Demand-Side Programs Investment Mechanisms

PURPOSE: This rule allows the establishment and operation of Demand-Side Programs Investment Mechanisms (DSIM), which allow periodic rate adjustments related to recovery of costs and utility incentives for investments in demand-side programs. (1) The definitions of terms used in this section can be found in 4 CSR 240-20.092 Definitions for Demand-Side Programs and Demand-Side Programs Investment Mechanisms. (2) Applications to establish, continue, or modify a DemandSide Programs Investment Mechanism (DSIM). Pursuant to the provisions of this rule, 4 CSR 240-2.060, and section 393.1075, RSMo, an electric utility shall file an application with the commission to establish, continue, or modify a DSIM in a utility’s filing for demand-side program approval. (A) An application to establish a DSIM shall include the following supporting information as part of, or in addition to, its direct testimony. Supporting workpapers shall be submitted with all models and spreadsheets provided as executable versions in native format with all links and formulas intact. 1. The notice provided to customers describing how the proposed DSIM will work, how any proposed DSIM rate will be determined, and how any DSIM rate will appear on customers’ bills; 2. An example customer bill showing how the proposed DSIM shall be separately identified on affected customers’ bills; 3. A complete, reasonably detailed, description and explanation of the design, rationale, and intended operation of the proposed DSIM; 4. Estimates of the effect of the DSIM and all other impacts of the demand-side program spending, in aggregate, on customer rates and average bills for each of the next five (5) years, and as a net present value of net benefits over the lifetime of the demand-side program impacts, for each rate class; 5. Estimates of the effect of the DSIM on earnings and key credit metrics for each of the next three (3) years including the level of earnings and key credit metrics expected to occur for each of the next three (3) years with and without the DSIM; 6. A complete, reasonably detailed, explanation of all the costs that shall be considered for recovery under the proposed DSIM and the specific account used for each cost item on the electric utility’s books and records; 7. A complete, reasonably detailed, explanation of any change in business risk to the electric utility resulting from implementation of a DSIM in setting the electric utility’s allowed return on equity, in addition to any other changes in business risk experienced by the electric utility; 8. A proposal for how the commission can determine if the DSIM is aligned with helping customers use energy more efficiently; 9. If the utility proposes to adjust its DSIM rates between general rate proceedings, proposed DSIM rate adjustment clause tariff sheets; and 10. If the utility proposes to adjust the DSIM amount between general rate proceedings, a complete, reasonably detailed, explanation of how the DSIM rates shall be established and how they will be adjusted for any over- and/or under-recovery amounts, as well as the impact on the DSIM amount as a result of, established, modified, or discontinued demand-side programs. (B) If an electric utility files to modify its approved DSIM, the electric utility shall file with the commission and serve upon parties, as provided in section (15) below, the following supporting information as part of, or in addition to, direct testimony. Supporting workpapers shall be submitted with all models and spreadsheets provided as executable versions in native format with all links and formulas intact; 1. Information as required by subsection (2)(A), above; 2. Explanation of any proposed modification to the DSIM and why the proposed modification is being requested; 3. A complete, reasonably detailed, explanation of any change in business risk to the electric utility resulting from modification of a DSIM in setting the electric utility’s allowed return on equity, in addition to any other changes in business risk experienced by the electric utility; and 4. Any additional information the commission orders to be provided. (C) Any party to the application for a utility’s filing for demand-side program approval may support or oppose the establishment, continuation, or modification of a DSIM and/ or may propose an alternative DSIM for the commission’s consideration including, but not limited to, modifications to any electric utility’s proposed DSIM. (D) The commission shall approve the establishment, continuation, or modification of a DSIM and associated tariff sheets if it finds the electric utility’s approved demand-side programs are expected to result in energy and demand savings and are beneficial to all customers in the customer class in which the programs are proposed, regardless of whether the programs are utilized by all customers and will assist the commission’s efforts to implement state policy contained in section 393.1075, RSMo, to— 1. Provide the electric utility with timely recovery of all reasonable and prudent costs of delivering cost-effective demand-side programs; 2. Ensure that utility financial incentives are aligned with helping customers use energy more efficiently and in a manner that sustains or enhances utility customers’ incentives to use energy more efficiently; and 3. Provide timely earnings opportunities associated with cost-effective measurable and/or verifiable energy and demand savings; (E) In addition to any other changes in business risk experienced by the electric utility, the commission shall consider changes in the utility’s business risk resulting from establishment, continuation, or modification of the DSIM in setting the electric utility’s allowed return on equity in general rate proceedings. (F) In determining to approve a request to establish, modify, or continue a DSIM, the commission may consider, but is not limited to only considering, the expected magnitude of the impact of the utility’s approved demand-side programs on the utility’s costs, revenues, and earnings, the ability of the utility to manage all aspects of the approved demand-side programs, the ability to measure and verify the approved demand-side programs’ impacts, any interaction among the various components of the DSIM that the utility may propose, and the incentives or disincentives provided to the utility as a result of the inclusion or exclusion of DSIM components as defined in 4 CSR 240-20.092(N). In this context the word “disincentives” means any barrier to the implementation of a DSIM. There is no penalty authorized in this section. (G) Any cost recovery component of a DSIM shall be based on costs of demand-side programs approved by the commission in accordance with 4 CSR 240-20.094 Demand-Side Programs. Indirect costs associated with demand-side programs, including but not limited to, costs of evaluation, measurement, and verification (EM&V), and/or utility’s portion of statewide technical reference manual, shall be allocated to demand-side programs and thus shall be eligible for recovery through an approved DSIM. The commission shall approve any cost recovery component of a DSIM simultaneously with the programs approved in accordance with 4 CSR 240-20.094 Demand-Side Programs. (H) Any throughput disincentive component of DSIM shall be based on energy or energy and demand savings from utility demand-side programs approved by the commission in accordance with 4 CSR 240-20.094 Demand-Side Programs and will be determined as a result of energy and demand savings determined through EM&V. 1. The commission shall order any throughput disincentive component of a DSIM simultaneously with the demand-side programs approved in accordance with 4 CSR 240-20.094 Demand-Side Programs. 2. In a utility’s filing in which a throughput disincentive component of a DSIM is considered, there is no requirement for any implicit or explicit utility throughput disincentive component of a DSIM or for a particular form of a throughput disincentive component of a DSIM. 3. Any explicit throughput disincentive component of a DSIM shall be implemented on a prospective basis. (I) Any earnings opportunity component of a DSIM shall be based on the performance of demand-side programs approved by the commission in accordance with 4 CSR 240-20.094 Demand-Side Programs and shall include a methodology for determining the utility’s earnings opportunity amount for individual demand-side programs based upon program performance relative to commission-approved performance metrics for each demand-side program. 1. Energy and demand savings targets approved by the commission for use in the earnings opportunity component of a DSIM are not necessarily the same as the incremental energy and demand savings goals and cumulative energy and demand savings goals specified in 4 CSR 240-20.094(2). 2. The commission shall order any earnings opportunity component of a DSIM simultaneously with the approval of the demand-side programs in accordance with 4 CSR 240-20.094 Demand-Side Programs. 3. Any earnings opportunity component of a DSIM shall be implemented on a retrospective basis and all energy and demand savings used to determine a DSIM earnings opportunity amount must be measured and verified through EM&V. (J) If the DSIM proposed by the utility includes adjustments to DSIM rates between general rate proceedings, the DSIM shall include a provision to adjust the DSIM rates not less than annually to include a true-up for over- and under-recovery of the DSIM amount as well as the impact on the DSIM amount as a result of approved new, modified, or discontinued demand-side programs. (K) If the commission approves an earnings opportunity component of a DSIM, such earnings opportunity component shall be binding on the commission for the entire term of the DSIM, and such DSIM shall be binding on the electric utility for the entire term of the DSIM, unless otherwise ordered or conditioned by the commission when approved. (L) The commission shall apportion the DSIM amount to each customer class. (3) Application for Discontinuation of a DSIM. The commission shall allow or require a DSIM to be discontinued or any component of a DSIM to be discontinued only after providing the opportunity for a hearing. (A) When submitting an application to discontinue a DSIM, the electric utility shall file with the commission and serve on parties as provided in section (15), the following supporting information as part of, or in addition to, direct testimony. Supporting workpapers shall be submitted with all models and spreadsheets provided as executable versions in native format with all links and formulas intact: 1. An example of the notice to be provided to customers; 2. If the utility’s DSIM allows adjustments of the DSIM rates between general rate proceedings, a complete, reasonably detailed, explanation of how the over-/under-recovery of the DSIM amount that the electric utility is proposing to discontinue shall be handled; 3. A complete, reasonably detailed, explanation of why the DSIM is no longer necessary to provide the electric utility a sufficient opportunity to recover demand-side programs costs, throughput disincentive, and/or to receive an earnings opportunity; 4. A complete, reasonably detailed, explanation of any change in business risk to the electric utility resulting from discontinuation of the DSIM in setting the electric utility’s allowed return on equity, in addition to any other changes in business risk experienced by the electric utility; and 5. Any additional information the commission orders to be provided. (B) Any party to the utility’s filing for demand-side program approval may oppose the discontinuation of a DSIM or any component of a DSIM. (C) In addition to any other changes in business risk experienced by the electric utility, the commission may take into account any change in business risk to the electric utility resulting from discontinuance of the DSIM in setting the electric utility’s allowed return on equity in a general rate proceeding. (D) If the utility requests that cost recovery be discontinued, in its notice to customers, the electric utility shall include a commission-approved description of why it believes the cost recovery component of the DSIM should be discontinued. (4) Requirements for Adjustments of DSIM Rates Between General Rate Proceedings. An electric utility with a DSIM shall file to adjust its DSIM rated no less often than annually. (A) The electric utility shall file tariff sheets to adjust its DSIM rates accompanied by supporting testimony and contain at least the following supporting information. All models and spreadsheets shall be provided as executable versions in native format with all links and formulas intact. 1. Amount of revenue that it has over-/under-recovered through the most recent recovery period by rate class. AND INSURANCE 2. Proposed positive or negative adjustments by rate class. 3. Electric utility’s short-term borrowing rate. 4. Proposed adjustments to the current DSIM rates. 5. Complete documentation for the proposed adjustments to the current DSIM rates. 6. Any additional information the commission ordered to be provided. (B) The staff shall examine and analyze the information filed by the electric utility and additional information obtained through discovery, if any, to determine if the proposed adjustments to the DSIM amount and DSIM rates are in accordance with the provisions of this rule, section 393.1075, RSMo, and the DSIM established, modified, or continued in the most recent filing for demand-side program approval. The staff shall submit a recommendation regarding its examination and analysis to the commission not later than thirty (30) days after the electric utility files its tariff sheets to adjust its DSIM rates. If the adjustments to the DSIM rates are in accordance with the provisions of this rule, section 393.1075, RSMo, and the DSIM established, modified, or continued in the most recent filing for demand-side program approval, the commission shall either issue an interim rate adjustment order approving the tariff sheets within sixty (60) days of the electric utility’s filing or, if no such order is issued, the adjustments to the DSIM rates shall take effect sixty (60) days after the tariff sheets were filed. If the adjustments to the DSIM rates are not in accordance with the provisions of this rule, section 393.1075, RSMo, or the DSIM established, modified, or continued in the most recent filing for demand-side program approval, the commission shall reject the proposed tariff sheets within sixty (60) days of the electric utility’s filing and may instead order the filing of interim tariff sheets that implement its decision. (C) Adjustments to the DSIM rates shall reflect a comprehensive measurement of both increases and decreases to the DSIM amount established in the most recent demand-side program approval or DSIM rate adjustment case plus the increases and decreases to the DSIM amount which occurred since the most recent demand-side program approval or DSIM rate adjustment case. All DSIM rate adjustments shall include a true-up of past DSIM collections based on the latest EM&V results where applicable. Any over-/under-recovered amounts will be accounted for in the going forward DSIM rates. (D) The electric utility shall be current on its submission of its Surveillance Monitoring Reports as required in section (10) and its annual reports as required in section (9) in order to increase the DSIM rates. (E) If the staff, public counsel, or other party believes the electric utility has not met the filing requirements of subsection (4)(A), it shall notify the electric utility within ten (10) days of the electric utility’s filing of an application or tariff sheets to adjust DSIM rates and identify the information required. The electric utility shall submit the information identified by the party, or shall notify the party that it believes the information submitted was in compliance with the requirements of subsection (4)(A), within ten (10) days of the request. A party who notifies the electric utility it believes the electric utility has not submitted all the information required by subsection (4) (A) and as ordered by the commission in a previous proceeding and receives notice from the electric utility that the electric utility believes it has submitted all required information may file a motion with the commission for an order directing the electric utility to produce that information, i.e., a motion to compel. While the commission is considering the motion to compel, the processing timeline for the adjustment to increase DSIM rates shall be suspended. If the commission then issues an order requiring the information be submitted, the time necessary for the information to be submitted shall further extend the processing timeline for the adjustment to increase DSIM rates. For good cause shown, the commission may further suspend this timeline. Any delay in submitting sufficient information in compliance with subsection (4)(A) or a commission order in a previous proceeding in a request to decrease DSIM rates shall not alter the processing timeline. (5) Implementation of DSIM. Once a DSIM is established, modified, or discontinued, in lieu of contemporaneous rate recovery the utility may request use of deferral accounting for MEEIA financial impacts using the utility’s latest approved weighted average cost of capital until the cut-off date for cost recognition ordered in the utility’s next general rate proceeding. (6) Duration of DSIM. Once a DSIM is approved by the commission, it shall remain in effect for the term established by the commission in the order approving that DSIM so as to allow full recovery of all DSIM amounts. During the term of an approved DSIM the utility or any party to the application for the utility’s filing for approval of a demand-side program may propose modifications to the DSIM. No modification of a utility’s DSIM shall be made without the assent of the utility. (7) Disclosure. Regardless of whether or not the utility requests adjustments of its DSIM rates between general rate proceedings, any amounts charged under a DSIM approved by the commission, including any earnings opportunity allowed by the commission, shall be separately disclosed on each customer’s bill. Proposed language regarding this disclosure shall be submitted to and approved by the commission before it appears on customers’ bills. The disclosure shall also appear on the utility’s websites. (8) Evaluation, Measurement, and Verification (EM&V) of the Process and Impact of Demand-Side Programs. Each electric utility shall hire an independent contractor to perform and report EM&V of each commission-approved demand-side program in accordance with 4 CSR 240-20.094 Demand-Side Programs. The utility shall provide oversight and guidance to the independent EM&V contractor, but shall not influence the independent EM&V contractor’s report(s). The commission shall hire an independent contractor to audit and report on the work of each utility’s independent EM&V contractor. The commission staff shall provide oversight and guidance to the independent commission contractor, but shall not influence the independent contractor’s audit(s). Staff counsel shall provide legal representation to the independent contractor in the event the independent contractor is required to testify before the commission. (A) Each utility’s EM&V budget shall not exceed five percent (5%) of the utility’s total budget for all approved demand-side program costs. (B) The cost of the commission’s EM&V contractor shall— 1. Not be a part of the utility’s budget for demand-side programs; and 2. Be included in the Missouri Public Service Commission Assessment for each utility. (C) EM&V draft reports from the utility’s contractor for each approved demand-side program shall be delivered simultaneously to the utility and to parties of the case in which the demand-side program was approved. (D) EM&V final reports from the utility’s contractor of each approved demand-side program shall— 1. Document, include analysis, and present any applicable recommendations for at least the following. All models and spreadsheets shall be provided as executable versions in native format with all links and formulas intact: A. Process evaluation and recommendations, if any; and B. Impact evaluation— (I) The annual gross and net demand savings and energy savings achieved under each demand-side program and the techniques used to estimate annual demand savings and energy savings; (II) For demand-side programs subject to cost-effectiveness tests, include total resource cost test, societal cost test, utility cost test, participant cost test, and nonparticipant cost test of each demand-side program; and (III) Determine the net benefits achieved for each demand-side program subject to cost-effectiveness tests and for the portfolio of such programs using the utility cost test (UCT) methodology; 2. Be completed by the EM&V contractor on a schedule approved by the commission at the time of demand-side program approval in accordance with 4 CSR 240-20.094(4); and 3. Be filed with the commission in the case in which the utility’s demand-side program approval was received and delivered simultaneously to the utility and the parties of the case in which the demand-side program was approved. (E) Electric utility’s EM&V contractors shall— 1. Include specific methodology for performing EM&V work; and 2. Utilize the TRM approved with the utility’s application for its DSIM and demand-side portfolio. (9) Demand-Side Program Annual Report. Each electric utility with one (1) or more approved demand-side programs shall file an annual report by no later than ninety (90) days after the end of each program year, make a public version available for publication on the commission’s website, and serve a copy on each party to the case in which the demand-side programs were last established, modified, or continued. Interested parties may file comments with the commission concerning the content of the utility’s annual report within thirty (30) days of its filing. Annual reports shall include at a minimum the following information, and all models and spreadsheets shall be provided as executable versions in native format with all links and formulas intact: (A) An affidavit attesting to the veracity of the information; and (B) A list of all approved demand-side programs and the following information for each approved demand-side program: 1. Actual amounts expended by year, including customer incentive payments; 2. Peak demand and energy savings impacts and the techniques used to estimate those impacts; 3. A comparison of the estimated actual annual peak demand and energy savings impacts to the annual demand and energy savings targets approved by the commission under 4 CSR 240-20.094(4)(I) or 4 CSR 240-20.094(5)(A)5.; 4. For market transformation demand-side programs, a quantitative and qualitative assessment of the progress being made in transforming the market; 5. A comparison of actual and budgeted demand-side program costs, including an explanation of any increase or decrease of more than twenty percent (20%) in the cost of a demand-side program; 6. The avoided costs and the techniques used to estimate those costs; 7. The estimated cost-effectiveness of the demand-side program and a comparison to the estimates made by the utility at the time the demand-side program was approved; 8. The estimated net benefits of each demand-side program and the demand-side portfolio; 9. For each demand-side program where one (1) or more customers have opted out of demand-side programs pursuant to section 393.1075.7, RSMo, a listing of the customer(s) who have opted out of participating in demand-side programs; 10. As part of its annual report, the electric utility shall file or provide a reference to the commission case that contains a copy of the EM&V report for the most recent annual reporting period; and 11. Demonstration of relationship of the demand-side programs to demand-side resources in latest filed 4 CSR 240-22 compliance filing. (10) Submission of Surveillance Monitoring Reports. Each electric utility with an approved DSIM shall submit to staff, public counsel, and parties approved by the commission a Surveillance Monitoring Report. Each electric utility with a DSIM shall submit, as page 6 of the Surveillance Monitoring Report, a quarterly progress report in a format agreed upon by the utility and staff, and all models and spreadsheets shall be provided as executable versions in native format with all links and formulas intact. The report shall be submitted to the staff, public counsel, and stakeholders approved by the commission. (A) The Surveillance Monitoring Report shall be submitted within fifteen (15) days of the electric utility’s next scheduled United States Securities and Exchange Commission (SEC) 10-Q or 10-K filing with the initial submission within fifteen (15) days of the electric utility’s next scheduled SEC 10-Q or 10-K filing following the effective date of the commission order establishing the DSIM. (B) If the electric utility also has an approved environmental cost recovery mechanism or a fuel cost adjustment mechanism, the electric utility shall submit a single Surveillance Monitoring Report for all mechanisms. (C) Upon a finding that a utility has knowingly or recklessly provided materially false or inaccurate information to the commission regarding the surveillance data prescribed in this section, after notice and an opportunity for a hearing, the commission may suspend a DSIM or order other appropriate remedies as provided by law. (D) Disagreements about the report format or content shall be settled by the commission. (11) Prudence Reviews. A prudence review of the costs subject to the DSIM shall be conducted no less frequently than at twenty-four- (24-) month intervals. (A) All amounts ordered refunded by the commission shall include interest at the electric utility’s short-term borrowing rate. (B) The staff shall submit a recommendation regarding its examination and analysis to the commission not later than one hundred fifty (150) days after the staff initiates its prudence audit. The timing and frequency of prudence audits for DSIM shall be established in the utility’s filing for demand-side program approval in which the DSIM is established. The staff shall file notice within ten (10) days of starting its prudence audit. The commission shall issue an order not later than two hundred ten (210) days after the staff commences its prudence audit if no party to the proceeding in which the prudence audit is occurring files, within one hundred sixty (160) days of the staff’s commencement of its prudence audit, a request for AND INSURANCE a hearing. 1. If the staff, public counsel, or other party auditing the DSIM believes that insufficient information has been supplied to make a recommendation regarding the prudence of the electric utility’s DSIM, it may utilize discovery to obtain the information it seeks. If the electric utility does not timely supply the information, the party asserting the failure to provide the required information must timely file a motion to compel with the commission. While the commission is considering the motion to compel, the processing timeline shall be suspended. If the commission then issues an order requiring the information to be provided, the time necessary for the information to be provided shall further extend the processing timeline. For good cause shown, the commission may further suspend this timeline. 2. If the timeline is extended due to an electric utility’s failure to timely provide sufficient responses to discovery and a refund is due to the customers, the electric utility shall refund all imprudently incurred costs plus interest at the electric utility’s short-term borrowing rate. (12) Tariffs and Regulatory Plans. The provisions of this rule shall not affect— (A) Any adjustment mechanism, rate schedule, tariff, incentive plan, or other ratemaking mechanism that was approved by the commission and in effect prior to the effective date of this rule; and (B) Any experimental regulatory plan that was approved by the commission and in effect prior to the effective date of this rule. (13) Nothing in this rule shall preclude a complaint case from being filed, as provided by law. (14) Variances. Upon request and for good cause shown, the commission may grant a variance from any provision of this rule. (15) Party status and providing to other parties affidavits, testimony, information, reports, and workpapers in related proceedings subsequent to the utility’s filing for demand-side program approval, modification, or continuation of a DSIM. (A) A person or entity granted intervention in a utility’s filing for demand-side program approval in which a DSIM is approved by the commission shall have the right to be a party to any subsequent related periodic rate adjustment proceeding without the necessity of applying to the commission for intervention; however, such person or entity shall file a notice of intention to participate within the intervention period. Public Counsel and the commission’s staff do not need to file a notice of intention to participate. In any subsequent utility’s filing for demand-side program approval, such person or entity must seek and be granted status as an intervenor to be a party to that proceeding. (B) Affidavits, testimony, information, reports, and workpapers to be filed or submitted in connection with a subsequent related annual DSIM rate adjustment proceeding or utility’s filing for demand-side program approval to modify, continue, or discontinue the same DSIM shall be served on or submitted to all parties from the prior related demand-side program approval proceeding and on all parties from any subsequent related periodic rate adjustment proceeding or utility’s filing for demand-side program approval to modify, continue, or discontinue the same DSIM, concurrently with filing the same with the commission or submitting the same to the manager of the energy resource analysis section of the staff and public counsel. (C) A person or entity not a party to the utility’s filing for demand-side program approval in which a DSIM is approved by the commission may timely apply to the commission for intervention, pursuant to 4 CSR 240-2.075(2) through (4) of the commission’s rule on intervention, respecting any related subsequent periodic rate adjustment proceeding or, pursuant to 4 CSR 240-2.075(1) through (5), respecting any subsequent utility’s filing for demand-side program approval to modify, continue, or discontinue the same DSIM. (16) Missouri Energy Efficiency Investment Act (MEEIA) Rate Design Modifications. (A) An electric utility may request modification of its DSIM rates by filing tariff schedule(s) with the commission as part of— 1. An application for approval of demand-side programs or a demand-side program plan and a DSIM; or 2. A general rate case proceeding. (B) Any request for modification of a rate design shall include with the filing supporting documentation for the request, including but not limited to, workpapers, data, computer model documentation, analysis, and other supporting information to support and explain the modification of the rate design. All information shall be labeled and all spreadsheets shall be provided as executable versions with all links and formulas intact. (C) Right to Discovery Unaffected. In addressing certain discovery matters and the provision of certain information by electric utilities, this rule is not intended to restrict the discovery rights of any party. AUTHORITY: section 393.1075.11, RSMo 2016.* This rule originally filed as 4 CSR 240-20.093. Original rule filed Oct. 4, 2010, effective May 30, 2011. Amended: Filed Dec. 27, 2016, effective Oct. 30, 2017. Moved to 20 CSR 4240-20.093, effective Aug. 28, 2019. *Original authority: 393.1075, RSMo 2009.