entity other than the utilities has final word over

EE program design.

       Furthermore, the AG cannot emphasize enough the absolute necessiq for

statewide coordination; no cost-effective EE endeavor can succeed without it. Therefore,

even if the Commission fails to require an independent third-party administrator (which is

crucial to my program likely to show real benefits), at least there must be (either i the
                                                                                    n

EEGs or by an Order of the Commission) a strict limit to the number and type of

programs statewide, in order to achieve sbtewide coordination.




                                                                                             3
Seciiorr 5: Porvdh and Program FiIhg Rqtiiremenb

       The EEGs state that every program, to be approved, must show B “high

probability of providing ratepayers’ benefits to the majority of ratepayers.” (EEGs, page

5). The AG would prefer that the language be more specific: “The program will not

cause the average ratepayer’s bill to increase.”     This has been the AG’s position
throughout the collaborative process. As noted in the Comments on the previous section,

the programs allowed should be limited and part of a coordinated statewide endeavor.

       Under the section “Deemed Savings Estimates,” (EEGs, page 7) the word “use” is

not defined. As noted above, the AG does not think that “deemed savings” should be

“used” as a substitute for actual measurement of savings. Some form of actual

measurement must be a part of any program.

       In the section “CustomerIncentives,” (EEGs, page 7) the first paragraph allows

possible incentives to participants in EE programs. The AG recommends adding the

following sentence at the end ofthe paragrabh: “Such incentives will be closely
                                        ,.   ,”!’,


scrutinized by the Commission.”

       As noted above, the section “Statewide Programs” (EEGs, p. 7) only allows for

statewide coordination and implementation if the Commission makes an affirmative

determination that %whstandardization [is) the most costeffective result and in the

public interest.” This approach creates a perverse presumption that a statewide approach

is not in the public interest. The AG strongly urges the Commission to require statewide

coordination, or - at the very least - statewide standardization. Abandoning statewide




                                                                                            4
                                                                                           51
coordination and implementation is certain to result in waste, gross inefficiencies,

counter-productive activities, and lost opportunities.

       In the section, “Program Filing P d w s and Schedules,” (EEGs, page S), the
first sentence states: “A program filed under these rules shall not be implemented until a

Commission order is issued expressly approving the proogram.” The AG recommends

adding the phase “after notice and hearing” to the end of that sentence. This follows

Ark. Code Ann. $23-3-405(a)(l), which states that EE programs and measures may only

be approved “[alfter proper notice and hearings,” wherein the Commission finds them to

be “beneficial.”

       The AG also has concerns about the requirement that there be a limit of 180 days

“ b m the filing date to the date of the commission order.” (EEGs, p. 8). There may be

circumstances in which such an inflexible time frame may not be i the public interest.
                                                                 n



Section 6: Benefit / Cost Tests

       The EEGs state that four tests set forth in the California Standard Practice Manual
(October 2001) should accompany any filing (EEGs, pages 8-91, without specifying

which test is the primary indicator of cost-ef&&veness, Consistent with the AG’s view

that ratepayer-bded energy efficiency should focus on programs that serve as resource

alternatives to supply-side options, this section should be modified to require that the

Total Resource Cost (TRC)test (EEGs Attachment A Table I page 10) be the p i a y
                                                                          rmr
                                                  .   I




indicator of cost-effectiveness.

       The section requires that all electric utilities m s “use an average measure life of
                                                         ut

ten years to evaluate a program or program prtfolio, or the actual measure lives far each



                                                                                             5
measure in a program.” Gas utilities, on the other hand, must %e an average measure

life offi,rteen years to evaluate a program or program portfolio, or the actual measure

lives for each measure in a program.” (EEGs, page $))(emphasisadded) The AG finds the

current language somewhat confusing. We rgcommend that it be modified to state that

the IOUs shall use the actual mawre lives far each measure in a program not to exceed

ten years for electric utility, and fifteen years for gas utility programs.

Section 7 Cost Recovery
        :

        This is the critical section for providing protections for ratepayers. The language

limiting recovery to “incremental costs of providing the (EE] program that are not

already included in the then current rates of the utility’’ @Gs, page 11) is necessary, but

it is not sufficient. There need to be other rkquirements i place to assure that ratepayers
                                                           n

only pay for efficiently-run programs that actually benefit them.

        Specificaliy, cost recovery should be allowed only subject to consistent statewide

standards and pursuant to consistent statewide mechanisms,set forth i the EEGs, or
                                                                    n
                                             1   ;   i:   ..
pursuant to Commission Order. The AG recbmmends that the EEGs state the following

regarding cost recovery from ratepayers:

    Rwovery should only be allowed a t r the fact, Le., after the program has been in
                                    fe
    place for some period of time;

    Recovery should only be allowed after the utility has shown that the expenditwes
    have resulted in cost effective energy and/ or demand (kW, kWh, therm) reductions,
    as evaluated by an independenf entity through established evaluation, measurement
    and verification (EM&V) procedures; and

    cost recovery should be allowed only for those costs ’associatedwith the actual
    implementation of the progrm(s), including administrativecosts, cost of m t r a s
                                                                               aeil
    andor labor, EM&V, etc. and should not include possible incidental costs of energy
    efficiency such as “lost revenues.”




                                                                                              6
                                                                                       53
       Indepeptdenr EM&V is essential to protect ratepayers’ interests. The AG strongly

opposes any plan that allows each utility to perform its own EM&V. Such an approach

cannot provide the reliability and assurance that are essential i a successful EE program.
                                                                n

It will also be more expensive than retaining one statewide independent evaluator. In

addition, it should be the Commission, or an independent entity, and not individual

utilities, which form a technical advisory committee of interested stakeholders to help

assist in the development of the EM&V plans. Finally, there must be some form of field

audit to audit the results of the programs.

       Many of the programs proposed by the utilities dwing the collaborative involve

some form of information, education or communicationcampaign. On these types of

programs or measures, the AG recommends that the EEGs specifically define and

establish the purpose and method of cost recovery of the three different types of public

information campaigns:

       (1) “Generic”nublic information (i.e., campaigns encouraging people and
companies in general to conserve, purchase more energy-efficient light bulbs or
appliances, build more energy-efkient home;, etc.) should not be allowed to be collected
f o utility ratepayers. This public service information should be provided by, and
 rm
funded by the Arkansas Energy Office, the ‘Governor’sOffice, the Commission,the AG
and other state government entities by means of public service announcements, speeches,
seminars, etc. If utility shareholders desire to fund such Campaigns, that should be
authorized, but it should not be recovered in rates;

        (2) Safetv , conservation and EE information that is utility-specificshould be
handled as it is now, i.e., costs which are solely related to safety, conservation and EE
infomation are allowed in base rates (pursuant to Ark. Code §23-4-207), but costs for
advertising, image-building or branding must be borne by shareholders. In either case,
these costs should not be included in any EE Rider or other cost-recovery mechanism.

        (3) Public information directly related to an enerm efficiency momam or measure
as long as the information is truly directly related to a program or measure, its costs
should be allowed as part of that program or measure, and collected in the same fashion.




                                                                                            7
Section 8: Program Plans

       The EEGs contain a list of “lnitial Program Categories” for purposes of the initial

filings of the utilities. (EEGs, page 12). &the fkstlitem, “Education,” the three-pronged

standard mentioned in the previous section for “infomtion” should be applied.

       As to the second item, “Energy Audits         ..,” these should be carefully scrutinized,
                                                     ,


The AG is concerned that audits should be directly linked to activities and programs that
will produce verified and swtained savings

       The AG has some c o n c about the item, “Lighting.” %nproved lighting”
                                ~

should be encouraged. However, with compact fluorescent bulbs becoming more and

more reasonably priced, it does not appear cost-effective to spend a great deal of

ratepayer money on high efficiency compact fluorescents Lamps (CFLs) unless used as a

”foot in the door” to encourage customers to also go after other costly and Mer-to-

achieve energy efficiency opportunities. . . .   I       . I




       Finally, the EEGs fail to list the one program that experience in other states has

shown is most likely to be cost-effective and easy to start quickly: retail point-of-sale

discounts for Energy Star and other energy efficient phg-load equipment and appliances.

There are a handful of market opportunities to influence consumer decision-makingon

energy-using equipment and measures; the most significant being (1) retail purchase of

off-the-shelf “plug and play” equipment and appliances (refrigerators, washerddryers,

dishwashers, room air conditioning units, lighting products (bulbs, lamps, and to a lesser

extent fixtures); (2) installation of energy using equipment and weatherization materials

(central air conditioners and furnaces, water heaters; insulation, windows, weather-

stripping); and (3) new construction (residential and commercid). Higher equipment and




                                                                                                   8
                                                                                                5s
appliance standards, while a key component in improving the efficient utilization of

energy, does in no way act as a substitute for retail point-of-saleprograms, with

salesperson training and consumer promotions, including cash incentives. Retail point of

sale is i fact one oftbe cornerstones of Califo&’s
         n                                                     often touted national to international

leadership in EE programs.

       Following the list of “Initial Program Categories,” the EEGs state: “Programs

filed by gas and electric utilities should consistent [sic] and should be fuel neutral.”

(EEGs, page 13). The guidelines should require more from utilities. The AG

recommends that the sentence should be reworded to state as follows: “Programs filed by

gas and electric utilities should be consistent and should be fuel neutral uitd

coordin nded   .”
Section 9: Annual Reporiing Requiremmls

        In this section, the EEGs require an mud report for all EE programs. It requires
that the report “present the results of the priscribed EM&V measures for each program.”

(EEGs, page 13). Because verifying actual savings is so critical, the AG recommends

adding a sentence that says: “The report’s results shall include a measure of each

program’s savings.”
                                          . , ..!I, I,   ,,   ::

Secthi 10: Recordr

       The AG has no comments on this section.




                                                                                                    9
                                   Respectfully submitted,

                                   MIKE BEEBE



                                   M.Shawn M c M m y             /
                                   Senior Assistant Attorney General
                                   Sarah R.Tacker
                                   Assistant Attorney General
                                   OfEce of the Attorney General
                                   323 Center Street, Suite 1100
                                   Little Rock, AR 72201
                                   (501) 682-3649




                            CERTIFICATE OF SERVICE
                                      *
                                      .   :
                                               >i

      I, M. Shawn M c M m y , do herdby 'certify that a copy of the foregoing Initial
Comments of the Arkansas Attorney General has been served upon all parties of record
by mailing a copy of same, in the U. S. mail, postage prepaid, t h i s a S e day of
November, 2006.




                                                                                  10
       BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION
                                                                             ‘ n :

                                                                        fd    1 r“ e   D
IN THE MATTER OF A NOTICE OF                           1
INQUIRY REGARDING A RULEMAKING FOR                         DOCKET NU.06-004-R
DEVELOPING AMD IMPLEMENTING                           1
q

             RBPLY COMMENTS OF THE AITORNEY G E M W
              TO OTHER PARTES’ COMMENTS ON PROPOSED
                   ENERGY EFFICIENCY GUIDELINES

       N O W comes the Consumer Utilities Rate Advocacy Division of the Arkansas
Attorney General’s Ofice (“AG”), which hereby submits its Reply Comments in

response to other parties’ Initial C m e n t s filed un November 21, 2006 regarding the

Energy Efficiency Guidelines (“EEGs”), proposed by the Commission in Order No. 11

on November 6,2006, as follows:



GENERAL COMMENTS

       After reading the Initial Comments filed in this proceeding, the AG is wen more

convinced that the EEGs’highly frachm~&gbn design relying on a utility-by-utility

model will not work. The various utilities’ Initid Comments voice numerous complaints

and disagreementsconcerning the proposed EEGs. These reveal the sometimes radically

divergcnt views on what can and should be done i energy efficiency (“EE”)programs
                                                n

and how they are to be implemented. The utilities’ Initial Comments also expose a

relatively uniform reluctance to carry out €E programs unless they receive some kind of
                                                     : ’
                                          i ’,   ’
financial “sweetener.” They all complain abut any attempts to forestall cost recovery

until EE programs are shown to be effective. They virtually all oppose the AG’s
                                                                                           56
recommended approach of using an independent administrator (‘X”’), and most even

oppose state-wide coordination of progrms.

        On the other hand, the AG,Arkansas Electric Energy Consumers, Inc. and

hkansas Gas Consumers, Inc. (“AEEC”), and Nucor Steel-Arkamas and Nucor-Yamato
                                                  :
                                                  I
                                                      ,.
                                                      ;
                                                           ..
Steel Company (Wucor”), the only parties filing comments who specifically represent

utility customers, all registered skepticism about any plan that guaranteed cost recovery

i advance Without establishmg cost-effectiveness and savings. The AG continues to
n

recommend that, as regards cost recovery, the following should apply:

   Recovery should only be allowed after the fact,i.e.,afler the program has been i
                                                                                  n
   place for some period of time;

    Recovery should only be alllowed after the utility has shown that the expenditures
    have resulted in cost effective energy and/or demand (kW, kWh, therm) reductions,
    as evaluated by an independent entity through established evaluation, measurement
    and verification (EM&V) procedures; and

    Cost recovery should be allowed only for those costs associated With the actual
    implementationof the program(s), including administrative costs, cost of materials
    andor labor, EM&V, etc. and should not include possible incidental costs of energy
    efficiency such as “lost revenues.”

        On the last point, tire AG strongly oj+ses the contention of many utilities that
“cost recovery” includes or should be allowed for reduction of non-fuel base revenue, or

gas companies’ “last revenues” or “lost margins” or that them should be financial

                                       programs. This is not good public policy, as it
incentives to utilities for “successfu~”

wastes ratepayer money. Furthermore, contrary to the contentions of several utilities, this

interpretation of “cost recovery” is not autbrized &der the Energy C o m a t i o n

Endorsement Act of 1977 (sometimes referred to as the “%EA”). The section of the

ECEA codified at Ark. Code Ann. §23-3405(3) states that the Commission shall allow a

‘ See, e.g., OG&E Initial Comments, p. 3; SWEPCO Initial Comments, p. 8; AOG Initial Comments, pp. 4-
 5; CenterPoint Initial Comments, p.3; AWG Initial Comments, pp. 2-3.


                                                                                                    2
utility “to recover any cosfs incurred by the u i i y as a result of its engaging in” an EE
                                               tlt

program. (emphasis added). The law does not allow “lost revenues” or “lostmargins” or

any “financial incentives,” unless the word “costs” is interpreted i a way other #an its
                                                                    n

ordinary meaning.

   The AG also notes that both Southwestern Electric Power Company (“SWEPCO”)
and Arkansas Oklahoma Gas Company rAOG”) agree with the AG‘s position that

merely stating that EE programs will be “fuel neutral” is not good enough; the EEGs

should include a strict prohibition against fuel switching and load building programs?

    The AG agrees with concerns by a n u m k of utilities that the timeline stated for

implementation of quick start programs is too short to allow procedurally for thoughtful

review and comment of utility submissions and for required implementation?



    The AG’s specific responses to some of the Initial Comments follow. However, the

fact that the AG does not specifically address a partkular comment does not mean that

the comment is acceptable to the AG.



RESPONSES TO INDMDUAL PARTIES’ COMMENTS

STAFF
                                                ’I   6   ,   it.

        The AG agrees with the General Staff of the Commission (“Staff”) that

“implementation of a state-wide energy efficiency plan ...could provide long-term, long-




’SWPCO Initial Comments, p. 6;AOG Initial Comments, pp. 11-12.
                                          EA1 .InitidComments, p. 8; AOG Initial Comments, pp. 8-9;
 See, e.g., OG&E Initial Comments, pp. 3-4;
 Centerpoint Initial Comments, p. 5; AWG Initial Coinmeks, pp. 1-2.

                                                                                                  3
lasting benefits to all Arkansans.” However, as voiced throughout this proceeding and

in our Initial Comments, this can only occur if it is a truly state-wide, coordinated effort.

        The AG has concerns about the S W s suggested modifications tu cost-benefit

andysis as it applies to educational progrild? As stated i the AG’s lnitiaI Comments,
                                                          n

educational programs should be divided into three categories:

       (1) “Generic”Dubh hformation (i. e., campaigns encouraging people and
companies in general to conserve, purchase more energy-efficient light bulbs or
appliances, build more energy-efficienthomes, etc.) should no?be allowed to be collected
fiom utility ratepayers. This public service information should be provided by, and
funded by the Arkansas Energy Ofice, the Governor’s Office, the Commission, the A G
and other state government entities by means of public service announcements,speeches,
seminars, etc. If utility shareholdersdesire to fund such campaigns, that shodd be
allowed, but it should not be recovered in rates;

                    .
        (2) Safety conservation and EE information that is utili&-specific should be
handled as it is now, i.e., costs which are solely related t safety, conservation and EE
                                                           o
information are allowed i base rates (pursuant to Ark. Code 823-4-2071, costs for
                            n                                               but
advertising, image-building or branding must be borne by sharehalders. In either case,
these costs should not be included i any EE Rider or other cost-recovery mechanism.
                                      n

       (3) Public infomation directly related to an enerw efficiency D ~ O W ~ ~ K measure
                                                                                  or I I
as long as the information is truly directly related to a program or measure, its costs
should be allowed as part of that program or meis&, and collected in the same fashion.

        The EEGs appear to allow utilities to recover costs for EE “stand-alone”

information campaigns, and the Staff appears to agree. This approach would blur the

Iines among the AG’s three categories, and the AG feels this would be inappropriate.

        The AG is concerned that the Staffappears. to be willing to relax the Promotional
                                              .
              ~
Practices RUIW P P F ~
                   for programs approVed under EEG!              While the AG ha^ no

objection to streamlining some processes, such a s duplication of the PPR filing

requirements i the EEGs, the AG opposes any relaxing of the Promotional Practices
             n



   tf
  sa f lnitid Comments, p. 1.
5
  Id., p. 3.
6
  Id., p.4.


                                                                                                4
                                                                                     61
Rules, to the extent this would allow programs encouraging fuel-switching or load-

building. The AG could only support such a recommended relaxation of the PPRS if the

EEGs were modified to reflect a shict prohibition against fuel switching and load

building programs,as discussed above.

        As to “deemed sa~ings,”~ AG does not oppose a proceeding to approve
                              the

standard deemed savings estimates for Arkansas, as suggested by the Staff. However, the

AG would reiterate its position in Initial Comments that “deemed savings” shodd not be

used as a substitwfe for actual measurement of savings. Some form of actual

measurement must be a part of any program, plan, or podolio. In addition, any

proceeding regarding deemed savings should follow Ak Code Ann. 923-3-405(a)(1),
                                                   r

which states that EE programs and measures may only be approved “[a]Aer proper notice

and hearings,” wherein the Commission h d s them to be “beneficial.”
        As stated above, the AG favors coo&ated            state-wide EE programs and agrees

with the Staff that any effort by the Commission to issue mandates for participation in

such programs must first follow the procedures set out i Ark. Code Ann. 8 23-3-
                                                        n

405(a)( 1) of notice and a hearing.


                                               ,   .   I



OG&E
                                        ,-   .If

        The AG opposes OG&E’s suggested language concerning “deemed savings,”’ as

it provides for deemed savings to be used in lieu of proven benefits. Many other utilities

join OG&E in voicing concern that “extensive measurement”to actually verify energy




’Id.,p. 5
*               Comments, p. 2.
 OG&E ~ n i t i a ~


                                                                                               5
                                                                                        G2’-
savings may be cost prohibitive, but at the m e t h e support this utility-by-utility

approach which will significantly multiply the cost of prograrn implementation.

                                             ..




           Entergy Arkansas, Inc.(EAI) opposes even the lukewarm mention of an

independent administrator, or IA, contained in the proposed EEGs. Not content with the

                                                                         A
fact that the EEGs as proposed create a perverse presumption against an I (as mentioned

in the AG’s Initial Comments), EA1 prefers that the IA should not even be addressed in

the EEGS? As mentioned in ow Initial Comments, this is an impomnt threshold issue,

and should be addressed now.

           The AG acknowledgesthat, as pointed out by EM,some programs may have
different EM&V timelines, and as such may not lend themselves to inclusion i the
                                                                            n
                                              I   : .

annual report. Should the Commission acknowledge this fact and remove the strict

EM&V reporting requirements from the annual report, the AG is insistent that mother

mechanism be included in the rules for reporting of EMBtV.




                                                     of
            SWEPCO recommends a change in the def~tion “Deemed Savings.”” The

AG feels this definition is more precise than the one initially proposed, and would be a

helpful amendment. The AG also supports the suggested change to the definition of




     EAI Initial Comments, p. 5.
Io SWEPCO        Initid Comments, pa3.
’I   Id

                                                                                           6
          The AG disagrees with SWEPCO’s suggestionthat utilities should have some say

in the choice of an IA, “since the utility is to bear the cost.”I2 With all due respect, it is

ultimately the utility rafepqyerswho are bearing the cost of EE programs, and not the

utilities. That is wby it is essential i the AG’s view that the IA nor be selected by tbe
                                        n
utilities.

           SWEPCO suggests a change i the language concerning the treatment of
                                     n

customer incentives for the purposes of cast/benefit tests.I3 The change would be

acceptable, if it adds the word “customer” in the second sentence to make is meaning
                                                                           t

clear. It should read: “Costs of customer incentives shall be considered a direct program

cost.”




ELECTRIC CUUPERATIWS

           The Electric Distribution Cooperatives (To-ops”) ask the Commission to exempt

them fiom the requirements of the EEGs.I4 The AG would prefer that the Co-ops not be

exempt, but fall under the state-wide program run by an I . If the Commission wishes to
                                                         A

push through EE on a utiIity-by-utilitybasis, the AG can see some allowances for the Co-
                                                   t,   - ’ -I   I.
ops because of their unique structure and situation. However, even in this situation, a
                                                                      !
                                           .   I




blanket exemption for the Co-ops is unwise and premature.



AOC

           Arkansas Oklahoma Gas Company (“AOG‘’) notes that ‘’utilities can hardly be

expected to meaningfully participate in energy efficiency that is financially detrimental to

la   Id., pp. 4-5.
     Id, pp. 6-7.
‘4   co-ops Initial Comments, p. 2.


                                                                                                 7
their well-being,’”’ It is this “mixed message” regarding utilities and EE that has been

one of the reasons why the AG has argued so persistently for an IA to run EE programs i
                                                                                      n
                                            ’   - , ,       ,

the state.

         AOG requests that the Commission acknowledge, in the EEGs,that it would be

willing to consider a decoupling mechanism in either a utility’s next rate case or i their
                                                                                   n
program filing dockets.’6 Such an inclusion would be inappropriate. The EEGs should

be as narrowly drawn as possible to accomplish the goals set forth in the ECEA, and

should go no further. The AG understands the natural gas companies’ desire to explore
decoupling. However, preferences for rate mechanisms like decoupling have no bearing

on the operation of EE programs and should not be included in the EEGs.

          The AG has mentioned above that we share AOG‘s concern that the proposed

EEGs do not prohibit fuel-switchmg and load-building programs.
                                                    1 , -       b




CEWERPOINT

          The AG disaBees with virtually all of the changes to the EEGs recommended by

Centerpoint Energy Resources Corp., d/b/a Centerpoint Energy Arkansas Gas

(“CenterPoint”). The Commission’s initial proposed EEGs are far superior, and the AG

cannot support any of Centerpoint’salternative rules.

          In this section, the AG will just point out one of the more egregious positions

taken by the company. Specifically, it is absolutely not true that ECEA “only pernits the

implementation of energy programs ‘by utility                       and dots not allow the

Commission to establish an independent administrator to run EE programs state-wide.

’’ AOG Initial Comments, p. 3.
’6       p.
     id., 6.
‘’Centerpoint Initial Comments, pp. 2-3.
                                                                                             8
Ark. Code Ann. 0 23-3-405@) gives the Commission wide latitude in directing energy

efficiency initiatives:

          Nothing i this subchapter shall be construed as limiting or cutting down the
                    n
          authority of the commission to order, require, promote or engage i other energy
                                                                             n
          cansesving actions or measures.

In the AG’s view, this authority includes contmcting with or establishing an independent

statewide coordinator of EE activities, as well as an independent evaluator of EE

programs’ effectiveness.



AWG
          Arkansas Western Gas Co. rAWG’7 recommends eady approval of deemed

savings for Arkansas.” As pointed out above; ‘mysuch proceeding must follow Ark

Code Ann. §23-3-405(aXl), which states that EE programs and measures may only be

approved “[alfter proper notice and hearings,” wherein the Commission finds them to be
“beneficial.”                                       ..
                                                    :




AEEC
          AEEC’s comments reflect due skepticism about some aspects of the EEGs,

including cost recovery requirements. However, some of the incorrect statements AEEC

makes cannot go unrefuted.
          For one, AEEC states that “the Commission is without authority to implement

social programs,” citing Arkansas GQSConsumers, Inc. Y. Arkamas Public Service

Commission,354 Ark. 37,118 S.W.3d 109 (2004), and infers from this that the



18
     AWG Initial Comments, p. 1.

                                                                                            9
Commission is without authority to implement some of the recommended EE programs.’’

The cited case merely held that the Commission Jacked the authority to implement the

particular program a issue under its generaI grants of legislative authority, and there was
                   t

no specific legislative authority for the program in question. In conbast, the ECEA is

clear legislative authorizationfor the Commissionto implement EE programs - whether

or not a particular measure is considered a “social program.”

           AEEC a h argues that comemtiun programs must benefit all ratepayers under

ECEA, and therefore only the RIM test should be used?’ As pointed out in earlier

submissions, other costhenefit tests am more accurate measures of benefits t all
                                                                           a

customers for some purposes than the RIM, and the ECEA does not mandate a particular

cost-benefit analysis.

           Finally, AEEC wants the Commission to implement “appropriate cost based time

sensitive rates for all u i i y customers in the state” before it engages in “DSM
                         tlt

programs.’’21As pointed out in the AG’s Response to Order No. 6 in this docket,

establishing timesensitive rates for d l custom& is impractical, and may actually be

counter-productive, althougb such rates may be appropriate for the larger customers.



A        W

           The AG has from the beginning of this process supported a progarn for

weatherization aimed at the most severely energy inefficient housing, organized state-

wide through the ACAAA. The AG continues to support such a program, as outlined in


19
     AEEC Initial Comments, p. 3.
20
     Id., pp. 8-1 I .
‘’   Id., p. 14.
                                                                                        67
the ACAAA's                       As stated above, the AG thinks that such a program could be

mandated by the Commission by following the provisions laid out in Ark. Code Ann.          0
23-34051ax2) requiring notice and a hearing. However, the AG strongly disagrees with
                                                ,.i           ,


the ACAAA's position that lost revenue should be recognized as a direct program

The ECEA does not call for it, and the AG does not think this is good public policy.



                                          Respectfully submitted,

                                          MIKE BEEBE
                                          Attorney General


                                          M.Shawn McMurray
                                          Senior Assistant Attorney General
                                          Sarah R.Tacker
                                          Assistant Attorney General
                                          OEce of &e Attorney General
                                          323 Center Street, Suite 1100
                                          Little Rock, AR 72201
                                          (501) 682-3649




     ACAAA Initial comments, pp. 3 4 .                .   ,   , ,
23   Id., p. 6.                                       ,       -




                                                                                           11
                           CERTIFICATE OF SERVICE

      I, M. Shawn McMurray, do hereby certify that a copy of the foregoing Reply
Comments of the Arkansas Attorney General has been served upon dl parties of record
by mailing a copy of same, in the W. S. mail, postage prepaid, this  >-x    day of
December, 2006.




                                                                                12
                                                                                        69


 1                   MS.    TACKER:        If the Commission w i l l i n d u l g e me,
 2   I would l i k e t o o f f e r a b r i e f o p e n i n g statement.
 3                   CHAIRMAN       HOCHSTETTER:           Sure.
 4                   M S . TACKER:        Thank you f o r the o p p o r t u n i t y t o
 5   p r e s e n t t h e p o s i t i o n o f t h e A t t o r n e y General i n t h i s
 6   docket.       The A t t o r n e y G e n e r a l a p p r e c i a t e s t h e
 7   Commission's a t t e m p t t o i n i t i a t e e n e r g y e f f i c i e n t
 8   p r o g r a m s i n A r k a n s a s and t o d e v e l o p g u i d e 1 in e s f o r t h a t .
 9                   The AG a l s o a p p r e c i a t e s t h e e f f o r t o f t h e
10   Commission and t h e s e p a r t i e s ,          b u t we a r e c o n c e r n e d t h a t
11   t h e p r o p o s e d g u i d e l i n e s do n o t r e f l e c t t h e Commission's
12   p u r p o s e s i n u n d e r t a k i n g t h i s d o c k e t and t h a t t h e rules
13   w i l l n o t r e a c h t h e Commission's d e s i r e d g o a l s .           Some
14   p a r t i e s seem t o have a d o p t e d t h e approach t h a t any
15   program i s b e t t e r t h a n no program.                The p r o p o s e d e n e r g y
16   efficiency       g u i d e l i n e s seem a t l e a s t i n p a r t t o follow
17   that l i n e o f t h i n k i n g .
18                   T h e r e has been s u c h a r u s h t o i m p l e m e n t a
19   framework of r u l e s and t o i m p l e m e n t q u i c k s t a r t programs
20   t h a t n o t .nough a t t e n t i o n has been p a i d t o a l o n g - t e r m
21   s t r u c t u r e t h a t can b e n e f i t b o t h consumers and u t i l i t i e s .
22   The AG does n o t believe t h a t any p r o g r a m i s b e t t e r t h a n
23   no program and i s c o n c e r n e d t h a t f o r some r a t e p a y e r s some
24   programs a r e v e r y l i k e l y t o b e c o s t l y b u t t o a c h i e v e no
25   s i g n i f i cant energy e f f i c i e n c y .

                                Buskman Court R e p o r t i n g
                                     m.372.5115
                                                                                                70


                                                                                                          I

 1                     W have s u b m i t t e d d e t a i l e d i n i t i a l and r e p l y
                        e
 2   comments r e g a r d i n g these g u i d e l i n e s and I w i l l n o t r e p e a t
 3   each o f t h o s e p o i n t s h e r e t o d a y .            However, t h e r e a r e
 4   t h r e e p o i n t s w h i c h t h e AG f e e l s s h o u l d b e h i g h l i g h t e d
 5   t h i s morning.
 6                     We r e s p e c t f u l l y urge t h e Commission to g i v e
 7   f u r t h e r c o n s i d e r a t i o n t o the s u g g e s t i o n o f an i n d e p e n d e n t
 8   a d m i n i s t r a t o r f o r e n e r g y e f f i c i e n c y programs i n A r k a n s a s .
 9   The b e n e f i t s o f such a s t r u c t u r e have been detailed by
10   t h e AC i n i t s v a r i o u s f i l i n g s t h r o u g h o u t t h i s d o c k e t .
11   W i t h o u t t h e i m p l e m e n t a t i o n o f an i ndependent
12   a d m i n i s t r a t o r , we w i l l be l e f t w i t h a h i g h l y f r a c t u r e d ,
13   u n p r o d u c t i v e , and i n e f f e c t i v e u t i l i t y - b y - u t i l i t y
14   approach.          T h i s w i l l n o t a c c o m p l i s h t h e Commission's
15   goals and could, i n f a c t ,                 harm ratepayers by a l l o w i n g
16   utilities t o pass t h r o u g h c o s t s f o r e x p e n s i v e e n e r g y
17   e f f i c i e n c y programs w i t h o u t a d e q u a t e s a f e g u a r d s .           The
18   p r o p o s e d r u l e s a s w r i t t e n i n c o r r e c t l y establish a
19   p r e s u m p t i o n a g a i n s t an i n d e p e n d e n t a d m i n i s t r a t o r .    The AC
20   s t r o n g l y u r g e s t h a t t h e Commission and t h e g u i d e l i n e s
21   c a l l f o r an a p p o i n t m e n t o f the i n d e p e n d e n t a d m i n i s t r a t o r
22   w i t h i n a t i m e c e r t a i n i f n o t immediately.
23                     Secondly,         a successful energy e f f i c i e n c y
24   program s h o u l d a l s o i n c l u d e a s y s t e m a t i c p l a n f o r
25   i n d e p e n d e n t a n d r e 1 ia b l e e v a l u a t i o n measurement and

                                    Bushman Court R e p o r t i n g
                                             501.372.5215
                                                                                        71


 1   v e r i f i c a t i o n t o determine t h e a c t u a l e f f e c t s o f energy
 2   e f f i c i e n c y programs i n c l u d i n g v e r i f i e d s a v i n g s and d e m a n d
 3   reduction.         The p r o p o s e d r u l e s do n o t r e q u i r e s u c h a
 4   component b u t appear to a l l o w each utility to c o n d u c t i t s
 5   own EM&V.         T h i s completely circumvents t h e necessary
 6   components o f i n d e p e n d e n t v e r i f i c a t i o n .      Because t h e
 7   r a t e p a y e r s u l t i m a t e l y b e a r the c o s t s o f a l l o f t h e s e
 8   programs, it i s i n t h e p u b l i c i n t e r e s t t o have an
 9   independent a u t h e n t i c a t i o n     of s a v i n g s a n d demand
10   reduction.         It i s the A C ' s p o s i t i o n t h a t EM&V a c t i v i t i e s
11   s h o u l d be s e p a r a t e d f r o m t h e u t i l i t i e s and t h a t t h e d r a f t
12   r u l e s 5 h o u l d b e modi f i ed a c c o r d i n g l y.
13                   T h i r d l y , e n e r g y e f f i c i e n c y programs s h o u l d
14   n e v e r b e allowed t o be used by u t i l i t i e s f o r
15   s e l f - f o r m a t i o n o r f o r t h e company's own f i n a n c i a l g a i n .
16   The r u l e s d o n ' t go f a r enough i n t h i s r e g a r d t o p r e v e n t
17   p r o g r a m s o r p r a c t i c e s t h a t encourage f i e l d s w i t c h i n g o r
18   load building.            T h r o u g h o u t t h i s p r o c e s s t h e AG has
19   recommended a m o r e c o n c r e t e p r o h i b i t i o n a g a i n s t such
20   programs.        T h e p r o p o s e d r u l e s s h o u l d be m o d i f i e d t o
21   r e f l e c t t h e d i s a l l o w a n c e o f any f i e l d s w i t c h i n g o r l o a d
22   b u i 7 d i ng program.
23                   We u r g e t h e Commission t o proceed c a u t i o u s l y
24   and c a r e f u l l y i n o r d e r t o p r o v i d e t h e best s o l u t i o n f o r
25   Arkansas Energy Consumers i n the l o n g - t e r m ,                   not just the

                                Bushman Court R e p o r t i n g
                                         5OlI37Z.5i!E5
                                                                                       72


 1   short-term.
 2                   The AC a p p r e c i a t e s t h e o p p o r t u n i t y t o p r e s e n t
 3   h i s r e p r e s e n t a t i o n s and t h a n k s you f o r h i s t i m e .
 4                   C H A I R M A N HOCHSTETTER:         Thank you, M s . T a c k e r .
 5   Entergy A r k a n s a s .
 6                   MS. RANEY:         Good m o r n i n g , Madam Chai rman and
 7   Commissioner Bassett and C o m m i s s i o n e r Bynum.                    Entergy
 8   A r k a n s a s f i l e d e x t e n s i v e initial comments and r e p l y
 9   comments on November 215t and December t h e 5 t h .                            I would
10   r e f e r t h e p a r t i e s t o t h o s e comments i n l i e u o f any
11   f u r t h e r statement.        I have b r o u g h t w i t h me t r u e and
12   c o r r e c t c o p i e s o f t h e comments that were f i l e d and w o u l d
13   t e n d e r them f o r i n c l u s i o n i n the t r a n s c r i p t .
14                  CHAIRMAN        HOCHSTETTER:          They w i l l be a d m i t t e d .
15   T h a n k you v e r y muck.
16   (WHEREUPON,        t h e p r e f i l e d comments of ENTERCY ARKANSAS was
17   e n t e r e d i n t o the r e c o r d as follows.)
18
19
20
21
22
23
24
25

                                 Bushman C o u r t R e p o r t i n g
                                        501.372.5125
                           BEFORE THE
                ARKANSAS PUBLIC SERVICE COMMISSION


IN THE MAlTER OF A NOTICE OF              1
1 NQUlRY REGARD1NG A                      )
RULEMAKING FOR DEVELOPING                 1             DOCKET NO. 06-004-R
AND IMPLEM€NTING ENERGY                   1
EFFICIENCY PROGRAMS                       1

  ENTERGY ARKANSAS. INC. INITIAL COMMENTS ON THE PROPOSED
 ENfRGY EFFICIENCY GUIDELINES AS ENUMERATED IN ATTACHMENT A
                       TO ORDER NO. 11




I.    INTRODUCTION

      Entergy Arkansas, Inc. (''EAII or the "Company") offers the following

comments to the Arkansas Public Senrice Commission (IIAPSC or the

"Commission") on the proposed Energy Efficiency Guidelines {"Rules") as

enumerated in Attachment A t Order No. I 1 in the above-referenced docket.
                            o
      EA1 participated in the Collaborative established by Order No. 3 This
                                                                      .
collaborative process proved to be a useful forum for discussion among the

participating parties and development of a comprehensive report to guide the

Commission in drafting the proposed Rules. Although time-consuming, the

collaborative process was more informative than the approach of having parlies

file formal written comments after publication of a rule. EA1 recommends that the

Commission consider using a collaborative process in the future for major

mdifications t an existing rule or development of a new tule.
              o
      €AI recognizes that energy efficiency programs offer benefks both to the

utility and to its customers, and €AI supports the Commission's effort to
                                                                         74
encourage the identification and implementation of such programs. A barrier to

providing energy efficiency programs has been the lack of an efficient regulatory

framework under which to seek approval of such sewices and recovery of the

cost o detivering those services to customers. The Rules remove that barrier
     f
and allow a utility to rnuve forward in offering energy efficiency programs to its
customers. One of the recommendations from the Collaborative was that the
Rules allow each utility to design energy efficiency programs that best meet the

needs of the customers served by that utility. Rather than mandating programs,
the Rules provide a framework under which a range of programs can be

reviewed and approved.

      As a general matter, €AI supports adoption of the Rules by the
Commission. However, EA1 offers the following comments and suggestions for

             f
modification o the Rules as appropriate.



II.   COMMENTS ON THE PROPOSED RULES FOR CONSERVATION AND

      ENERGY EFFICIENCY PROGRAMS
Section A: Purpose

      The Company agrees with the purpose of the Rules.



Section 2: Goals ofEnergy Efficiency Programs

      The Company agrees with the goals for energy efficiency programs, but

suggests removing the parenthetical comments to the extent they may cause

confusion and imply a priority rather than serving as clarifications. The Company

suggests changes t the following goals identified i Section 2 of the Rules:
                  o                               n

                                       -2-
                                                                         35
           * Energy savings directly attributable to program activities &g+new




           4   Long-term and permanent changes in behavior, attitudes,

               awareness, and knowledge about energy savings and use of
               energy efficient technologies   3

               Permanent reduction of electric utility peak demand     W&&R

               associated with enerw efficiencv PW rams



Section 3: Deffnitions
                                                     o
       The Company suggests the following revisions t certain of the definitions

for additional clarity.



Enersv Efficiencv - Reducing the rate at which energy is used by equipment
andlor processes while maintainina or improvina the customer's existing level of

comfort and end-use functionalitv. Reduction in the rate o energy used may be
                                                         f
e&aiw# achieved by substituting #&wid+y more advanced mmwwe4e




. .
e   technoloqv o by
                r
reorcranizina the mwess to reduce waste heat. waste coolinn or enerav.




                                       -3-
                                                                           Demand

Rpponse                                                         is a form of energy

efficiency.



Enerav Efticiancv Savinqs     -   Energy efficiency (kW, kWh, ccf) savings are

determined by comparing mea^^& energy use before and after implementation

of an energy eavhge efficiency measure.



The w o d "Implementet' is not used in the Rules and this definition should,

therefore, be deleted.



Measure - The equipment, materials and practices that when installed and used

at a customer site result in measurable and verifiabte



improvement in enemv efficiency.



Proqram - A plan to deliver a particular energy efficiency 6ewke measure or set

o
f             measures to a p a # i w k target population of customers, including a

set of benefit / cost test results, specific objectives that   can be wakh&mg
                         quantified, and provisions to evaluate, monitor, and verify

results.




                                         -4   -
                                                                             77
Section 4    The Administration and Implementation o Energy Efficiency
                                                    f
Programs

      The last paragraph of Section 4 gives the Commission discretion to

appoint an administrator independent of the utilities. Section 2 defines an

administrator as the entity responsible for creating and managing an energy

efficiency portfolio. However, the Rule provides further that "the utility will
ultimately retain the responsibility for compliance with these Rules."        This

provision appears to create an inherent conflict.

      The philosophy of an independent administrator was the subject of

disagreement during the Collaborative meetings and was so noted i the report.
                                                                n
The Rule is premised   on programs and benefit I cost tests that are specific to
each gas or electric utilrty. The Rule does not address h o w the additional staff

and costs of an independent administrator would be factored into that evaluation
or shown to be beneficial when each utility will have different customer bases
and feswurce cost structures.       The Rule gives ultimate responsibility for

compliance to the utilities, but does not give the utilities the ability to control

implementation and management of the programs. There is little economic or
operational efficiency t be found in having an independent administrator
                        o
manage pottblios that are different for every utility. There are a host of issues

regarding an independent administrator that have not been thoroughly explored

and which dewwe a full inquiry with public participation. The Company suggests

that the topic of an independent administrator i not appropriate in the context of
                                               s
these proposed rules and is an issue that should be considered separately. The

Company recommends striking the following provisionfmm Section 4:

                                       -5-
Section 5: Portfolio and Program Filing Requirements

       The Company has no comments regarding portfolio and program filing

requirements.



Section 6 : Benefit I Cost Tests

       Section 6 provides in part that the Commission will not limit the costs and

benefits that may be considered i the benefit
                                n                  I cost tests to those listed in the
California Standard Practices Manual.         A wide variety of energy efficiency
programs have been developed across the United States and the Manual does

not take into account this full variety in its list of benefits and costs. Further some

types of programs, such as market transformation programs, do not easily fit

within the    Manual's protocols. The limitations in the Manual also serve as a
barrier to utilizing pilot programs to test creative new approaches to energy
efficiency.    The Company commends the Commission for recognizing the

limitations o strict adherence to the Manual, and for allowing the use
             f                                                                of costs
and benefits that are appropriate to the design and target population of an
individual program.

       Section 6 incorporates an Analysis Tool, included as Attachment A to the

Rules, as the method for performing benefit I cost analyses on efficiency
programs. The Analysis Tool is made part o the Rules, however, a utility may
                                          f
use an alternate method with prior Commission approval. In its present form, the

Company notes that the Tool does not encompass all the potential outputs

described in Table I that is part    o Section 6. Moreover, the Toot is still in the
                                      f
dewlapmental stage and has not yet been validated. Presumably the validation
will occur in the context of the first electric and gas program reviews. It is also

possible that errors and needed corrections may be revealed periodically in the

course of reviewing programs. Also, enhancements may be developed as the

Commission and utilities gain experience using the Tool. By making the Tool a

part of the Rules, any changes t it could only be accomplished through the
                                o
administrative rulemaking process.        While the Tool was developed for the

Arkansas Collaborative, there are many other accepted processes for performing

the California Standard Practice Manual tests. Requiring prior approval for their

use adds an unnecessary procedural step. It would be appropriate for the

Cornmission to post the Tool on its website as a resource for those wishing to

use i for beneffi I cost tests under this Rule. Other processes that prove useful
    t
in particular program hearings could be added to the resource list. This non-

regulatory approach better fits the fact that software is always evolving. The

Company suggests striking the following from this Section:

             k   n   ,   k   Q   A




Consistent with this suggestion, Attachment A should be deleted from the Rules.
                                                                           80

Section 7: Cost Recovery

      This section provides that the incremental costs of energy efficiency

programs may be recovered through a surcharge or rider and that approved

program budgets may be included in the rider. The Company agrees with this

method of cost recovery. Review of experiences in other jurisdictions during the

course of the Collaborative indicates that effective energy efficiency programs

are not static, market transformation being an example. In fact, the scope      of
welldesigned programs is planned t change as identified milestones are
                                  o
reached. If efficiency program portfolios are actively managed by the utility, then

the annual program costs should change from year t year. A surcharge or rider
                                                  o
alows cost recovery to track with program changes. Addressing efficiency costs

in infrequently filed rate cases is not compatible with active efficiency program

management. In the third paragraph of this section, the Company suggests the

following change fur clarification:

              "A utility may request that costs from approved program

       budgets be &ie&ed included for recovery in the rider."

       Section 9 on Annual Reports contains a provision addressing the filing of

cost reconciliation data if the utility is recovering costs through a surcharge or

rider. The Company suggests this provision is more appropriately located in

Section 7 and recommends deletion of that paragraph from Section 9. The

Company suggests adding the following paragraph to Section 7:

              "If a utility is recovering conservation and energy efficiency

       program msts through a surcharge or rider, the utility shall file,

                                       -8-
        contemporaneous with the Annual Report under Section 9, a

        redetermined Energy Efficiency Cost Rate (EECR). In support of

        this redetermined rate, the utility shall fife a schedule of actual

        program costs for the reporting period, actual amounts collected

        under the rider for the reporting period, and approved program

        budgets for the current calendar year. The EECR shall be adjusted

        to reflect a reconciliation of any over or under recovery for the prior

        year and the approved budget for the current calendar year.”



Section 8: Program Plans
        This Section requires the filing by each utility of Quick Start or Pilot

Prcgrams for each customer dass by April 1, 2007.                 These are to be

implemented by September 1, 2007. There is no special provision for the

procedural schedule on these Quick Start programs. The Rules do generally

address program filing procedures and schedules in Section 5. The period from

the filing of a program to a Commission order is 180 days. The time between

April 1 and September 1 is 153 days. Assuming that each utility has three

customer dasses, approximately 72 individual programs will be filed in April

2007.    Futlher, no program is to be implemented until it is approved by the

Commission. If the utilities are to implement these programs, they will need
several months after approval in which to ramp up far a rollout on September 1,

2007. This further     compresses the review period to perhaps 60 days. The
Company suggests that it will not be possible to conduct the full review

contemplated under Section 5 if Quick Start programs are to be implemented by

                                         -9-
                                                                                 82
September 1 by all utilities, The Company suggests that because these are Pilot

programs of a limited duration, they be given a streamlined review by the

Commission. The results measured in these programs mn be incorporated into

the more comprehensive review of utility portFotios which can be addressed on

the procedural schedule outlined in Section 5. The Company suggests the

addition of the foltowing language at the end of the last sentence in the

Subsection on Quick Start andlor Pilot Programs:

             'The utility filing of Quick Start programs shall include those

      items required by Section 5, Pilot Programs. There shall be 60

      days from the date of the filing to the Commission order. If the

      utility filing i prima facie in compliance with the requirements of this
                     s
      subsection, it shall be approved by the Commission without

      hearing."

      The Company recommends a change in the paragraph on Comprehensive
Programs to be consistent with the Company's recommendation that the

provision for an independent administrator be removed from Section 4. The

Company suggests the following change:

             Comwehensive Prosrams

             Beginning April 1, 2009,each electric and gas utility shall file

      a comprehensive set of program plans that will be its Initial
                   ..
      Portfolio.   a



                                       -10-
                                                                       83
Section 9: AnnuaI Reports
      The Company suggests a clarification to the dates to be included within

the annual report. This clarification could be accomplished by modifying the first
sentence of Section 9 to reflect that the annual report due to be filed by April 1.

each year is to report on the performance of the energy efficiency programs in

effect during the preceding calendar year.

      Section 9 requires that the report present the results of the prescribed
evaluation, measurement and verification (“EM&V”)measures for each program

and the aggregate EM&V measures for the utility porffolio. At the program fevel,

EM8V may not be designed to produce final results that coincide with a calendar

year report. Some EM&V may be more frequent than once a year, and for other

programs it may take several years to complete. Similarly, a portfolio will have

many programs with different schedules f r EM&V. Commission review of EM&V
                                        o
results is more appropriate for the review and approval of programs and

portfolios. For an annual report, the Company suggests providing information

consistent with Section 2. The report should discuss the utility goals for its

portfolio in quantitative terms, progress toward those    goals, and estimates of
actual savings achieved.

       In comments on Section 7      - Gust      Recovery, the Company suggests

adding a provision for the reconciliation of costs and annual adjustment of a

surcharge or rider. That suggested change includes a requirement that a filing

for an annual adjustment to the surcharge or rider should be contemporaneous

with filing of the Annual Report under Section 9.    Consistent with this suggested
change to Section 7, the Company recommends deleting the paragraph in

                                       -11   -
Section 9 addressing the filing of a reconciliation report if the utility is recovering

costs under a surcharge or rider.



Section 10: Records

       The Company has no comments regarding Section 10: Records.




                                         -12-
                                                                            85
                          CERTFKATE OF SERVICE

      I, Tucker Raney, da hereby certify that a copy of the foregoing has
been senred upon all parties of record this 21st day of November, 2006.
                                                                   ~ E C5   10 SO AH 'OS
                                  BEFORE THE
                  ARKANSAS PUBLIC SERVICE COMMISSION                   FilwED
IN THE MATTER OF A NOTICE OF               1
INQUIRY REGARDING A                        1
RULEMAKING FOR DEVELOPING                  1             DOCKET NO. 06-004-R
AND IMPLEMENTING ENERGY                    1
EFFICIENCY PROGRAMS                        1

       ENTERGY ARKANSAS, INC. REPLY COMMENTS ON THE PROPOSED
     ENERGY EFFICIENCY GUIDELINES AS ENUMERATED IN ATTACHMENT A
                           TO ORDER NO. 11




1.       INTRODUCTION

         Entergy Arkansas, Inc. ("EAI" or the "Company")offers the following reply

comments to the Arkansas Public Service Commission ("APSC or the

"Commission")on the proposed Energy Efficiency Guidelines ("Efficiency Rules")

as enumerated in Attachment A to Order No. 11 in the above-referenced docket.

         In their comments, Arkansas Western Gas ("AWG)          and Centerpoint
Energy Arkansas Gas ("CentePoint Energy") submitted complete revisions to
the Efficiency Rules that are significantly different from the Commission's

proposal. Because the proposed Efficiency Rules reflect more closely the results

of the Report of a Collaborative Stakeholder Process Addressing Energy

Efficiency in Arkansas Pursuant to Docket 06-004-R("Collaborative Report"), EA1

objects to the total replacement of the proposed Efficiency Rules. EA1 offers the
following specific comments on the proposed Efficiency Rules.

         These reply comments are organized to correspond with the proposed

Efficiency Rules. Additionally, EA1 offers a suggested mechanism for addressing            0
                                                                             87

the comments of several parties regarding the adoption by the Commission of

certain universal templates or standards.



II.    SECTION 3: DEFINITIONS

       AWG has proposed a modification to the definition of Energy Efficiency

and added a number of new definitions. The intent of these changes is to adopt

the concept of full fuel cycle efficiency. This concept is explained by AWG in its

comments at pages 3-5. The basis for AWG’s position is that ‘natural gas power

plants are huge consumers of primary fuel.” While this statement may be true, it

is not of value in regard to all Arkansas electric utilities. EA1 utilizes nuclear and

coal as primary fuelsfor approximately 90 percent of its generation. This issue i
                                                                                s
also addressed in the Collaborative Report at page 46, where the consensus was

not fo adopt the concept of full fuel cyde efficiency in the proposed Efficiency

Rules. EA1 supports the position recommended in the Collaborative Report.


111.   SECTION 5: PORTFOLIO AND PROGRAM FILING REQUIREMENTS

       The General Staff (“Staff”) of the APSC suggests in its Initial Comments

that the Commission should clarify the relationship between the Promotional

Practices Rules (“Promotional Rules”) and the Efficiency Rutes.               As an
alternative, Staff suggests combining the review under both rules of utility energy

efficiency program filings by incorporating the filing requirements of the

Promotional Practices Rule into Section 5 of these Efficiency Rules.’             €AI

disagrees with this approach, The intended target of the Promotional Rules IS




                                         -2-
fuel switching and load building programs. In the subsection headed “Uniformity

of Programs,” these Efficiency Rules require that all programs filed be fuel

neutral. If upon review of a program submitted under these Efficiency Rules the

Commission finds it is a fuel switching or load building program, then that

program cannot be approved under these Efficiency Rules. If the utility chooses,

it may re-submit the program under the Promotional Rules. These            two sets of
rules offer separate regulatory paths depending upon whether a program

encourages fuel switching or load building, and there is no compelling reason to

create cost and confusion by trying to combine incompatible rules.



IV.    SECTION 7: COST RECOVERY

       A number of parties commented that lost revenues and utility incentives

should be included as program costs eligible for recovery.’       In Section 5, under
the subheading of “Portfolio Description and Support,” a required item is a “Cost

Recovery Proposal.” The utility will choose what to include in that proposal. In

Section 6 on BenefitlCost Tests, the Efficiency Rules give the utility the option of
including any cost that is appropriate, which can include lost revenues.                 In

Section 7 on Cost Recovery, all direct program costs are eligible for recovery,

including lost revenues. EA1 interprets the Efficiency Rules to give utilities the

flexibility to seek recovery of lost revenues and utility incentives, which can be
approved by the Commission if justified. To avoid any misunderstandings, EA!



 Arkansas Community Action Agency Association (‘ACAAA”) at 6 , Oklahoma Gas & Electric
Company (*OG&E) at 3, Southwestern Electric Power Company (“SWEPCU) at 8, AWG at 2 -
3, and Centerpoint Energy at 3.


                                          -3-
joins with the other parties in requesting a clarification that lost revenues and

utility incentives are eligible for cost recovery.



V.        ADOPTiON OF UNIVERSAL TEMPLATES OR STANDARDS

          Several parties requested in their comments the adoption by the

Commission of a generic set of “Deemed Savings,” that could be utilized by all

~tilities.~The Staff suggests that a generic Evaluation, Measurement, and

Verification (“EM&V”) template could have value for all utilities.4 Two parties

commented on the value of a generic quick start education pr~grarn.~
                                                                   While

each of these recommendations has merit, there is an investment required tu

develop Deemed Savings, EM&V templates, and education programs. The

utilities have the ability to invest in deveioping these generic items and can seek

to recover the cost in their efficiency Portfolio filings. There is nothing in the

proposed Efficiency Rules that would prevent utilities from jointly investing in
development of these generic templates and programs, and then jointly

submitting them to the Cornmission for approval.

          Because Section 7 on Cost Recovery allows recovery of approved
program budgets, utilities will be able to contemporaneously recover costs of

                                                                f
approved programs. It should be recognized by all that the cost o development

of programs must be borne by the utility until the programs are approved. Rather

than individually bearing the cost o developing Deemed Savings for example, it
                                    f
would be cost-effective f r utilities to jointly invest in this project. Statewide
                         o
 . _ .-
__ _-
3
    A C M at 5. Staff at 5,OG&E at I-2.and AWG at 1.
    staff at 5.
    Arkansas Oklahoma Gas (‘AOG“) at 9-10 and AWG at 2.


                                            -4-
Deemed Savings would also minimize the cost of program measurement and

evaluation. Similarly, the interested utilities can join together to submit common

EM&V and education templates for approval.          It is not necessary for the

Commission by rule to order private companies to cooperate; they should be able

to make that decision on their own.



VI.   W€AT HERlZATI0N

      During the Collaborative, EA1 joined with the ACAAA, AOG, and AWG         in
recommending a mandatory, statewide utility residential weatherization program

that would be delivered through the network of Community Action Agencies. The

Energy Consewation Endorsement Act of 1977 specifically recognizes

inadequate insulation of buildings as leading to the waste of enormous amounts

of energy.     Insulation is one of the primary measures in a residential

weatherization program.

       In addition to the administrative efficiencies of piggy-backing on this

existing network. the ability to   coordinate gas and electric utility residential
weatherization programs would maximize the achievement of energy savings at

each individual residence. A lack of coordination and common standards among

utilities would be a barrier to customers taking advantage of the program.

       In their initial comments on the Efficiency Rules, the following parties

recommended that the Commission approve a Quick Start Residential

Weatherization Program in this rulemaking; AOG, AWG, and the ACAAA." The

Attorney General also supported this program in the "Response of the Attorney

 AOG at 9-10 ,AWG at 2 and ACAAA at 2.


                                         -5-
General to the Collaborative Report,”which was filed subsequent to the submittal

                                               EA1
of the Collaborative Report to the Cornmissi~n.~ joins with these parties in

recommending that the              Commission explicitly approve a            Residential

Weatherization Quick Start Program as part of this rulemaking proceeding.



                                                Respectfully submitted,
                                                ENTERGY ARKANSAS, INC.




                                                Assistant General Counsel
                                                Entergy Services, Inc.
                                                P.O. Box 551
                                                Little Rock, Arkansas 72203
                                                Telephone: (5011 377-4372




                          -   ._
7
    R@sponse the Attorney General to the Collaborative Report at 6.
           of


                                              -6-
                                                                            92
                         CERTlFlCATE OF SERVICE

      I, Tucker Raney, do hereby certify that a copy of the foregoing has
been served upon all parties of record this 5th day of December, 2006.
                                                                                       93


 1                   MS. RANEY:         Thank you.          A l l right.        SWEPCO.
 2                   MR.   MATTHEWS:         Thank you, Madam Chairman,
 3   members of t h e Commission.                 SWEPCO l i k e w i s e f i l e d
 4   comments on November 17 and December 5 and I t e n d e r f i l e
 5   marked c o p i e s o f b o t h t o t h e r e c o r d and r e s p e c t f u l l y
 6   w a i v e t h s o p p o r t u n i t y t o v i s i t w i t h you f u r t h e r .   Thank
 7   you.
 8                   C H A I R M A N HUCHSTETTER:         Thank y o u , M r . Matthews.
 9   They w i l      be a d m i t t e d i n t o the r e c o r d .
10   (WHEREUPON,        t h e p refiled comments o f SWEPCO was e n t e r e d
11   into t h e r e c o r d as follows.}
12
13
14
15
16
17
18
19
20
21
22
23
24
25

                                Bushman Court Reporting
                                        5U1.372.5115
                                      BEFORE THE
                      ARKANSAS PUBUC SERVICE COMMISSION
                                                                              F11, E D

IN THE MAlTER OF A NOTICE OF INQUIRY                       1
REGARDING A RULEMAKINO FOR                                 1    DOCKET NO. 06-0044
DEVELOPING AND IMPLEMENTING fNERGY                         1
EFFICIENCY PROGRAMS                                        1

                      SOUTHWESTERN ELECTWC POWER COMPANY
               INITIAL COMMENTS ON THE PROPOSED ENERGY EFFICIENCY
                                 GUIDELINES

                                      I. lntroductlon

         Southwestern Electric Power Company (WVEPCO" or 'Company*), an operating

subsidiary of American Electric Power Company, Inc. ("AEP), submits these initial

m m e n t s on the Energy Efkiency Guidelines (*Guidelines") proposed by the Arkansas
Public Service Commission ("APSC' or 'Commission") in its Order 1 filed November 6,

2006.

         In assessing the proposed Guidelines, it m s be recognized that Arkansas is still
                                                   uf
at the outset, although not the absolute beginning, of its overall energy efficiency

initiative.   In that context, the proposed Guidelines appear to be sufficiently

comprehensive, mering all of the required areas This is appropriate at this Initial stage
                                                                                              t
in the state's initlative.   By issuing more general guidelines such a5 these, the

Commission provides a great deal of flexibility to individual utilities in their approaches

and plans for energy eficiency, while still providhg adequate overall guidance regarding
required plan content, evaluation approaches, etc. Presumably, as experience is gained

with individual utility plans, proceedjngs and follwups. more detailed procedures may

become embodied in the overall process either by precedent or through the

development of revised rules and guidelines that take such experience into account




                                         Page 1
                                                                             .
        Of course, this more generaked approach may create additimal work for the

 Commission, its Staff and other parties, a8       each utlllty’s initial plans and related
 proceedings will likely vary somewhat, and contain some unique elements that must be

dealt with. The more general nature of the guldelines may also create some uncertainty
for utilities, as to how their initial plans, including cost recovery proposals, may be
received.

        On balance, it would seem that the flexibility offered by the Commission’s
approach at this stage is preferabfe to a higher degrw of specificity bslng prescribed
with lime direct experience to build on in developing that specificity.

    Given SWEPCO’s overall view of the proposed Guidelines expressed above,

SWEPCO has n major exceptions to the proposed Guidelines. Rather, the following
            o
comments are intended primarily to:

    I. Offer some revisions that, SWEPCO believes, will help to clarify the

        Commission’s intenf;

    2. Build in some additional flexibility in one or two areas, consistent with SWEPCO’S

       inlerpretatim of th@overall intent of these initial Guidelines; and

   3 Offer a few other revisions of a “housekeeping”nature.
    .



                         II. Smctfic Comments on Guidelines

SECTION 3: Definitions

       SWEPCO suggests the following revisions for certain definilions in order to

provide a clearer understanding o the terns as they are utllied in the Guidelines.
                                 f
Admjnfstratot-The current definition should be expanded to more fully encompass the

plan of programs to be administered. Therefore, it is recommended that the wording for

this definition be changed as follows (changes botded and italicized):




                                          Page 2
        "The entity responsible for creating and managing an energy efficiency
        progrem or portfolio ofpmgrams.'


 Deemed Savings    - The current definition reads,
        'A predetermined, validated estimate o energy and peak demand
                                             f
        savings attributable to an energy efiiaency measure in a particular type o
                                                                                 f
        application that a utility may use instead of energy and peak demand
        savings determined through measurement and verification activities."

SWEPCO suggests that this definition be expanded to more fully recognize how deemed

savings are calculated, what they fully represent, and how they should be reviewed and

revised periodically to be effective and useful:

       "Predetermined, validated estlmates          of energy and   peak demand
       savings attributable to particular energy efficiency measures, based upon
       engineering     calculatims,    baseline      studies   andlor   reasonable
       assumptions.      Such savings are generally those representing the
       difference balween standard     efflclency measures and energy efficient
       measures. Deemed savings values must be revised periodically to reflsd
       new technologies, new federal, state o local policies and codes."
                                             r


              -
lmplernenter The s e m d sentence of the definition recognizes that Irnplementers and

utilities may be the same entity. However, SWEPCO suggests that the definition be

expanded to mflact that Implementers, utilities and Administrators may all be the same
entity: Therefore, it is recommended that the wording of t i sentence be changed as
                                                          hs

follows (changes bolded and italicized):

       'An entity charged by a utility to deliver programs to customers.
       Implementem, Adminishim, and utilities may be the same entity, or
       related by a cotrad."




                                           Page 3
                                                                 I '




                                                                                             93'-
Prosram    - The current definition seems to encompass more of the components of a
"Program Plan" instead of just a program. In order to clarify between a 'plan" and a

"program", SWEPCO suggests hat some of the language from the definition of

*Program" be incorporated into the definition of "Program Plan": Therefore, it is

recommended that the wording of the definitions be changed as follows (changes bolded
and rtalicized):

        'Program     - A -articular                 energy efficiency sewice or set
        of services to a partiwlar target ppa n
                                             lo .
                                              i
                                           out -




       'Program Plan        -A
                            plan to deliver a porlfolio of energy emciency
       programs which indudes a set d benefWmsf test results, specific
       objectives that can be ovaluafed using quanM7able measures, and
       provisions to evaluate, monitor and ~m'fymsdts.'


                   - SWEPCO suggests that the period of the year be further defined. For
purposes o budgeting and reporting, a calendar p a r is highly preferable. Therefore, it
         f
is recommended that the wording of the definition be changed as follows (changes

bolded and italcized):                                                                              L




       'The year in which progmams are adrnlnistered and delivered. For the
       purposes of plannlng and reporting, a program year shall be
       considered a calendar year, January f through December 3


SECTION 4:          mlnlstrati
                                                                                       u

       The Commission recommends that although the utility retains the responsibility
for complying with the Guidelines, the Cornmission may designate an administrator

independent of the utilities. SWEPCO malntains that since the utility is to bear the cost,



                                          Page 4
                                                                                       '       98
the risk, and h e accountablllty for the Programs, the utility should play an active role in

deciding whom he administrator will be.




        The definition o 'Porffalio" encompasses an entire group of programs.
                        f

Furthermore, the definition     f
                                o 'Plan' encompasses the concept of a palfolio of
programs.     Therefore, the title of the W o n could be changed to "Plan Filing
Requirements."

Portfollo Description and Support -
       The itemiration of actions to be included in a portfotio seem to be more Indicative

of those that should be included in a "Plan." Therefore, it is recommended that the
wording for this seclion be changed as follows (changes bolded and italicized):

       'Each Plan filing shall address the following:
                     Demonstration that the scope of pFograms smes all customer
                     cI sses
                      a
                     Plan benefrtlcost analysls listing total costs and benefits,
                     tnduding expected savings goals for the portfoiio o f p m p m s
                     Cost Recovery Proposal
                     Any additional supporting information the administrator may
                     propose                                                                        c


Proaram Oescriotlon and S U D D O ~

       Within Section 5 is a subsection reparding Deemed Savings. The utilization of
Deemed Savings should be Included as a part of any program description and the

reporting thereof.     Therefore, It is suggested that the subsection 'Deemed Savings

Estimates' be deleted and a bullet be inserted next to last in the itemized listing of what
a program should address. A suggested wording for this bullet is provided:




                                           Page 5
        "estimated energy and peak demand savings and the basis for these
        savings estimates, which may include Deemed Savings."


 The last bullet ofthe list notes that "any addltlonal analyses the utility may propose" may

 be included. It is suggested that the word "utility"be changed to "Administrator"to more

accurately reflect who is responsible    for developing the support documentation. As
previously noted, the Administrator may also be the utility.



Uniformihr of Proarams

        I! is recommended that the last sentence o this subsection be reworded to more
                                                 f
strongly reflect that fuel switching and load building are prohibited, which changes are In
concert with the Arkansas Attorney General's previously submitted comments as well.
The recommended revision is to delete the last sentence and substitute it with the

following;

       "Fuel switching and load building programs shall not be included as
       energy efficiency pragmams."


Deemed Savfnas Estirnates

       As suggested earlier, this sectlw, should be deleted and included as a bullet Item
in the 'Program Description and Suppod" section.                                               c




Customer InEenttves

        Ths section states that the costs o incentives are to be considered in the
                                           f

benefitloost testing of programs. However, it is the incentive that is to be a part of the
testing, while the msts should be considered as a direct program cost for recovery

purposes.    Therefore,it is recommended that the third paragraph of t i section should
                                                                      hs

be reworded as follows(changes M d e d and Italicized):



                                         Page 6
         'All customer W n m n t i v e s shall be wnsidered In the benefitlcost
         testing of programs. Costs of incentives shall be considered a direct
         progmm codm


PIlot Pronrams

         Pilot programs can be an important initial sfep in the development of

comprehensive energy efficiency programs. Therefore, it is      important that the recovery
of these wsts i provided for i the Guidelines. In order to dady the ability to recover
              s              n
these costs, it is recommended that the following sentence be added to this subsectlon:

        "All costs for pilot programs shall be considered eligible for cost recovery."


y
        The remmmended economic evaluatfon approach, embodied in the model

referenced in Attachment A, uses       an evaluation period of ten years, regardless of
measure life. (It uses an "annualition" approach to account for the differences in

measure lives.) The fotlowing suggested revision acknowledges this, while allowing for

optimal evaluation perids squat to (1) ten years, (2)the life o the measure, or (3)
                                                              f
fifteen years (gas utillties only).

         "A utility shall use an evaluation period of either ten years (a gas utility
                                                                                                L


        may use an evaluation period of f h n years), or the actual measure

        lives for each measure in a program to evaluate a program o program
                                                                   r
        portfolio."



SECTION 7: Cost Recoveq

        It is imperative for utllities to have the assurance that costs for energy efficiency

programs are recovered. As noted in t h e Guidelines, cost remvery is to be in

accordance with Ark. Code Ann. 523-3401etseq, which states that a utility "be allowed

                                          Page 7
 to increase its rates or charges as necessary to recover any costs incurred by the public

 utility company as a result of its engaging in any   such program or measure" (Ark. C d e
 Ann. 523-3405(3)). The Guidelines state (page 11) that cost recovery is limlted to

 incremental costs only.      Discussion was lively during the collaborative regarding

 incentives and lost revenues. The Guidelines do not seem to provide for the sure

 mavery of additional costs in the future, such as lost revenues or incentives. In order
to be consistent with the flexibaity afforded throughout the document, it is recommended

that a provkion be added which allows a utllity to seek additional cost recovery. The

following provides suggested revisions to this section. (changes bolded and italicized):

        "Cost recovey of conservation and energy efficiency programs shall be in
       accordance with the provisions of Ark. Code Ann. 523-3401 et seq.
       Cost recovery shall include all                      incremental costs which
       repsent the direct program costs that are not already included in the
       then current rates of the utility. The utility may propose other elements
        f r recowory that are considered justified and for which such
         o
       justincation may be prowlded.


       A u!My may request cost recovery through a surcharge or rider. If a utility
       requests cot recovery fhrough a surcharge or rider. the cost recovery
       through that   mechanism shall Include all b&We&+h              incremental
       costs of providing the program that are not already included i the then
                                                                     n
       current rates ofthe utility.


       A utility may request that all cos& from approved program budgets be
       reflected in the rider."


SECTION 8 Froaram Plans

       The Commission bas correctly noted that there should be a start-up period prior

to the implementation of a full energy efficiency program. However, this section is

somewhal confusing in its explanation of the transition period and its development into

                                         Page 8
                                                                                        io2
                                     s
the comprehensive program period. It I therefore suggested that the two time periods

be dellneated in this section. A suggested rewording of h i s section is as follows:

       Secton 8: Program Plans

       Program plans shall coyer at least one year and may cover up to three
       years.


       All programs filed by gas and electric     utilities should be consistent and
       should be fuel neutral, Le., should not encourage fuel switching as a
       primaty purpose.


       Program plans shall reflect the effects o all energy efficiency p r q a m s in
                                               f
       the electric resource plans OT natural gas procurement plans of the
       electric and natural gas utilities respectively. Furthermore, all energy
       efficiency programs shall be consistent with each utility's current electric
       resource plans o natural gas procurement plans.
                       r

       Inttial Plan FilinaS
      The initial filings of energy efficiency programs, will cover program years
      2007 - 2009. (Program year 2007 will be a pattial calendar year, while
      2008 and 2009 will be full calendar years.) They should inltially include
      energy efficiency measurns that can be implemented on 8 relatively
      'quick start andlor pilot" bassis. The quick start nature of the programs is
      based on the procedural schedule contemplated by Commission Order                       c


                                                on
      No. 10 issued in Docket No. 06-004-R September 5, 2006. The initial
      program should be limited in nature in order to enable implementation in
      the 2007 program year. Proposed "quick start" or pilot programs for
      program year 2007 shall be filed not later than April 1,2007 with review to
      be completed and tmplemntation to occur not later than September 1.
      2007.


      Electric and gas utitities should file energy eficiency programs choosing
      individual programs from within the following generaf list d Initial Program
      Categories:

                                         Page 9
        [List of tnitial Program Categories]


        All programs filed from the above categwy list should have a high
        probability of providing ratepayer benefits to the majority of customers.
        Program plans for program years 2008 and 2009 may contain additional
        programs beyond those induded in the above cabgory list.

        Qmnrehensive Plan Filinns
        Beginning April 1, 2009, each electric and gas utility shall file a
        comprehensive set o program plans (for program years 2010 and later)
                          f
        unless administration o programs has been previously delegated by the
                              f
       Commlsslon. in which case each administrator shall flle a comprehensive
       set of program plans by that date.


       The programs proposed may continue to Include, but are not limited to,
       the 'quick   sa t andlor pilot" programs contained in the List of Inltlal
                     tr
       Program Categories.


                                      111. Conclusjgg

       SWEPCO appmiates the opportunity to provide these initial comments on tha

Energy Emciency Guidelines and is committed to successful implementation of a

meaningful prqram plan in Arkansas that is beneficial t all parties involved.
                                                       o                              I-



                                               Respty#ully submitted




                                               %        tern Electrlc Power Company
                                               By: David R. Matthew, Its Attorney
                                               Arkansas Bar No. 76072
                                               Matthews, Campbell, Rhoads, MeClure
                                               Thompson & Ftyauf. P.A.
                                               119 South Second Street
                                               Rogers, Arkansas 72756
                                               (479) 636-0875




                                         Page 10
                                                                                                     I04
                                      CERTIFICATE OF SERVICE

              I, David R. Ma ews, attorney for Southwestern Elsctrlc Power Company, state that t have on
       this    7
              $-  day of     /gc6u4cc        , 2006, provided a true and correct copy of the above and
       foregoing instrument to all attorneys of records, either eleptrPflically OF in the United States mail,
       postage prepaid.




                                      Susan E. D’Auteuil                       Lawrence E. Chisenhall, Jr,
Robert M. Lflord                      APSC Genaral Staff                       Arkansas Oklahoma Gas Corp.
Arkansas Electrle Co-op.              1000 Center Street                       2840 Regions Center
One Coopmratlve Way                   P.O. Box 490                             400 West Capktol
Llttle Rock, AR 7221 94208            LiMte Rock, AR 722034400                 Little Rock, AR 72201

                                       William H Peters
                                                .                             Terrl Gallup
Mlehael J. Callan                      Arkansas Valley Elecbic Co-op.
Arkansas Oklahoma Gas Corp.                                                   SWEPCO
                                       1811 W. Commercial Streit              P.0. Box 204
P.O. Box 17004                         P.O. Box 47
Fort Smith, AR 72991-7004                                                     Tulsa, OK 84102-0201
                                       mark, AR 72949

Rlcky Gunfer                           Ronald S. Moore
                                                                               Loll L. Burrows
Arkansas Western Gar Company           Ashley Chlcot EIectTIc Coop.            Attorney General of Arkansas
1901 Sain !3reet                       307 E. Jeffersan
                                                                               323 Center St., Suite 200
P.O. Box 93288                         P.O. Box 43f
                                                                               Llttle Rock, AR 72201
Fayetteville, AR 72703-1263            Hamburg, AR 71648
                                       Don Smothers                            Kenny Henderson
W. H. Frinell                          Carroll EIPCfric Cooperative Corp.
C & L Electric Ccopedvm Cow.                                                   CenterPoint Energy Arkla
                                       120 Hwy 62 Spur
900 Church Street
                                       P.O. Box 4000                           407 W, CapltoI, Ste IO2
Star City, AR 71667                                                            P.O. Box 751
                                       Berryville, AR 72618-4000
                                                                               Uttle Rock, AR 72203

                                       Delwood Brett                          Wayne Honeycutt
Harry Hamlin
                                       Clay County Eketrlc Co-op              Craighead ElMtn’c Co-op
Clay County Electric Coop              Highway 67 North                       4314 Stadium Blvd.
425 W. Capitol, Suite 1800
                                       P O BOK
                                        ..    459                             P.O. BOX7503
Little Rock, AR 72201                                                         Jonesboro. AR 72403-7503
                                       Corning, AR 724220458

Steve Strickland                       Gene Sweat                              Don Crabbe
Entergy Arkansas. Inc.                 Fanners Ele&c Co-op                     First Electrlc Co-op
425 W. Capitol                         300 Hwy 367 North                       lo00 S. JP Wright Loop Road
P.O. o x 551
    B                                  P.O. Box 708                            P.0. BPI[ 5018
Lltfle Rock. AR    7220q               Newport, AR 72112                       Jaeksonvllie. AR 72076-5018




                                                     Pagc I: I
Ross Rogers                         Lsrry Hellurns                   e
                                                                    M1 Coleman
Logan Township Gas Users Assoe.     YlsdssIppi Ca. Electric Co-op   North Arkansas electric Co-op
1815f ljwy IO9 North                P.0. box 7                      P.O. Box 1000
Scranton, AR 72863                  Blythrvllle, A 723154007
                                                  R                 Sdem, AR 72576


                                     Mark C a p                     MItehell Johnson
Rob Ratley                           OuachIta Electric Coop
Oklahoma Gas & Electrk Company                                      Oxarks Electric Co-op
                                         Brsd,ey ferrybad           P.O. Box 848
P.O. Box 1058                        P.O. Box 877
Fort Smith, AR 729014058                                            Faye#evllte, AR 727024848
                                     Camden, AR 71711-0877


Davld Fugitt                         Leon Phllpot                   BlIl Conlne
Petit Jean Electric C o o p          Rlch Mountaln Eiedrlc Co-op    South Central Arkansas Electric
P.O. Box 37                          515 Janssen Avenue             P.O. BOK 476
Clinton, A R 72031-0037              Men& AR 71953-3265             Arkadelphia, AR 71923-0476


                                                                    David W. Gibson
C. Wayne Wtritrker                    Efirabetb D. Stephens         Empire District Electric Company
Southwest Arkansas Electric Co-op     SWEPCO                        602 Joplln
P.O. Box f807                       . P.O.Box21106
                                                                    P.O. Box 127
Texarkana, AR 7755044807              Shrweport, LA 71156-OOOI      Jopiln, M U 64802


BiHy C. Martin, ill
Woodruff Electrlc Co-op
P.O. Box 1619
Forrest Clty, AR 72335-1619




                                                                                                       i




                                                  Page 12
                                      BEFORE THE
                     ARKANSAS PUBLIC SERVICE COMMISSION
                                                                        < - I :

                                                                        ?E        ED

 IN THE MATTER OF A NOTICE OF INQUIRY                      1
 REGARDING A RULEMAKING FOR                                1     DOCKET WO. 06-004-R
 DEVELOPING AND IMPLIiMENTING ENERGY                       1
 EFFICIENCY PROGRAMS                                       1


                   SOUTHWESTERN ELECTRIC POWER COMPANY
              REPLY COMMENTS ON THE PROPOSED ENERGY EFFICIENCY
                              GUIDELf NES


        Southwestern Electric Power Company rSWEPCO” or ‘Company”), an operating

subsidiary of American Electric Power Company. Inc. (“AEP”), submits these Reply

Comments to the initial Comments regarding the proposed Energy Efficiency Guidelines

(Guidelines”) submitted by the various parties to the docket on November 21,2006.

       Many of the opinions and suggeslions presented           n
                                                               i the Initial Comments of
vatlous parties appear to be restatements or enhancements of previously stated

opinions. The comments also include a few original opinions, as well as items related to

clarifying the draft guidelines. While SWEPCO does not agree with or support many of

the resfated arguments presented by other parties, we are of the opinion that we have

sufficiently presented our position in writing and also in person at the many collaborative
                            t
meetings. SWEPCO put forth Is initial position on many of the Issues addressed by the

various parhes in our filing made March 24, 2006,further clarified certain opinions in our

Initial Response to Attachment A made October 24, 2006, and further reinforced         our
position in our Initial Comments regarding the proposed Energy Efficiency Guidelines

filed November 17, 2006. Therefore, we do not see     the need to state our position, once

again, in the form of Reply Comments. We will be available to provide clarification of




                                         Page 1
                                                                                              8
our position, should it be needed by the Commission or others, at the hearlng to be held

December 13,2006.

                                           R e s p e c p submitted




                                           Southwesw Electric Power Company
                                           By: David R . Matthew, Its Attorney
                                           Arkansas Bar No. 76072
                                           Matthews, Campbell, Rhoads, McClure
                                           Thompson & Fryauf, P.A
                                           1 19 South Second Street
                                           Rogers, Arkansas 72756
                                           (479) 636-0875




                                       Page 2
                                                                                                      108           *   ?




                                            CERTIFJCATE OF SERVICE

                     f, David R. Matfhews, atlorney for Southwestern Electric Power Company, state that I have on
             this 5th day of December, 2006, provided a true and correct copy of the above and foregoing
             instrument to all attorneys of records, either slectronicaiy or in the United States mail, postage
            prepaid.




     Roberi M. lyford                      Susan E. D’Auteull                      Lawrence E. Chisenhall, Jr.
     Arkansas Electric Co-op.              APSC General Staff                      Arkansas Oklahoma Gas Gorp,
     One Cooperative Way                   1000 Cenfer Street                      2840 Reglons Center
     Little Rock, AR 7221WZO8              P.O. Box 400                            400 West Capitol
.
                                           Little Rock, AR 722034400               Llttle Rock, AR 72201

     Michael J. Callan                      William H. Peters
                                            Arkansas Valley Electric Coop.        Terri Gallup
     Arkansas Oklahoma Gas Carp.                                                  SWEPCO
     P.O. Box 17004                         I811 W.CornmefclalStreet
                                            P.O. Box 47                           P.O. Box 201
     Fort Smith, Af2 72917-7004                                                   Tulsa, OK 84102-0201
                                            Orark, AR 72949

     Ricky Gunter                           Ronald 8. Moore
     Arkansas Western Gas Company           Ashley Chicot Electric Coep.           Lori L. Burrows
     I001 Sain Street                       307 E. Jefferson                       Attorney General of Arkansas
     P.O. Box 13288                         P.0.Box 43t                            323 Center St., Sulte 200
     Fayetteville, AR 72703-1288            Hamburg, AR 71646                      Little Rock, AR 72201

    W. H.Frluell                           Don Smofhers
                                           Carrol?Electric Cooperatlve Cow.        Kenny Hendetson
    C & L Electric Cooprratlve Corp.                                               CenterPoint Energy Arkla
    900 Church Street                      920 Hwy 62 Spur
                                           P.O. BOX Qoao                          401 W. Capitol, Ste 102
    Star City, AR 71667                                                           P.O. Box 751
                                           Berryvlf le, AR 72616-4000
                                                                                  Llttls Rock, AR 72203

    Harry Hamlin                           Derwood Brett                         Wayne Honeycutt
    Clay County Eleetrlc C o o p           Clay County Electric Co-op            Craighead Electric Co-op
    425 W. Capitol, Suite I800             Htghway 87 North                      4314 Stadium Blvd.
    Little Rock, AR 72201                  P.O. Box 459                          P.O. Box 7503
                                           Corning, AR 724220458                 Jonesbora, AR 72403-7503
    Steve Strickland                       Gene Sweat                             Don Crabbe
    Entetgy Arkansas, Inc.                 Farmers Electric Co-op                 First Electric Co-op
    425 W. Capitol                         300 Hwy 367 North                      1000 S. JP Wright Loop Road
    P.O. Box 551                           P.O. Bux 708                           P.O. Bux 5018
    Little Rock, AR 72201                  NBWpOCt, AR 72112                      Jacksonville, AR 72076-5038




                                                         Page 3
Ross Rogers                         Larry Hellums                   Me1 Coleman
Logan Township Gas Users Assoc.     Mlssisrippl Co,Electric Co-op   North Arkansas electric Coop
1 ~ 5 ~ w 10s M O ~
      1    y                        P.Q. Box 7                      P.0. Box 1000
Scranton, AR 72863                  Blythovllle, AR 72315-0007      Salem, AR 72576


                                    Mark Cayce                      Mftchell Johnson
Rob Ratley
                                    Ouachita Eledrlc Co-op          Ozarks Electric Co-op
Oktahoma Gas & Electric Company
                                        Brad,ey Ferry               P.O. Bow 848
P.O. Box 1058                       P.O. BOX 877
Fort Smith, AR 72904-1058                                           Fayetteville, AR 72102-0848
                                    Camden, AR 71711-0877


Davld Fugitt                        Leon Philpot                    Bill Conlne
Petit Jean Electric Co-op           Rlch Mountain Electrk C o a p   South Central Arkansas Electric
P.O. Box 37                         51s Jansoen Avenue              P.O. Box 476
Clinton, AR 720314037               Mena, AR If9535265              Arkadelphia, AR 719236476

                                                                    Davld W. Glbson
C. Wayne Whltaker                   Elizabeth D. Stephens           Empire District Electric Company
Southwest Arkansas Electric Co-op   SWEPCO                          602Joplln
P.O. Box 1807                       P.O. Box 21106                  P.0. Box 127
Texarkana, AR 775584.4807           Shsveport, LA 71156-0001
                                                                    Japlin, MO 64802

Billy C, MaAn, 111
Woodruff Electric Co-op
P.0, Box 1679
Fornest City, AR 72335-7 9
                        61




                                                  Page 4
                                                                             110


 1                  CHAIRMAN HOCHSTETTER:             OG&E and Empire
 2   District.
 3                  MR. CHISENHALL:             Madam Chairman, members of t h e
 4   commi s s i o n , OG&E and Empi r e 1i k e w i s e w a i v e o p e n i ng
 5   comments and would have i n t r o d u c e d the i n i t i a l and r e p l y
 6   c o m m e n t s o f OG&E a n d E m p i r e .
 7                  CHAIRMAN       HOCHSTETTER:       Thank you.      They   will be
 8   admitted i n t o t h e record.
 9   (WHEREUPON,        t h e p r e f i l e d comments o f OG&E and EMPIRE was
10   e n t e r e d i n t o t h e r e c o r d as follows.)
11
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                               Buskman Court R e p o r t i n g
                                        501.372.5115
                                  BEFORE THE
                         ARKANSAS PUBLIC SERVICE COMMISSION

IN THE MATTER OF A NOTICE OF INQUIRY                 1
REGARDING A RULEMAKING FOR                               DOCKET NO. 06-004-R
DEVELOPING AND IMPLEMENTING ENERGY                   1
EFFICIENCY PROGRAMS                                  1

             OKLAHOMA GAS A N D ELECTRIC COMPANY
   RESPONSE TO ARKANSAS ENERGY EFFICIENCY NOTICE OF INQUIRY


    Pursuant to the Arkansas Public Service Commission’s (“Commission”)

 November 6,2006 order in Docket No. 06-004-R (Order No. 11), Oklahoma Gas

 and Electric Company (“OG&E”) hereby submits initial comments on Proposed
 Energy Efficiency Guidelines (EEGs), attachment A to Order No. 11.

        Section 2: Goals of Enerqy Efficiency Programs:

 In section two (Attachment A) the Commission highlights specific goals a utility
 should address. The Company notes that the benefits of temporary peak
 demand reduction programs (i.e. a load curtailment program) is absent. Where it
 is conceivable this type of program was anticipated in the catch all “Any other
 criteria not listed above.”The Company believes the addition of a specific listing
 (Temporary peak demand reduction) would help clarify certain aspects of the list
 of desired goals.

        Section 3: Definitions

 In section three (Attachment A) the Commission sets forth certain definitions
 including one for Demand Response. The definition begins “Changes in electric
 use by end use customers . .. ” The Company believes demand response is a
 program that may be used by all utilities. Therefore, the Company believes the
 beginning portion of the definition should read “Changes in energy use by end
 use customers . . . ”

        Section 5: Portfolio and Program Filing Requirements

 In section five (Attachment A, page 7) the Commission begins to identify how
 deemed savings estimates may be applied during program filing. The Company
 has a strong preference for the deemed savings approach. The Company is



                                         1
                                                                           112
concerned that the requirement of extensive measurement to verify actual
savings may be cost prohibitive.

The Company believes t h e section “Deemed Savings Estimates” (page 7), needs
io be changed to state ....

“Deemed savings approved by the Commission prior to plan implementation,
should be used as part of the evaluation process. Program administrators are
encouraged to implement a deemed savings approach, wherever possible, to
minimize program costs.” By minimizing these program costs, the Company
believes more programs will pass the applicable benefit 1 cost test.

       Section 6: BenefitlCost Tests

In section six (Attachment A) the Commission presents table 1, (Cost-
EffectivenessTests with Primary and Secondary Means of Expressing Test
Result). In each of the tests, net present value (NPV) is listed as a primary cost-
effectivenesstest, as well as most of the secondary tests. An integral part of any
NPV is the discount (or hurdle) rate applied to the stream of time-differentiated
savings and costs. The Company believes a certain amount of direction from the
Commission at this juncture is needed to ensure uniform filing now and in the
future.

The Company believes the Commission should include a standard discount rate
recommendation that can be tied to the then current economic environment. For
example, t h e Commission could recommend that benefit I cost streams should
be discounted at the then current average 1 year U S Treasury Note yield as
publish in the Wall Street Journal on the first business day of January for the
current year. Other similar measure rnig ht include:
   1. 10 year treasury yields
   2. Consumer Price Index
   3. APSC prescribed discount rate set for all utilities each year.

The Company appreciates the Commissions foresightedness in allowing the
flexibility of using t h e Economic Evaluation Model {provided) or an approved
model of our own. Additionally, the Company appreciates the ability to use t h e
actual measured lives for each measure in a program instead of a rigid average
measure life of I O years.

      Section 7: Cost Recovery

In section seven (Attachment A) the Commission states, “Cost recovery shall be
limited to the incremental costs which represent t h e direct program costs that are
not already included in the then current rates of the utility.” The statements
appear to preclude utilities from evaluating and requesting recovery of any non-
fuel base revenues erosion by the Company as a result of its energy efficiency


                                         2
                                                                         113
activities. Such non-fuel base revenues were anticipated during previous rate
proceedings by all parties.

The Company believes t h e Commission should allow recovery of non-fuel base
revenue. Recovery can be proposed in the annual reporting process detailed in
Section nine (Attachment A} during the reconciliation of each program’s
surcharge.

As an alternative to direct recovery of non-fuel base revenues, the Company
believes utilities could receive incentives for achieving reduced energy sales
targets through the use of shared savings mechanisms such as performance-
based contracting. A shared savings mechanism can be evaluated during a
programs initial review and annually there after to ensure reasonableness.

The Company is concerned that reducing consumption through this Energy
Efficiency process will harm the Company by not allowing OG8E to fully recover
the embedded costs of providing service to customers. However, thk Company
believes it to be prudent to create checks and balances that will allow the
Commission to study lost non-fuel revenue recovery and all shared savings
mechanisms.


      Section 7: Cost Recovery
The Company notes that: Paragraph 4 (Section 7: Cost Recovery section) reads
- “Demand response programs that involve rates (e.g. interruptible service,
curtailment, off-peak service, time of use rates) shall not be included in any
surcharge or rider. The rates for those mechanisms will be established through
utility-specific rate or tariff proceedings.” The Company agrees with this
statement insofar as the approved tariffs or riders include a periodic revenue
true-up mechanism. However, if a periodic revenue true-up mechanism is not
contemplated by the Cornmission, then t h e Company takes exception to the
highlighted portion of the proposed rule.


      Section 8: Proqram Plans

The Company is concerned with the timehe proposed by t h e Commission for
“Quick Start” programs. If programs are filed on April 1, the proposed default
implementation of September 7 is less than the 180 days allowed for
Commission approvat. Additionally, the Company believes it is unrealistic to
require implementation of these programs immediately following approval. If the
Commission approves program plans intact and unchanged, some time will b e
required to put in place organizational reassignments not possible prior to
receiving the required Commission approvals. This is in addition to finalizing and
producing program collateral materials, communicating program procedural



                                        3
                                                                           lid
guidelines and rolling out programs to field delivery organizations. If the
Commission approves filed program plans with revisions or by other means
alters program implementation plan milestones, additional time may be required.
In addition, the Company would like to clarify that the program plans will most
likely include implementation activities occurring over a period of time.

The Company would tike to make the following changes to the “List of Initial
Program Categories” (page 12, Attachment A).
        Delete Commercial and industrial process improvement program (and its
               description).
        Add Commercial and industrial prescriptive incentive programs
                 these programs offer a fixed-dollar incentive for multiple defined
                 prescriptive measures (Le. lighting, HVAC replacements,
                 occupancy sensors, motors, etc).
The Company believes process improvements can not be implemented
effectively within the “Quick Start” timeframe. However, prescriptive programs
have been demonstrated to achieve the desired results within relatively short
tirneframes.

This concludes Oklahoma Gas and Electrics comments to the Commission for
the referenced order.


                                   Respecffu Ily submitted,

                                  CHISENHALL, NESTRUD & JULIAN, P.A.
                                  2840 Regions Center
                                  400 West Capitol Avenue
                                  Little Rock, Arkansas 72201
                                  (50I) 372-5800
                                                                  4




                                                              d


                                          Ladre &e E. Chisenhall, JL, (#74023)
                                               7                      Y




                                  ATTORNEYS FOR OKLAHOMA GAS AND
                                  ELECTRIC COMPANY

                          CERTIFICATE O SERVICE
                                       F
        I, Lawrence E. Chisenhall, Jr., do hereby certify that I have served a copy
of the foregoing instrument upon the parties of record via U.S. Mail, postage
prepaid, this        of November, 2006.
                                    ..-




                                          4
                               BEFORE THE                                         115
                      ARKANSAS PUBLIC SERVICE            COMMISSION~OQ~   DEI: -5 A 1: 01
                                                                                     0

IN THE MATTER OF A NOTICE OF INQUIRY                1
                                                                          FILED
REGARDING A RULEMAKING FOR                          1       DOCKET NO. 06-004-R
DEVELOPING AND IMPLEMENTING ENERGY                  1
EFFICIENCY PROGRAMS                                  1

    REPLY COMMENTS OF OKLAHOMA GAS AND ELECTRIC COMPANY
        TO ARKANSAS ENERGY EFFICIENCY NOTICE OF INQUlRY

    Pursuant to the Arkansas Public Service Commission’s (“Commission”)

 August 8,2006 order in Docket No. 06-004-R (Order No. 6),Oklahoma Gas and

 Electric Company (“OG&E”) submits its Reply Comments to comments provided

                                                             attached-to Order
 by other parties to the Energy Efficiency Guidelines (“EGGS”)

 No. 11.


 Section 4: Administration and Implementation of Eneray Efficiency
 Proq rams

       Utilities Not Responsible for Eneray Efficiency RuIe Compliance if a

       3rdParty Administrator is Used

       The Company agrees with Centerpoint Energy, p. 4, in that a utility can

       not be held responsible for complying with Energy Efficiency rules if an

       independent administrator is in charge of administration.


 Section 5: Portfofio and Proqram Filinq Requirements

       Fuel Neutral




                                         1
                                                                              116
      The Company takes issue with the comments made by Arkansas
      Western Gas under the heading of “Strategic Direction’’ (pp. 3-7, Exhibit

      C-E). It is unfortunate that the business case for natural gas is stressed.

      However, the economics of rising gas prices have resulted in reduced

      demand as would be expected. To use the Energy Efficiency Guidelines

      to encourage increased natural gas usage at a time of increasingly volatile

      gas prices is inappropriate, would seem to constitute fuel switching, and

      could potentially increase consumers’ costs. The Company believes that

      education materials and rebates should be available for high efficiency
      geothermal heating and cooling systems, dual-fuel heat pump systems

      that meet DOE’SEnergy Star standards as well as high efficiency air

      conditioners and gas furnaces. This would allow customers to make

      decisions based on their individual preferences, circumstances, and

      econornics.

Section 6: BenefitlCost Test

      Commission Approved Measured Life

      The Attorney General recommends that the language regarding measure

      lives be modified to state “...the lOUs shall use the actual measure lives

      for each measure in a program not to exceed fen years for electric
      utility...programs.” The Company agrees that the actual measured life

      approved by the Commission should be used, but disagrees with

      artificially limiting measure lives to ten years. The following Table is taken

     from the California Energy Commission’s Database for Energy Efficient




                                         2
                                                                                        fi7
                                                   and reflects energy
      Resources (DEER) Version 2-01 October 26,2005,

     efficiency measure Estimate Useful Life (EUL).



     Table 3.1 Updated DEER Measure Lifetimes

                               Measure Description           I   Sector   1       EUL
      AIC Central. e65 k   m   . & k u t - S Y S m PKB       I    C   1       1    5




      C-Commercial, /-Industrial,R-Residential, A-Agriculture, NC-Ne w Consfruction

     As shown above, many energy efficiency measures have estimated useful

      lives significantly greater than ten years.

Section 7: Cost Recovery

     Concurrent Cost Recovery




                                                         3
                                                                            118
     The Attorney General recommends that cost recovery should be altowed

     after an independent entity uses EM&V procedures to ensure programs

     resulted in cost effective energyldemand reductions (p. 6). Such a means

     of recovering costs places the utility at risk of not being able to recover

     costs and as such this means of recovering costs is contrary to the Energy

     Conservation Endorsement Act which requires programs to be beneficial

     to utilities.


Section 8: Proqram Plans

     Quick Start Proqrams

     Arkansas Western Gas mentions (p.2)“only two quick start programs

     should be approved by the commission... ” The Company desires to

     reinforce the Commission’s belief that other programs, not just Severely

     Energy Inefficient Housing Program and Education, could be offered.

     Deemed Savinq Estimates Required Prior to Filing Enerqy Efficiency

     Proaram Plans

     The Company agrees with an excellent point made by Arkansas Western

     Gas (p. I ) and Arkansas Electric Energy Consumers and Arkansas Gas

     Consumers (p.7) that deemed savings need to be approved and provided

     to utilities well in advance of any utility program filing deadlines. The

     Company is concerned that appropriate deemed savings values may not

     be available for quick start or other programs. Therefore, the Company

     reserves the right to propose additional deemed savings for approval.

     Implementation Deadlines



                                        4
                                                                            I19
      Arkansas Western Gas suggests that comprehensive programs could be

      filed by October I,                              2008 (p. 2).
                        2007 and implemented by April I,

      Although many programs could be implemented 6 months after a filing,

      the Company feels strongly that each program should be treated

       independently. Some complex programs may not be able to be

      implemented within 6 months. It is more appropriate to provide a unique

      implementation timeline for each program when it is filed

                                   Respectfully submitted,

                                   CHISENHALL, NESTRUD & JULIAN, P.A.
                                   2840 Regions Center
                                   400 West Capitol Avenue
                                   Little Rock, Arkansas 72201
                                   (50A ) 372-5800



                                   by: 1
                                                    E. Chisenhdll, Jr., (#74023)

                                   ATTORNEYgFOR OKLAHOMA GAS AND
                                   ELECTRIC COMPANY



                          CERTfFlCATE OF SERVICE

        I, Lawrence E. Chisenhall, Jr., do hereby certify that I have served a copy
of the foregoing instrument upon the parties of record via U.S. Mail, postage
prepaid, this %f of December, 2006.




                                           5
                                                                           c
IN THE MAlTER OF A NOTICE OF INQUIRY                           1
                                                                         i7LED
                                                                         T f


REGARDING A RULEMAKING FOR                                     )     DOCKET NO. 06-004-R
DEVELOPiNG AND IMPLEMENTING ENERGY                             1
EFFICIENCY PROGRAMS                                            1

                   THE EMPIRE DISTRICT ELECTRIC COMPANY’S
                       INITIAL COMMENTS TO ORD€R NO. I 1

         The Commission is seeking Initial Comments on the proposed Energy Efficiency

 Guidelines (“EEGs”)as set forth in Attachment A to Order No. 11. The Empire District Electric

 Company reserves its right to comment or its right to challenge the economic evaluation model

 referenced in Attachment A to Attachment A of Order No. 11 since the document has not been
 made available for review and has been made a part of the Rules for Conservation and Energy

 Efficiency Programs by its reference in Section 6: BenefiVCosts Test.


                                         Respecffully submitted,

                                         CHISENHALL, NESTRUD & JULIAN,                P.A.
                                         2840 Regions Center
                                         400 West Capitol Avenue
                                         Little Rock, Arkansas 72201
                                         (501) 372-5800




                                         APTORNdYS FOR THE EMPIRE DISTRICT
                                         ELECTRIC COMPANY




                                                1

				
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