BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF NEW MEXICO FOR APPROVAL OF ELECTRIC ENERGY EFFICIENCY PROGRA1M[S AND PROGRAM COST TARIFF RIDER PURSUANT TO THE NEW MEXICO PUBLIC UTILITY AND EFFICIENT USE OF’ ENERGY ACTS PUBLIC SERVICE COMPANY OF NEW MEXICO, Applicant. ) ) ) ) ) ) ) ) ) ) ) ) Case No. 12-00317-UT RECOMMENDED DECISION May 24, 2013
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PUBLIC SERVICE COMPANY OF NEW MEXICO, Applicant ... · of public service company of new mexico for approval of electric energy efficiency progra1m[s and program cost tariff rider
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BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF THE APPLICATIONOF PUBLIC SERVICE COMPANY OF NEWMEXICO FOR APPROVAL OF ELECTRICENERGY EFFICIENCY PROGRA1M[S ANDPROGRAM COST TARIFF RIDERPURSUANT TO THE NEW MEXICO PUBLICUTILITY AND EFFICIENT USE OF’ ENERGY ACTS
PUBLIC SERVICE COMPANY OFNEW MEXICO,
Applicant.
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))))))))))
Case No. 12-00317-UT
RECOMMENDED DECISION
May 24, 2013
akippenbrock
Traditional Exhibit 1
TABLE OF CONTENTS
STATEMENT OF THE CASE’, ...................................................
I. Legal Standards fix tl~e Approval of EnergyEfficiency and Load Management Programs ..................................
A. The Statute ...............................................................
B. The Rule ...................................................................
C. The AG D~:cision and. Commission-ApprovedEUEA Rates ..............................................................
D. The TRC q-est ............................................................
2. PNM’s After Tax Weighted Average Cost ofCapital ("WACC") is the AppropriateDiscount Rate to Use in the TRC Test toCalculate the Present Value of Costs andBenefits on a Life-Cycle Basis to DetermineIf IE E/LM Programs are Cost Effective ......................
4. The Value of Demand Savings Due toAvoided Capacity Costs .......................................
II. PNM’s Program Proposals .......................................................
A. Introduction ..............................................................
B. The 2012 Plan .............................................................
C. Overall Plan Statistic:~ ..................................................
D. Proposed New Programs ...............................................
1. Whole House Program .........................................
Page
1
6
6
7
8
10
10
12
15
17
21
21
22
23
30
31
Recommended DecisionCase No. 12-00317-UT Page i
III.
IV.
Page
2. LI Home Efficiency Program ................................. 33
3. Residential Stay Cool Program ....................................35
4. Home Energy Reports Programs ...................................37
5. Student Efficiency Kit Program ....................................38
E. Proposed R.evisions to Existing Prol,n’ams .................................39
1. Low Income Refrigerator and CFLReplacement Program ................................................39
2. Community CFL Program ...........................................40
3. Comrnercial Comprehensive Program .............................41
4. Market Transfbrmation Program ....................................42
5. Residential Lighting Program ("RLP") ............................44
F. Programs to be Terminated ...................................................44
1. Energy Star Homes Program ........................................44
2. Energy Smart for Renters ............................................45
G. Duration and (Dual Savings Programs) ....................................45
H. M&V .............................................................................48
NMIEC’s Motion in Limine to Exclude the Testimonyof Frank C. Graw,~s and Portions of the Testimonyof Gerard Ortiz .........................................................................49
V. The 2012 Plan Rate Rider ...........................................................68
FINDINGS AND CONCLUSIONS ....................................................69
Recommended DecisionCase No. 12-00317-UT Page iii
Frances I. Sundheim, Heating Examiner fc,r this case, submits this Recommended
Decision to the New Mexico P~ablic Rel,mlation Commission ("Commission" or "PRC") pursuant
to the New Mexico Public Utility Act, NMSA 1978 Subsections 62-3-1 et se~. ("PUA"), and the
New Mexico Efficient Use o:[" Energy Act, NMSA 1978 Subsections 62-17-1 e__t seq. ("EUEA"),
and the PRC Rules of Procedure 1.2.2.29(E)(4) and 1.2.2.37(B). The Heating Examiner
recommends that the Commission adopt the following statement of the case, discussion, findings
of fact, conclusions of law and decretal paragraphs in :its Final Order.
STATEMENT OF THE CASE
On October 5, 2012, tlhe Public Service Company of New Mexico ("PNM") filed its
Application for Approval of 2012 Plan and Revisions to Tariff Rider No. 16 ("Application").
The Application requests the Commis.,;ion’s approval to: (1) determine the 2012 Plan is cost
effective and satisfies the requiremen’Is of the EUEA and applicable Commission rules and
orders; (2) approve the 2012 Plan, including (a) the discontinuance of the Energy Star Home
and Energy Smart for Renter.’; l?rogram~; (b) the revi,,~ed budgets and participation levels for the
existing energy efficiency ("fW,") and load management ("LM") programs previously approved
in Case No. 10-00280-UT that PNM is~ proposing to continue; (c) the proposed new programs
and budgets; and (d) PNM’s propc.sed profit incentive, and grant such other approvals,
authorizations and actions that may be required under the PUA, EUEA and Commission rules
and orders to implement the 2012 Plan ~md Revised Tariff Rider No. 16.
On October 18, 2012., ~.he Commission issued an Order designating the undersigned as
Hearing Examiner to preside over this case.
Pursuant to the Order of the He~tring Examine~:, issued on October 24, 2012, a preheating
conference was held in this m~ttter on November 2, 2012. Participating in this conference were
representatives of PNM, Western Re.sources Advocates ("WRA"), the Coalition for Clean
Affordable Energy ("CCAE"), the New Mexico Attorney General ("AG"), Comverge, Wal-Mart
Stores East, LP, and Sam’s East, Inc, ("Wal-Mart"), iEnerNoc, Inc., the New Mexico Industrial
Energy Consumers ("NMIEC"), and the PRC Utility Division Staff ("Staff").
Subsequent to the pre-hearing conference, Motions for Intervention were filed by CCAE,
WRA, AG, Comverge, Wal-Mart, EnerNoc and NMIEC which were granted by the Hearing
Examiner.
On November 8, 2012:. the Hearing Examiner issued a Procedural Order that, among
other things prescribed a form and means for publishing notice, established that PNM would also
mail notice to all customers in !its service territory, and established a procedural schedule for this
case.
On November 30, 2012, PNM filed a Motion for Entry of a Protective Order, and
resubmitted a second Proposed Protecti~.’e Order on December 11, 2012. On December 13, 2012,
the Hearing Examiner issued the Protective Order to be used in this matter.
PNM filed affidavits on December 27, 2012 indicating PNM’s mailing of the prescribed
Notice to ratepayers, and publication of the Notice in the following newspapers: The
Albuquerque Journal, Las Cruces Sun News, Union County Leader, and Alamogordo Daily
News.
On December 17, 2012, Wal-Mart Stores filed an unopposed Motion for Admission Pro
Hac Vice for Matthew G. Bingham, Esq. which was granted by the Hearing Examiner on
December 28, 2012.
On January 1, 2012 Sierra Club filed a Motion to Intervene which was unopposed.
Recommended DecisionCase No. 12-00317-UT Page 2
On January 3, 2013, Motions for Leave to Intervene were filed by William Payne
("Payne"), Abelardo Suniga ("Suniga"), and James and Nichole Brown ("Brown"), collectively
Movants. On January 16, 2013, PNM filed objections to the Movants as untimely, that no
request to file out of time was made, that Brown and Suniga filed no indication of the nature of
their interest in the case, anti the interest stated by Payne was to report the proceeding on the
internet. On January 22, 2013, the Hearing Examiner issued an Order denying the interventions.
On January 31, 2013, Movant Payne e-mailed a Motion for the Removal of the Hearing
Examiner and a Motion to Strike to the Commissioners and others in this case. In its Order dated
February 14, 2013, the Comraission tbund that the Order Denying Motion to Intervene was
proper and that the Motion t~.-~r Removal and the Motion to Strike were without merit and should
be denied.
On January 23, 2013, the AG filed the Direct Testimony of Doug Gegax.
On January 23, 20113. tihe Direck Testimony of John E. Curl was filed on behalf of WRA
and CCAE.
On January 23, 20113 ~he Staff filed the direct testimony of Bruno E. Carrara, P.E., James
A. Brack, Dwight Lamberson and John Reynolds.
On January 23, 2013, NMIEC filed the Direct l’estimony of Cynthia Boswell.
On January 23, 2013, CCAE filed the Direct Testimony of Maureen Quaid.
On January 30, 2013, Staff filed a Motion to File Additional Testimony Exhibits, which
were exhibits cited in the filed testimony, but erroneoasly not included in the filing. This motion
was unopposed and was granted on the record the first day of hearing.
On February 6, 2013, PNM filed the Rebuttal Testimony of Gerard T. Ortiz, and Patrick
J. O’Connell, Frank C. Graves, and Steven M. Bean; WRA and CCAE filed the Rebuttal
Recommended DecisionCase No. 12-00317-UT Page 3
Testimony of John E. Curl; CCAE filed the Rebuttal[ Testimony of Maureen Quaid; and Staff
filed the Rebuttal Testimony of Bruno E. Carrara and John J. Reynolds.
On February 7, 2013, ~Ihe Commission issued an Order Designating William Herrmann as
Co-ttearing Examiner for administratiw~" efficiency in this matter.
On February 8, 2013,. NMIEC t]led a Motion in Limine to exclude the Testimony of
Frank Graves filed by PNM. On February 21, 2013, PNM filed Response to the Motion in
Limine to exclude the testimony of Frank Graves. This motion will be ruled on in this
Recommended Decision.
On February 8, 2013, PNM file.] Corrections ’Io Frank C Graves Rebuttal Testimony for
figures FCG-3 and FCG-4.
The public hearing in this case was held on February 11 through 14, 2013 at the
Commission’s offices, PElqU\ Building, 1120 Paseo de Peralta, Santa Fe, New Mexico. No
persons appeared at the hearing to make public comment on this proceeding.
The following counsel e, ntered their appearances at the proceeding:
For PNM:
For Western Resources Advocates:
For Comver~e~ Inc.:
For EnerNoc~ Inc.:
For Coalition for Clean AffordableEnergy:
For New Mexico Industrial Energy._Consumers:
For Wal-Mart Stores East~_.L~P andSam’s East:
Benjamir~ Phillips, Esq.,Patrick T. Ortiz, Esq.,Rebecca Dempsey, Esq.
Steven S. Michel, Esq.
Joanne Reuter, Esq.
Anastasia S. Stevens, Esq.
Charles F. Noble, Esq.
Peter Gould, Esq.
Jeffrey H. Albright, Esq.
Recommended DecisionCase No. 12-00317-UT Page 4
For Attornev General of Ne~v Mexico: Jeff Taylor, Esq.
For Staff of the Utility Divisionof the PRC:
Nancy Burns, Esq.
The following witnesses appeared and testified at the hearing:
For PNM: Gerard T. OrtizPatrick J. O’ConnellSteven M. BeanFrank C. Graves
For New Mexico Attorney General:
For Western Resource Advocate andCoalition for Clean Affordablte Energy_2."
For Coalition for Clean Affordable
Doug Gegax
John E. C, url
Maureen Quaid
For Staff of the Utility Divisionof the PRC:
Dwight LambersonBruno W. CarraraJohn J. ReynoldsJames A. Brack
For New Mexico Industrial Energy."Consumers:
Cynthia Bothwell
The following initial briefs and statements were filed on March 8, 2013 following the
public hearing: Comverge filed its Statement of Position; NMIEC filed its Initial Brief; EnerNoc
Inc., filed its Position Statement and Brief; the AG filed its Post Hearing Brief; and New Mexico
Gas Company, Inc. filed a Motion for Leave to File Amicus brief, and on March 14, 2013, the
Hearing Examiner issued an Order permitting the filing of the Amicus brief. The Motion was
unopposed and PNM filed its initial br!:ef; CCAE filed its initial brief; and Staff filed its initial
brief.
The following respon.se briefs were filed on March 15, 2013 by CCAE; EnerNoc Inc,
NMIEC; Wal-Mart, Inc.; PNM: and Staff.
Recommended DecisionCase No. 12-00317-UT Page 5
Legal Standards for the approval of energy efficiency and load managementproRrams
A. The Statute
Section 62-17-5 of the Efficient Useof Energy Act ("EUEA") establishes the primary
requirements regarding the energy efficiency and load management programs that utilities are
required to implement and the factors the Commission should consider in approving those
programs. Subsection A resolves the initial question of whether or not cost effective energy
efficiency and load management resources are appropriate items for utility spending, as follows:
Pursuant to the findings and purpose of the Efficient Use of EnergyAct, the commission sh.all consider public utility acquisition ofcost-effective energy efficiency and load management resources tobe in the public interest.
Next, Subsection B describes the purpose of the programs public utilities should pursue:
The commission shall direct public utilities to evaluate andimplement cos:I-effective programs that reduce energy demand andconsumption. (Emphasis added)
Subsection C establishes the findings the Commission must make as a threshold
determination in approving proposed programs:
Before the commission approves an energy efficiency and loadmanagement program fil)r a public utility, it must find that theportfolio of programs is cost-effective and designed to provideevery affecte, d customer class with the opportunity to participateand benefit economicalily. The comrnission shall determine thecost-effectiwmess of energy efficiency and load managementmeasures using lhe total resource cost test.
In addition to the program cos’,ts, Section F of the statute provides that:
The commission shall also provide public utilities an opportunityto earn a pro£it on cost-effective energy efficiency and loadmanagement resource development that, with satisfactory program
Recommended DecisionCase No. 12-00317-UT Page 6
performance, is financially more attractive to the utility thansupply-side utility resources.
Finally, subsection G of the sl:atute establishes a general rule requiring minimum requirements
for these resources as follows:
Public utilities l:,roviding electricity and natural gas service to NewMexico customers shall,, subject to commission approval, acquireall cost-effective and achievable energy efficiency and loadmanagement resources .available in their service territories. Thisrequirement, however, for public utilities providing electricityservice, shall nc.t be less than savings of five percent of 2005 totalretail kilowatt-hour sales to New Mexico customers in calendaryear 2014 and ten percent of 2005 total retail kilowatt-hour sales toNew Mexico customers in 2020 as a result of energy efficiencyand load management programs impleraented starting in 2007.
In reviewing energy efficiency and load management programs for possible approval, the
Commission must assure thai the programs "reduce energy demand and consumption", and that
the programs are "cost effective and designed to provide every affected customer class with the
opportunity to participate and benefit economically", ’Ihat the utility has proposed to acquire, "all
cost effective and achievable energy efficiency and load management resources in their service
territories", and that the utility satisfies the minimum acquisitions required for 2014 and 2020.
B. The Rule
The status of Rule 1.7.7.2 NMAC is uncertain, as detailed in the testimony of Staff
witness Reynolds. Direct, pp.10-11. In Case No. 08-00024-UT, by Final Order issued April 8,
2010, the Commission repealed Rule 17.7.2
replacement Rule 17.7.2 NMAC (2010 Version).
NMAC (2007 Version) and promulgated
The New Mexico Supreme Court’s opinion of
July 27, 2011 in Attornel~. General v. New Mexico Public Regulation Commission ("AG
Decision") vacated and annulled the .Case No. 08-00024-UT Final Order and remanded the
matter back to the Commission for further proceedings. Currently, a rulemaking regarding Rule
Recommended Decision
Case No. 12-00317-UT Page 7
17.7.2 NMAC is pending in Case No. 12-00250-UT and a separate rulemaking regarding the rule
is held in abeyance in Case No. 11-00057-UT. Under the State Rules Act, NMSA 1978 Section
14-4-1 et see. an agency rule is required to be filed wi~Ih the State Records Center and is not valid
and enforceable until filed with the SIate Records (;enter. The 2010 version of Rule 17.7.2
NMAC currently is on file with the State Records Center, despite the fact that the final order
promulgating this rule was annulled and vacated by the A G Decision.
Given the uncertainty of the status of Rule 15’.7.2 NMAC since the AG Decision, it has
been some parties practice to rely on the 2007 version of the rule for energy efficiency
compliance purposes. Staff Ex. 2 (Reynolds Direct) pp.10-11. However, such reliance is not
universally accepted. Further, in the Commission’s Final Order of November 22, 2011 in Case
No. 11-00439-UT, the Commission k~as waived until further order the 1.5% cap under the
17.7.2.7.Z NMAC (2007 Version) as well as the annual requirement for energy efficiency
program approval under 17.7.2.9.B NMAC (2007 Version). On this basis, public utilities are to
file for program approval not less than every two years.
Therefore reliance on this rule for the purpc,ses of this docket would only further the
confhsion and uncertainty of the record in this matter. The Hearing Examiner will evaluate this
matter solely on the statutorly requirements of the EUE.A.
C. The A G Decision and Commission-Approved EUEA rates
In the AG Decision, the Supreme Court vacated and annulled the Commission’s final
order in Case No. 08-00024-U’F because the Adder Rates contained in Section 9(K) of the Rule
17.7.2 NMAC (2010 Version) to eliminate utility disincentives and provide for incentives for
energy efficiency programs, was not utility specific, cost-based, and based on substantial
evidence in the record. AG Decision, para. 18 ("The PRC’s adoption of the adder rates was
Recommended DecisionCase No. 12-00317-UT Page 8
arbitrary and unlawful in that they were, not evidence-based, cost-based, nor utility specific.") In
doing so, the Supreme Court concluded the EUEA is to be read in harmony with the ratemaking
provisions of the EUEA and EUEA rates must balance the interests of the utility, ratepayers and
consumers in order to be just and reasonable. AG Decision, para. 15.
Prior to the July 2"7, 2011 issuance of the AG Decision, the Commission had set an
incentive rate, termed a Reduced Adder, for PNM in Case No. 10-00280-UT by Final Order
issued June 23, 2011.1 Since the date o~I’AG Decision, the Commission reaffirmed the lawfulness
of PNM’s incentive rate, or Reduced Adder, in Case No. 11-00308-UT which was docketed by
the Commission, in relevant part, for the specific purpose of determining the lawfulness of
PNM’s Reduced Adder, based on the requirements o1~ the AG Decision.2 In the Final Order in
Case No. 11-00308-UT, the Commission found "that PNM’s reduced Adder is evidence-based,
cost-based and utility specific as required by the EUEA and the Attorney General. Accordingly,
PNM should be not required to refund any of the Reduced Adder amounts it has already
collected from ratepayers, and should be allowed to continue to collect those amounts until
further order of the Commis’sion. Case No. l l-00308-UT Final Order, ¶¶ 36, A (issued
November 3, 2011)." Staff I_--~x. 5, (Br~ck Direct) pp.6, ll. 14-18. The Final Order in Case No.
11-00308-UT is under appeal at the New Mexico Supreme Court where the AG and NMIEC
~ Based provision 9(k) of the vacated Rule 17.7.2 NMAC (2010 Version), in Case No. 10-00280-UT, theCommission had set two types of Adder Rates for PNM; namely: (1) a 2010 Interim Adder to designed to removeEUEA disincentives and recover EUEA incentives set by the rule to recover $0.01 per kWh saved and $20 per KWsaved; and, (2) a Reduced Adder rate designed to recover incentives in the amount of $0.002 per kWh saved and $4per KW saved."~ See’, for example, Case No. l l-00308-UT, Order Initiating Investigation, ¶IA, issued August 16, 2011, ("Aninvestigation into whether PNM should be required to refund all 2010 and 2011 Interim Adders and Reduced it hasreceived or will receive, and whel:her it should be required to cease charging its customers for the Reduced Adder inlight of the Court’s Attorney Gener,:d decision is hereby commenced.")
Recommended DecisionCase No. 12-00317-UT Page 9
have contested the lawfulness of setting an EUEA incentive rate to recover a profit on EE and
LM program expense.
As outlined by Staff wiitness Brack, in Case No. 10-00280-UT, the Commission approved
a Staff recommended reduced adder incentive rate of $.004 per kWh saved and $4 per KW saved
for energy and demand savings exp~..cted from PNM’s proposed 2010 Plan, resulting in an
approximate, annual $1.4 million dollar incentive or approximately 7.7% of the $18 million
annual budget approved for PNM’s 2(1110 Plan in Case No. 10-00280-UT. Staff Ex. 5, (Brack
Direct), pp.5, 11, 9-15. Currently, SPS has no EUEA incentive rate; and in Case No. 11-00047-
UT, the Commission established an incentive rate f6r EPE’s 2012 and 2013 approved energy
efficiency programs, also calculated as a 2.4% annual[ return on EPE’s approved EUEA program
costs for those years. Ida. pp. ]14, 11.14-17.
D. The TRC Test
I. Introductio:n
The cost effectiveness of the company’s proposed programs should be determined using
the TRC test as mandated by the EUEA. Section 62-17-5(C) states: "The commission shall
determine the cost-effectivene:~s of energy efficiency and load management measures using the
total resource cost test." The EUEA defines "cost effective" to mean that an EE or LM program
"meets the total resource cost test." Section 62-17-4(C). The EUEA prescribes the mandatory
use of the TRC to determine cost effectiveness. The EUEA further requires that the Commission
direct utilities to evaluate and i.mplement "cost effecti.ve programs" and that utilities acquire "all
cost effective and achievable energy efficiency and load management resources available in their
service territories." Section!; 62-17-5(B) and (G).
The EUEA defines the TRC test as "a standard that is met if the monetary costs that are
borne by the utility and the participants and that are incurred to develop, acquire and operate
Recommended Decision
C~se No. 12-00317-UT Page 10
energy efficiency or load management resources on a life-cycle basis are less than the avoided
monetary costs associated with developing, acquiring and operating the associated supply-side
resources." Section 62-17-4(J ).
In accordance with the statutory standard, PNM included all monetary program costs,
including utility and incremental participant costs over a 12 month period, on the cost side of the
TRC equation. Bean Direct 38, Bean Reb. 17. The utility program costs included in the TRC
calculation are shown in Bean Direct 44, Table 7. All projected costs found to be reasonable are
excluded from PNM’s elecmic cost of service used to determine base rates. The incentive or
rebate levels requested by PNM are novel, and a case of first impression. The internal
administrative costs are about five percent (5%) of the total cost and the M&V costs are about
two percent (2%) of the total cost. Bean Direct 46.
The avoided monetary costs of the programs, i.e. the savings or benefits, used in the TRC
test are the avoided capacity and energy costs PNM will avoid or defer due to implementation of
the 2012 Plan which theoretically result in customers consuming less energy and requiring less
peak demand capacity that wc,uld otherwise be used or required. O’Connell Direct 3. PNM
determined the value of the savings by multiplying the: expected energy and demand savings over
the useful life of each program measure times PNM’s avoided costs of energy and capacity.
PNM’s avoided costs used in the TRC calculations are shown in Bean Direct, Ex. SMB-1,
Appendix A 39, and are discussed further below. The quantity of energy and demand savings
used in the TRC calculation for each program are based on the results of independent M&V
analysis for existing programs, and on values for the new programs calculated from evaluation of
similar programs at other utilities, the statewide potential study conducted for the New Mexico
Energy and Minerals Department, data for program analysis from professional organizations and
Recommended DecisionCase No. 12-00317-UT Page 11
PNM’s internal engineering as:~essments. Bean 2/13/13, Tr. 438-9. These quantities and other
assumptions used in the TRC calculations are listed in Bean Direct Ex. SMB-1, Appendix C, 41-
60.
2. PNM’s After Tax Weighted Average Cost of Capital("WACC") Is The Appropriate Discount Rate to Use in theTRC Test to Calculate the Present Value of Costs and Benefitson a Life-C:ycle Basis to Determine if EE/LM Programs AreCost Effective.
The TRC ratio of the benefits to costs of EE/I,M programs on a life-cycle basis involves
performing a net present value ("NPV") analysis of the lifetime benefits and costs. Bean Direct,
PNM Ex. SMB-1 13; Direcl Testimony of Patrick J. O’Connell, ("O’Connell Direct") 2, 4;
Direct Testimony of James A. Brack, ("Brack Direct") 3-4; Direct Testimony of Bruno E.
Carrara, ("Carrara Direct") 7-8. "rhe discount rate is a significant driver of overall
cost-effectiveness of EE progTams. Brack, Tr. 2/15/13 876. In a present value analysis, the
lower the discount rate, the higher is the present value of the benefits. Gegax Tr. 2/13/13 578,
579. The discount rate used by PNM to perform the present value calculations was 8.2%,
PNM’s WACC. O’Connell Direct 6; Brack Direct 3; Carrara Direct 8. Although Staff does not
dispute the use of PNM’s WACC for purposes of this case, Staff recommends that PNM be
required to evaluate and present a "ratepayer discount rate" for future cases because of Staff’s
concerns with using the WACC. Brack Direct 4-5; Carrara Direct 13. Staff’s recommendation
is based on the concept that the consumer lending rate would be the appropriate discount rate
from the "participant or general ratepayer perspective" because that would be the interest rate a
customer would have to pay to finance the energy efficiency investment. Brack Direct 4. Staff
acknowledged that the choice of an appropriate discount rate is based on the perspective from
which cost-effectiveness is being evaluated. Brack Direct 4; Tr. 2/15/13 Brack 876.
Recommended DecisionCase No. 12-00317-UT Page 12
The TRC is one of five cost-effectiveness tests for EE programs generally used in the
industry. Brack 2/15/13, Tr. 875. Each test provides different kinds of information about the
impacts of EE programs from different vantage points. Brack 2/15/13, Tr. 876. As discussed
above, the TRC is required by the EUEA to determine the cost effectiveness of EE/LM
programs. The key question that is answered by the YRC is whether the total costs of energy in
the utility service territory decrease. Brack 2115/13, Tr. 876. Thus, the TRC considers costs and
benefits from the perspective c,f all utility customers, including participants and non participants,
within the utility service territory. Rebuttal Testimony of Frank C. Graves, ("Graves Rebuttal")
10-11; Brack 2/15/13 Tr. 876.
Staff witness Lamberson expressed concerns over the use of the TRC and presents Staff’s
overall proposal to the Commission to docket a rulemaking to evaluate the use of other tests,
such as the Utility Cost Test, for dete:t’rnining the cost effectiveness of EE and LM programs.
Lamberson Direct, p.5. However, the TRC is currently the statutorily mandated cost
effectiveness test that must be used. Any programs that pass the TRC must be implemented.
Curl Rob., 2-3.
PNM witness Graves testified that the utility WACC is generally used as the discount rate
in the TRC to determine cost.-effectiw:ness of EE/LM programs around the country. Graves
Rebuttal, 10-11, 12. He testified that the TRC tests cost effectiveness from the perspective of the
utility and its customers and only the utility WACC correctly compares future costs that will be
avoided (i.e., benefits) with present costs. Graves Rebuttal, 10-11. He pointed out that the
majority of the costs of EE programs are spent by the utility and all of the benefits are future
utility system benefits. None of tl~.e direct savings of participants are included in the
measurement of benefits. Graves Rebuttal 11-12.
Recommended Decision
Case No. 12-00317-UT Page 13
Mr. Graves’ testimony is not inconsistent with findings in other states. E._~.., Re
Protocols for the Measurement and Verification ~ Energy Efficiency and Peak Demand
Reduction Measures, 2009 WL 3413628, Appendix C, § III(a) (Ohio PUC) ("For the TRC...the
after-tax weighted average cost of capital has generally been adopted because this is the same
discount rate as is used from a utility perspective to evaluate supply-side investments."); Re
Ben~t-Cost Analysis and Program Evaluation for Energy Efficiency Programs, 2008 WL
1952027, *6 (Kan. SCC) (utility’s WACC typically used as the discount rate for the TRC
because it takes into accounl tlhe average cost of borrowing of the utility, and is the same rate
used to borrow money for the other utility resource investments on the supply-side); see, Re 2012
PA Total Resource Cost (TRC) Test, 2012 WL 4046451 *3 (Pa. PUC) (electric distribution
company WACC is proper discount rate to use in TRC); contra, Re Energy Efficiency
=ner6y Star Homes~Vhole House (New)Student Efficiency Kits (New)Residential Stay Cool (New)Home Ener6y Reports (New)Low Income EELow Income Refrigerator & CFL
IEasy Savings KitLl~e Effi ci ency (New)I Community CFLLoad Management
rPNM Power Saver
PNM Peak Saver
38,455,0391 374,997,7511 8,2051
7,372,2399,647,718
114,4961,500,329
702,5551,161,8547,920,000
36,861,194137,534,029
3,434,88813,502,960
4,917,88212,547,969
7,920,000
281,4031,977,9822,135,743
99,502
4,051,66415,823,85329,900,400
696,512
1,2632,501
11386255
1,688i7201
3318234311
.__ 450,000 450,000I 40,000675,000 675,000 20,000
IMarket Transformation
Savings estimates for compact fluorescent light ("CFL") bulbs reflected in the above chart
are based on deemed savings per bulb found by ADM in its M&V report for PNM’s 2011 calendar
prog!am. ADM has adjusted those deemed savings estimates in its draft report for ]?NM’s 2012
calendar program which will. be finalized and was filed by April 1, 2013 to take into account the
phasing out of incandescent bulbs pursuant to the federal Energy Independence and Security Act of
2007, Public Law 110-140, Dec. 19, 2007 ("EISA"). Staff has recommended reduced savings
estimates for CFLs which are lower than those used by PNM in its 2012 Plan as reflected in the
above chart and lower than those recommended by ADM for use going for~vard. See PNM’s
Initial Brief, pp.8-9; Bean 2/13/13, Tr. 435. PNM agrees that it will use the savings per bulb
determined by ADM, as accepted by the Commission, to recalculate the TRC ratios for programs
with CFLs and will adjust the savings, TRC calculations, incentive and Rider accordingly in the
compliance filing made after receipt of the Commission’s Final Order. Staff’s recommended
Recommended DecisionCase No. 12-00317-UT Page 25
savings projections for CFL products should be rejected to the extent they are inconsistent with
About 36% of the avoided cost benefit of this program is due to avoided capacity since
non residential customers use a significant amount ol.-" their energy during PNM’s peak demand
period. There is no evidence of any modifications that could be made to the Commercial
Comprehensive program that would result in a cost el~’fective program if no capacity savings are
recognized, as NMIEC Witness Bothwell recommends. If the demand reduction benefits of the
program are ignored, the program would not be cost effective and there is no evidence of any
modifications that would provide a TRC greater than 1. Ms. Both~vell’s recommendation would
result in termination of a program that has been used extensively by commercial and industrial
customers, including members of NMIEC, and is not persuasive or practical, and should be
rejected. Bean Reb. 27.
4. Market Transformation Program
PNM offers the MT program which authorized programs designed primarily for general
energy efficiency education activities and not subject 1:o the TRC requirement, although the costs
Recommended Decision
Case No. 12-00317-UT Page 42
of the MT program are included in the calculation of the total 2012 Plan portfolio TRC. The
goals of the MT program are to: 1) increase awareness of the importance and benefits of energy
efficiency; 2) encourage behavior changes that result in the adoption of energy efficient
measures; and 3) promote emerging technologies that are not part of existing EE programs but
have the potential for inclusi(~n in future programs. The MT program uses promotional activities
and advertising channels to target efforts aimed at specific customer segments, including hard-to-
reach segments. Bean Direct, 16.
PNM proposes to expand efforts to raise awareness of the nature and importance of
energy efficiency by implementing an on-line energy audit tool as part of the MT program and
conducting a mass media coramunications campaign that would promote the importance of
energy efficiency and direct customers to explore the offerings through the PNM programs. The
audit tool would provide customer specific savings information and direct customers to the EE
programs applicable to their situation. PNM is also proposing to work with the Southwest
Energy Efficiency Project ("SWEEP") to provide building code awareness and technical training
to code officials and building professionals. Finally.~ PNM proposes to work with community
based organizations to comn’mnicate the potential to save energy through efficiency programs
and behavior changes. Bean DJ,rect, 17.
PNM proposes to increase the current MT budget of $93,600 by $235,759 to allow for
the program expansion. Eighty percent of the additional budget is for the mass media
communication strategy with the remaining 20% for implementing the code training and
community organization outreach. PNM believes that a broad campaign to increase awareness
of the PNM programs is ess.~,’ntial for ~neeting the aggressive participation targets contained in
the 2012 Plan and to achieve the EUEA. required savings. Bean Direct, 17-18. Staff and CCAE
Recommended DecisionCase No. 12-00317-UT Page 43
support the MT program proposals. Reynolds Direct, 47-48; Reynolds Reb. 18; Quaid Direct,
19-20.
5. Residential Lightin~ Program ("RLP")
Staff recommends two major changes to the RLP that would drastically reduce
participation and savings and affect participation in the program: (1) greater reduction in the
deemed savings per CFL bulb than found by ADM, and
50%. Staff’s recommendations are not adequately
(2) reduction of average rebates by
supported on the record. These
recommendations should be rejected. See earlier discussion of this issue.
CCAE recommends that PNM include LED lamps in addition to CFL bulbs in the
Residential Lighting program. PNM a~ees that it will begin to include incentives for LEDs in
the Residential Lighting program as the price point improves and customer demand increases.
Since PNM estimates that I, ED incentives will represent a small percentage of the total lighting
incentives during the term of the 2012 Plan, relatively minor adjustments to other incentive
levels will allow PNM to keep the program budget at the level proposed in the 2012 Plan even
though incentives for LEDs will be higher than incentives for CFLs, provided the rebate budget
is not cut in half as Staff suggests. Bean Reb. 20.
F. Programs to be Terminated
1. Energs~ Star Homes Program
PNM proposes to temfinate tl-~e Energy Star Homes Program due to recent U. S.
Environmental Protection Agency ("EPA") implementation of ENERGY STAR version 3.0,
which has increased builders" costs to achieve ENERGY STAR certification. The additional
costs are causing many builders to no longer participate in ENERGY STAR Home programs and
PNM is projecting significantly lower participation. In addition, the incremental cost to
construct a home to meet ENERGY STAR version 3.0 standards is high compared to the
Recommended DecisionCase No. 12-00317-UT Page 44
incremental annual energy savings that can be achieved over the savings resulting from a
"conventional" home built to the new state building code standards. The combination of a higher
incremental cost, lower savings and lower participation levels will cause the ENERGY STAR
Home program to fail to achieve a TRC of more than 1..0 going forward. PNM, therefore,
recommends that the program be discontinued in 2013. Bean Direct, 8. PNM proposes that
builders who have already been approved for rebates under the existing program will have until
September 30, 2013, to cornplete construction and receive the rebates. The 2012 Plan includes
the estimated cost to provide these rebates and close out the program. PNM’s efforts to design
an alternative cost effective replacement program have been unsuccessful to date, but PNM
should continue to research a potential program for new residential construction.
2. Energy Smart fc,r Renters
This program is implemented by MFA which has notified PNM that it will not be cost
effective for MFA to continnae the program in 2013. Participation in the program has been
much less than projected, due to difficulty in contacting landlords, reluctance of landlords to
contribute the required ten percent of the costs of the energy efficiency upgrades, and delays in
performing work in rental units, mav~y times beca~ase tenants ~vho were approved for the
program moved before the wo~:k could be completed. PNM submits that it should discontinue
this program and direct the.. resources to programs with greater potential to reach low income
renters. Bean Direct, 10-11.
G. Duration and [Dual Savings Programs_)
PNM projects that apl:.roved new programs can be implemented within six weeks of entry
of the Final Order grantin~ Commission approval. ~[~he 2012 Plan proposes that the programs
included in the 2012 Plan would be implemented for two full calendar years, 2014 and 2015, and
would continue until they are modified or terminated hy entry of a Commission order, except for
Recommended DecisionCase No. 12-00317-UT Page 45
the Community CFL program which PNM proposes to terminate automatically at the end of
2014. If program costs are expected to deviate from the budgets approved by the Commission in
this proceeding by more than 25%, PNM will file a request for budget modification. See,
October 5, 2012, Applicatic.n for Approval of 20113 Electric Energy and Efficiency Load
Management Program Plan and Revision to Tariff Rider.
Staff proposes that programs which produce collateral gas savings should only be
approved for implementation in year 1 of the 2012 Plan and that continuation thereafter be made
contingent on PNM reaching a collaborative agreement with New Mexico Gas Company for
splitting the costs and benefits, or on the programs having a TRC greater than 1.0 without
inclusion of the costs and benefits of gas savings. Staff’s dispute is not whether gas benefits can
be added to the TRC test, but whether it is fair for electric customers to pay for them. Staff Ex. 1,
Lamberson Direct, p.8, 11.3-10.
On March 8, 2013, New Mexico Gas Company Inc. (NMGC) filed a Motion for Leave
to File Amicus Brief, and the Brief itself. In the brief, NMGC concurs ~vith the testimony of
CCAE witness Quaid, as follows:
All savings produced by PNM’s programs, whether gas or electric,are elegible to b.e counted towads the EUEA goals. The TRC testis well defined and widely applied, and includes all energy savingsin program benefits. This standard definition should be maintainedby the PRC, and gas savings that accrue to PNM’s program effortsshould be counIed. If the PRC requires PNM to remove gassavings from the: benefits; in the TRC tests, while still accruing thecosts to produce the savings, the TRC results may fall below 1.0,and PNM m.a2i be forced to shut down cost effective programs.Stopping cost effective PNM programs will reduce net economicbenefits for households and businesses served by PNM to meet thestatutory savings require~nent of 5 percent savings by 2014 and 10percent savings by 20201. Quaid Reb. at 3.
Recommended DecisionCase No. 12-00317-UT Page 46
NMGC adds that it is uncontroverted that including gas energy savings as benefits under the
TRC for electric utility programs is standard across the industry, as well as consistent with the
California Standard Practice Manual tbr Energy Efficiency. /__d.; Tr. 2/11 at 104-105. Amicus
briefp.2.
Additionally, Staff witness Reynolds recommended that the Commission approve these
programs for only one year of the Pl.an, and that continued implementation in year two be
contingent on PNM reaching a cost sharing agreement with NMGC by the beginning of year
two. While both PNM and NMGC are open to discussions regarding such an arrangement,
Staff’s position is impractical, and xvo~ld harm the consumers participating in these programs.
The Hearing Examiner relies apon the: reasons discussed in PNM’s Initial Brief, pp. 2-7, and
Reply Brief, pp.1-7, the NMGC Amicus brief at 3, and witness Quaid’s Rebuttal opinion. This
recommendation should be r@~’cted. Gas savings should be included in the TRC calculations for
these programs and they slhould be approved for the same period as programs which do not
produce gas savings in addition to electric savings. PNM should be required to discuss offering
the programs in collaboratior,, with NMGC and should file a report one year from the entry of the
Commission’s Final Order on tlhe result~ of those discussions.
Staff also recommended that the Commission put a two year limitation on
implementation of the programs in the 2012 Plan so that, barring further Commission order, all
programs would automatically terminate two years after entry of the Final Order. This would
unnecessarily put the programs at risk of automatic: termination, and would serve no useful
administrative purpose. Therefore, this recommendation should be rejected, and all programs
proceed for the entirety of the two :gears proposed until further order of the Commission
modifying or terminating them.
Recommended DecisionCase No. 12-00317-UT Page 47
H. M&V
Once the Commission .enters its. Final Order in this case, PNM has indicated it will take
several months to fully establish the approved new programs. Customer participation will take
time to develop and program costs are often higher at the start of new programs, causing the new
programs to have lower TRC ratios if the evaluation is based on only the first few months of
deployment in calendar year 2013. PNM recommends that the new programs be evaluated by
the independent evaluator at the end of :2014, after at least a full calendar year of implementation,
to provide a more accurate assessment of the cost effectiveness of the new programs. This
would be similar to the evaluation process for PNM’s initial EE programs approved in Case No.
07-00053 UT. Bean Direct, 39. No party opposed this proposal.
Staff and NMIEC recommend that PNM be ~.’equired to provide program participation,
budgets, costs and projected energy and demand savings by rate class in future Annual Reports
("AP,"), as well as projected program badgets and energy and demand savings by eight specified
rate classes beginning with PNM’s next plan application. Reynolds Reb. 20-21, Ex JRR-1 Reb.
PNM indicates that this. information would not lead to any useable end product, because
PNM’s programs are not o~]2ered by rate class; rather they are offered by type of customer-
commercial, residential, or industrial customer. PNM also indicates that no other utility has been
required to provide this information regarding their programs.
A review of the briefs; and the testimony on this issue does not indicate that the programs
are offered based on the rat~:: class of the participant. In fact, all agree that the programs are
offered by the type of customer. Staff has also admitted that "no customer class is inherently
prevented from participating in and benefitting from PNM’s proposed programs." Reynolds Reb.
18-19, Reynolds 2/15/13, Tr. 806. There would clearly be an administrative burden to separate
Recommended DecisionCase No. 12-00317-UT Page 48
the rate class participants in each offering, without a substantial rationale for doing so.
Therefore, the Hearing Examiner recommends that the Staff proposal should be rejected.
Based on the record in this case. and the forgoing discussion of the various programs, the
Hearing Examiner recommends the adoption of the programs with the changes suggested for
each program as delineated.
III. NMIEC’s Motion in L,imine to Exclude the Testimony of Frank C.Graves and Portions of the Testimom, of Gerard Ortiz
NMIEC filed its Motion seeking to exclude both the Direct Testimony and the Rebuttal
Testimony of PNM witness Frank Graves, and the portions of the Direct Testimony and Rebuttal
Testimony of PNM witness Gerard Ortiz offering opinions in support of Mr. Graves’ testimony
on the grounds that neither Mr. Graw~s nor Mr. Ortiz are attorneys and Mr. Graves did not
possess the familiarity with New Mexico law to offer an opinion as to the proper incentive to be
authorized for PNM under the EUEA at the beginning of the hearing on February 11, 2013, the
Heating Examiner ordered PNM to file its respons~ to the Motion within ten days, i.e. by
February 21, 2013.
NMIEC does not contend that Mr. Graves is unqualified to provide expert testimony on
model that would have provided greater savings to customers at the expense of drastically greater
exposure to shareholders).
Wal-Mart’s Position
Wal-Mart asserts that PNM’s proposal in this case would essentially implement a full
decoupling structure for tlh~--: recovery of lost revenues due to reduced sales from energy
efficiency and load management. If the plan is approved, Wal-Mart states that PNM will be able
to maintain and even increase its net profits even though it is selling less electricity as a result of
the energy efficiency programs included in the 2012 plan. While this is one potential outcome of
the full implementation of the EUEA, constructing a decoupling plan requires the breadth and
depth of review provided in a general rate case and is; beyond the scope of an energy efficiency
plan filing. PNM’s rates have historically contained clLass cross subsidies that can be exacerbated
by rider based recovery me::hanisms. In addition, PNM agreed in a prior case not to seek
decoupling until its next general rate ca:~e. (PRC Case No. 10-00086-UT) Wal-Mart Reply Brief,
p.3.
Wal-Mart further stat:,’s that removing disinceatives to energy efficiency is an important
piece of achieving the counlry’s energy efficiency goals, but it is a complicated problem that
regulators and utilities have just begu~ to address. Walmart encourages the Commission to
reject PNM’s attempt to imp]~ement clecoupling without adequate analysis. Wal-Mart Reply
Brief, p.4.
Recommended DecisionCase No. 12-00317-UT Page 64
EnerNOC’s Position
EnerNOC takes no position on the PNM proposal, or on any of the other incentive
positions parties to this proceeding have espoused. EnerNOC encourages the Commission to
adopt Staff’s view that the incentive rnechanism chosen for PNM in this case should be "[f]or
purposes of this case only." (Staff Ex.5, Brack Direct at 8, see also Staff Ex. 1, Lamberson Direct
at 4.) EnerNoc Position Statetnent and Brief-In-Chief, p.13.
Staff’s recommendation that the Commission initiate a
Additionally, EnerNOC supports
process to establish a uniform
methodology for calculating the benefits associated with energy efficiency and load management
programs as part of the rulemaking to resolve the status of the Energy Efficiency Rule, 17.7.2
NMAC, including guidelines for specific incentive rate proposals. EnerNoc Brief at 13.
NMIEC’s Position
NMIEC objects to tlhe incentive mechanism, because PNM has based its proposal on the
notion that the EUEA requires the Commission to compensate the Company for its anticipated
lost profits for not building generation plant at some point in the future. (Direct Testimony of
Frank Graves, pp. 1-2)NMIEC Initial Brief at 5.
NMIEC shares the Attorney General’s opinic.ns that because PNM’s shareholders have
not provided any capital resources to fund the energy efficiency and load management programs,
there is no economic justification for awarding PNM a profit on those expenses. Adding the cost
of the proposed incentive to customers’ bills is net just and reasonable because it requires
ratepayers to compensate the utility for a risk they have not taken. Additionally, like the AG,
NMIEC believes that the proposal is simply a disguised mechanism to deal with a perceived
disincentive of implementing energy efficiency. PNM agreed to not request Commission
approval of any mechanism to address disincentives to utility energy efficiency programs
Recommended DecisionCase No. 12-00317-UT Page 65
pursuant to the EUEA until, at the earliest, its next general rate case. (Case No. 10-00086-UT,
Amended Stipulation to Cor~form to Commission Order, p.12) NMIEC Initial Brief, p.9.
Finally, NMIEC shares the opinion, detailed above by Wal-Mart, that PNM’s incentive proposal
is, in fact, a decoupling rate under a different name. NMIEC Initial Brief, p. 10.
Recommendation
As noted earlier, tE.e EUEA requires the Commission to allow public utilities the
opportunity to earn an energy efficiency incentive - or more specifically stated, "to earn a profit
on cost-effective energy efficiency and load management resource development that, with
satisfactory program perforraance, is financially more attractive than developing supply-side
resources." The Commission should not accept the Company’s proposed methodology to
determine the amount of ener~iy efficiency incentive Io award PNM. PNM’s proposed incentive
methodology would, among other things, recover forgone or lost profits. Allowing recovery of
something foregone or lost is; not an incentive as envisioned in Section 62-17-5.F. PNM’s
proposal is also amazingly complex, and speculative in that it relies upon future events that may,
or may not, occur as "planned". While the Company employs a sophisticated planning tool and
has a base line of past experience, it is difficult to recommend that customers begin paying an
incentive so heavily based ov~ future events and outco~nes.
The WRA/CCAE Proposal is also problematic in that it would have to be implemented
for the full life of the program. The Commission could not very well begin to implement this
proposal and keep its flexibility� to dew:lop a different methodology in a future rulemaking. The
Cornmission also recognizes that there may be a problem with the approach in its relabeling of
items that are expense items as hard assets or capital items. There are differences in the risk
profiles of these categories. The result of the relabeling of the cost categories, and the future
Recommended DecisionCase No. 12-00317-UT Page 66
implications of this proposal as additional programs are added, make it difficult for the Hearing
Examiner to recommend it at this time. At the same time, the Hearing Examiner recognizes that
the CCAE/WRA proposal matches the cost recovery period to the benefit period. This temporal
matching is a recognized reg,datory principle. Tr. Vol. 3, p.496. In other words, ratepayers pay
for the program during the period that they will .also obtain the benefits of the program.
Witnesses agreed that an eight year energy efficiency program life was the appropriate period to
use for the benefits timefrarne. Tr. Vol. 5, p.929 (Carrara); Tr. Vol. 4, p.497 (Graves; WRA Ex.
2, Curl Direct, p.6. The present value of year one of the CCAE/WRA proposal is $26.1 million.
PNM Ex. 8 Graves Rebuttal,. p.15 (corrected), Figure FCG-3. However, the cost to ratepayers
for the first year is only $5.(; million and $5.3 million in the second year, and decreasing each
year thereafter. Therefore, this approach may limit the alternatives that could realistically be
considered in the proposed mlemaking.
The Hearing Examiner recommends Staff’s approach for this proceeding. Staff’s
approach results in a profit incentive of $1,700,703 which is reasonable for the size of PNM’s
energy efficiency program. Additionally, Staff".; approach equals a profit margin of
approximately 7.6%. The Commission in PNM’s last energy efficiency case determined that a
profit margin of 7.6% was reasonable. The Attorney General witness also recommended that
based on previous Commission decisions, a profit margin in this range was appropriate. The
Hearing Examiner finds that although not endorsing all the aspects of Staff’s methodology nor
the methodology itself, the: end result of Staff’s approach is fair, just and reasonable. An
appropriate profit incentive like a fair :t’ate of return :is not susceptible to precise mathematical
calculation or to any certain f617mula and is, instead, dependent on the exercise of informed and
rational judgment. Mountain State Telephone & Telegraph Co. v. New Mexico State
Recommended DecisionCase No. 12-00317-UT Page 67
Corporation Commission, 99 N.M. 1., 8, 653 P.2d 501 (1982). The reasonableness of the
ultimate decision of the Con;tmission i:~ the measure of the judgment exercised. New Mexico
Industrial Energy Consumers v. New Mexico Public Service Commission, 104 N.M. 565, 725
P.2d 244 (1986) There is a zone of reasonableness within which the Commission is free to set a
fair rate of return. State v. Mountain States Telephone & Telegraph Company, 54 N.M. 315,
338, 224 P.2d 155 (1950). The Commission must rely on its expert judgment in establishing a
fair rate of return. New Mexico Industrial Energy Consumers, supra; Attornel: General of New
Mexico v. New Mexico Public Service Commission, 101 N.M. 549, 686 P.2d 957 (1984). The
Commission is not bound by or limited to any one method of determining a fair rate of return for
it is the "end result" rather than the methodology used that matters. Hobbs Gas Co., 94 N.M. at
733, 734; Mountain States 1;el. & Tel. Co. v. New Mexico State Corporation Commission, 90
N.M. 325, 338, 563 P.2d 588 (1977). Although the Hearing Examiner recommends Staff’s
proposal as a basis for awarding an ince:tative in this case, the Hearing Examiner, emphasizes that
it should be accepted for this. case only. Until the Commission adopts a particular method for
determining an energy efficie~,acy incentive award, a utility’s award should continue to be
determined on a case-by-case basis, in conside~:ation of the particular evidence and
circumstances. The Commis’,sion is not foreclosed from refining its regulatory approach, and
parties are encouraged to do tlte same and make appropriate recommendations.
V. THE 2012 PLAN RATE RIDER
PNM recovers the cos;t.’; associated with energy efficiency programs and related profit
incentives through Rider No. 16 which is assessed to the applicable rate classes as a percent of
bill surcharge. PNM propose~ to increase the program cost element of the Rider from 2.150% to
2.595% of customers’ bills and to increase the profit incentive element from 0.112% to 0.332%
Recommended DecisionCase No. 12-00317-UT Page 68
of customers’ bills. Bean Direct, 4"7 and Ex. SMB-3, p.1; Bean Reb. 32 and Ex. SMB-4
(Rebuttal). These amounts should be corrected to reflect the recommendation regarding the
incentive included in the prior section of the recommended decision. The revised program cost
element of the Rider will recover the $22,493,227 2012 Plan cost for 12 months of program
participation over a 12 month period. The profit :incentive element of the Rider should be
adjusted to recover the propo:~ed $1,700,703 profit incentive. The total revised Rider rate will be
less than 3% of customers’ bills, before taxes and franchise fees. The proposed Rider omits the
reconciliation elements approved in Case No. l.l-00123-UT and in the 2011 Annual
Reconciliation filing made on March 127, 2012 which expired in November and December of
2012 and April of 2013. Bean Direct, 47. Only seven customers are potentially affected by the
$75,000 annual Cap the EU15,A imposes on individual customer bills. PNM estimated that under
its proposal, the net impact of the energy efficiency rider change on residential customers ranges
from approximately $0.13 $7.76 per month depending upon kWh use, and for Small
Power/General Service customers ranges from approximately $0.22 -$59.31 per month
depending upon kwh use. Tln..e average residential bill impact is $2.01/month for PNM North and
$2.13 for PNM South. Bean Reb. 32 and Ex. SMB-4 (Rebuttal), p.5. These estimates will be
slightly reduced considering the recommendations herein.
The Commission’s Final Order in Case No. 10-00280-UT approved inclusion of the
following statement in PNM customer bill inserts: "The energy efficiency line on your bill pays
for programs that save energy and avoid the cost of new electricity generation." PNM proposes
to continue to include this stalement in customer bill inserts, and the Hearing Examiner agrees.
FINDINGS AND CONCLUSIONS
The Hearing Examiners recommend that the Commission FIND and CONCLUDE as
follows:
Recommended DecisionCase No. 12-00317-UT Page 69
1. The Statement of the Case and Discussion and all findings and conclusions
contained therein are incorporated by reference herein as findings of fact and conclusions of law
of the Commission.
2. PNM is authorized to conduct the business of providing public utility service
within the State of New Mexico and is a public utility as defined by NMSA 1978, Section
62-3-3(G). PNM is subject to the jurisdiction of the Commission under the Public Utility Act,
NMSA 1978, Subsection 62-3-1, et seq.
3. The Commission has jurisdiction over the parties and the subject matter of this
case.
4. PNM satisfied the requirements of the EUEA Section 62-1-5(E) to solicit non
binding recommendations o~z. the design and implementation of the proposed Programs from
Commission Staff, the Attorney General, the Energy, Minerals and Natural Resources
Department and other interested parties.
5. PNM’s Application and supporting exhibits and testimony demonstrate that it
considered the appropriate criteria and explain how PNM applied the criteria in selecting the
proposed Programs.
6. The portfolio of EE/LM programs proposed by PNM in the 2012 Plan is cost
effective and designed to provide every affected customer class with the opportunity to
participate and benefit economically, and satisfies the requirements of Section 62-17-5(C) of the
EUEA.
7. The overall design of the programs in the 2012 Plan will achieve broad program
access within each affected customer class and some of the programs are designed to allow
participation by low income customers.
Recommended DecisionCase No. 12-00317-UT Page 70
8. PNM demonstrated that the proposed set of programs will produce system
benefits in the form of energy savings and peak demand reductions that are necessary in order for
PNM to meet the 2014 energy savings requirement in the EUEA Section 62-17-5(G).
9. The educatiolml measures and other indirect impact measures proposed in the
Market Transformation program are not subject to the TRC test, do not negate the overall cost
effectiveness of the 2012 Plan and should be approved.
10. With the exception of the Market Transformation program which is included as an
indirect impact measure that need not in and of itself be cost effective, each program individually
and the portfolio of programs in the 2012 Plan as a wlq.ole, satisfy the TRC test.
11. PNM’s assumpIions, calculations and other elements associated with its TRC
calculations, including the projected costs and benefits for the programs, are appropriate and
should be approved. The incentive calculation used in this calculation is not approved.
12. PNM’s methodology for calculating the TRC ratios of the programs and the 2012
Plan as a whole is appropriate for the purposes of this case and is approved, except for the
incentive calculation proposed by the Company.
13. The projected energy savings per CFL bulb used in the calculation of the TRC
ratios for the EE programs in the 2012 Plan, the total EE savings and profit incentive should be
the savings recommended by ADM in its M&V report to be filed on or before April 1, 2013 for
PNM’s programs implemented in 2012. PNM should include recalculations of the TRC ratios,
the total EE savings, the profit :incentive and the Rider using the ADM recommended savings for
CFL bulbs, as accepted by the Commission, and the costs of including a limited number of LED
bulbs, in a compliance filing; due 15 days after entry of the Commission’s Final Order.
Recommended Decision
Case No. 12-00317-UT Page 71
14. The five proposed new EE programs in the 2012 Plan-Whole House Program,
Low Income ("LI") Home Efficiency Program, Residential Stay Cool Program, Home Energy
Reports ("HERS") Program, and Student Efficiency Kits Program-meet the requirements of the
EUEA and should be approw,’d.
15. The revisions to the budgets and p~Lrticipation levels for nine existing PNM
EE/LM programs as proposed iin the 2012 Plan are reasonable and should be approved.
16. The new and existing EE/LM programs approved for inclusion in the 2012 Plan
should be implemented in accordance with the Program Plan, with the program changes agreed
to by PNM as discussed in this Recommended Decision, and with the various additional
information proposed by the Hearir~g Examiner for those programs, until order of the
Commission modifying or terminating them.
17. Although the existing Energy Star Home and Energy Smart for Renters programs
have been implemented for’ an adequate period, those programs have not sufficiently met their
goals and purposes and they should be lerminated. Builders currently participating in the Energy
Star Home program who lmve already been approved for rebates should be given until
September 30, 2013 to complete construction and receive the rebates.
18. The 2012 Plan program costs of $22,493,227 for the first full calendar year of
implementation of the programs (2014) are just and reasonable and should be approved for
recovery over a twelve month period. This should be the approved calendar year budget for the
2012 Plan until further Commission order modifying tlne 2012 Plan budget.
19. The individual, program budgets for calendar year 2013, as prorated by PNM in
accordance with the Commiss:ion’s Final Order in C, ase No. l l-00123-UT and shown in this
Recommended Decision, should be approved.
Recommended Decision
Case No. 12-00317-UT Page 72
20. The individual program budgets proposed in the 2012 Plan for the first full
calendar year of implementation of the 2012 Plan are reasonable and should be approved as the
calendar year program budgets until fu~:her Commission order modifying the program budgets.
21. PNM’s proposed program costs are reasonable and PNM should be authorized to
recover those costs subject to reconciliation and true-up on a calendar year basis. PNM should
act reasonably to address signi:ficant changed circumstances which may occur between the time
of program approval and progr~tm expenditure and file requests for budget modification if annual
program costs are projected to vary by more the 25% of the approved budgets.
22. The initial measurement and evaluation of the approved new programs by the
independent evaluator should be at the end of 2014, after at least a full calendar year of
implementation, to provide a more accurate assessment of the cost effectiveness of the new
programs.
23. The Rider elements for ~:he approved program costs 2.595% of customers’ bills
should be adjusted to reflect the recommendation regarding the incentive rate, after which the
total Rider rate should be app:~oved under PNM’s cost recovery proposal, the program costs and
profit incentive will be recovered only from the electric customer classes that are eligible to
participate in the programs.
24. The Rider does not exceed the limit established in the EUEA, NMSA Section 62-
17-6(A), and provides for the recovery on a monthly basis of the reasonable costs of the
programs and incentive.
25. The Rider will not permit PNM to earn an excessive rate of return.
26. Staff and NM]~.F’,C’s recommendations that PNM provide data in future plan
applications and annual report.,; on program costs and benefits by rate class should be rejected.
Recommended DecisionCase No. 12-00317-UT Page 73
27. The 2012 Plan meets the requirements of the EUEA and should be approved.
The Hearing Examiner recommends that the Commission ORDER as follows:
A. The EI!;/LM programs in PNM’s 2012 Plan are approved.
B. PNM’s program Rider adjusted for the incentives amount described herein
is approved.
C. Within 115 days of the filing of the Final Order, PNM shall make a
compliance filing consisting of the revised Program ]Rider, program budgets for calendar years
2013 and subsequent years, TRC calculations. The revisions shall reflect the incentive method
approved herein and all changes resulting from amendments to the programs as proposed in the
2012 Plan, as described herein.
D. Any outstanding matter not specifically ruled on is disposed of consistent
with this Final Order.
I S S U E D at Santa Fe, New Mexico this 24th day of May, 2013.
NEW MEXICO PUBLIC REGULATION COMMISSION
Recommended DecisionCase No. 12-00317-UT Page 74
BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF THE APPLICATIONOF PUBLIC SERVICE COMPANY OF NEWMEXICO FOR APPROVAL OF ELECTRICENERGY EFFICIENCY PROGRAIVIS ANDPROGRAM COST TARIFF IRIDERPURSUANT TO THE NEW MEXICOPUBLIC UTILITY AND EFFICIENT USE OFENERGY ACTS,
PUBLIC SERVICE COMI?ANY OF NEWMEXICO,
APPLICANT.
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Case No. 12-00317-UT
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing Recommended
Decision, issued May 24, 201.3, was sent by electronic mail to the individuals listed below.