BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO Proceeding No. A- E IN THE MATTER OF THE APPLICATION OF BLACK HILLS/COLORADO ELECTRIC UTILITY COMPANY, LP FOR APPROVAL OF ITS ELECTRIC DEMAND SIDE MANAGEMENT (DSM) PLAN FOR PROGRAM YEARS 0 0 AND FOR APPROVAL OF REVISIONS TO ITS ELECTRIC DSM COST ADJUSTMENT TARIFF. DIRECT TESTIMONY AND ATTACHMENTS OF MATTHEW E. DAUNIS ON BEHALF OF Colorado PUC E-Filings System BLACK HILLS/COLORADO ELECTRIC UTILITY COMPANY, LP May, 0

2 TABLE OF CONTENTS SECTION PAGE I. IDENTIFICATION OF WITNESS... II. PURPOSE OF DIRECT TESTIMONY... III. APPROVALS REQUESTED... IV. ELECTRIC DSM PLAN BACKGROUND AND HISTORICAL PERFORMANCE... V. COMPLIANCE WITH C.R.S ()... VI. CURRENT ENVIRONMENT... VII. CURRENT DSM PLAN... VIII. 0-0 DSM PLAN DESIGN AND DEVELOPMENT... IX. 0-0 DSM PLAN OVERVIEW... X. 0-0 DSM PLAN SAVINGS GOALS... XI. PROPOSED BUDGET AND COST-EFFECTIVENESS... XII. NET-TO-GROSS AND TECHNICAL ASSUMPTIONS... XIII. REPORTING... XIV. FLEXIBILITY, CHANGE PROCESS AND ANNUAL MEETING... XV. DSMCA TARIFF SHEETS...

3 TABLES Table : Historical Plan Energy and Demand Savings... Table : Plan Year Budgets and Expenditures... Table : Reduction Goal Percentages... Table : Detailed Program Savings and Participants for 0... Table : Detailed Program Savings and Participants for 0... Table : Detailed Program Savings and Participants for 0... Table : Comparison of Savings Goals... Table : Proposed Budgets... 0 Table : Benefit-Cost Model Inputs... Table 0: Forecasted Modified Total Resource Costs... Table : Plan NTG Factors... Table : Plan EM&V Schedule... ATTACHMENTS Attachment MED-: 0-0 Colorado Electric Demand Side Management Plan Attachment MED-: Proposed DSMCA Tariff Sheets

4 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 I. IDENTIFICATION OF WITNESS Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. A. My name is Matthew E. Daunis. My business address is 0 East th Street, Lawrence, Kansas 0. Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? A. I am employed by Black Hills Utility Holdings, Inc. ( BHUH ), a wholly-owned subsidiary of Black Hills Corporation ( BHC ) as Manager Energy Efficiency/DSM- Strategy and Program Design. Q. WHAT ARE YOUR DUTIES AND RESPONSIBILITIES IN YOUR CURRENT POSITION? A, I am primarily responsible for designing and evaluating Energy Efficiency/Demand Side Management ( DSM ) programs to meet energy savings targets established by legislative, regulatory and/or company mandates or goals. Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND BUSINESS BACKGROUND. A. A summary of my education, employment history, and experience is provided in Appendix A. Q. ON WHOSE BEHALF ARE YOU TESTIFYING? A. I am testifying on behalf of Black Hills/Colorado Electric Utility Company, LP ( Black Hills or the Company ). Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS COMMISSION? A. Yes.

5 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page II. PURPOSE OF DIRECT TESTIMONY 0 0 Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY? A. Through the Application filed in this proceeding, Black Hills is requesting approval of the Company s proposed 0-0 Colorado Electric Demand Side Management Plan ( 0-0 DSM Plan or Plan ), which is attached to my testimony as Attachment MED-. Through my direct testimony, I explain the history, background and context in which the Company developed the 0-0 DSM Plan. I also explain the composition of and provide policy support for the Plan. In addition, I describe and sponsor the updated Black Hills tariff sheets for the Demand Side Management Cost Adjustment ( DSMCA ), which are being proposed in connection with the Plan ( DSMCA Tariff Sheets ). The DSMCA Tariff Sheets are attached to my direct testimony as Attachment MED-. Q. WHO IS THE COMPANY S OTHER WITNESS IN THIS PROCEEDING AND WHAT IS HIS AREA OF TESTIMONY? A. One other witness, Andrew Cottrell, Principal Consultant with Applied Energy Group, Inc., provides supporting direct testimony. Mr. Cottrell sponsors the DSM Potential Study. He discusses how the DSM Potential Study was designed, how the energy savings were estimated, and how the DSM Potential Study informed the 0-0 DSM Plan. Mr. Cottrell also provides supplemental technical information regarding development of the Plan.

6 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page III. APPROVALS REQUESTED 0 Q. WHAT ARE THE SPECIFIC APPROVALS BLACK HILLS IS SEEKING FROM THE COMMISSION IN THIS PROCEEDING? A. Black Hills is asking the Commission to: Approve and grant the Application filed in this proceeding. Approve the 0-0 DSM Plan as set forth in Attachment MED- including approval of: o Proposed Electric DSM Programs o Energy and Demand Savings Goals o Participation Goals o Budgets o Technical Assumptions, Deemed Savings, Avoided Costs and Net-to- Gross ( NTG ) Ratios o Evaluation, Measurement and Verification ( EM&V ) Reporting Schedule o Flexibility to Revise the Plan Approve revisions to the DSMCA Tariff Sheets as set forth in Attachment MED- and continued use of the DSMCA Incentive Mechanism. 0

7 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page IV. ELECTRIC DSM PLAN BACKGROUND AND HISTORICAL PERFORMANCE 0 0 Q. CAN YOU PLEASE EXPLAIN WHAT DEMAND SIDE MANAGEMENT IS AND WHAT TYPES OF PROGRAMS IT INCLUDES? A. Demand Side Management is the modification of consumer demand for energy through various methods, such as financial incentives and education. Usually, the goal of DSM is to encourage the consumer to use less energy in total, but especially during peak hours, or to move the time of energy use to off-peak times such as nights and weekends. Peak demand management does not necessarily decrease total energy consumption. DSM includes: Energy Efficiency: Customers using less energy to perform the same tasks. Demand Response (includes load management): Any reactive or preventative method to reduce, flatten or shift peak demand. Demand response includes all intentional modifications to consumption patterns of electricity of end use customers that alter the timing or level of instantaneous demand. Q. WHAT IS A DSM PLAN? A. A DSM plan sets forth the goals and budgets for the individual energy efficiency and demand response programs that Black Hills will offer during a specific time period. The DSM plan presents estimated measurements of the cost-effectiveness of each program proposed to be offered, as well as the means by which the savings attributable to these programs will be evaluated, measured and verified.

8 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 Q. PLEASE BRIEFLY EXPLAIN THE HISTORY OF THE COMPANY S DSM PROGRAM. A. Black Hills has implemented two DSM plans covering calendar years 00 through 0. Black Hills filed an application to implement DSM measures and for a DSMCA charge for associated costs on November, 00, under its Application for Approval of its Electric Demand Side Management (DSM) Plan for Calendar Years 00, 00 and 0 and for Approval of a DSMCA. The Commission initiated Docket No. 0A-E to consider Black Hills 00 0 DSM Plan filing. Several parties including Staff of the Public Utilities Commission and the Office of Consumer Counsel intervened. Prior to hearing, Black Hills and Intervening Parties entered into a Settlement Agreement resolving all disputed issues in the proceeding. The Settlement Agreement, amending Black Hills proposed plan, was approved without modification by Decision No. R0-0. In addition to modifying and adding DSM programs and allowing for flexibility, the Settlement Agreement provided that each program year under the plan would run from July to June 0 and required the Company to perform a detailed DSM market potential study consistent with the National Action Plan for Energy Efficiency ( NAPEE ) guidelines to be included with its next electric DSM application. Black Hills current plan was filed on January, 0, under Verified Application for Approval of its Electric Demand Side Management (DSM) Plan for Program Years 0-0 (July 0 - December 0), 0 and 0 (the Current DSM Plan ) in Docket No. A-00E. In developing the Current DSM Plan, Black Hills performed a detailed DSM Potential Study as agreed to in Docket No. 0A-E, and

9 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 combined those results with its suite of DSM programs approved in the 00-0 DSM Plan. The application also sought approval of a pre-pay metering pilot program and approval of updates to and an increase in the DSMCA. Black Hills also proposed to transition the July to June 0 program year to a calendar year time-frame. On May 0, 0, Black Hills filed a Stipulation and Settlement Agreement ( Stipulation ) in Docket No. A-00E through which the parties agreed to resolve non-program specific changes as well as program specific savings and budget changes. With the exception of the prepay metering pilot program, the Current DSM Plan, as modified by the Stipulation, was approved by Decision No. R-000. Black Hills sought reconsideration of the decision rejecting the pre-pay metering pilot program; however, the Commission affirmed the recommended decision in Decision No. C-. On November, 0, Black Hills, as directed in Decision No. R-000, filed an updated plan incorporating the changes in the Stipulation and eliminating the pre-pay metering pilot program. Q. PLEASE DESCRIBE THE ENERGY AND DEMAND SAVINGS GOALS SET IN EACH OF THE DSM PLANS AND HOW HISTORICAL ACHIEVEMENTS COMPARED TO THE GOALS. A. Table below shows a comparison of actual achievement to energy and demand savings goals from the 00 DSM plan year to date. 0

10 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Table : Historical Plan Energy and Demand Savings Program Year Energy Savings Goals (kwh) Actual Energy Savings (kwh) Demand Savings Goals (KW) 00/00 0,,,,,, 00/0,,0,,,0, 0/0,,000,,,0, 0/0 0,,0,0,0,0, 0,,,,,, Total,0,,0,, 0,0 Actual Demand Savings (KW) The total of the actual energy savings over the period starting on July, 00 through 0 were % of goal and the actual demand savings were % of goal. Q. WHAT WERE THE HISTORIC DSM PLAN BUDGETS? A: Table below shows the historic budgets and actual expenditures per program year. The total of the actual expenditures over the period starting on July, 00 through 0 were 0.% of goal. Table : Plan Year Budgets and Expenditures Plan Year Budget Goal Actual Expenditures 00/00 $,0, $,, 00/0 $,, $,, 0/0 $,, $,, 0/0 $,, $,, 0 $,, $,,00 Total $,, $,, 0

11 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 V. COMPLIANCE WITH C.R.S () Q. WHAT ARE THE ENERGY SAVINGS AND PEAK DEMAND REDUCTION GOAL REQUIREMENTS OF C.R.S FOR ELECTRIC DSM PLANS? A. The statutory reduction goals are for utilities to achieve at least five percent of the utility s retail system peak demand measured in megawatts in 00 (the base year) and at least five percent of the utility s retail energy sales measured in megawatt-hours in 00. Q. WHAT IS THE TIMELINE FOR A UTILITY TO MEET THE STATUTORY REDUCTION GOALS? A. Currently, these five percent reduction goals are required to be met in 0, which is the last year of the Plan. Q. AS OF THE DATE OF YOUR TESTIMONY, HAS BLACK HILLS MET THE 0 FIVE PERCENT RETAIL SYSTEM PEAK DEMAND REDUCTION GOAL? A. Yes. Q. AS OF THE DATE OF YOUR TESTIMONY, HAS BLACK HILLS MET THE 0 FIVE PERCENT RETAIL ENERGY SALES REDUCTION GOAL? A. Yes. Q. AS OF DECEMBER 0, WHICH IS THE END OF THE PLAN PERIOD, WHAT ARE YOUR PROJECTIONS ON BLACK HILLS PERFORMANCE AS COMPARED TO BOTH OF THE FIVE PERCENT REDUCTION GOALS? A. Table below reflects Black Hills actual and projected peak and program savings.

12 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Table : Reduction Goal Percentages Plan Year Projected Peak Savings (MW) CRS () Savings Requirements by 0 (MW) % of 0 Peak Savings Goal Projected Program Savings (MWh) CRS () Savings Requirements by 0 (MWh) % of 0 Program Savings Goal 00/00. %,,0 % 00/0.0 %,,0 % 0/0. %,0,0 0% 0-0. %,0,0 % 0.0 %,,0 0% 0. %,0,0 % 0.0 0%,,0 % 0.0 %,0,0 % 0.0 %,,0 % Total.0 %,00,0 0% Note: 00/00 through 0 Savings are Actual reported program savings. Note: 0 Savings are projected from current participation. Note: The cells in gray are the current proposed program design. VI. CURRENT ENVIRONMENT 0 Q. WHAT IS THE IMPORTANCE OF THE DSM PROGRAMS TO BLACK HILLS? A. Energy efficiency is relevant to multiple areas of Black Hills operations. In addition to the vital role energy efficiency plays in Black Hills planning for resource use, it is also a critical element in providing excellent customer service, supporting the principles of environmental stewardship, and meeting the Company s responsibility towards the National Action Plan for Energy Efficiency. Because of these important elements, Black Hills goal has been to develop an appropriate portfolio of energy-efficiency programs.

13 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Q. WHICH CUSTOMERS BENEFIT FROM THE COMPANY S DSM PROGRAMS? A. The Black Hills energy efficiency program portfolio for 0 through 0 was developed through a comprehensive planning process, including a comprehensive benefit-cost analysis of a wide range of measures that affect electricity consumption across all customer classes. The program portfolio is divided into three broad program categories based on customer sector residential, commercial and industrial, and special programs. The residential, commercial and industrial programs provide a variety of energy efficiency opportunities for each customer class (in order to be eligible, the applicable rate schedule must be subject to the DSMCA). Special programs target low-income residents and education in schools. Q. WHAT TEST(S) DOES THE COMPANY USE TO DETERMINE IF THE DSM PROGRAMS ARE COST EFFECTIVE? A. DSM program cost-benefit analysis employs the following five benefit-cost tests: Modified Total Resource Cost Test ( mtrc ): evaluates the cost effectiveness of measures and programs as a resource option from a societal perspective; Societal Cost Test: similar to the mtrc with the addition of environmental externalities; Utility Cost Test: evaluates cost-effectiveness from the utility s perspective; Participant Test: evaluates whether a program/measure is cost-effective from the participant s perspective; and

14 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 Ratepayer Impact Measure: measures a DSM program/measure s impact on utility rates. Q. WHAT IS THE PURPOSE OF THESE TESTS? A. Cost-effectiveness tests are used to analyze programs/measures from different perspectives and are used to screen options for program design and aid in selecting the most cost-effective options given a balanced portfolio. The Total Resource Cost Test ( TRC ) is currently the industry standard for evaluating programs and measures from a societal perspective and is utilized by most states as the benchmark for evaluating programs/measures. Colorado uses the mtrc test which accounts for non-energy benefits. The mtrc test is a widely-accepted methodology that has been used specifically in Colorado to assess cost-effectiveness. The mtrc measures the net costs of an energy efficiency program as a resource option based on the total costs of the program, including both the participant and the utility costs. This test represents the combination of the effects of a program on both participating and nonparticipating customers. Programs and measures must have a benefit-cost ratio greater than.0 (excluding certain special programs, such as low income) to be considered for inclusion in the program design. The higher the benefit-cost ratio, the more cost-effective the program/measure. Q. HAVE ANY CHANGES TAKEN PLACE IN THE INDUSTRY THAT MAY IMPACT THE COMPANY S PROPOSED 0-0 DSM PLAN? A. Yes. Recent changes to the Department of Energy federal standards have significantly

15 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 impacted the savings potential of a number of measures, including, but not limited to, the following residential measures: Room Air Conditioners Refrigerators Freezers Dishwashers Air Source Heat Pumps Lighting Clothes Washers Program modifications and new programs were considered in order to achieve the Commission s goals and provide all Black Hills customers with access to cost-effective energy efficiency programs. Q. DID THE COMPANY S SERVICE TERRITORY HAVE ANY IMPACT ON THE COMPOSITION OF THE COMPANY S PROPOSED 0-0 DSM PLAN? A. Yes. The make-up of the territory and related DSM Potential Study drove the composition of the Plan. Factors considered include the geography, residential and commercial building type, income, demographics, etc. Mr. Cottrell, in his direct testimony filed in this proceeding, addresses the DSM Potential Study and technical assumptions in more detail. 0 VII. CURRENT DSM PLAN Q. ARE YOU FAMILIAR WITH THE CURRENT DSM PLAN?

16 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 A. Yes. I am responsible for design and development as well as the monitoring, evaluation and reporting of the Current DSM Plan. Q. CAN YOU PROVIDE AN OVERVIEW OF THE STRUCTURE OF THE CURRENT DSM PLAN? A. The Current DSM Plan is split into three main segments: Residential, Commercial & Industrial, and Special. Each segment includes programs that are designed, in aggregate, to be available to all customers in a rate class. Special programs target low-income residents and education in schools. Q. THROUGH 0, PLEASE EXPLAIN THE COMPANY S PERFORMANCE UNDER THE CURRENT DSM PLAN. A. As reflected in Table above, the Current DSM Plan has performed at an acceptable level, meeting an aggregate % of the Current DSM Plan s energy savings goal through 0 and an aggregate % of the Current DSM Plan s demand savings goal through 0. Several factors have influenced the performance of the Current DSM Plan, including lack of participation in the C&I Prescriptive Program and the C&I Self-Direct Program. VIII. 0-0 DSM PLAN DESIGN AND DEVELOPMENT 0 Q. HOW WAS THE 0-0 DSM PLAN DESIGNED? A. The energy efficiency portfolio contained in the Plan is based upon the combination of Black Hills existing energy efficiency portfolio, the DSM Potential Study, analysis of other utility programs, cost-effectiveness, stakeholder input and budget. The programs

17 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 are designed to be inclusive, giving all customers the opportunity to benefit from participating in Black Hills energy efficiency programs. Whenever possible, the portfolio leverages existing resources to ensure comprehensive, cost-effective programs. The 0-0 DSM Plan portfolio includes twelve energy efficiency programs. Mr. Cottrell, in his direct testimony, addresses how the DSM Potential Study was used to inform the Plan. Q. WHAT WAS THE ROLE OF PROGRAM EVALUATION IN DEVELOPMENT OF THE PLAN? A. Program evaluation reports under the Current DSM Plan calculated and recommended net-to-gross (NTG) values, measure savings verification, and provided direction on delivery mechanisms. IX. 0-0 DSM PLAN OVERVIEW 0 Q. PLEASE PROVIDE AN OVERVIEW OF BLACK HILLS 0-0 DSM PLAN. A. The 0-0 DSM Plan presents a continuation of the Current DSM Plan, which has been implemented throughout Black Hills Colorado service territory. Generally, the Black Hills program portfolio is divided into three broad program categories based on customer sector residential, commercial and industrial, and special programs. Black Hills expects to continue its programs with modest changes to design, incentives, delivery or operating protocols. In addition to Plan improvements, the 0-0 DSM Plan proposes the addition of two new residential program components: a Residential Home Energy Comparison Report component and a Residential On-Site

18 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Energy Evaluation component. This Plan also proposes a redesigned C&I Lighting program and enhanced Low-Income Assistance and School Based Energy Education programs. These programs as well as the other proposed programs are explained in my testimony below. Q. WHAT MAJOR CHANGES FROM THE 0-0 DSM PLAN HAVE BEEN INCORPORATED INTO THE 0-0 DSM PLAN? A. Major changes from the Current DSM Plan include: High Efficiency Lighting: Removed light fixtures and smart strips; added LED specialty bulbs; shifted some focus from CFLs to LEDs. Residential High Efficiency Cooling: Added Ductless Mini Split Heat Pumps; added higher tiers for CAC and ASHP; moved insulation measures to new On- Site Energy Evaluation program. Residential Appliance Recycling: actual program performance. Lowered participation estimates based on 0 On Line Home Energy Evaluation: Added a free energy saving kit for those Customers who complete the evaluation. On-Site Energy Evaluation: New program added to encourage whole house improvement to existing homes. Home Energy Comparison Report: New program added to motivate residential customers to reduce energy usage without the installation of a measure or providing a monetary incentive.

19 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 C&I Prescriptive: Shifted lighting measures to the C&I Lighting program; added refrigeration measures. C&I Lighting: Now has two tracks for customers: o Track : Small Business Direct Lighting o Track : Prescriptive lighting measures School Based Energy Education: Expanded to include high school kits and education. Low Income Assistance Program: Evaluations and direct install of measures at no cost to participants; expanded to include LEDs. Discontinued Residential Program: High Efficiency Appliances. Discontinued C&I Program: Self-Direct. Q. PLEASE DESCRIBE THE PROPOSED 0-0 DSM PLAN DOCUMENTATION YOU HAVE SUBMITTED AS ATTACHMENT MED-. A. The 0-0 DSM Plan consists of the following: An Executive Summary; The 0-0 Program Portfolio, and Appendix A: Detailed Benefit-Cost Analysis Results. 0 X. 0-0 DSM PLAN SAVINGS GOALS Q. WHAT ARE THE ANNUAL PROGRAM PARTICIPATION AND SAVINGS GOALS IN THE 0-0 DSM PLAN?

20 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page A. The annual participation and program savings goals are shown in Tables, and below, which are also contained in the Plan as Tables, and. Table : Detailed Program Savings and Participants for 0 Program Name Participant Demand Savings Goals (kw) Energy Savings Goals (kwh) High Efficiency Lighting,00,, Appliance Recycling 0,0 On-Site Energy Evaluation,000 0, High Efficiency Cooling 0,00 Home Energy Comparison Report 0,000 0,0,000 Online Home Energy Evaluation,000, C&I New Construction, C&I Custom 0,,0 C&I Prescriptive 0 0, C&I Lighting,0,0 Low-Income Assistance, 0, School Based Energy Education,00,0 Total Program,,0,, Table : Detailed Program Savings and Participants for 0 Program Name Participant Demand Savings Goals (kw) Energy Savings Goals (kwh) High Efficiency Lighting,00 0,,0 Appliance Recycling 00, On-Site Energy Evaluation,00, High Efficiency Cooling, Home Energy Comparison Report,00 0,,0 Online Home Energy Evaluation,000, C&I New Construction, C&I Custom,,0 C&I Prescriptive 0 0, C&I Lighting 0,, Low-Income Assistance,, School Based Energy Education,00,0 Total Program,,,0,0

21 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Table : Detailed Program Savings and Participants for 0 Program Name Participant Demand Savings Goals (kw) Energy Savings Goals (kwh) High Efficiency Lighting,00,,0 Appliance Recycling 0,0 On-Site Energy Evaluation,00 0, High Efficiency Cooling,0 Home Energy Comparison Report, 0,, Online Home Energy Evaluation,000, C&I New Construction, C&I Custom 0,,0 C&I Prescriptive 0 0, C&I Lighting 0,0,, Low-Income Assistance,, School Based Energy Education,00,0 Total Program 0,0,0,, Q. HOW WERE THESE GOALS DETERMINED? A. These goals were determined using the bottom-up approach, where program participation and budget is determined for each individual measure. Participation is then multiplied by per-unit savings to determine measure and program-level goals. These program goals are then rolled up to the sector and portfolio-level to determine the overall Plan goals. Q. HOW DO THE PROPOSED GOALS COMPARE TO THE ANNUAL PROGRAM SAVINGS GOALS IN THE CURRENT DSM PLAN? A. Table below shows that the proposed energy savings goals and demand savings goals for the Plan are lower than were approved for the Current DSM Plan.

22 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Table : Comparison of Savings Goals Program Year Energy Savings Goals (MWh) 0/0 0,.0 0,. 0,.0 0,.0 0,0.0 0,.0 Demand Savings Goals (MW) Q. WHY ARE THE ANNUAL PROGRAM SAVINGS GOALS IN THE 0-0 DSM PLAN LOWER THAN THE ANNUAL PROGRAM SAVINGS GOALS IN THE CURRENT DSM PLAN? A. There are several reasons for the lower annual program savings goals. First, there has been a shift of federal baseline standards in both the lighting and HVAC areas. Second, projected participation has been shifted due to actual, historical results. Third, the savings goals in the Current DSM Plan are at the generator, while the savings goals under the 0-0 DSM Plan have been calculated at the meter. XI. PROPOSED BUDGET AND COST-EFFECTIVENESS Q. WHAT ARE THE PROPOSED BUDGETS FOR EACH YEAR OF THE PLAN? A. The proposed budgets for each program year of the Plan are shown in Table below.

23 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Table : Proposed Budgets Proposed Plan Budgets Program Year Budget 0 $,, 0 $,, 0 0 $,, Q. HOW WERE THE PROPOSED YEARLY PLAN BUDGETS DETERMINED? A. The yearly budgets and corresponding rate impacts are consistent with the budgets in the Current DSM Plan. The basis for budget development is consistent with goal determination utilizing the bottom-up approach. Each measure has an incentive amount associated with it. Depending on the program delivery mechanism (direct delivery, point of purchase rebates, mail in rebates, etc) factors are applied to the incentive amounts for program delivery, administration, and marketing per program. In addition to the programlevel budgets, portfolio-level budgets were developed for general administration, general marketing/education, and evaluation. These portfolio-level budgets account for any expenses that cannot be directly attributed to a specific program (for example, a utilitywide marketing campaign to promote all programs). Q. HOW IS BLACK HILLS MEASURING COST-EFFECTIVENESS OF ITS DSM PROGRAM UNDER THE PROPOSED PLAN? A. To determine the portfolio of energy efficiency measures, a comprehensive benefit-cost analysis was conducted on a wide range of measures that affect electricity consumption across all customer classes.

24 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Black Hills uses the mtrc as the primary method of assessing the costeffectiveness of energy efficiency measures and programs. The mtrc test is a widelyaccepted methodology that has been used specifically in Colorado to assess costeffectiveness. The mtrc measures the net costs of an energy efficiency program as a resource option based on the total costs of the program, including both the participant and the utility costs. This test represents the combination of the effects of a program on both participating and non-participating customers. Q. WHAT IS THE PROCESS OF ANALYZING PROGRAM COST- EFFECTIVENESS? A. The benefit-cost screening model that was used has been adapted from Minnesota Office of Energy Security BenCost software and is consistent with the California Standard Practice Manual. The benefit-cost tests were performed using utility-specific data. The input data required for the model includes: 0

25 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Table : Benefit-Cost Model Inputs General Inputs Retail Rate ($/kwh) Commodity Cost ($/kwh) Demand Cost ($/kw-year) Environmental Externality Cost ($/kwh) Discount Rate (%) Growth Rate (%) Line Losses (%) Project-Specific Inputs Utility Project Costs (Administrative & Incentives) Direct Participant Project Costs ($/Participant) Project Life (Years) kwh/participant Saved (Net and Gross) kw/participant Saved (Net and Gross) Number of Participants 0 Savings estimates for individual measures or programs were developed using a variety of sources. Colorado-specific data was utilized where available, with regional and national data filling the information gaps. Impacts were calculated using generally accepted engineering algorithms based on a set of reasonable assumptions. Because of the diversity in equipment and energy consumption patterns across multiple building types and end-uses, there exists a variability in these savings estimates as they relate to program design and target markets, particularly at the planning stage of these programs. Q. WHAT ARE THE FORECASTED mtrcs FOR EACH OF THE PLAN S PROGRAMS? A. The forecasted mtrcs for each Plan program are shown in Table 0 below.

26 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Table 0: Forecasted Modified Total Resource Costs Forecasted Modified Total Resource Costs Program mtrc Residential High Efficiency Lighting. Appliance Recycling. Onsite Energy Evaluation. High Efficiency Cooling Program. Home Energy Comparison Report. Online Home Energy Evaluation.0 Commercial New Construction. C&I Custom. C&I Prescriptive.0 C&I Lighting.0 Low Income Assistance. School Based EE.0 Q. ARE ANY OF THE PROGRAMS IN THE PLAN NOT COST-EFFECTIVE? A. No. XII. NET-TO-GROSS AND TECHNICAL ASSUMPTIONS 0 Q. PLEASE DEFINE THE TERM NET-TO-GROSS ( NTG ). A. As part of the participant surveys, program participants are asked a series of questions to better understand their decision-making process regarding purchase of program qualifying equipment and the influence of the program. The NTG ratio includes freeridership and participant spillover effects estimated through participant self-reports from the participant surveys and a secondary review of net-to-gross estimates from programs

27 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 similar to the programs being analyzed. NTG accounts for the amount of savings that can be claimed by the Company for a particular program in its annual status report. Q. WHAT NTG FACTORS DOES THE COMPANY PROPOSE TO USE UNDER THE PLAN? A. The table below provides NTG factors, based on program evaluations, utilized in development of the Plan. Table : Plan NTG Factors Program Name Measure NTG Factor High Efficiency Lighting All 0% Appliance Recycling Refrigerator Recycle % Appliance Recycling Freezer Recycle % Appliance Recycling Room A/C Recycle % On-Site Energy Evaluation CFL 0% On-Site Energy Evaluation Hot Water Measures % On-Site Energy Evaluation Insulation Measures 00% High Efficiency Cooling All 0% Home Energy Comparison Report All 00% Online Home Energy Evaluation All % C&I New Construction All 0% C&I Custom All 0% C&I Prescriptive All 0% C&I Lighting SBDI Track % C&I Lighting Prescriptive Track 0% Low-Income Assistance All 00% School Based Energy Education All % Q. WILL THE COMPANY USE THESE SAME NTG FACTORS IN EVALUATION OF DSM SAVINGS OBTAINED BY THE COMPANY UNDER THE PLAN?

28 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page A. Yes. The Company will use the above NTG factors unless modified by a 0-Day Notice. Q. WHAT ARE THE TECHNICAL ASSUMPTIONS USED IN DEVELOPMENT OF THE PLAN? A. The technical assumptions, such as deemed savings, avoided cost, measure life, incremental costs, etc. are set forth in the Plan and are addressed in Mr. Cottrell s direct testimony. XIII. REPORTING 0 0 Q. WHAT ARE THE COMPANY S REPORTING OBLIGATIONS UNDER THE PLAN? A. The Company will file an Annual Report on the prior year s Plan performance no later than April st every year. As explained below, the Company will also file EM&V reports on an annual basis. Q. WHAT WILL BE CONTAINED IN THE ANNUAL REPORT? A. The Annual Report will contain the results achieved during the previous plan year, in total and by program, including participation, achieved energy and demand savings, actual expenditures, and net economic benefits achieved. Q. PLEASE DESCRIBE THE EM&V PROCESS PROPOSED BY BLACK HILLS UNDER THE PLAN. A. EM&V of programs will be performed on a three-year rotating schedule. That is, each program and sub-program will be analyzed to determine the extent to which implementation is achieving the desired goals(s) at some point during the life of the Plan.

29 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page The schedule for EM&V for each program is shown in Table below. Table : Plan EM&V Schedule Program Name Sector Proposed EM&V Year EM&V Report Filing Date Low-Income Assistance Residential 0.0. On-Site Energy Evaluation Residential 0.0. Home Energy Comparison Report Residential 0.0. Appliance Recycling Residential 0.0. C&I Lighting Non-residential 0.0. C&I Custom Non-residential 0.0. C&I Prescriptive Non-residential 0.0. High Efficiency Cooling Residential 0.0. C&I New Construction Non-residential 0.0. School Based Energy Education Residential 0.0. High Efficiency Lighting Residential 0.0. Q. WHAT IS THE PURPOSE OF THE EM&V? A. The primary purpose of the EM&V is to assess customer satisfaction with the evaluated program, assess changes to technical assumptions, including NTG ratios, assess overall program effectiveness, and assess program processes.

30 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Q. WHEN ARE EM&Vs TO BE FILED WITH THE COMMISSION? A. Black Hills will file the EM&Vs with the Commission in this proceeding no later than April of each year on the schedule set forth in Table above. Q. WHAT WILL THE COMPANY DO IN RESPONSE TO THE EM&V REPORTS? A. The Company will consider implementing recommended changes in the program year following the period of evaluation. These changes will not be backward looking and so shall not affect calculations, including calculations for achieved savings or net economic benefits, for the Plan year covered by the EM&V. Black Hills will, within thirty days after the annual filing of the EM&V, provide 0-Day and/or 0-Day Notice, as applicable, detailing which EM&V recommendations will be implemented. Requirements for 0-Day and 0-Day Notices are addressed later in my direct testimony. XIV. FLEXIBILITY, CHANGE PROCESS AND ANNUAL MEETING 0 Q. IS BLACK HILLS ASKING FOR FLEXIBILITY WITH RESPECT TO THE PLAN? IF SO, WHAT FLEXIBILITY IS THE COMPANY REQUESTING? A. Yes, the Company is asking for flexibility under the Plan. Specifically, Black Hills requests authority to have the flexibility to, during each Plan year, move budget dollars between programs and customer segments within the Plan without further Commission authorization and approval, so long as the Company does not incur costs in excess of % of the applicable annual Plan budget amount. Q, WHAT IF THE COMPANY EXCEEDS % OF ITS ANNUAL PLAN BUDGET DURING A PLAN YEAR?

31 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 A. The Company should not be precluded from spending amounts in excess of % of the annual budget. However, unless otherwise approved by the Commission, if the Company s total expenditures in any year exceed % of the total approved Plan budget for that year, the Company will have the burden of going forward and the burden of proof with respect to the reasonableness and prudence of any expenditures exceeding the % cap. Q. WILL THE COMPANY CONTINUE TO HOLD ANNUAL MEETINGS REGARDING THE PLAN? A. Yes. During the fourth quarter of each Plan year, the Company will hold an annual meeting to discuss changes to the programs, issues of concern, new program ideas, existing program evaluations, and the results of its DSM programs. Notice for all meetings shall be provided to all parties on the certificate of service for this Proceeding and will be posted on Black Hills energy efficiency website. Q. CAN CHANGES BE MADE TO THE PLAN BY THE COMPANY THROUGH THE ANNUAL MEETING PROCESS? A. Yes. Modifications may be made to the Plan through the annual meeting process. The Company, or participants in the annual meeting, can recommend modifications at the annual meeting. Any recommended modifications to the Plan, along with Black Hills response to those recommended modifications, will be included in a summary of the annual meeting to be prepared by Black Hills. The annual meeting summary will be provided to those on the certificate of service in this Proceeding and posted on the Black Hills website within thirty (0) days after the annual meeting. Modifications that Black

32 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 Hills decides to implement following the annual meeting will be provided through a 0- Day or 0-Day Notice as appropriate. Q. HOW WILL BLACK HILLS PROVIDE NOTIFICATION OF CHANGES IN THE PLAN, OTHER THAN THOSE MADE PURSUANT TO THE GRANTED BUDGET FLEXIBILITY? A. The Company will provide the following two types of advance notice of Plan changes. Changes pursuant to notice, however, cannot exceed the % budget flexibility. 0-Days Advance Notice: Addition of a new DSM program Changes to eligibility requirements Changes related to rebate levels New or eliminated measures within a DSM program Modification of the approved avoided costs or technical assumptions 0-Days Advance Notice: Discontinuance of any DSM program Q. WHAT IS THE 0-DAY NOTICE PROCESS? A. The Company will provide 0-Day Notices to all parties on the certificate of service for this Proceeding and it will also be posted on Black Hills energy efficiency website. The required 0-Day Notice will explain the change being made. Parties receiving such notice will have days from the date of the notice within which to provide a response to the Company s notification. The notice will provide direction on how to provide a response to the Company. Prior to implementing the change contained in a 0-Day

33 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page Notice, the Company will act in good faith in considering any responses received and, upon written request, will provide its rationale for the action on the changes to a program proposed by a response. Q. WHAT IS THE 0-DAY NOTICE PROCESS? A. The Company will provide 0-Day Notices to all parties on the certificate of service for this Proceeding and it will also be posted on Black Hills energy efficiency website. The required 0-Day Notice will contain the basis for the Company s decision. Parties receiving such notice will have 0 days from the date of the notice within which to provide a response to the Company s notification. The notice will provide direction on how to provide a response to the Company. Prior to implementing the change contained in a 0-Day Notice, the Company will act in good faith in considering any responses received and, upon written request, will provide its rationale for the action on the changes to a program proposed by a response. Q. WHAT ADDITIONAL PROPOSALS ARE PRESENTED BY THE COMPANY IN THIS PROCEEDING? A. Black Hills proposes to file a report with the Commission on the economic feasibility of implementing a residential Demand Side Management Saver s Switch program within twenty-four () months of the effective date of the final Commission decision approving the Plan. A Saver s Switch program could provide for load reductions through management of residential customers central air conditioning units during times of peak usage.

34 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page XV. DSMCA TARIFF SHEETS 0 0 Q. DOES BLACK HILLS CURRENTLY HAVE AN APPROVED DSMCA TARIFF? A. Yes. The Company has approved DSMCA Tariff Sheets, which are found in Black Hills tariff as Colo. No., Sheet Nos. ( DSMCA Tariff ). Q. PLEASE DESCRIBE THE PURPOSE OF THE DSMCA TARIFF. A. The DSMCA Tariff primarily facilitates the recovery of DSM program costs and also sets forth the approved methodology for calculating the DSMCA Rider. Q. HOW DOES THE DSMCA INCENTIVE MECHANISM WORK? A. Pursuant to the DSMCA Tariff, the prospective recovery of DSM program costs is accomplished through a uniform DSMCA surcharge applied to all customer classes to which the DSMCA applies. Any under- or over-collection of DSM program costs by the DSMCA Rider will be trued-up in the annual April filing using the methodology in the DSMCA Tariff. The methodology for calculating the DSMCA Rider has not changed from the methodology approved in Docket No. 0A-E. Q. PLEASE DESCRIBE THE PROPOSED CHANGES TO THE DSMCA TARIFF SHEETS. A. The proposed revisions to DSMCA tariff Sheet Nos., and 0 are found in my Attachment MED-. The DSMCA Tariff Sheets, which are redlined in Attachment MED-, have been updated as needed to correspond with the proposed 0-0 DSM Plan and to make clarifying changes. Here is a summary of the changes that are reflected in more detail in Attachment MED-: Sheet No. :

35 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 0 o Introductory/explanatory statement added prior to definitions. o Table setting forth the annual determination periods, DSMCA filing dates and goals were removed to make the DSMCA Tariff more generic. In addition to adding the Plan Year term, the DSMCA Filing Dates were changed to be annually on April or annually on October, as applicable, in order to reflect the date on which these filings are actually made. Sheet No. : o Under the Financial Disincentive Offset provision, language is added stating that the annual Energy Savings Goal is reflected in the approved DSM Plan. o References to the Second DSMCA filing have been corrected to be the April DSMCA filing date. o Duplicate Incentive Cap definitions have been removed. o Under Applicable Rate Classes, the language has been made generic and no longer refers to specific rate classes since the tariff sheets for the different rate classes also specifically indicate whether the DSMCA applies. Sheet No. 0: o The Application section is revised to reflect DSMCA Rider filing requirements, including the DSMCA Rider formula. o The Annual Report Filing Requirements section is revised to indicate what needs to be filed annually, on or before April, in addition to the DSMCA. These filings include the Annual Report and the EM&V Reports (according to the schedule set forth in the Plan).

36 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Q. IS THE COMPANY PROPOSING ANY CHANGES TO THE DSMCA INCENTIVE MECHANISM? A. No. The Company proposes to use the same incentive mechanism set forth in the DSMCA Tariff Sheets. Q. WHAT IS THE REQUESTED EFFECTIVE DATE OF THE DSMCA TARIFF SHEETS? A. The Company requests that the DSMCA Tariff Sheets be approved in this Proceeding, and that it be permitted to file compliance tariffs on two days notice after issuance of a final order in this Proceeding. Since the DSMCA Tariff Sheets have been made more generic so that its provisions apply regardless of the DSM plan year, they do not need to have a January, 0 effective date. Q. WHY HASN T THE COMPANY PROVIDED A PROPOSED NEW DSMCA RIDER TARIFF SHEET (SHEET NO. )? A. Under the DSMCA Tariff, the next DSMCA Rider is to be filed on October, 0, to become effective on January, 0. Inputs needed to accurately calculate the DSMCA due on the October DSMCA Filing Date are not yet available. The new DSMCA will be filed on October, 0, pursuant to the DSMCA Tariff. 0 Q HAS THE COMPANY ESTIMATED THE IMPACT ON THE DSMCA RIDER RESULTING FROM THE PROPOSED BUDGET FOR 0, THE FIRST YEAR OF THE PLAN? A. Yes. If the DSMCA of.% proposed in Advice Letter No., which is currently pending before the Commission, is approved for implementation on July, 0, Black

37 Proceeding No. A- E Black Hills 0-0 DSM Plan May, 0, Page 0 Hills estimates, for illustrative purposes only, that through the October DSMCA Filing, the DSMCA Rider will be approximately.% assuming a 0 Plan Year budget of $,,. Q. WHAT WOULD BE THE CUSTOMER IMPACT OF A DSMCA RIDER SET AT. PERCENT? A. Under this scenario and based on estimates, the typical residential customer would have a percentage increase of 0.% or a monthly increase of $0. per month. The typical small commercial customer would have a percentage increase of 0.% or a monthly increase of $0. per month. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes, it does.

38 Appendix A Statement of Qualifications Matthew E. Daunis I received a Bachelor s degree in Mechanical Engineering from the University of Maine in. I received a Master s degree in Business Administration from the University of Nebraska in. I have been employed in the utility industry in positions requiring knowledge of Demand Side Management, customer service, and marketing for about years. Prior to that, I was employed by a major HVAC manufacturer for ten years in various marketing and sales positions.