Agenda Date: March 29, 2000 Item Numbers: Dockets: UE-000302 and UE-970686 Company Name: Puget Sound Energy (PSE) Staff: Joelle Steward, Policy Research Specialist, Energy Doug Kilpatrick, Electric Industry Coordinator Recommendation: Permit the tariff revisions filed in Docket UE-000302 to become effective April 1, 2000 and order the Company to file, in Docket UE-970686, semi-annual reports within 45 days of the end of the second and fourth quarters. Background: The purpose of this filing is to incorporate the annual adjustments to PSE’s Electricity Conservation Service Rider, Schedule 120. This filing is in compliance with the Commission’s order in Docket UE-970686, which states: The rate set forth in Schedule 120 shall be subject to revision effective April 1 of each year to reflect (a) PSE’s projected expenditures under its Schedule 83...for the then-current calendar year, and (b) the variance between actual electricity conservation expenditures for the previous calendar year and expected revenue collections under Schedule 120 during the 12-month recovery period ending March 31 of the then current year. An estimated $7,089,290 will be collected from the conservation rider during the period of April 1, 1999 to March 31, 2000 (February and March 2000 are forecasted recoveries). Total conservation spending in 1999 was $4,579,710. Factoring in an undercollection of $198,990 in 1998, the estimated overcollection for 1999 is $2,310,590. Therefore to serve the 2000 DSM budget of $6,919,417, this projected overcollection is subtracted from the amount needed to be recovered in the tariff. As a result, this filing proposes a slight decrease in customer rates. For instance, the conservation rider rate for residential customers will decrease from 0.039 cents per kWh to 0.024 cents per kWh, or $0.36 on an average customer’s monthly bill. Considerations: Intimately tied to the tariff rider that collects funds for conservation programs is the effectiveness of the program implementation and the kilowatt-hour savings achieved with the rider dollars. While Staff concludes that based on the accounting order in the original application the true up in this filing is appropriate, we are concerned that PSE is not meeting its savings targets and is generally undercommitting itself to conservation. Dockets UE-000302 and UE-970686 March 29, 2000 Page 1 Last year was the first year of PSE’s three-year conservation plan that has an energy savings goal of 18 aMW, of which 5 aMW were targeted for 1999. The 1999 investment in conservation was expected to nearly double that of 1998, which was $5.5 million. Of the 19 electric conservation programs in the tariff, five were new and several of the on-going programs received modifications. Filed concurrently with the adjustment in this filing was PSE’s Annual Report of DSM Programs Recovered Through the Electric Rider and Gas Tracker in Calendar Year 1999, which was filed under Docket No. UE-970686. This report details program delivery, expenditures, and energy savings. Last year, PSE achieved only 3.5 aMW of its targeted 5 aMW Energy saving resulting from PSE’s participation in the Northwest Energy Efficiency Alliance (NEEA) are not included in these numbers. A conservative estimate of these savings is 4,923,000 kWh. PSE contributed $2,523,219 to NEEA in 1999.. Some programs, such as Residential Energy Efficiency Services, Compact Fluorescent Lighting and Commercial/Industrial Retrofits achieved savings beyond PSE’s expectations; however, most programs delivered well under the Company’s expectations. Of course, we should note that some energy savings, particularly from the five new programs, should occur in 2000 as a result of 1999 efforts. In its three-year program plan the Company projected it would capture 43.3 million kWh of conservation savings in 1999. Instead, actual energy savings achieved last year totaled just under 31 million kWh, or roughly 28% below the projection. At the same time, the Company expended $4.5 million on its 1999 electric conservation programs rather than the planned $7.3 million. It appears to Staff and the other stakeholders who participated in the Company’s technical assistance group (TAG) that underachieved energy savings and expenditures are on-going symptoms of PSE’s lack of commitment to capturing all possible cost-effective conservation as a means of providing least-cost resources to its customers. When the 5 aMW savings target was initially set, following an extensive series of TAG meetings, the goal was considered conservative, based on then-estimated cost-effective conservation potential in PSE’s service area, as developed by staff of the Northwest Power Planning Council. In the Company’s 2000-2001 Least Cost Plan, filed with the Commission in December 1999, PSE itself identified 291 aMW of cost-effective electric conservation potential over the next 20 years. This amounts to 10.9 aMW annual potential. Thus, PSE itself confirms that 1998's established program targets in the range of 5 aMW were conservative. For 2000, PSE’s three-year conservation program had targeted electricity savings of 52,156 MWh, or 6 aMW. Following conversations with Staff, the Company has now increased the current year target to 64,000 MWh, or 7.3 aMW, based on jobs completed and in progress in the first three months of 2000. Staff will be pleased if PSE can achieve these additional savings in 2000 in order to recover ground lost in 1999. To this end, Staff recommends that the Commission order PSE to file semi-annual reports within 45 days of the end of the second and fourth quarters on the Company’s progress and on-going efforts to reach the targeted savings levels. The next report will be due no later than August 15, 2000. In the meantime, Staff is expecting to continue discussions with the Company and stakeholders about PSE’s conservation program plans and accomplishments. Staff feels that if the Company continues to fall behind in the achievement of identified cost-effective conservation, other means of accomplishing this within its service area should be explored. Stakeholders are aware that PSE will likely file a rate case at the completion of the current rate plan period, as set out in the merger. This opportunity, or others, may be the proper venue for discussing these issues and possibly recommending a different mechanism for delivering DSM programs. Recommendation: Given that the tariff revisions in the current filing are in compliance with the Commission order in Docket UE-970686, Staff recommends that the Commission permit the tariff revisions filed in Docket UE-000302 to become effective April 1, 2000. In addition, Staff recommends that the Commission order the Company to file, in Docket UE-970686, semi-annual reports within 45 days of the end of the second and fourth quarters. The next report will be due no later than August 15, 2000.