STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION ) ) ) ) ) ) ) ) ) ) ) ) ) VERIFIED PETITION AND REQUEST FOR ADMINISTRATIVE NOTICE

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1 STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION IN THE MATTER OF THE VERIFIED PETITION OF INDIANAPOLIS POWER & LIGHT FOR APPROVAL OF DEMAND SIDE MANAGEMENT (DSM PLAN, INCLUDING ENERGY EFFICIENCY (EE PROGRAMS, AND ASSOCIATED ACCOUNTING AND RATEMAKING TREATMENT, INCLUDING TIMELY RECOVERY THROUGH IPL S EXISTING STANDARD CONTRACT RIDER NO. 22 OF ASSOCIATED COSTS INCLUDING PROGRAM OPERATING COSTS, NET LOST REVENUE, AND FINANCIAL INCENTIVES. CAUSE NO. VERIFIED PETITION AND REQUEST FOR ADMINISTRATIVE NOTICE Indianapolis Power & Light Company ( Petitioner, IPL or the Company hereby petitions the Indiana Utility Regulatory Commission ( Commission for approval of a Demand Side Management ( DSM Plan, including energy efficiency ( EE programs and associated accounting and ratemaking treatment as further described below. In support of this Petition, IPL represents and shows the following: IPL s Corporate Status and Operations 1. IPL is a public utility corporation organized and existing under the laws of the State of Indiana with its principal office and place of business at One Monument Circle, Indianapolis, Indiana IPL is engaged in rendering electric utility service in the State of Indiana. 2. IPL provides retail electric utility service to approximately 490,000 retail customers located principally in and near the City of Indianapolis, Indiana, and in portions of the

2 following Indiana counties: Boone, Hamilton, Hancock, Hendricks, Johnson, Marion, Morgan, Owen, Putnam and Shelby Counties. IPL owns and operates electric generating, transmission and distribution plant, property and equipment and related facilities, which are used and useful for the convenience of the public in the production, transmission, delivery and furnishing of electric energy, heat, light and power. IPL has maintained and continues to maintain its properties in a reliable state of operating condition. Petitioner s Public Utility Status 3. IPL is a public utility under Ind. Code and Ind. Code and an electricity supplier as that term is used in Senate Enrolled Act ( SEA 340 codified at Ind. Code ( Section 9 and SEA 412 codified at Ind. Code ( Section 10. IPL is subject to the jurisdiction of this Commission in the manner and to the extent provided by the Public Service Commission Act, as amended, and other pertinent laws of the State of Indiana. Section Section 10(h, adopted by the 2015 Indiana General Assembly, requires electricity suppliers, including IPL, to file a plan with the Commission for approval beginning not later than calendar year 2017 and not less than one (1 time every three (3 years. The plan must contain EE goals, EE programs to achieve the EE goals, program budgets and program costs, and evaluation measurement and verification ( EM&V procedures that must include independent EM&V. Section 10(j enumerates ten (10 factors the Commission shall consider when determining the overall reasonableness of a plan. If the Commission determines the plan is reasonable, then the utility is allowed to timely recover through a rate adjustment mechanism all associated program costs, including direct and indirect costs of energy efficiency programs (including EM&V costs, reasonable lost revenues and reasonable financial incentives. Section 2

3 10(g and (k. The Commission shall allocate and assign costs associated with a program to the class or classes or customers eligible to participate in the program. Section 10(k. 5. This filing is made in compliance with the Section 10(h requirement that beginning not later than calendar year 2017 an electricity supplier, (such as IPL, shall petition the Commission for approval of a plan that complies with the statute. The Company s proposed Section 10 plan is set forth in IPL s prefiled case-in-chief. Overview of Plan 6. IPL requests Commission approval of a DSM Plan for the three calendar year period of 2018 through The DSM Plan includes energy efficiency goals; a portfolio of EE programs and other DSM Programs designed to achieve the EE goals and demand savings; program budgets and program costs; and EM&V procedures that include independent EM&V. Approval of a three year plan for the requested period aligns with IPL s Integrated Resource Plan ( IRP filing timeline and the three year timeframe established in Section 10. Also, the multiyear plan is administratively efficient, promotes DSM/EE program market continuity and consistency in IPL s service territory, and facilitates building long term relationships with customers and local market actors. Implementation of the DSM Plan will promote efficiency in the rendering and use of the retail energy service. Energy Efficiency Goals and Demand Savings 7. The DSM Plan is designed to achieve average annual gross energy savings of approximately 125,000 MWh over the three year period and a demand reduction of approximately 70 MW as follows: 3

4 Table 1 -- DSM Plan EE Goals and Demand Savings 1 Program Gross Energy Savings (MWh Program Gross Demand Savings (MW , , , On an annual basis this level of energy savings is approximately a 0.9% reduction from the current level of IPL energy sales, when the sales are not adjusted downward to reflect customers that have opted out of participation in IPL s DSM programs. When sales are adjusted to take into account customers that have opted out of programs as authorized by Section 9 and Section 10(p, these savings represent about 1.2% of the remaining (non-opted out sales. The DSM Plan goals are reasonably achievable, consistent with IPL s IRP and designed to achieve an optimal balance of energy resources in IPL s service area. The weighted average life of the measures projected to be installed under the cost effective DSM Plan portfolio is approximately 9.4 years. DSM Plan Programs 9. The DSM Plan program portfolio allows for participation by all customers, including low income customers, and provides for industrial customer opt out in accordance with Section 9 and Section 10(p. The following thirteen (13 DSM programs, including nine (9 residential programs and four (4 programs targeting business customers, are included in the DSM Plan: 1 This demand reduction includes demand savings provided by the Residential and Business Demand Response Programs. It does not include the demand savings that are provided by the Conservation Voltage Reduction Program. 4

5 Table 2 -- Program Portfolio Residential Appliance Recycling Community Based Lighting Residential Demand Response Income Qualified Weatherization Lighting & Appliances Multifamily Peer Comparison School Education Whole Home Business Custom Business Demand Response Prescriptive Small Business Direct Install 10. The cost effective program portfolio continues many of same measures offered in programs approved by the Commission Order in Cause No dated December 28, 2016 ( Order, but with appropriate updates. Program Budgets and Program Costs 11. IPL s program budgets reflect the direct (including EM&V, portfolio level and indirect costs of the DSM Plan. IPL estimates the program operating budgets associated with the Plan s savings goals to be approximately $78.2 million over the three year period not including net lost revenue, financial incentives (shared savings and portfolio costs (emerging technology: Table 3 -- DSM Plan Budgets ($ x 1, $26, $26, $25,672 Total $78,236 5

6 12. IPL requests authority to roll forward into the next program year any unused and approved budget funds that remain unspent at the end of a plan year. As explained in IPL s prefiled case-in-chief and further described below, IPL also asks that the Commission authorize the same spending flexibility for the DSM Plan as is currently in place and to allow the IPL program implementation oversight board ( OSB to exercise such authority per its current structure. 13. IPL seeks recovery through IPL s existing Standard Contact Rider No. 22 ( Rider 22 of the net lost revenue and financial incentives associated with the DSM Plan. Net lost revenue and financial incentive for the plan years are estimated in IPL s prefiled case-in-chief. So as to allow the Commission to have a complete picture of the DSM costs that will be reflected in Rider 22 during the three DSM Plan years, IPL s case-in-chief also presents the impact of the lost revenue which persists from DSM programs previously approved by the Commission (also referred to as legacy lost revenue. EM&V 14. The EM&V for the DSM Plan will be conducted by an independent evaluation contractor who will perform a process and an impact evaluation. The process evaluation will identify how well programs are implemented. The impact evaluation will examine the more technical effects of the programs such as energy savings. Accounting and Ratemaking 15. The books and records of IPL are kept in accordance with the Uniform System of Accounts for Electric Utilities as prescribed by the Commission and generally accepted accounting principles ( GAAP. 6

7 16. The DSM Plan cost recovery proposal includes a request for continued accounting and ratemaking procedures to recover costs through Rider 22, including the direct costs (including EM&V, portfolio and indirect costs, net lost revenue, and the shared savings financial incentive. 17. With respect to the implementation mechanics of cost recovery via Rider 22, IPL is not proposing to make any changes from the accounting and ratemaking treatment for the DSM Plan costs that is currently in effect. Consistent with current practice, DSM costs will continue to be recovered contemporaneously through the Rider 22 on a projected basis. Likewise, the DSM Rider will continue to include a reconciliation mechanism. The reconciliation mechanism will correct for any variance between the projected program costs (including program operating costs, lost revenue and the shared savings financial incentive and the actual program costs (including program operating costs, lost revenue and shared savings financial incentive based on the EM&V of the Plan programs. 18. IPL also does not propose to make any changes from the current methodology being used to allocate DSM costs among customer classes. The allocation of the DSM Plan costs will be allocated to customer classes as authorized in Cause No based on the cost of service approved in that docket (adjusted to exclude those customers who have chosen to opt out of participation in DSM programs. 19. The DSM Plan includes DSM measure life tracking for lost revenue calculations. IPL s proposal for lost revenue recovery for the life of the measures reflects the actual reduced kwh or kw sales resulting from the DSM programs, as determined by the independent EM&V evaluator. 7

8 20. IPL requests authority to recover a financial incentive known as shared savings through Rider 22. IPL proposes to apply the same construct previously approved by the Commission s December 17, 2014 Order in Cause No ( Order. This financial incentive is 15% of the net present value of Utility Cost Test ( UCT net benefits. The net benefits of the UCT reflect the difference between the costs avoided by DSM programs and the costs incurred by the utility to deliver the programs. The shared savings structure encourages IPL to maximize UCT benefits in the delivery of cost effective DSM programs. DSM programs that do not meet the cost effectiveness tests are excluded from the shared savings mechanism. IPL does not propose to earn shared savings on the Income Qualified Weatherization program. Oversight and Reporting 21. Consistent with current practice and as discussed in IPL s prefiled case-in-chief, IPL proposes to continue to utilize its existing IPL OSB to oversee implementation of the DSM Plan. IPL proposes the IPL OSB continue to have the ability to shift dollars within a program budget as needed as well as shift dollars among programs as long as the programs are found to be cost effective and the overall DSM Plan approved budget is not exceeded. In addition, IPL proposes the OSB continue to be authorized to exercise spending flexibility to increase funding in the aggregate, without shifting dollars from other programs, by up to 10%, and to modify programs based on a review of initial program results as reported by an independent third-party evaluator. IPL also requests that the OSB be granted continuing authority to approve new cost-effective programs to fill marketplace needs as they arise so long as the new program would not increase total program operating costs above the spending level authorized by the Commission. 8

9 22. IPL proposes to report on the status of the DSM Plan program implementation consistent with current practice as further detailed in IPL s prefiled case-in-chief. DSM Rider In this docket, IPL requests Commission approval of the DSM Plan program cost and authority to recover such cost on a timely manner through IPL s ongoing semi-annual DSM Rider 22 filings filed under Cause No DSM-[X]. IPL does not seek approval of updated Rider 22 billing factors in this proceeding. 24. IPL requests the Commission approve the Company s proposed changes to the text of Rider 22. These changes are identified in IPL s prefiled case-in-chief and are necessary and appropriate to reconcile the Rider language with Section 10 and otherwise effectuate the proposed DSM Plan cost recovery. Applicable Law 25. IPL considers the provisions of the Public Service Commission Act, as amended, including Ind. Code , to be applicable to the subject matter of this Petition. 26. The DSM Plan includes programs that are not EE. The Commission DSM Rule, et seq., and other provisions of the Public Service Commission Act, including Ind. Code , 12, and 42, and Ind. Code Ch provide the Commission authority to approve the accounting and ratemaking sought for these aspects of the DSM Plan. 27. Approval of the proposed DSM Plan and associated cost recovery is consistent with the long standing public policy and is consistent with the Energy Independence and Security Act ( EISA of 2007, which provides that the rates allowed to be charged by any electric utility 9

10 shall (i align incentives with the delivery of cost-effective energy efficiency; and (ii promote energy efficiency investments. 16 U.S.C. 2621(d(17(A. Further, EISA provides that states shall specifically consider the following as policy options: (i removing the throughput incentive and other regulatory and management disincentives to energy efficiency; (ii providing utility incentives for the successful management of energy efficiency programs; [and] allowing timely recovery of energy efficiency related costs [ ]. 16 U.S.C. 2621(d(17(B. Request for Administrative Notice 28. Pursuant to 170 IAC , IPL requests administrative notice to be taken of IPL s most recent IRP which is the IRP filed with the Commission on November 1, Procedural and Other Matters 29. IPL notified the other members of its OSB of its intent to file this Petition. 30. IPL is filing its case-in-chief contemporaneous with its Petition, including direct testimony, attachments and workpapers. 31. Pursuant to 170 IAC (b of the Commission s Rules of Practice and Procedure, IPL requests the Commission promptly conduct a prehearing conference and preliminary hearing to establish a procedural schedule in this Cause. In accordance with 170 IAC (e, IPL will seek to enter into a stipulation regarding a procedural schedule in lieu of a prehearing conference. 32. So that the DSM Plan may be timely implemented commencing January 1, 2018, IPL requests a final Commission order approving the relief sought in this Petition on or before December 15, In the event that a final Commission order approving the relief sought in 10

11 this Petition is not issued prior to January 1, 2018, IPL will continue to deliver programs and timely recover the associated costs in accordance with the Order (p. 23 (finding that approvals therein extend from January 1, 2017 to December 31, 2017 or the effective date of an order in IPL s next DSM plan approval proceeding. 2 Petitioner s Authorized Representatives 33. The names and address of IPL s attorneys in this matter who are duly authorized to accept service of papers in this Cause on behalf of IPL are: Teresa Morton Nyhart (Atty. No Jeffrey M. Peabody (Atty. No Douglas W. Everette (Atty. No BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, Indiana Nyhart Phone: ( Peabody Phone ( Everette Phone: ( Fax: ( Nyhart tnyhart@btlaw.com Peabody jpeabody@btlaw.com Everette deverette@btlaw.com WHEREFORE, IPL respectfully requests the Commission to promptly publish notice, make such investigation and hold such hearings as are necessary and advisable, and thereafter make and enter an order in this Cause: (i (ii approving IPL s DSM Plan; authorizing and approving IPL s proposed recovery, through the Standard Contract Rider No. 22, of the costs of the DSM Plan, including direct (including EM&V costs, portfolio and indirect costs of the DSM Plan, net lost revenue, and shared savings; 2 In accordance with the Order, this Petition is filed no later than May 31,

12 (iii approving accounting and ratemaking treatment for IPL to implement the DSM Plan, including the authority to defer the over and under recoveries of projected DSMÆE program costs through the Standard Contract Rider No. 22 pending reconciliation prior to the time the Commission issues an order authorizing IPL to recognize these costs through the ratemaking process; and and proper. (iv granting to IPL such other and further relief in the premises as may be appropriate Däted this 17th day of l/ray Respectfully submitted, l,l'{þv-a Teresa Morton Nyhart (Atty. No Jeffrey M. Peabody (Atty.No Douglas W. Everette (Atty. No BaRNgs & THonwSURG LLP 11 South Meridian Street Indianapolis, Indiana Nyhart Phone: ( PeabodyPhone ( Everette Phone: (3I7 23I-7764 Fax: ( Nyhart tnvhart(òbtlaw.com Peabody jpeabodv(ôbtlaw.com Everette Attorneys for Indianapolis Power & Light Company T2

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14 CERTIFICATE OF SERVICE The undersigned certifies that two copies of the foregoing Verified Petition and Request for Administrative Notice was served this 17th day of }l4ay 2017, via hand delivery, on the Office of Utility Consumer Counselor, PNC Center, 115 W. Washington St., Suite 1500 South, Indianapolis, Indiana A courtesy copy of the foregoing was also served on the following via electronic mail Jennifer A. Washburn Citizens Action Coalition 603 East Washington Street, Suite 502 Indianapolis, Indiana iwashburn@citact.org Jeffrey M. Peabody Teresa Morton Nyhart (Atty. No Jeffiey M. Peabody (Atty. No Douglas W. Everette (Atty. No BenNes & TuonNnuRG LLP 11 South Meridian Street Indianapolis, Indiana Nyhart Phone: ( PeabodyPhone ( Everette Phone: (3I Fax: ( Nyhart tnyhart(òbtlaw.com Peabody Everette deverette@btlaw.com Attorneys for Indianapolis Power & Light Company t4