cozen vv o'connor · e-mail: [email protected] counsel for pennsylvania independent oil &...
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COZEN VV O'CONNOR
January 30, 2019
VIA E-FILE
Rosemary Chiavetta, Secretary Pennsylvania Public Utility Commission Commonwealth Keystone Building 400 North Street, 2nd Floor North Harrisburg, PA 17120
Re: Petition of Peoples Natural Gas Company LLC for Approval of its Energy Efficiency and Conservation Plan; Docket No. M-2017-2640306
EXCEPTIONS OF PEOPLES NATURAL GAS COMPANY LLC
Dear Secretary Chiavetta:
Enclosed for filing with the Commission are the Exceptions of Peoples Natural Gas Company LLC in the above-referenced proceeding. Copies of the Exceptions are being served as indicated on the enclosed Certificate of Service.
Thank you for your attention to this filing. Should you have any questions or concerns, please contact me.
DPZ:kmg Enclosure
cc: Honorable Dennis J. Buckley [email protected] (Word version) Per Certificate of Service Lynda W. Petrichevich, Peoples Vice President of Regulatory Affairs William H. Roberts, II, Esquire, Peoples Senior Counsel
David P. Zambito Direct Phone 717-703-5892 Direct Fax 215-989-4216 [email protected]
17 North Second Street Suite 1410 Harrisburg, PA 17101
717.703.5900 877.868.0840 717.703.5901 Fax cozen.com
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
Petition of Peoples Natural Gas Company LLC for : Approval of Its Energy Efficiency and Conservation : Docket No. M-2017-2640306 Plan :
CERTIFICATE OF SERVICE
I hereby certify that I have this day served a true copy of the foregoing Exceptions of Peoples Natural Gas Company LLC, upon the parties, listed below, in accordance with the requirements of 52 Pa. Code § 1.54 (relating to service by a party).
VIA E-MAIL AND FIRST CLASS MAIL:
Steven C. Gray, Esquire Office of Small Business Advocate Commerce Building, Suite 202 300 North Second Street Harrisburg, PA 17101-1303 E-mail: [email protected] Counsel for Office of Small Business Advocate
Christy Appleby, Esquire Darryl Lawrence, Esquire Office of Consumer Advocate 555 Walnut Street Forum Place, 5th Floor Harrisburg, PA 17101-1923 E-mail: [email protected] E-mail: [email protected] Counsel for Office of Consumer Advocate
Tishekia E. Williams, Esquire Michael Zimmerman, Esquire Duquesne Light Company 411 Seventh Avenue Pittsburgh, PA 15219 E-mail: [email protected]
[email protected] Counsel for Duquesne Light Company
Kevin J. Moody, Esquire 212 Locust Street, Suite 300 Harrisburg, PA 17101-1510 E-mail: [email protected] Counsel for Pennsylvania Independent Oil & Gas Association
Michael A. Gruin, Esquire Stevens & Lee 17 N. 2nd Street, 16th Floor Harrisburg, PA 17101 E-mail: [email protected] Counsel for Duquesne Light Company
Linda R. Evers, Esquire Donald R. Wagner, Esquire 111 N. Sixth Street Reading, PA 19601 E-mail: [email protected] E-mail: [email protected] Counsel for Duquesne Light Company
Anthony C. DeCusatis, Esquire Kenneth M. Kulak, Esquire Catherine G. Vasudevan, Esquire Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103-2921 E-mail: [email protected] E-mail: [email protected] E-mail: Catherine.vasudevan@morganlewis. Counsel for Duquesne Light
DATED: January 30, 2019 P. Zambito, Esquire
Counsel for Peoples
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION
Petition of Peoples Natural Gas Company LLC for : Approval of Its Energy Efficiency and Conservation : Docket No. M-2017-26403 06 Plan :
EXCEPTIONS OF PEOPLES NATURAL GAS COMPANY LLC
David P. Zambito, Esq. (PA ID No. 80017) Jonathan P. Nase, Esq. (PA ID No. 44003) Cozen O'Connor 17 North Second Street, Suite 1410 Harrisburg, PA 17101 Tel: (717) 703-5892 Fax: (215) 989-4216 E-mail: [email protected]
William H. Roberts II, Esq. (PA ID No. 54724) Peoples Natural Gas Company LLC 375 North Shore Drive Pittsburgh, PA 15212 Tel: (412)208-6527 E-mail: [email protected]
Counsel for Peoples Natural Gas Company LLC Dated: January 30, 2019
TABLE OF CONTENTS
Page
I. INTRODUCTION 1
II. DESCRIPTION OF THE PLAN 3
III. EXCEPTIONS 4
A. The Appropriate Resolution of this Case , 5
1. Exception No. 1. The ALJ erred by denying the Plan, without prejudice. The ALJ should have ordered a different resolution, as described herein.
5
a) The Commission should approve the Plan 5
b) If the Commission agrees with the ALJ that additional notice to ratepayers is necessary, the Commission should tentatively approve the Plan, subject to additional notice and the submission and review of comments 6
c) If the Commission disapproves any part of the EE&CP, the Commission should disapprove the entire EE&CP, without prejudice, noting that Peoples has fulfilled its obligations under Paragraphs 109-112 of the Merger Settlement 7
B. The Notice Issue 8
1. Exception No. 2. The Administrative Law Judge erred in denying the Petition, and disapproving the EE&CP, without prejudice, on the grounds that the Company did not give ratepayers proper notice of the Plan 8
a) The ALJ erred by failing to consider Peoples' arguments regarding standing to raise the notice issue 9
b) The ALJ erred by finding that Peoples should have provided additional notice of the EE&CP. Peoples gave the notice required by law at the time. The Commission should not change the rules now to find that Peoples gave notice incorrectly more than a year ago 13
2. Exception No. 3. The ALJ erred by denying the Petition, and disapproving the EE&CP in its entirety, because Peoples failed to provide adequate notice to ratepayers when the EE&CP was filed. Any deficiencies in notice can be addressed without requiring
Peoples to re-file its Petition and re-litigate this entire proceeding. 16
The CHP Program 17
1. Exception No. 4. The ALJ erred in disapproving the CHP Program on cost-effectiveness grounds 18
a) The ALJ erred in disapproving the CHP Program. The preponderance of the credible evidence demonstrates that People's CHP Program is cost effective 18
b) The ALJ erred in disapproving the CHP Program. The Plan as a whole is cost effective. The Commission should exercise its discretion to approve the CHP Program 22
2. Exception No. 5. The ALJ erred in disapproving the CHP Program because it is a "load growth" program. The Commission should find that Peoples properly included a CHP Program in its voluntary natural gas EE&CP 24
3. Exception No. 6. The ALJ erred in disapproving the CHP Program based on the size of the program 28
4. Exception No. 7. The ALJ erred in failing to address Duquesne's argument that a voluntary natural gas EE&CP must be proposed as part of a base rate case. The Commission should reject that argument 30
5. If the Commission agrees with the ALJ that the CHP Program should be disapproved, the Commission should disapprove the entire EE&CP, without prejudice 32
The Four Natural Gas Energy Efficiency Programs 33
1. Exception No. 8. The ALJ erred in stating that the natural gas energy efficiency programs should be modified as suggested by the OCA. Net-to-gross adjustments should only be required to be used on a going-forward basis. Additionally, the Commission should reject the OCA's proposed modification to Peoples' Residential New Homes Program; as revised, that program appropriately reflects the impact of changes in building codes 34
2. Exception No. 9. The ALJ erred in disapproving the natural gas energy efficiency programs on the grounds that Peoples failed to give ratepayers proper notice of the EE&CP. The ALJ further erred by holding that the CHP Program can be severed from the natural gas energy efficiency programs; if the Commission disapproves the
ii
CHP Program, it should disapprove the entire EE&CP, without prejudice 37
REQUEST FOR RELIEF 37
iii
TABLE OF AUTHORITIES
Page(s)
Pennsylvania Court Cases
Barasch v. Pa. Pub. Util. Comm 'n, 546 A.2d 1296 (Pa. Cmwlth. 1988) 12
Diamond Energy, Inc. v. Pa. Pub. Util. Comm 'n, 653 A.2d 1360 (Pa. Cmwlth. 1995) 16
Eastwood Nursing v. Dep't of Pub. Welfare, 910 A.2d 134 (Pa. Cmwlth. 2006) 23
George v. Pa. Pub. Util. Comm 'n, 735 A.2d 1282 (Pa. Cmwlth. 1999) 11
Lehigh Valley Power Committee v. Pa. Pub. Util. Comm 'n, 563 A.2d 548 (Pa. Cmwlth. 1989) 6, 16
McCloskey v. Pa. Pub. Util. Comm 'n, 1624 C.D. 2017 (Pa. Cmwlth. 2018) petition for allowance of appeal filed November 8, 2018 passim
West Penn Power Co. v. Pa. Pub. Util. Comm 'n, 659 A.2d 1055 (Pa. Cmwlth. 1995) 6, 16
Pennsylvania Public Utility Commission Cases
Application of SUEZ Water Pennsylvania, Inc., Docket No. A-2018-3003519 (Order entered December 20, 2018) 9
Energy Efficiency and Conservation Plan, Docket No. M-2008-2069887 (Implementation Order entered Jan. 16, 2009) 7, 10, 32
Grattan v. Verizon Pennsylvania Inc., Docket No. C-20078498 (Initial Decision of ALJ Susan D. Colwell issued March 26, 2008, Final Order entered May 28, 2008) 12
In Hynn Yoo and Yu Shin Yoo v. Philadelphia Gas Works, Docket No. C-2013-2369915 (Initial Decision of ALJ Marta Guhl issued June 4, 2014, Final Order entered July 10, 2014) 13
Joint Application of Peoples Natural Gas Company, LLC, Peoples TWP LLC and Equitable Gas Company, LLC, Docket Nos. A-2013-2353647 et al. (Order entered November 14, 2013) 1
iv
Joint Petition for Adoption of Partial Settlement Resolving Pending Telecommunications Issues, Docket Nos. P-00991648 and P-00991649 (Sept. 30, 1999) 16
Pa. Pub. Util. Comm 'n, et al. v. UGI Utilities, Inc. - Gas Division, Docket No. R-2015-2518438 (Opinion and Order entered October 14, 2016) 25, 31
Petition of PECO Energy Company for Approval of Its Act 129 Phase III Energy Efficiency and Conservation Program, Docket No. M-2015-2515691 (Opinion and Order entered March 17, 2016) 29
Petition of Philadelphia Gas Works for Approval of Demand-Side Management Plan for FY 2016-2020, and Philadelphia Gas Works Universal Service and Energy Conservation Plan for 2014-2016, 52 Pa. Code § 62.4- Request for Waivers, Docket No. P-2014-2459362 (Tentative Opinion and Order entered August 4, 2016) 24
2016 Total Resource Cost (TRC) Test, Docket No. M-2015-2468992 (Order entered June 22, 2015) 18, 22
Verizon Pennsylvania, LLC et al. v. Conversent Communications of Pennsylvania LLC et al., 2008 Pa. PUC LEXIS 380 11
Pennsylvania Statutes
66 Pa. C.S. § 703(g) 15
66 Pa. C.S. § 1329 11
66 Pa. C.S. § 1329(c)(1) 10
66 Pa. C.S. §§ 2201 etseq 26
66 Pa. C.S. §§ 2801 etseq 26
Pennsyvlania Regulations
52 Pa. Code §5.41 13, 14
52 Pa. Code § 5.533 1
52 Pa. Code § 5.571(d) 10
52 Pa. Code § 5.572 15
v
Statements of Policy
Final Policy Statement on Combined Heat and Power, Docket No. M-2016-2530484 (April 5, 2018) passim
Miscellaneous
Secretarial Letter, Voluntary Energy Efficiency and Conservation Program, Docket No. M-2009-2142851 (December 23, 2009) 5
vi
I. INTRODUCTION
NOW COMES Peoples Natural Gas Company LLC ("Peoples" or the "Company"),
pursuant to 52 Pa. Code § 5.533, to file these exceptions to the Initial Decision ("I.D." or "Initial
Decision"), issued in this matter on January 10, 2019 by the Honorable Administrative Law Judge
Dennis J. Buckley (the "ALJ").
This proceeding involves Peoples' petition (the "Petition"), filed on December 27, 2017,
requesting Pennsylvania Public Utility Commission ("PUC" or "Commission") approval of an
energy efficiency and conservation plan ("EE&CP" or "Plan").1 This plan was required by
Paragraphs 109-112 of the settlement agreement ("Merger Settlement") approved by the
Commission in Joint Application of Peoples Natural Gas Company, LLC, Peoples TWP LLC and
Equitable Gas Company, LLC, Docket Nos. A-2013-2353647 et al. (Order entered November 14,
2013) ("Merger Proceeding").2
On January 16, 2018, the Office of Small Business Advocate ("OSBA") filed a Notice of
Appearance and Answer. On January 19, 2018, the Office of Consumer Advocate ("OCA") filed
a Notice of Intervention and Answer. On February 5,2018, the Pennsylvania Independent Oil and
Gas Association ("PIOGA") filed a Petition to Intervene. The unopposed petition was granted by
ALJ Buckley on February 6, 2018. On March 12, 2018, Duquesne Light Company ("Duquesne")
filed a Petition to Intervene. Duquesne's Petition was denied by the ALJ, but the Commission
granted the Petition on consideration of Duquesne's Petition for Interlocutory Review and Answer
1 Peoples' EE&CP has been modified during the course of this proceeding. For a detailed description of the Plan in its current form, see Peoples' Main Brief pp. 3-12. In the interest of brevity, these Exceptions incorporate by reference Peoples' Main Brief and Reply Brief. Some repetition of those documents, however, is unavoidable. 2 For a more complete procedural history, see Peoples' Main Brief pp. 1-3.
of Material Questions (Opinion and Order entered June 14, 2018) ("Order Answering Material
Questions").
Prehearing conferences were held on January 26, 2018, June 22, 2018, and August 15,
2018. A hearing was held on September 13,2018. Briefs were filed on October 1, 2018 and Reply
Briefs were filed on October 11, 2018. The ALJ issued his Initial Decision on January 10, 2019.
The ALJ recommended that the Commission deny the Petition and disapprove the EE&CP,
without prejudice. The primary reason for this recommendation was that the ALJ concluded
"Peoples' ratepayers were not provided with adequate notice of this proceeding." I.D. at p. 43.
But for this conclusion, the ALJ would have recommended approval of a portion of the EE&CP,
with modifications. I.D. at p. 45. The ALJ, however, also recommended that the Commission
disapprove part of the EE&CP on other grounds. Specifically, the ALJ recommended that the
Commission disapprove the portion of the EE&CP proposing a combined heat and power ("CHP")
program on cost effectiveness and other grounds. I.D. at p. 49.
Peoples respectfully submits that the Commission should reverse the ALJ's Initial
Decision, grant Peoples' Petition, and approve Peoples' EE&CP, as modified during the course of
this proceeding. If, however, the Commission agrees with the ALJ that additional notice to
ratepayers is necessary, Peoples submits that the Commission should modify the ALJ's Initial
Decision, tentatively grant Peoples' Petition and approve the EE&CP, subject to additional notice
and an opportunity for ratepayers to comment on the plan. Finally, if the Commission agrees with
the ALJ that the CHP Program should be disapproved, the Commission should deny the Petition
and disapprove the EE&CP in its entirety, without prejudice, noting that Peoples has fulfilled its
obligations under Paragraphs 109-112 of the Merger Settlement.
2
II. DESCRIPTION OF THE PLAN
Peoples' Main Brief, pp. 3-12, described the Plan in detail. While these Exceptions
incorporate that brief by reference, a brief description of the Plan is necessary here.
The Plan is an integrated whole comprised of two parts. The first part, the natural gas
energy efficiency portion of the plan, includes four programs designed to reduce customers'
natural gas usage. The second part is a CHP Program designed to achieve net energy savings by
promoting the installation of CHP plants that use natural gas to generate electricity and use the
waste heat to serve a thermal load.3 Peoples' Main Brief p. 5.
The four natural gas energy efficiency programs are: Small Equipment Program ("SEP");
Commercial Equipment Program ("CEP"); Residential New Homes Program ("RNHP"); and,
Commercial and Multifamily New Buildings Program ("CNBP"). The SEP and CEP address the
lost opportunities arising when customers choose not to purchase the high efficiency option when
replacing old equipment or installing new equipment. The RNHP and the CNBP address the new
construction market, since the most pressing lost opportunity is to improve the efficiency of
buildings when they are first constructed. Peoples Exhibit 12 p. 4. The four natural gas energy
efficiency programs together are projected to cost $25.0 million over the five-year life of the
EE&CP. They have a combined Total Resource Cost ("TRC") Test Benefit/Cost Ratio ("BCR")
of 1.15. Peoples Exhibit 12 pp. 1-2.
The CHP Program targets medium and large commercial and industrial customers with
high thermal and electric loads. Customers considering CHP need to submit the project details
before and after the CHP project is completed. The project will be screened for cost-effectiveness
under the TRC Test and an Economic Test. Projects that would receive an incentive greater than
3 These projects would increase gas usage, but would more than compensate for that by reducing customers' consumption of electricity.
3
$500,000 will be reviewed by an independent evaluator prior to the commitment to pay the EE&CP
incentive to ensure that the project passes both the TRC Test and the Economic Test. Peoples
Exhibit 20 ^ 4b. When a project is completed, it must be re-screened for cost-effectiveness and
net savings using actual values, rather than assumptions. If it is still cost effective and saves
energy, the incentive will be paid. Peoples Exhibit 12 pp. 50-51. The CHP Program is subject to
a $17.5 million cap, although expenditures at the present time are projected to be $12.3 million
over five years. Using the TRC Test, the CHP Program is projected to have a BCR of 1.87.
Peoples Exhibit 12 p. 2.
As explained in Peoples' Main Brief, the Plan evolved significantly during the course of
this proceeding. Peoples submits that, in its final form, the Plan is just, reasonable and in the public
interest. It includes all the necessary components of an EE&CP. For example, the EE&CP offers
a variety of programs to different classes of customers; the programs are reasonably sized in terms
of both costs and projected energy savings; and the Plan as a whole is cost effective. As noted in
Peoples' Reply Brief, pp. 1-2: (a) the OSBA supports the entire EE&CP, (b) PIOGA supports the
entire EE&CP, subject to a condition not pertinent here; (c) the OCA supports the natural gas
energy efficiency program portion of the EE&CP, subject to certain modifications; and (d)
Duquesne has no objection to the natural gas energy efficiency portion of the EE&CP.
III. EXCEPTIONS
Peoples respectfully submits that the ALJ erred by denying the Petition and disapproving
the entire EE&CP, without prejudice. Peoples will begin by discussing the appropriate resolution
of this case. Peoples will then discuss each of the major issues in the case: the due process/notice
issue, the CHP Program portion of the EE&CP, and the natural gas energy efficiency portion of
the EE&CP.
4
A. The Appropriate Resolution of this Case
1. Exception No. 1. The ALJ erred by denying the Plan, without prejudice. The ALJ should have ordered a different resolution, as described herein.
The ALJ denied the Petition and disapproved the EE&CP, without prejudice. I.D. p. 51.
This result was intended to permit Peoples to address alleged deficiencies and to resubmit an
EE&CP to the Commission in the future. Such further proceedings are not necessary. Peoples
respectfully submits that the Commission should reverse the Initial Decision and approve the
EE&CP. However, if the Commission does not approve the EE&CP, the Commission should,
nevertheless, order a different resolution than that recommended by the ALJ in the Initial Decision,
a resolution that allows for cure of alleged deficiencies in this case, without the need for a future
proceeding, all as discussed in the following paragraphs.
a) The Commission should approve the Plan.
For the reasons stated in Peoples' Main Brief and Reply Brief, which are incorporated
herein by reference, the Commission should approve the EE&CP. Peoples' Main Brief, pp. 16-37
and 41-45; Peoples' Reply Brief, pp. 5-18 and 19-20. The EE&CP is just and reasonable and in
the public interest. The EE&CP contains all of the necessary components of any prudent and cost-
effective EE&CP. The EE&CP is largely consistent with Act 129, as the Commission directed in
its December 23, 2009 Secretarial Letter in Voluntary Energy Efficiency and Conservation
Program, Docket No. M-2009-21242851 ("December 2009 Secretarial Letter"). Finally, the
EE&CP is consistent with the Commission's recent Final Policy Statement on Combined Heat and
Power, Docket No. M-2016-2530484 (April 5, 2018) ("Final Policy Statement"), which
encourages electric distribution companies ("EDCs") and natural gas distribution companies
5
("NGDCs") to include CHP programs in their EE&CPs. Consequently, the Commission should
reverse the Initial Decision, grant the Petition, and approve the EE&CP, in its entirety.
b) If the Commission agrees with the ALJ that additional notice to ratepayers is necessary, the Commission should tentatively approve the Plan, subject to additional notice and the submission and review of comments.
The ALJ denied the Petition and disapproved the EE&CP, primarily because he found that
ratepayers must be given additional notice of, and opportunity to comment on, the EE&CP. I.D.
pp. 45-49. Peoples respectfully disagrees, as explained in Section III.B.l, infra. However, if the
Commission agrees with the ALJ that ratepayers must be given additional notice of, and
opportunity to comment on, the EE&CP, the Commission should modify the ALJ's decision.
Rather than denying the Petition without prejudice, the Commission should tentatively approve
the Plan as discussed in Section III.B.2, infra. Specifically, the Commission should tentatively
approve the entire EE&CP and direct Peoples to provide ratepayers with additional notice of the
Plan. Ratepayers, other than those who have already participated in this proceeding, would then
be given an opportunity to submit written comments on the Plan. To the extent that these
comments raise issues of law, policy, or discretion, the Commission could enter a final order
addressing the comments. See, e.g., West Penn Power Co. v. Pa. Pub. Util. Comm'n, 659 A.2d
1055 (Pa. Cmwlth. 1995), petition and cross petition for allowance of appeal denied, 674 A.2d
1079 (Pa. 1996); Lehigh Valley Power Committee v. Pa. Pub. Util. Comm'n, 563 A.2d 548 (Pa.
Cmwlth. 1989). However, if any of these comments raise factual issues, the Commission should
remand the matter to the ALJ for issuance of a Supplemental Initial Decision prior to entering a
final order on the EE&CP. This approach would address any due process concerns without the
need to completely re-start this litigation.
6
c) If the Commission disapproves any part of the EE&CP, the Commission should disapprove the entire EE&CP, without prejudice, noting that Peoples has fulfilled its obligations under Paragraphs 109-112 of the Merger Settlement.
In addition, the ALJ disapproved the CHP Program portion of the EE&CP. I.D. pp. 49-51.
Peoples respectfully submits that the ALJ erred, as explained in Sections III.C.1-C.4, infra.
However, if the Commission disapproves any part of the EE&CP, the Commission should, like
the ALJ, disapprove the entire EE&CP, without prejudice. While Act 129 allows the Commission
to approve an EE&CP in part and disapprove it in part, see Energy Efficiency and Conservation
Plan, Docket No. M-2008-2069887 (Implementation Order entered January 16, 2009) p. 12 ("The
Commission will approve or reject all or part of a plan at public meeting within 120 days of the
EDC's filing."), the Commission should not force a natural gas utility submitting a voluntary plan
to implement a partial plan against its will. Peoples does not wish to implement some parts of its
voluntary EE&CP without the remaining parts. Consequently, if the Commission concludes that
any part of the EE&CP must be disapproved, it should disapprove the entire EE&CP, without
prejudice.
In doing so, the Commission should also acknowledge that Peoples has fulfilled its
obligations under Paragraphs 109-112 of the Merger Settlement. Those Paragraphs required
Peoples to use a certain procedure to develop the EE&CP. They also required Peoples to meet
certain deadlines, including submitting the EE&CP to the Commission within 48 months of closing
on the Merger.
Peoples developed the EE&CP following the procedure set forth in the Merger Settlement,
filed it timely with the Commission, and has pursued this litigation to the fullest. If Peoples'
EE&CP is disapproved, without prejudice, Peoples should have the right to revise the EE&CP and
resubmit it, when and as Peoples sees fit.
7
B. The Notice Issue
In his Initial Decision, the ALJ disapproved the entire EE&CP, without prejudice, because,
in his opinion, "Peoples' ratepayers were not provided with adequate notice of this proceeding."
I.D. p. 43. The ALJ apparently agreed with Duquesne that Peoples was required to give all
customers individual notice of the filing of this case. Since Peoples did not do so, he recommended
disapproval of the entire EE&CP, without prejudice. I.D. pp. 45-49.
Peoples respectfully submits that the ALJ erred. First, he failed to even consider Peoples'
arguments that the only party to raise the notice issue lacked standing to do so. Second, he erred
in finding that Peoples did not give proper notice; Peoples gave the notice that was required by
law at the time. Third, he erred in finding that the appropriate remedy is to disapprove the EE&CP,
without prejudice. If the Commission concludes that Peoples should have provided additional
notice, the Commission should tentatively approve the EE&CP, subject to additional notice and
an opportunity for ratepayers to submit comments.
1. Exception No. 2. The Administrative Law Judge erred in denying the Petition, and disapproving the EE&CP, without prejudice, on the grounds that the Company did not give ratepayers proper notice of the Plan.
The ALJ's primary reason for disapproving the EE&CP was that ratepayers were not
provided with adequate notice of the filing of the EE&CP. I.D. p. 43. The history of this issue is
worth noting. As stated above, the ALJ originally denied Duquesne's Petition to Intervene in this
proceeding, but the Commission reversed that decision in its Order Answering Material Questions.
In its brief in support of that petition, Duquesne raised its notice issue for the first time. Peoples
filed a Motion to Strike this portion of Duquesne's brief on the ground that the issue was not raised
in the underlying Petition for Declaratory Review. Peoples' Motion noted that Duquesne could
8
properly raise the notice issue in a second filing, which would allow the other parties an
opportunity to file a response before the Commission resolved the issue. Peoples' Motion to Strike
pp.7-8. Duquesne did not make such a filing.
The Commission's Opinion and Order on the Petition for Interlocutory Review, at pages
7, 13 and 14, restated Duquesne's notice issue, and stated at page 7:
However, we conclude that the issue of notice is not relevant to our disposition of the Interlocutory Petition and shall decline to rule on the Motion to Strike. Nonetheless, the OALJ retains the discretion to address the issue of service and publication, as deemed appropriate.
Now, some seven months later, the notice issue is again before the Commission.
Peoples respectfully disagrees with the ALJ that a "do-over" is required on the facts of this
case. First, the ALJ erred by not even addressing Peoples' argument that Duquesne - who received
actual notice of the EE&CP and fully participated in this proceeding - lacks standing to raise the
issue of improper notice to other ratepayers. Second, the ALJ erred by failing to find that Peoples
gave ratepayers proper notice. Third, the ALJ erred by denying the Petition, and disapproving the
entire EE&CP, without prejudice; other remedies are more appropriate under the circumstances of
this case.
a) The ALJ erred by failing to consider Peoples' arguments regarding standing to raise the notice issue.
The ALJ denied the Petition, and disapproved the EE&CP, in part, based on his conclusion
that Peoples was required to give individual notice of the filing to all ratepayers. I.D. pp. 45-49.
The ALJ relied heavily on a Motion of Commissioner David W. Sweet in Application of SUEZ
Water Pennsylvania, Inc., Docket No. A-2018-3003519. That Motion, however, was defeated by
a vote of 4-1. Consequently, that Motion has no precedential authority.
Commissioner Sweet's motion was in response to the decision of the Commonwealth Court
of Pennsylvania in McCloskey v. Pa. Pub. Util. Comm'n, 1624 C.D. 2017 (Pa. Cmwlth. 2018)
9
("McCloskey"), petition for allowance of appeal filed November 8, 2018. The Court issued its
decision on October 11, 2018 - the same date that Reply Briefs were filed in this proceeding and
the record in this proceeding was closed. No party asked the ALJ to reopen the record to address
this issue pursuant to 52 Pa. Code § 5.571(d) ("The record may be reopened upon notification to
the parties in a proceeding for the reception of further evidence if there is reason to believe that
conditions of fact or of law have so changed as to require, or that the public interest requires, the
reopening of the proceeding.") (emphasis added). Nor did the ALJ reopen the record on his own
motion. As a result, the parties did not have an opportunity to provide their perspectives to the
ALJ on the impact of the McCloskey case on the instant proceeding.
Peoples respectfully submits that the McCloskey case should have no impact. First,
McCloskey is distinguishable on the law. McCloskey involved 66 Pa. C.S. § 1329(c)(1), which
provides that an application proceeding establishes the rate base that "shall" be incorporated into
the rate base of the acquiring public utility in its next base rate case, as a result of the acquisition.
In other words, the amount to be included in rate base due to the acquisition is conclusively
established in the application proceeding; parties to the subsequent rate case cannot challenge the
amount to be included in rate base as a result of the acquisition.
In contrast, Peoples EE&CP involves a reconcilable surcharge. Nothing will be decided in
this proceeding that a party cannot raise again during the reconciliation proceeding.
Peoples witness Petrichevich stated that Peoples' proposed EE&C Rider generally aligns
with the EE&CPs developed by EDCs pursuant to Act 129. Peoples Statement No. 1, Direct
Testimony of Lynda W. Petrichevich p. 8. In its Implementation Order in Energy Efficiency and
Conservation Program, Docket No. M-2008-2069887 (Jan. 16,2009), the Commission discussed
the reconcilable adjustment mechanism to be used by EDCs pursuant to Act 129. The Commission
10
stated "the annual review and reconciliation for each EDC's cost recovery mechanism will occur
pursuant to a public hearing, if required due to petitions filed by interveners, and will include an
evaluation of the reasonableness of all program costs and their allocation to the applicable
customer classes." Implementation Order p. 38. In other words, parties who did not participate in
the instant proceeding could intervene in a future proceeding and challenge all costs claimed by
Peoples as well as the allocation of costs among classes. Because of ratepayers' rights to
participate in that process, due process does not require that they receive notice of, and an
opportunity to participate in, the instant proceeding.
Second, McCloskey is distinguishable on the facts. In the McCloskey case, the OCA
properly raised the issue of whether the residential ratepayers that it represents received adequate
notice of an application fded pursuant to 66 Pa. C.S. § 1329. In this case, in contrast, the only
party who claimed that Peoples failed to give ratepayers adequate notice of its Petition was
Duquesne. Peoples argued in its Main Brief, p. 38, and in its Reply Brief, p. 18, that Duquesne
lacks standing to raise this issue. Duquesne received actual notice of the filing of the Petition, as
is conclusively demonstrated by the fact that Duquesne filed a Petition to Intervene in the
proceeding. Duquesne also fully participated in this proceeding. Clearly, Duquesne was not
denied notice and an opportunity to be heard.
Duquesne's argument is that other potential parties to this proceeding were denied notice
and an opportunity to be heard. Duquesne, however, never established its standing to advocate
on behalf of other ratepayers. The Commission stated in Verizon Pennsylvania, LLC et al. v.
Conversent Communications of Pennsylvania LLC et al., 2008 Pa. PUC LEXIS 380 at *10:
The test for standing in Commission proceedings is well established. As the Commonwealth Court explained in [George v. Pa. Pub. Util. Comm 'n, 735 A.2d 1282 (Pa. Cmwlth. 1999), appeal denied 758 A.2d 1202 (2000)], to establish standing, a party must satisfy all three parts of a three-pronged test. First, the party
11
must have a substantial interest in the subject of the case. A substantial interest is an interest that surpasses the common interest of all citizens in procuring obedience to the law. Second, the party's interest must be direct. To satisfy this element of the test, the party must demonstrate that the subject of the Complaint caused harm to its interests. Third, the party's interest must be immediate and not a remote consequence. An immediate interest involves the nature of the causal connection between the action complained of and the complainant's injury and the interest the complainant seeks to protect is within the zone of interests sought to be protected by the statute or constitutional guarantee in question.
With respect to the issue of notice to other ratepayers, Duquesne has no interest that is substantial,
direct or immediate. Duquesne was not harmed by Peoples' alleged failure to provide adequate
notice to ratepayers. Cf Grattan v. Verizon Pennsylvania Inc., Docket No. C-20078498 (Initial
Decision of ALJ Susan D. Colwell issued March 26, 2008, Final Order entered May 28, 2008) ("A
person who is not adversely affected by the matter he seeks to challenge is not 'aggrieved' and
therefore has no standing to obtain judicial relief."). Duquesne's only interest in this issue is the
common interest of all citizens in procuring obedience to the law. Since Duquesne had actual
notice, and fully participated in this proceeding, it was not aggrieved by Peoples' alleged failure
to provide adequate notice to ratepayers, and therefore lacks a substantial, direct, or immediate
interest in this issue.
Duquesne's Reply Brief cites the case of Barasch v. Pa. Pub. Util. Comm 'n, 546 A.2d 1296
(Pa. Cmwlth. 1988) ("Milesburg ") as supporting its standing in this proceeding. In that case, West
Penn Power filed a petition with the Commission, asking it to publish a declaratory order in the
Pennsylvania Bulletin for public review and comment. The Commission denied that request. West
Penn was clearly aggrieved by the Commission's denial of the relief that West Penn requested. In
this case, however, Duquesne has not established that it is aggrieved by Peoples' alleged failure to
provide adequate notice of the EE&CP to other ratepayers. Milesburg does not support Duquesne'
position.
12
Additionally, it is well-settled that a private litigant lacks standing to pursue an issue on
behalf of another in Commission proceedings. See, e.g., In Hynn Yoo and Yu Shin Yoo v.
Philadelphia Gas Works, Docket No. C-2013-2369915 (Initial Decision of ALJ Marta Guhl issued
June 4, 2014, Final Order entered July 10, 2014) (finding that the complainants, who were not the
customers of record at the subject property, lacked standing to raise issues regarding the bills and
quality of service rendered to the customer of record). Clearly, Duquesne lacks standing to pursue
the notice issue on behalf of Peoples' other ratepayers.
The Initial Decision never addresses Peoples' standing argument; the ALJ only addresses
the merits of Duquesne's argument. This was clearly error. The ALJ should have addressed
Peoples' standing argument. The Commission should do so now, and, for the reasons discussed
above, should find that Duquesne lacks standing to argue that the due process rights of others were
violated.
b) The ALJ erred by finding that Peoples should have provided additional notice of the EE&CP. Peoples gave the notice required by law at the time. The Commission should not change the rules now to find that Peoples gave notice incorrectly more than a year ago.
Even if the Commission addresses the merits of Duquesne's notice argument (which it
should not), the Commission should find that the ALJ erred in denying the Petition, and
disapproving the EE&CP in its entirety, based on Duquesne's claim that Peoples failed to give
adequate notice to ratepayers. As explained in Peoples' Main Brief, pp. 38-40, and its Reply Brief,
pp. 18-19, Peoples gave the notice that was required by law when it filed its Petition. Retroactively
changing the rules would violate Peoples' due process rights.
Peoples filed its EE&CP in compliance with the procedures set forth in the December 23,
2009 Secretarial Letter. That letter stated that voluntary EE&CPs were to be filed in accordance
with 52 Pa. Code § 5.41. The Secretarial Letter did not require (i) notice to be given to individual
13
ratepayers, (ii) notice to be given to other public utilities serving the same territory as the utility
filing the EE&CP, or (iii) notice to be published in the Pennsylvania Bulletin.
On December 27, 2017, Peoples filed its EE&CP in accordance with 52 Pa. Code § 5.41.
Section 5.41 (b) requires that a copy of a petition be served on I&E, the OCA and the OSBA, which
was done in this case. That regulation also requires that "[a] copy of the petition shall be served
on all persons directly affected and on other parties whom petitioner believes will be affected by
the petition." Peoples is unaware of any instance in which the Commission construed this
regulation to require that each individual customer of a utility be served with a copy of a petition
requesting Commission approval of an EE&CP - even EE&CPs required by Act 129.
According to the ALJ, EDCs do not need to give ratepayers notice when filing an Act 129
EE&CP because: "The passage of Act 129 put the ratepayers of EDCs on notice that EE&CPs
would be filed. No such statutory requirement or notice exists, here." I.D. p. 46. This attempt to
distinguish Act 129 EE&CPs from voluntary EE&CPs is hardly compelling. Peoples respectfully
submits that there is no basis for distinguishing Act 129 EE&CPs from voluntary EE&CPs with
regard to the need for notice - or, more precisely, the lack of a need for notice.
In addition, the ALJ failed to consider Peoples' argument that, in addition to the notice
required by the December 2009 Secretarial Letter and the Commission's regulations, Peoples gave
the notice required by the Commission's Order approving the Merger Settlement. The Merger
Settlement required Peoples, no later than 45 months after closing on the merger, to provide a copy
of an energy efficiency study to the demand side management stakeholders (which included the
OCA, the OSBA, I&E, Citizens for Pennsylvania's Future, any interested party in the Merger
Proceeding, and any interested large customer of Peoples), and to the parties to the Merger
14
Proceeding. That notice was provided on December 1, 2016 and a collaborative was convened on
December 14, 2016.
The Merger Settlement also required Peoples to file the EE&CP with the Commission no
later than 48 months after closing on the merger, and to serve the filing on the parties to the Merger
Proceeding and the demand side management stakeholders. The Merger Settlement - including
this service requirement - was ultimately approved by ALJ Mark A. Hoyer and the Commission.
The Commission decision approving the Merger Settlement therefore established service
requirements for Peoples' EE&CP above and beyond the service requirements established in the
December 2009 Secretarial Letter and the Commission's regulations for petitions.
To the extent that Duquesne seeks to have the Commission establish even greater service
requirements for Peoples' EE&CP - individual notice to ratepayers - Duquesne seeks to amend a
prior Commission Order, pursuant to Section 703(g) of the Code and Section 5.572 of the
Commission's Regulations. Obviously, a presiding officer cannot amend a Commission Order;
only the Commission can amend a Commission Order.
The Commission should not amend its Order in the Merger Settlement now, to require that
Peoples provide ratepayers with individual notice of the filing of its petition, which was required
to be filed by December 31, 2017. Compliance with such an amendment would obviously be
impossible now. The Commission should not order that which cannot be done. Consequently, the
Commission should not amend its order in the Merger Settlement to modify the service
requirements that applied at the time the Petition was filed.
15
2. Exception No. 3. The ALJ erred by denying the Petition, and disapproving the EE&CP in its entirety, because Peoples failed to provide adequate notice to ratepayers when the EE&CP was filed. Any deficiencies in notice can be addressed without requiring Peoples to re-file its Petition and re-litigate this entire proceeding.
Finally, even if the Commission agrees with the ALJ that Peoples must provide ratepayers
with individual notice of its EE&CP, the Commission should not adopt the ALJ's Initial Decision,
which gave Peoples the opportunity to re-start this litigation from the beginning. There is no need
to resort to a "do-over;" any deficiencies in the notice that Peoples gave when it filed this case
more than a year ago can be addressed without requiring Peoples to re-file its Petition and re-
litigate this entire proceeding.
Due process requires notice and a meaningful opportunity to be heard. See Joint Petition
for Adoption of Partial Settlement Resolving Pending Telecommunications Issues, Docket Nos. P-
00991648 and P-00991649 (Sept. 30, 1999). However, due process does not, in all cases, require
that the opportunity to be heard take place in a "live" hearing. Hearings are unnecessary if the
only questions presented are matters of law, policy, or discretion. West Penn Power Co. v. Pa.
Pub. Util. Comm 'n, 659 A.2d 1055 (Pa. Cmwlth. 1995), petition and cross petition for allowance
of appeal denied, 674 A.2d 1079 (Pa. 1996); Lehigh Valley Power Committee v. Pa. Pub. Util.
Comm'n, 563 A.2d 548 (Pa. Cmwlth. 1989). However, hearings are necessary if disputed
questions of fact must be resolved. Diamond Energy, Inc. v. Pa. Pub. Util. Comm 'n, 653 A.2d
1360 (Pa. Cmwlth. 1995). •
Consequently, if the Commission determines that Peoples must provide ratepayers with
additional notice of the Petition and the EE&CP, the Commission should:
• tentatively approve the EE&CP, subject to a notice and comment period; • provide detailed instructions to Peoples regarding the content of the notice to be
provided to ratepayers, to avoid any further dispute as to whether ratepayers received adequate notice;
16
• direct Peoples to provide additional notice to ratepayers within 60 days of the date of entry of the Commission's tentative order; and
• permit ratepayers to submit comments on the EE&CP within 90 days of the date of entry of the Commission's tentative order.
If all of the comments raise issues of law, policy, or discretion, the Commission should
expeditiously enter a final order on the EE&CP. If, however, some comments raise issues of fact,
those comments should be referred to the ALJ for a hearing and the issuance of a Supplemental
Initial Decision. The parties would have an opportunity to submit Exceptions and Reply
Exceptions, and then the Commission could issue an order finally resolving this proceeding.
There is no need for the parties and the Commission to incur the cost of a "do-over," as
recommended by the ALJ. The approach suggested above more appropriately balances the due
process rights of ratepayers with the utility's interest in obtaining an efficient and expeditious
resolution of this proceeding. The approach suggested above also furthers the public interest in
facilitating an expeditious approval of the EE&CP, enabling the Company to begin implementing
its plan promoting energy efficiency and conservation.
C. The CHP Program
In his Initial Decision, the ALJ recommended that the CHP Program be disapproved for
several reasons. His primary objection concerned the evidentiary support for the cost-effectiveness
of the CHP Program. He also expressed certain substantive concerns with the CHP Program.
Peoples respectfully submits that the ALJ erred; he should have approved the CHP Program
because it is just, reasonable and in the public interest. Even if the Commission agrees with the
ALJ's concerns regarding the evidentiary record, the Commission should address the ALJ's
substantive concerns in order to provide guidance to Peoples in the event that Peoples attempts to
revise the CHP program and resubmit it as part of an EE&CP.
17
Finally, if the Commission agrees with the ALJ that the CHP Program should be
disapproved, the Commission should dismiss the entire EE&CP, without prejudice. The EE&CP
is a comprehensive package, and the CHP Program is an important part of that package. The
Commission should not require Peoples to implement an EE&CP without the CHP Program.
1. Exception No. 4. The ALJ erred in disapproving the CHP Program on cost-effectiveness grounds.
On page 1 of the December 2009 Secretarial Letter, the Commission stated that the cost-
effectiveness of energy savings is prudent and essential for any EE&CP. Cost-effectiveness is
determined by application of the TRC Test. The Commission has consistently held that the TRC
Test is to be applied at the plan level rather than at the program level. 2016 Total Resource Cost
(TRC) Test, Docket No. M-2015-2468992 (Order entered June 22, 2015) ("TRC Test Order"). As
a result, if a plan has a TRC Test value greater than 1.0, but a particular program in the plan has a
TRC Test value of less than 1.0, the Commission has discretion to approve that program. 2016
TRC Test Order, p. 18.
The ALJ disapproved Peoples' CHP Program on cost-effectiveness grounds, primarily
because he concluded, in a summary-type fashion, that Peoples' evidence concerning cost-
effectiveness was unreliable. I.D. p. 49. Peoples respectfully submits that the ALJ erred. First,
the preponderance of the credible evidence demonstrates that Peoples' CHP Program is, in fact,
cost effective. Second, even if the Commission agrees with the ALJ, it should exercise its
discretion to approve the CHP Program.
a) The ALJ erred in disapproving the CHP Program. The preponderance of the credible evidence demonstrates that People's CHP Program is cost effective.
Peoples' original EE&CP was prepared using the 2015 Environmental Protection Agency
and Combined Heat and Power Partnership's Catalog of CHP Technologies ("EPA CHP
18
Catalog"). In Peoples Statement 2-R2, Second Rebuttal Testimony of Theodore M. Love, and its
accompanying exhibits, Peoples' witness Love explained that Peoples' revised EE&CP was
prepared using U.S. Energy Information Administration, Distributed Generation and Combined
Heat & Power System Characteristics and Cost in the Buildings Sector ("EIA CHP Data").
In their surrebuttal testimony and their briefs, the OCA and Duquesne criticized the use of
the EIA CHP Data, but Mr. Love explained that the EIA CHP Data is credible, reasonable, and
has several advantages over the EPA CHP Catalog:
1. The US Energy Information Administration is a credible and respected federal agency, and the author of the report, Leidos, is a well-established company with an extensive background in power generating technologies.
2. The purpose of the EIA CHP Data is for projecting into the future, and the EIA uses this report for its Annual Energy Outlook projections, as described in the preface to the report. To contrast, the EPA CHP Catalog is a more static document that should be used as a benchmark for CHP technology, but not necessarily as a projection of future trends. The Revised EE&C CHP Program is comprised of projections for potential projects, not an analysis of actual projects, and hence it is appropriate to use the EIA CHP Data for this purpose.
3. The O&M cost methodology utilized by the EIA CHP Data is more comprehensive than that of the EPA CHP Catalog since it more accurately breaks out O&M costs between fixed costs ($/kW-yr) and variable costs (on a $/kWh).
4. The EIA CHP Data is more recent than the EPA CHP Catalog, which is important not just in terms of costs, but also in terms of efficiency levels per cost. While the EPA CHP Catalog does have a 2017 update, this is not actually an update to any section of the report that was utilized in the original filing of the EE&C Plan. As stated on page ii of the 2017 EPA CHP Catalog "The September 2017 revision incorporated a new section on packaged CHP systems (Section 7)". Mr. Crooks says on page 8, line 10 of his surrebuttal that the 2017 EPA CHP Catalog still relies on 2014 data, but in fact the EPA CHP Catalog cost and performance data for reciprocating engines is based on data available in 2013 (EPA CHP Catalog, footnote to Table 2-2). The data for combustion turbines is not as explicitly stated, but Table 3-2 of the EPA CHP Catalog expresses the costs in 2013$, which implies that it's based on 2013 data.
Peoples Statement No. 2-REJ, Rejoinder Testimony of Theodore M. Love p. 12.
Additionally, Mr. Love stated: "I would like to emphasize that the CHP Program
projections provided in the Revised EE&C Plan are projections for potential projects that are
expected to be cost effective, and not the analysis of an actual project." Peoples Statement No. 2-
19
REJ, Rejoinder Testimony of Theodore M. Love p. 11. As implemented, however, the CHP
Program will be based on the analysis of actual projects. As a result, even though the CHP Program
passed the TRC Test, that data understates the true cost effectiveness of the program because of
the manner in which the CHP Program will be implemented:
In the future, any actual projects that may participate in the CHP program will need to go through a rigorous screening process that includes the collection of actual cost, equipment, and usage information. If a project is not cost effective based on project cost, equipment and usage information, it will not qualify for the program, in other words, qualify to receive incentives. This leads to a selection bias for projects that have characteristics that are more likely to make them cost effective, such as lower construction costs, lower O&M, and high waste heat utilization rates. While we can debate what these costs and savings for potential projects may be, my previous rejoinder testimony has clearly shown that, even after accounting for all the hypothetical additional costs that Mr. Crooks brings up, the program is still projected to be cost effective utilizing a valid TRC test methodology.
Peoples Statement No.2-REJ, Rejoinder Testimony of Theodore M. Love p. 11.
It should be noted, in this regard, that Peoples made a commitment to apply an economic
test for CHP projects. As explained by Ms. Petrichevich at page 8 of her Second Rebuttal
Testimony:
The Company already performs an economic test associated with acquiring new loads on its system. This test involves a load assessment which would determine both the expected revenues and the availability of system capacity, costs of any system upgrades should they be necessary, and the return on investment related to the total capital investment in the new load. For CHP projects, the evaluation would also include the TRC test to justify any incentive offered under the EE&C plan.
See also Peoples Exhibit 20 ]j 4a.; and Peoples/OSBA Joint Stipulation f 1. Furthermore, Peoples
made a commitment to have any CHP project that would result in an incentive greater than
$500,000 reviewed by an independent evaluator prior to the commitment to pay the EE&C
incentive, to ensure that the project passes both the TRC Test and the Economic Test. Peoples
Exhibit 20 f 4b. Finally, Peoples' CHP Program includes a requirement that eligible projects have
net primary energy savings, Peoples Statement No. 2-R2, Second Rebuttal Testimony of Theodore
20
M. Love p. 24. When a project is completed, it must be re-screened for cost-effectiveness and net
savings using actual values, rather than assumptions. If it is still cost effective and saves energy,
the incentive will be paid. Peoples Exhibit 12 pp. 50-51. If every CHP project must in fact be
cost-effective to receive incentives, it is hard to comprehend how the Program as a whole is not
cost-effective.
Finally, it is significant to note that Duquesne witness Crooks performed his own TRC Test
calculations of the CHP Program. Mr. Love disagreed with certain aspects of Mr Crooks'
calculations:
• Peoples appropriately treated transmission and distribution costs as avoided costs, whereas Mr. Crooks incorrectly treated them as lost revenue; Peoples Statement No. 2-REJ, Rejoinder Testimony of Theodore M. Love p. 7.
• Peoples properly treated the CHP program as a fuel-switching program when applying the TRC Test; Peoples Statement No. 2-REJ, Rejoinder Testimony of Theodore M. Love p. 10.
• Peoples correctly applied a measure lifetime of greater than 15 years for CHP projects, consistent with the Commission's Final Policy Statement, Peoples Statement No. 2-REJ, Rejoinder Testimony of Theodore M. Love pp. 2-6. See also, Tr. 222-224. The opposing parties' witnesses admitted that CHP projects can have a lifetime of greater than 15 years. Tr. 294-297 (Mr. Crooks) and 310 (Mr. Crandall).
The ALJ agreed with Mr. Crooks that a useful life of 15 years should be used for calculating
the TRC Test for CHP Projects. I.D. p. 50. While Peoples disagrees with that decision, the
evidence nevertheless demonstrates that Peoples' CHP Program has a TRC Test value of greater
than 1.0 even if a 15-year useful life had been used. Mr. Love re-calculated the TRC Test for the
CHP Program, using Mr. Crooks' numbers, including the 15-year useful life of CHP projects, but
correcting Mr. Crooks' other two mistakes, discussed above. Using this methodology, Mr. Love
found that the CHP Program had a TRC Test value of 1.09. Peoples Statement No. 2-REJ,
Rejoinder Testimony of Theodore M. Love p. 10. In other words, even using Duquesne's data
(corrected for errors), the CHP Program is cost effective.
21
For all of the foregoing reasons, the Commission should reverse the ALJ's decision and
find that the preponderance of the credible evidence of record demonstrates that Peoples' CHP
Program is cost effective. The Initial Decision fails to perform a thorough evaluation of the
evidence and, instead, simply jumps to a summary conclusion that the CHP Program should not
be approved. At a minimum and in light of the Commission's Final Policy Statement promoting
CHP, the Commission should — with the support of its technical advisory staff — perform a more
thorough analysis of the CHP Program.
b) The ALJ erred in disapproving the CHP Program. The Plan as a whole is cost effective. The Commission should exercise its discretion to approve the CHP Program.
As stated above, the Commission has consistently held that the TRC Test is to be applied
at the plan level rather than at the program level; if a plan has a TRC Test value greater than 1.0,
but a particular program in the plan has a TRC Test value of less than 1.0, the Commission has
discretion to approve that program. 2016 TRC Test Order, p. 18. Even if the Commission agrees
with the ALJ that the evidence of record does not demonstrate that the CHP Program itself is cost
effective, the Commission should exercise its discretion to approve the CHP Program.
Peoples introduced evidence demonstrating that the plan as a whole has a TRC Test value
greater than 1.0. Peoples' original plan had a TRC Test value of 1.53. Peoples Exhibit 1 p. 13.
As revised, the plan had a TRC Test value of 1.70. Peoples Exhibit 12 pp. 1-2. As revised, the
four natural gas energy efficiency programs had a combined TCR Test value of 1.15. Even if the
CHP Program's TRC Test value is less than 1.0, the Commission should exercise its discretion to
approve the CHP Program.
As discussed above, the TRC Test calculations understate the true cost-effectiveness of the
Program because the program, as implemented, will have a selection bias favoring projects that
have characteristics that are more likely to make them cost effective. Peoples Statement No. 2-
RE J, Rejoinder Testimony of Theodore Love. That selection bias becomes more pronounced
because of People's commitment to apply an economic test, and because of Peoples' commitment
to have any CHP project that would result in an incentive greater than $500,000 reviewed by an
independent evaluator prior to the commitment to pay the EE&C incentive. Peoples Exhibit 20
4b. Finally, Peoples' CHP Program includes a requirement that eligible projects have net
primary energy savings, Peoples Statement No. 2-R2, Second Rebuttal Testimony of Theodore M.
Love p. 24.
The Commission should also approve the CHP Program for policy reasons. Peoples' CHP
Program is consistent with the Commission's Final Policy Statement,4 which provides: "This
policy statement is intended to: ... Encourage EDCs and NGDCs to make CHP a part of their
energy efficiency and resiliency plans, as well as their marketing and outreach efforts." Final
Policy Statement p. 2. A policy statement is a public announcement of a policy that the agency
intends to follow in future adjudications. Eastwood Nursing v. Dep 't of Pub. Welfare, 910 A.2d
134,141 (Pa. Cmwlth. 2006). It is therefore appropriate for the Commission, in this case, to follow
the policy set forth in the Final Policy Statement.
Peoples Main Brief, pp. 41-46, and its Reply Brief, pp. 19-20, argued in detail that Peoples'
EE&CP advances the policy goals of the Final Policy Statement. Peoples incorporates those
arguments by reference here. Nevertheless, it is worth reiterating here that the Final Policy
Statement recognized that economic factors can be a barrier to the development of CHP. Final
Policy Statement pp. 3-4. Peoples' CHP program would help CHP projects overcome that barrier
by providing financial incentives to qualifying CHP projects.
4 It is interesting to note that the Disposition Section of the ALJ's Initial Decision does not mention the Final Policy Statement.
23
For all of the foregoing reasons, the Commission should exercise its discretion to approve
the CHP Program. This is indeed the first major proceeding in which the Commission can
implement its policy favoring CHP deployment, as announced in the Final Policy Statement.
2. Exception No. 5. The ALJ erred in disapproving the CHP Program because it is a "load growth" program. The Commission should find that Peoples properly included a CHP Program in its voluntary natural gas EE&CP.
In addition to disapproving the CHP Program on cost-effectiveness grounds, the ALJ
disapproved that program on the grounds that it is a "load growth" program. I.D. p. 51. This was
error that should be reversed by the Commission. Even if the Commission agrees with the ALJ
that the CHP Program should be disapproved on cost-effectiveness grounds, the Commission
should still address this "load growth" reason for disapproving the CHP Program so that Peoples
knows whether it can include a CHP Program in a revised EE&CP. It would be a disservice to the
Parties, and administratively inefficient, if the Commission would avoid the issue now, and allow
Peoples to file a revised EE&CP that includes a revised CHP Program, only to have the
Commission decide that a voluntary natural gas EE&CP cannot include a CHP Program because
it is an alleged "load growth" program.
In its Main Brief, the OCA stated, "[wjhile the OCA is not opposed to CHP programs as
part of a NGDC's other programs, the OCA submits that the Company's proposed CHP should
not be considered as an energy efficiency program." OCA's Main Brief p. 17. Peoples respectfully
submits that the OCA's position elevates form over substance; if an NGDC can implement a CHP
program that provides net energy savings, it should be permitted to do so as part of its EE&CP.
Duquesne also argued that an NGDC should not be permitted to include a CHP Program
in its EE&CP. Duquesne relied heavily on the following language from the Tentative Opinion and
Order in Petition of Philadelphia Gas Works for Approval of Demand-Side Management Plan for
24
FY 2016-2020, and Philadelphia Gas Works Universal Service and Energy Conservation Plan for
2014-2016, 52 Pa. Code § 62.4 - Request for Waivers, Docket No. P-2014-2459362 (Tentative
Opinion and Order entered August 4, 2016) ("PGW USECP Order"), p. 81:
As pointed out by the OCA, on the electric side fuel switching has been considered an acceptable part of an energy conservation program because in that instance, the fuel switching results in reducing electricity usage as that usage is replaced by other energy sources. However, under the scenario in this proceeding, PGW's proposal would instead result in an increase in the demand for natural gas in the Company's service territory as alternative energy load transitions to natural gas usage. Considering that the overall purpose of a DSM energy conservation plan of a utility should be to reduce that utility's existing energy demand requirements, we shall deny the implementation of PGW's Efficient Fuel-Switching program in the context of this proceeding.
The Commission, however, has not established an across-the-board policy of disapproving
all CHP programs in natural gas EE&CPs. In Pa. Pub. Util. Comm 'n, et al. v. UGI Utilities, Inc.
- Gas Division, Docket No. R-2015-2518438 (Opinion and Order entered October 14, 2016)
("UGI Utilities"), pp. 28-29, the Commission stated:
Previously, the Commission has rejected the inclusion of CHP programs in natural gas EE&C programs. In general, natural gas EE&C programs are designed to reduce the usage of natural gas. CHP programs, to the contrary, usually result in higher natural gas usage, but produce an overall reduction in total energy usage. As such, CHP programs are more akin to market development projects, in addition to being energy efficient. Thus, the Commission had rejected CHP programs in natural gas EE&C plans.
However, in this instance, and under the additional conditions below, we support this proposal. Several unique conditions exist in this case. First, the CHP program is targeted to LFD customers. This customer segment will fund these proposals and receive the benefits. Thus, no other rate classes will be impacted. Secondly, the Company has agreed to track these projects separately because the fuel-switching program will result in an increase in gas usage that should not be conflated with the savings from the energy efficiency programs. Lastly, it is important for the Company to offer programs that may be attractive to this larger customer segment, and that can enhance the long term competitiveness of our commercial and industrial sector.
Our support for this CHP program is, however, conditioned as follows. As noted above, CHP programs are most appropriately categorized as market development projects. The economic tests for market expansion/extension vary
25
substantially from the Total Resource Cost (TRC) test and the proposed Program Administrator Cost (PAC) test proposed for this EE&C plan. As such, UGI should develop an economic test consistent with the Company's new business extension tariff. The economic test will permit the incremental revenue benefits to the Company to be compared with the CHP program costs, including the incentive costs of the program paid by customers. This method will help ensure that CHP program participants are not being subsidized by non-participants in the long run. Thus, UGI should include this information in its annual EE&C reports.
If there was any question after the UGI Utilities decision about the Commission's
willingness to allow NGDCs to include CHP programs in their EE&CPs, it was answered by the
Commission's recently-enacted Final Policy Statement. As stated above, the Final Policy
Statement provides: "This policy statement is intended to: ... Encourage EDCs and NGDCs to
make CHP a part of their energy efficiency and resiliency plans, as well as their marketing and
outreach efforts." Final Policy Statement p. 2. The ALJ's holding that Peoples' CHP Program
should be disapproved because it is a "load growth" program is inconsistent with this statement,
and should be reversed.
The ALJ's holding that Peoples' CHP Program should be disapproved as a "load growth"
program is also inconsistent with such statutes as the Natural Gas Choice and Competition Act, 66
Pa. C.S. §§ 2201 et seq. and the Electricity Generation Customer Choice and Competition Act, 66
Pa. C.S. §§ 2801 etseq. Those statutes use market forces to further the public interest in promoting
cheaper, more abundant and reliable energy for consumers - with appropriate safeguards. The
Commission should use that same approach in promoting CHP development.
EDCs are permitted to include fuel switching programs in their EE&CPs. See PUC's
Technical Reference Manual, June 2016 (Errata Update February 2017) pp. 45-50 (Fuel
Switching: Electric Heat to Gas/Propane/Oil Heat), 155-157 (Fuel Switching: Electric Clothes
Dryer to Gas Clothes Dryer), 289-293 (Fuel Switching: Small Commercial Electric Heat to Natural
gas/Propane/Oil Heat), pp. 354-359 (Fuel Switching: Electric Resistance Water Heaters to
26
Gas/Oil/Propane), and 360-368 (Fuel Switching: Heat Pump Water Heaters to Gas/Oil/Propane).
Duquesne argues, however, that NGDCs should not be permitted to include fuel switching
programs in their EE&CPs because NGDCs have a market incentive to make them successful.
Duquesne's Main Brief p. 52. Peoples respectfully submits that the Commission should utilize
these market incentives to make its CHP policy effective, rather than trying to fight them.
In this case, an NGDC wants to promote CHP in a substantial way, with appropriate
safeguards. In contrast, the only EDC in Peoples' service territory that offers a CHP program as
part of its Phase III EE&CP is Duquesne. Peoples Gas Exhibit 5 p. 37. Duquesne's Phase III
EE&CP includes one sentence stating that CHP projects may qualify for incentives if certain
conditions are satisfied, Rejoinder Testimony of Lynda W. Petrichevich p. 4 n.l, but no customers
have taken advantage of this assistance to date. Although Duquesne contends that it has spoken
with 13 customers in the past few years about CHP projects, none of those CHP projects have
come to fruition. Tr. 238. There is a need for a more-effective CHP program. Therefore, the
Commission should reject Duquesne's attempt to establish an across-the-board policy of
prohibiting NGDCs from including CHP programs in their EE&CPs. Duquesne's abject failure to
develop CHP in its service territory (whether intentional to protect electric load or unintentional)
should weigh heavily in favor of affording Peoples an opportunity to do so.
For all of the reasons discussed above, the Commission should find that an NGDC may
include a CHP component in an EE&CP, with appropriate safeguards. The Commission should
therefore reverse the ALJ's conclusion that Peoples' CHP Program should be disapproved simply
because it has been labeled by opponents as a "load growth" program.3
5 If the Commission reverses the ALJ's holding that Peoples' CHP Program should be disapproved on the grounds it is a "load growth" program, the Commission should approve Peoples' CHP Program because it contains appropriate safeguards. See, e.g., Peoples' Main Brief, pp. 14, 20, and 33.
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3. Exception No. 6. The ALJ erred in disapproving the CHP Program based on the size of the program.
If a natural gas EE&CP can include a CHP program, the question that arises is: What is an
acceptable size for that CHP program? The Commission should address this issue in this case,
even if the Commission disapproves the EE&CP on other grounds, so that Peoples can revise its
EE&CP and submit a revised plan that will be acceptable to the Commission.
In its briefs, Peoples argued that its CHP program was a reasonable size, in terms of both
budget and energy savings. Peoples' Main Brief pp. 25-27, Peoples' Reply Brief, pp. 11-12.
Peoples expects to provide incentives to four projects each year during the term of the EE&CP.
Peoples Exhibit 12 p. 50. These projects would increase gas usage, but would more than
compensate for that by reducing customers' consumption of electricity. Peoples projects the net
primary energy savings (in MMBtus) from its CHP Program over the five-year term of the EE&CP
as shown in Table 1.
Table 1. Net Primary Energy Savings (MMBtus)
2019 2020 2021 2022 2023 2019-2023 First Year 426,430 426,430 426,430 556,993 761,313 2,597,595 Lifetime 8,528,590 8,528,590 8,528,590 10,548,617 14,022,044 50,156,432
Source: Peoples Exhibit 12 p. 49 (as corrected by Errata Sheets).
Peoples is able to achieve these results on a budget of $12,311,700 over the five-year term
of the EE&CP. Exhibit 12 p. 50. Peoples does not currently project any participation by projects
using micro turbines or other emerging CHP technology, but would like to be able to incent such
projects if they become cost-effective within the horizon of the EE&CP. Therefore, Peoples
proposed a budget cap of $17.5 million for the CHP Program, which is higher than the currently
projected spending of $12.3 million in order to be able to address such a change in market
conditions. Peoples Exhibit 12 p. 12.
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The ALJ stated:
The CHP program has been presented as a take it or leave it, and while Duquesne and OCA suggested a pilot program, Peoples did not provide that alternative. The other four legs of the Plan, i.e. the energy efficiency programs, were either not objected to or were the subject of proposed modifications from the OCA which Peoples agrees to. If the Commission sees fit to ultimately approve Peoples EE&CP, the due process/notice issue notwithstanding, then the CHP is severable from those four programs. The door is open for Peoples to separately propose a CHP pilot program in another proceeding.
I.D. p. 50.
Peoples respectfully submits that the ALJ erred in ruling not only that the CHP component
can be severed from the remainder of the EE&CP, as already explained, but also that the CHP
component of a natural gas voluntary EE&CP must be a pilot program. The ALJ provided no
reasoning for his conclusion, but the ALJ essentially agreed with Duquesne, who argued that
Peoples' CHP Program should be dramatically scaled back based on the CHP programs that were
previously approved by the Commission. Duquesne's Main Brief pp. 4, 12, 54-55.
In his Surrebuttal Testimony, David Defide noted that three natural gas utilities have
submitted CHP programs to the Commission for approval. The largest of these was UGI Utilities'
proposed plan, which had a proposed budget of $3.6 million.6 As approved by the Commission,
that program has a budget of $1.1 million. UGI Utilities. Mr. Defide contended that Peoples'
program should also be reduced to a budget of $1.1 million. DLC Statement No. 1-SR, Surrebuttal
Testimony of David Defide, p. 14.
Neither Duquesne nor the ALJ explained why these prior cases prohibit Peoples (or any
other NGDC) from proposing a more substantial program. The Commission can only act on the
6 It is worth noting, in this regard, that PECO Energy Company has an electric Phase III EE&CP that includes a CHP program. Petition of PECO Energy Company for Approval of Its Act 129 Phase III Energy Efficiency and Conservation Program, Docket No. M-2015-2515691 (Opinion and Order entered March 17, 2016). The budget for this program is $24.9 million over five years. PECO Exhibit 1 pp. 67-68.
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proposals before it. As a result, the fact that the Commission has only approved limited CHP
proposals does not establish a binding precedent that prohibits an NGDC from proposing a more
substantial proposal.
Additionally, the UGI Utilities case was resolved through a settlement. Peoples Statement
No. 2-R2, Second Rebuttal Testimony of Theodore M. Love p. 29. Peoples should not be bound
by another party's decision to reduce the size of its CHP program in exchange for unstated benefits
as part of a settlement agreement.
Finally, Peoples' program is based on its EE&C Study, including participation estimates.
This study was prepared as required by the Merger Settlement. The EE&C Study was submitted
to a collaborative, and Peoples' EE&C Plan was developed based on comments received at that
time. Peoples' program should be evaluated on its own merits; it should not be judged by the
proposals developed by others based on different facts and using different procedures.
Peoples' proposed CHP Program made a substantial commitment to promoting the
deployment of CHP in its service territory. There is no reason for the Commission to make a
blanket statement that such a substantial commitment is unacceptable.
4. Exception No. 7. The ALJ erred in failing to address Duquesne's argument that a voluntary natural gas EE&CP must be proposed as part of a base rate case. The Commission should reject that argument.
The ALJ correctly noted the limited precedent for an NGDC to file a voluntary EE&CP.
As a result, this case presented numerous issues of first impression. One of those issues was a key
procedural issue: How is an NGDC to present a voluntary EE&CP to the Commission? Duquesne
argued that it must be done as part of a base rate case. Peoples disagreed. The ALJ did not address
this issue in his Initial Decision. This was error. The Commission should address this issue in this
case, even if the Commission disapproves the EE&CP on other grounds, so that Peoples can revise
its EE&CP and submit a revised plan to the Commission using an acceptable procedure.
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Duquesne contends that an EE&CP can only be considered in the context of a base rate
case. Duquesne's Main Brief p. 5; Reply Brief p. 6, 10-17. Act 129, however, does not require
an EDC's EE&CP to be considered as part of a base rate case. If Act 129 is the model to be
followed for an NGDC's voluntary EE&CP, there is no basis for requiring a natural gas EE&CP
to be included in a base rate case.
Duquesne believes Peoples' EE&CP must be included in a base rate case because it
includes a CHP component. Duquesne cites the Joint Statement of Chairman Gladys M. Brown
and Commissioner David Sweet in UGI Utilities ("Joint Statement") for the proposition that "only
in a base rate case will all affected parties have an 'opportunity to evaluate any projected increased
throughput and correspondingly negotiate settlement terms with this in mind'." Duquesne's Main
Brief p. 5. The Joint Statement, however, has limited precedential authority; it is essentially a
concurring opinion by two Commissioners. Peoples can find no language in the Opinion and Order
adopted by a unanimous Commission that suggests the Commission requires an EE&CP to be filed
as part of a base rate case.7
Additionally, Duquesne makes too much of the Joint Statement. The Joint Statement did
not say 11 only in a base rate case" will parties have an opportunity to evaluate projected increased
throughput; Chairman Brown and Commissioner Sweet simply stated that "/sjince this program
is proposed within a rate case, the parties have had opportunity to evaluate any projected increased
throughput and correspondingly negotiate settlement terms with this in mind." Joint Statement p.
1 (emphasis added). Duquesne presents no reason why it could not evaluate any projected
increased throughput in the instant proceeding and negotiate settlement terms with this in mind.
7 Significantly, as noted by the ALJ, I.D. p. 44 n.8, the Presiding Officer in that case, ALJ Colwell, "characterized the filing of an EE&CP by UGI in the context of a general rate case as, 'highly irregular,' but addressed that EE&CP in her Recommended Decision (RD) as part of an overall settlement."
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There is no question that a petition for approval of a voluntary EE&CP proceeding is a
proper filing with the Commission. Even where, as here, a CHP program is a component of such
a program, Peoples respectfully submits that a natural gas utility has the option of submitting its
EE&CP to the Commission outside the context of a base rate case. The record concerning Peoples'
CHP program is far more detailed and focused than could ever occur in a general base rate
proceeding8 - or in a policy-making or rule-making proceeding, such as that which produced the
Final Policy Statement. As a result, the Commission should clearly state that natural gas utilities
are not required to file their EE&CPs as part of base rate proceedings.
5. If the Commission agrees with the ALJ that the CHP Program should be disapproved, the Commission should disapprove the entire EE&CP, without prejudice.
In the Initial Decision, the ALJ stated "If the Commission sees fit to ultimately approve
Peoples' proposed EE&CP, the due process/notice issue notwithstanding, then the CHP is
severable from [the four natural gas energy efficiency] programs." I.D. p. 50. This statement was
error. Peoples made clear in this proceeding that its EE&CP is a comprehensive package and that
the CHP Program is a vital part of that package. See, e.g., Peoples' Reply Brief p. 2.
Consequently, if the Commission agrees with the ALJ that the CHP Program should be
disapproved, Peoples respectfully requests that the Commission disapprove the entire EE&CP,
without prejudice to Peoples' right to revise and resubmit a comprehensive EE&CP. Act 129
allows the Commission to approve an EE&CP in part and disapprove it in part. See Energy
Efficiency and Conservation Plan, Docket No. M-2008-2069887 (Implementation Order entered
Jan. 16, 2009) p. 12 ("The Commission will approve or reject all or part of a plan at public meeting
8 This case did not have the limited time frame for discovery, adjudication and briefing that would apply in a rate case. Additionally, a rate case has a host of additional issues, including revenue requirement, rate design, and cost of capital, which would have distracted attention from the issues presented in this case.
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within 120 days of the EDC's filing."). Nevertheless, the Commission should not force a utility
submitting a voluntary EE&CP to implement a partial plan against its will. Peoples does not wish
to implement some parts of its voluntary EE&CP without the remaining parts. Consequently, if
the Commission concludes that the CHP Program must be disapproved, it should disapprove the
entire EE&CP, without prejudice.
In doing so, the Commission should note that Peoples has fulfilled its obligations under
Paragraphs 109-112 of the Merger Settlement. Those Paragraphs required Peoples to use a certain
procedure to develop the EE&CP. They also required Peoples to meet certain deadlines, including
submitting the EE&CP to the Commission within 48 months of closing on the Merger.
Peoples developed the EE&CP following the procedure set forth in the Merger Settlement,
filed it timely with the Commission, and has pursued this litigation to the fullest. If Peoples'
EE&CP is disapproved, without prejudice, Peoples should have the right to revise the EE&CP and
resubmit it ~ but only when and as Peoples sees fit.
D. The Four Natural Gas Energy Efficiency Programs
The ALJ's Initial Decision stated:
As the OCA set forth in its Main Brief, the OCA recommends that the Plan, consisting of the four energy efficiency programs, be approved as modified in accordance with OCA's recommendations. OCA Main Brief at 10-16. The OCA maintains that these energy efficiency programs, as modified, would provide benefits to Peoples' customers and so are in the public interest. I agree, generally, with the OCA that the public interest would be served by a workable EE&CP based on the four energy efficiency programs, as modified, and but for the notice issue, I would approve the same.
I.D. p. 45. -The ALJ went on to say that "the energy efficiency programs, were either not objected
to or were the subject of proposed modifications from the OCA which Peoples agrees to." I.D. p.
50 (emphasis added). Peoples agreed to some of the modifications suggested by the OCA.
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Specifically, Peoples modified its Plan to include the use of a third party evaluation and monitoring
firm, as suggested in the Direct Testimony of OCA Witness Crandall, and the OCA supported
those changes. OCA Reply Brief p. 2. Additionally, Peoples agreed to the OCA's suggestion that
Peoples monitor on-going federal litigation that could impact natural gas energy efficiency
standards, and to make appropriate modifications in its plan to reflect changes in those standards,
if necessary. Peoples' Reply Brief, p. 10. No change is necessary in Peoples' EE&CP at this time,
however, as a result of this agreement.
Peoples, however, did not agree to all of the modifications suggested by the OCA. See,
e.g., Peoples' Reply Brief, pp. 9-11. As a result, the ALJ erred in approving all of the OCA's
suggested modifications to the natural gas energy efficiency programs.
The ALJ also erred in stating that he would have approved the natural gas energy efficiency
programs, but for his conclusion that Peoples did not give ratepayers proper notice of the EE&CP.
As argued above, Peoples gave proper notice of its EE&CP. As also discussed above, if additional
notice is required, the Commission could ensure due process by tentatively approving the entire
EE&CP, subject to additional notice and the submission of comments. Finally, as also discussed
above, if the Commission disapproves the CHP Program, the natural gas energy efficiency
programs should also be disapproved, without prejudice; the Commission should not require
Peoples to implement only part of its proposed EE&CP.
1. Exception No. 8. The ALJ erred in stating that the natural gas energy efficiency programs should be modified as suggested by the OCA. Net-to-gross adjustments should only be required to be used on a going-forward basis. Additionally, the Commission should reject the OCA's proposed modification to Peoples' Residential New Homes Program; as revised, that program appropriately reflects the impact of changes in building codes.
The OCA recommended that Peoples use net-to-gross adjustments for program planning
purposes. OCA's Main Brief pp. 11-12. This approach reflects the impact of customers who
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would have installed energy efficient gas appliances with or without Peoples' incentives. By using
this approach, the OCA argued, Peoples' EE&CP will be as cost effective as possible. OCA's
Main Brief p. 11.
In his rebuttal testimony, People's witness Love stated: "I note that the Phase III TRC Test
Order for Act 129 (Docket No. M-2015-2468992) states that [net-to-gross] values should be used
primarily for program planning purposes and not as the ultimate measure of a program or
portfolio's success or failure." Peoples Statement No. 2-R, Rebuttal Testimony of Theodore M.
Love p. 4. Consequently, the OCA's proposal seems to be aimed at the process Peoples will use
to plan future iterations of its EE&CP, rather than at the Commission's evaluation of Peoples'
EE&CP, as modified during the present proceeding. If the Commission adopts this proposal at all,
this proposal should only be adopted on a going-forward basis; at most, Peoples should be required
to use net-to-gross factors in planning amendments to its EE&CP or in planning Phase II of its
EE&CP.
Additionally, the OCA suggested that Peoples should not be permitted to receive energy
efficiency credit for any savings in its Residential New Homes Program ("RNHP") less than 25%
of the applicable residential code. OCA's Main Brief pp. 13-16. As explained in Peoples' Main
Brief, the RNHP targets residential new construction projects with four or fewer units that are
heated with natural gas. It will offer an incentive to builders who construct new homes that are
more efficient than required by the applicable Pennsylvania building code, based on a home
Energy Rating System Index score. Peoples' Main Brief p. 7.
As originally proposed, the RHNP would offer incentives to builders who construct a new
home that is at least 25% more efficient than applicable building codes. Peoples Gas Exhibit 1 p.
39. As modified during this proceeding, the RNHP will offer incentives to builders who construct
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a new home that is at least 5% more efficient than applicable building codes. Peoples Gas Exhibit
12 p. 39. Peoples witness Love explained that on May 1, 2018 (after the filing of the instant
proceeding), the Pennsylvania Uniform Construction Code Review and Advisory Council voted
to adopt the 2015 International Energy Conservation Code ("IECC 2015"), which guides the
energy usage characteristics of newly constructed residential buildings in Pennsylvania. This code
represents a significant jump from the previous, 2009 code. As a result:
The program plan was updated to more flexibly address changing market conditions. Peoples still plans to initially offer an incentive of $40 per annual MMBtu for new homes that achieve 25% savings as compared to applicable building code, as determined by a Home Energy Rating System ("HERS") rating. However, to address changes in code or other market factors, Peoples may lower this threshold to a minimum of 5% above code and/or increase the incentives to a maximum of $50 per annual MMBtu.
Peoples Statement No. 2-R2 pp. 9-10.
Peoples respectfully submits that the OCA's insistence on using the 25% threshold for the
RNHP program, despite the change in applicable codes, is inconsistent with one of the OCA's
other proposed modifications to the EE&CP - that Peoples monitor on-going federal litigation for
potential changes in applicable regulations that could impact the EE&CP. See OCA's Main Brief,
pp. 13-14. With respect to the OCA's proposed modification in the RNHP program, Peoples
identified a change in applicable law, which had the effect of changing the applicable baseline for
energy savings. In response, Peoples made the reasonable response of maintaining its original
plan of offering incentives for new homes that achieve 25% savings as compared to applicable
building codes, but maintaining the flexibility to reduce that threshold, if necessary, due to the
implementation of the new building code.
Peoples submits that its RNHP, as modified during the course of this proceeding, is just,
reasonable and in the public interest. The OCA's recommendation to further modify the program
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should be rejected. Consequently, the Commission should modify the ALJ's Initial Decision to
reject the OCA's proposed adjustment to Peoples' RNHP.
2. Exception No. 9. The ALJ erred in disapproving the natural gas energy efficiency programs on the grounds that Peoples failed to give ratepayers proper notice of the EE&CP. The ALJ further erred by holding that the CHP Program can be severed from the natural gas energy efficiency programs; if the Commission disapproves the CHP Program, it should disapprove the entire EE&CP, without prejudice.
As stated above, the ALJ stated that he would have approved the natural gas energy
efficiency programs, but for Peoples' failure to give ratepayers adequate notice of the EE&CP.
I.D. p. 45. As discussed above, Peoples gave proper notice of its EE&CP. If, however, the
Commission concludes that Peoples must give ratepayers additional notice of the EE&CP, the
Commission should tentatively approve Peoples' entire EE&CP, subject to the Company giving
ratepayers additional notice and the Commission reviewing comments from ratepayers.
Finally, as also discussed above, the ALJ erred in finding that the CHP Program is
severable from the natural gas energy efficiency programs, and by suggesting that the natural gas
energy efficiency programs should be approved without the CHP Program. Peoples' EE&CP is
intended to be a comprehensive package. If the Commission disapproves the CHP Program, the
Commission should disapprove the entire EE&CP, without prejudice; it should not require Peoples
to implement the natural gas energy efficiency programs by themselves. The Company should not
be forced to implement a partial program.
IV. REQUEST FOR RELIEF
WHEREFORE, for all of the reasons set forth above, Peoples Natural Gas Company LLC
respectfully requests that the Commission:
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(1) Reverse the ALJ's Initial Decision, grant Peoples' Petition for approval of its
energy efficiency and conservation plan, and approve Peoples' energy efficiency and conservation
plan, as modified during the course of this proceeding.
(2) If the Commission agrees with the ALJ that additional notice to ratepayers is
necessary, the Commission should modify the ALJ's Initial Decision, tentatively grant Peoples'
Petition and approve its energy efficiency and conservation plan, subject to additional notice and
an opportunity for ratepayers to submit written comments on the plan.
(3) Finally, if the Commission agrees with the ALJ that the CHP Program should be
disapproved, the Commission should deny the Petition and disapprove the EE&CP in its entirety,
without prejudice, noting that Peoples has fulfilled its obligations under Paragraphs 109-112 of the
Merger Settlement.
Dated: January 30, 2019
David P. Zaml/ito, Esq. (PA ID/No. 80017) Jonathan P. Nase, Esq^(PA]0No. 44003) Cozen O'Connor 17 North Second Street, Suite 1410 Harrisburg, PA 17101 Tel: (717)703-5892 Fax: (215)989-4216 E-mail: [email protected]
William H. Roberts II, Esq. (PA ID No. 54724) Peoples Natural Gas Company LLC 375 North Shore Drive Pittsburgh, PA 15212 Tel: (412)208-6527 E-mail: [email protected]
Counsel for Peoples Natural Gas Company LLC
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