Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Missouri Public Service Commission v. Union Electric Company

Court of Appeals of Missouri, Western District, First Division

December 6, 2016



          Before Anthony Rex Gabbert, P.J., Thomas H. Newton, and Alok Ahuja, JJ.

          Thomas H. Newton, Judge

         Union Electric Co. d/b/a Ameren Missouri (Ameren or Ameren Missouri) appeals a Missouri Public Service Commission order granting Staff's motion for summary determination and denying Ameren's cross-motion for summary determination. The ruling arose from a Staff complaint alleging that Ameren had violated the Commission's Missouri Energy Efficiency Investment Act (MEEIA)[1] rules by using stale "avoided costs" data to calculate Ameren's performance-incentive award under an approved demand-side program investment mechanism (DSIM). At issue is whether the Commission's interpretation of the term "methodology" as used in 4 C.S.R. § 240-20.093(1) (F)[2] was reasonable. Ameren contends that "methodology" simply encompasses the formula used to calculate its avoided costs. The Commission concluded that "methodology" encompasses both the formula and a prescribed data set used in the formula to make that calculation. Also at issue is whether it was reasonable for the Commission to subject Ameren's DSIM performance-incentive award to that regulation. We affirm.

         Factual and Procedural Background 1. Missouri's Energy-Conservation Statute

         The Missouri Legislature enacted MEEIA in 2009 to encourage utilities to conduct programs that "modify the net consumption of electricity on the retail consumer's side of the electric meter." § 393.1075.2(3). Recognizing that lowered energy consumption would affect a utility's revenue and profits, the Legislature stated, "It shall be the policy of the state to value demand-side investments equal to traditional investments in supply and delivery infrastructure and allow recovery of all reasonable and prudent costs of delivering cost-effective demand-side programs." § 393.1075.3. As part of its plan for MEEIA's implementation and to give utilities incentives to adopt demand-side programs, the Legislature allowed the Commission to "develop cost recovery mechanisms to further encourage investments in demand-side programs including, in combination and without limitation: . . . allowing the utility to retain a portion of the net benefits of a demand-side program for its shareholders." § 393.1075.5. Following notice-and-comment rulemaking, the Commission finalized its MEEIA implementing regulations in February 2011, and this Court upheld the Commission's four orders of rulemaking in State ex rel. Pub. Counsel v. Pub. Serv. Comm'n, 397 S.W.3d 441 (Mo. App. W.D. 2013), including the rule at issue here.[3]Under the Commission's rules, a utility's DSIM may include the "(4) [r]ecovery of lost revenues; and (5) [u]tility incentive[s] based on the achieved performance level of approved demand-side programs." 4 C.S.R. § 240-20.093(1)(M). How the latter were to be calculated under Ameren's approved demand-side program is at issue in this litigation.

         2. Dispute Overview

         As discussed in more detail below, while the Commission's rulemaking was on appeal before this Court, Ameren's plan to adopt demand-side programs for its customers was approved by the Commission as modified by the parties. Two documents from the approval process are key to understanding this dispute: Ameren's DSIM plan, which would, among other matters, allow the utility to recover both lost revenues and a performance incentive, and the modification of that plan negotiated by the parties. The modification adopted the DSIM plan with certain changes, and the nature and extent of those changes are at issue here, along with how the regulations we upheld intersect with those changes.

         Ameren submitted the same underlying data to its independent evaluators to calculate two different plan components, the TD-NSB (or throughput-disincentive net shared benefits, i.e., lost revenues) and the performance incentive, at the end of the three-year program cycle to "true up" the additional DSIM charges that ratepayers had been making under the programs. Commission Staff objected to the data used for the performance-incentive calculation, and the Commission agreed that, under the plan, the modification, and the regulations, Ameren was required to use different, more recent data to calculate the avoided costs underlying the performance incentive. While the actual dollar amount of the difference between a performance incentive calculated using "stale" and "updated" avoided-cost data has not been specified on appeal, Staff counsel noted during argument before the Commission that the performance-incentive component of Ameren's DSIM represented about 7 percent of the total that the utility could recover under MEEIA as an inducement to adopt demand-side programs, assuming that the plan achieved 100 percent of its energy-saving goals.

         "Avoided costs" include those investments that utilities would have made under a traditional supply-side program, such as new energy generation and transmission facilities and the costs of complying with environmental regulations to build these facilities. Shareholders receive a return on those investments in the rates charged to customers, which rates also include the costs of the energy used. Increased capacity and increased demand result in both higher revenues and better investment returns. When customers adopt, under a demand-side program, conservation measures that lower the revenues which utilities receive due to decreased demand, investment in additional supply-side facilities from which utility shareholders can earn a return are no longer required. Under MEEIA, as an incentive to encourage the adoption of conservation measures, utilities implementing approved demand-side programs can charge their customers an additional fee representing a share of both the revenues that are lost and the foregone investments in new generating capacity. Under the regulations, these foregone investments are calculated as part of the performance-incentive component of a DSIM and are reduced by the utilities' costs of implementing the programs (these are recovered in other ways under a DSIM); they are also pegged to the numbers of conservation measures actually adopted and the amount of energy saved. At issue here is whether a measure of the energy saved for purposes of the performance-incentive award includes an updated estimate of actual energy costs over the life of a demand-side program. If so, when such costs rise, shareholders have the potential to recover more under a demand-side program, because customers have saved more money by decreasing energy usage; when they fall, the shareholder recovery will be decreased because customers have saved less money despite decreasing energy usage.

         3. Ameren's Plan and Modifications

         Ameren filed a three-year demand-side program with the Commission in January 2012 (MEEIA 1 Plan), while the case challenging MEEIA's implementing regulations was pending on appeal.[4] The program was based on the utility's "2013-2015 Energy Efficiency Plan" report (report), which was submitted with Ameren's application and included a DSIM. Ameren's MEEIA 1 Plan was not adopted as filed, but was modified under a July 2012 "Unanimous Stipulation and Agreement Resolving Ameren Missouri's MEEIA Filing" (stipulation). The Commission approved the modified MEEIA 1 Plan (modified plan) in an August 2012 order.

         The stipulation that the Commission approved states that the DSIM described in Ameren's report was to be adopted "[s]ubject to the terms and conditions contained herein" and as "modified to reflect the terms and conditions herein." Three lengthy stipulation paragraphs specifically address and modify Ameren's recovery of TD-NSB, including how this component was to be calculated, and the utility's performance incentive. Nothing in the plan as modified by the stipulation expressly indicates how the performance-incentive award is to be calculated other than that it was to be a percentage of certain net shared benefits set forth in an appendix. The regulations define a utility incentive in terms of annual net shared benefits. 4 C.S.R. § 240-20.093(1)(EE). They further define "annual net shared benefits" as "the utility's avoided costs measured and documented through evaluation, measurement, and verification (EM&V) reports for approved demand-side programs less the sum of the programs' costs. . . ." 4 C.S.R. § 240-20.093(1)(C) (emphasis added). Avoided costs are defined as "the cost savings obtained by substituting demand-side programs for existing and new supply-side resources." 4 C.S.R. § 240-20.093(1)(F). These cost savings include "avoided utility costs resulting from demand-side programs' energy savings and demand savings associated with generation, transmission, and distribution facilities including avoidable environmental compliance costs." Id.

         Ameren's MEEIA 1 Plan report contains an extensive discussion of the "Throughput Disincentive" (TD) that was approved as modified by the stipulation. According to Ameren's report, "the throughput disincentive is about how the reduction in sales volumes impacts the revenues collected by the utility." During argument before the Commission, Staff counsel stated that the TD-NSB was used in Ameren's DSIM as a substitute for the "lost revenue" that may be recovered under MEEIA and that Staff did not challenge Ameren's use of deemed (or "stale") avoided-cost values in calculating TD-NSB.[5] TD-NSB is not a term used or defined anywhere in MEEIA or in its implementing regulations. And under the regulations, its apparent equivalent- lost revenue-is not defined in terms of net shared benefits or avoided costs.

         The stipulation specifically provides that for purposes of determining Ameren's final recovery for its TD-NSB, the software used in calculating NSB for the MEEIA 1 Plan would be re-run using only:

(i) the actual number of energy efficiency measures (by type) installed in each month up to that point, (ii) the actual program costs in each month incurred up to that point; and (iii) for Commercial and Industrial Custom measures for which the TRM [Technical Resource Manual] does not provide a deemed value, savings determined according to the protocol provided for at pages 85 to 98 of the TRM.

         Further, the stipulation provided that "EM&V [Evaluation, Measurement, and Verification] shall not be utilized to calculate the actual NSB for the purposes of determining Ameren Missouri's TD-NSB Share." In contrast, when discussing the performance-incentive component, the stipulation does not state how it will be calculated but requires that "[a]ctual net energy savings for each program year will be determined through the EM&V."

         The TD-NSB part of the stipulation, including how it will be calculated, accords in many respects with a report table-Table 2.12, "Description of Update Process"- listing "the items associated with estimating net benefits and whether those items will be updated for purposes of assessing performance and benefits as part of the implementation process." This table addresses "the mechanics of sharing net benefits" as part of implementing the DSIM's "program expense tracker, " which under the MEEIA regulations is linked to the "cost recovery of demand-side program costs" and not to a utility's incentive award. 4 C.S.R. § 240-20.093(1)(M)(2). Items on the list represent data that will be used to calculate whether the company makes progress on its goal of saving a specified number of kilowatt hours of energy "at the meter." On this list is the item "Avoided Costs, " which has a red "X" instead of a green "√"in the

         "Update?" box beside the phrase, as well as the following description: "The avoided energy, capacity, and T&D [transmission & distribution] values are deemed." Text above the table states, "Notice that several items will not be updated, so the focus remains on the cost of the programs and the number of measures implemented." Neither the table nor the text refers to the performance-incentive award.

         While the stipulation is otherwise silent as to the chart appearing in Ameren's report, it further includes a paragraph describing the variances granted to Ameren to the extent that the stipulation's terms and conditions are inconsistent with Commission rules. The rule at issue here, with the contested term "methodology" and the use of the most recently filed IRP methodology to calculate avoided costs for the performance incentive, is not among any of the granted rule variances. As modified by the stipulation, Ameren's performance incentive was to be recovered "[a]fter the conclusion of the three-year Plan period, " which explains why the Commission granted a number of variances that address the performance incentive but only within the context of "timing of recovery" and of "calculation."

         4. Final Recovery Under Ameren's DSIM

         Ameren filed an integrated resource plan (IRP), as required by Chapter 22 rules, in 2014, or the first time that an IRP had been filed since the utility calculated avoided costs for purposes of submitting its MEEIA 1 Plan to the Commission. The IRP included updated avoided-cost data, reflecting changes in the cost of energy since the prior IRP had been filed. Ameren then provided data to its EM&V contractors to calculate 2014 net shared benefits for use in determining its performance-incentive award over the life of its 2013-2015 demand-side program. Unlike the IRP, however, the data Ameren submitted to its contractors to calculate the avoided costs for the performance incentive had not been updated from its MEEIA 1 Plan submission. The EM&V evaluators filed Ameren's final DSIM reports in May 2015. In June 2015, Commission Staff filed a complaint, alleging that Ameren had failed to comply with 4 C.S.R. § 240-20.093(1)(F) by not providing "its independent evaluation, measurement and verification contractors [EM&V contractors] with the most recent avoided cost information needed for the calculation of the portion of annual net shared benefits that are to be awarded to [Ameren] as a performance incentive" under its DSIM for the 2014 program year.[6] Ameren admitted that it had not given its EM&V contractors the avoided-cost data used in its most recently adopted IRP. Ameren contended, however, that it had performed its obligations under the stipulation approved by the Commission because its approved modified plan did not require avoided costs to be updated for the performance-incentive award. Ameren also argued that the rule requiring a utility to use "the same methodology used in its most recently-adopted [sic] preferred resource plan [IRP] to calculate its avoided costs" under its DSIM does not require the use of the updated avoided-cost data included in the avoided-cost calculations for its most recently adopted IRP. 4 C.S.R. § 240-20.093(1)(F) (emphasis added).[7]

         5. The Commission's Ruling

The Commission heard oral argument on Staff's complaint following briefing and issued an order in November 2015 granting Staff's motion for summary determination and denying Ameren's motion for summary determination. As part of its findings of fact, the Commission explained what avoided costs are and summarized the dispute this way:
Avoided costs are an estimate of future costs over at least a 20-year period. At the time Ameren Missouri's DSIM was created, that estimate of avoided costs was based on the methodology used in the preferred resource plan set forth in Ameren Missouri's MEEIA 1 Plan. Ameren Missouri made its next Chapter 22 Electric Utility Resource Planning Rules triennial IRP filing in 2014. For the 2014 IRP filing, the formula used in the methodology did not change, but the numbers plugged into the formula used to estimate avoided costs did change. As a result, the estimate of avoided costs also changed [due to significant drops in market prices for energy].
EM&V, as performed by Ameren Missouri's contractors, does not calculate or otherwise determine the avoided costs used to calculate net shared benefits. Instead, the avoided cost estimates are provided to the EM&V contractors by Ameren Missouri. When Ameren Missouri
provided the estimate of avoided costs to its independent EM&V contractors for program year 2014, it gave them the estimated avoided costs as calculated using the inputs from the 2012 MEEIA 1 Plan methodology, not the estimated avoided costs calculated using the inputs from the 2014 IRP methodology. Staff asked Ameren Missouri to provide the avoided cost estimates using the inputs from the 2014 IRP methodology to the EM&V contractors, but Ameren Missouri refused to do so, contending that the DSIM established in the 2012 stipulation and agreement does not require the use of updated costs estimates.

         While the Commission acknowledged that Ameren's proposed plan did not allow the use of updated avoided costs estimates, it noted that the stipulation "provides for variances from several rules that would otherwise be inconsistent with the provisions of the stipulation and agreement, [and that] subsection 4 CSR 240-20.093(1)(F) is not one of the rules from which a variance is provided." Thus, the Commission ruled that the utility's approved DSIM "remains subject to that regulation, and Ameren Missouri is required to 'use the same methodology used in its most recently adopted preferred resource plan to calculate its avoided costs'" for purposes of calculating its performance incentive.

         The Commission determined that, in the context of rule 4 C.S.R. § 240-20.093(1)(F), "methodology includes both the formula by which avoided costs are to be calculated and the inputs used in that formula." According to the Commission, this "interpretation is consistent with the goal of the MEEIA statute, which is to encourage the electric utility to implement energy-saving measures by protecting the utility's financial interests while also protecting consumers." This goal, according to the Commission, is accomplished by connecting the company's performance incentive "to how much money ratepayers actually saved as a result of the company's MEEIA program."

         Describing the function of a performance incentive under MEEIA, the Commission determined that the disputed rule must be interpreted as requiring the use of the most recently used data in calculating that incentive. In this regard, the Commission stated,

The sole purpose of a performance incentive under MEEIA is to give the utility an earnings opportunity that will place shareholders in a financial position comparable to the earnings opportunity they would have had if those shareholders had instead made a future supply-side investment. Future earnings opportunities from supply-side investments are dependent on the dynamic character of the energy marketplace. If energy and capacity market prices increase, the utility may be able to earn greater profits. Conversely, if those market prices drop, the utility may be able to earn less profit on its investment. Thus, it is appropriate that the calculation of the utility's performance incentive should reflect the most current market price information available when avoided costs are calculated. That is the result obtained when the requirements of Commission Rule 4 CSR 240-20093(1)(F) are interpreted correctly, as described in Staff's complaint.

         Ameren filed an application for rehearing and request for clarification. Intervenor Missouri Division of Energy also filed an application for rehearing. The Commission denied the requests for rehearing, but agreed with Ameren that, in making its calculation, "the 2014 IRP actual costs begin to apply to the calculation of net benefits only after the 2014 IRP was filed." Ameren filed this appeal.

         Legal Analysis

         Ameren raises three points on appeal, arguing that (1) the Commission erred and its order was unreasonable because it incorrectly interpreted and effectively rewrote the applicable rule; and its order is arbitrary and capricious and constitutes an abuse of discretion because (2) "the Commission relies on financial metrics calculated using avoided cost estimates existing when the plan was approved, but then disregards those avoided cost estimates in evaluating the operation of the plan that it approved"; and (3) its rationales "do not support the Commission's made-up definition of the term 'methodology' as used in the MEEIA rules."

         Under section 386.510, [8] we review a Commission order to determine whether the order is lawful and reasonable. Office of Pub. Counsel v. Mo. Pub. Serv. Comm'n, 409 S.W.3d 371, 375 (Mo. banc 2013). The Commission's order "has a presumption of validity, and the burden of proof is on the appellant to prove that the order is unlawful or unreasonable." Id. Ameren does not challenge the lawfulness of the order.[9]

         Accordingly, our sole focus in this appeal is on whether it was reasonable.

         A Commission decision "is reasonable where the order is supported by substantial, competent evidence on the whole record; the decision is not arbitrary or capricious or where the [Commission] has not abused its discretion." Id. "We consider the evidence, along with all reasonable supporting inferences, in the light most favorable to the Commission's order." State ex rel. Pub. Counsel v. Mo. Pub. Serv. Comm'n, 289 S.W.3d 240, 246-47 (Mo. App. W.D. 2009). And, "where a decision involves the exercise of [Commission] regulatory discretion, Missouri courts have long recognized that the Public Service Commission Law delegates a large area of discretion to the [Commission] and 'many of its decisions necessarily rest largely in the exercise of sound judgment.'" State ex rel. Mobile Home Estates, Inc. v. Pub. Serv. Comm'n of Mo., 921 S.W.2d 5, 9-10 (Mo. App. W.D. 1996) (quoting State ex rel. Dyer v. Pub. Serv. Comm'n, 341 S.W.2d 795, 802 (Mo. 1960), cert. denied, 366 U.S. 924 (1961)). Thus, "the reviewing court will not substitute its judgment for that of the [Commission] on issues within the realm of the agency's expertise." Id.

         1. Updated Avoided Costs

         Ameren first argues that the Commission disregarded the terms of the MEEIA 1 Plan it approved, because that plan specifically indicated in Table 2.12 that avoided costs would not be updated for purpose of calculating the DSIM's utility-incentive component. Citing 4 C.S.R. § 240-20.093(2)(J), Ameren contends that the Commission was bound to the DSIM it approved.[10] We agree that the Commission was bound to the DSIM it approved, but we disagree that the performance-incentive calculation was subject to Table 2.12 in Ameren's proposed MEEIA 1 Plan, because it appears to us that the table addressed the TD-NSB calculation and not the performance incentive. Even if Table 2.12 applied to the performance incentive, the modified plan that the Commission approved was based on a stipulation that did not grant the utility a variance from section 240-20.093(1)(F), which governs the calculation of the avoided costs that are used in determining a utility's performance incentive, but not lost revenue (or "TD-NSB"). Accordingly, the Commission's approval of the utility-incentive component was conditioned on Ameren's compliance with section 240-20.093(1)(F). The record supports the Commission's reasonable conclusion that the utility-incentive component of Ameren's "approved demand-side program remains subject to the requirements of that regulation."

         Neither MEEIA nor its implementing regulations discuss, mention, or define "throughput disincentive net shared benefit" (TD-NSB). MEEIA and the implementing regulations do, however, address "lost revenue, " narrowly defined as "only those net revenues lost due to energy and demand savings from utility demand-side programs approved by the commission. . . ." 4 C.S.R. § 240-3.163(1)(Q). This Court upheld the lost-revenue definition in State ex rel. Public Counsel, 397 S.W.3d at 454, and rejected Ameren's argument that the definition of "lost revenue" in Chapter 20 should be consistent with its definition in Chapter 22 of the regulations, finding that "the Commission could have reasonably concluded that the definition of lost revenue used in Chapter 22 to address integrated resource planning is not consistent with the purposes of the MEEIA."[11] Id.

         In the report and the modified plan to which Ameren and the Commission agreed, TD-NSB, the equivalent of lost revenue, is addressed separately from the performance-incentive component and is subject to different requirements, including how TD-NSB would be calculated, using deemed avoided-cost data, both annually and for purposes of a "true-up" at the end of the program. The report and the modified plan do not detail how the performance incentive is to be calculated for purposes of the EM&V annual reports or for trueing up. The regulations define a DSIM utility lost-revenue requirement as "the revenue requirement explicitly approved (if any) by the commission to provide the utility with recovery of lost revenue based on the approved utility lost revenue component of a DSIM." 4 C.S.R. § 240-20.093(1)(R). Note that this definition does not base lost revenue on "net shared benefit." So while Ameren and the Commission agreed that the utility could recover a component dubbed TD-NSB, they had to define how it would be calculated because, as a substitute for "lost revenue, " no regulation prescribes how a TD-NSB is to be determined for purposes of recovery under MEEIA.[12]

         As to the performance incentive to which Ameren would be entitled under its DSIM, the stipulation states that, "using final Evaluation, Measurement and Verification ("EM&V") results (with EM&V to be performed after each of the program years 1, 2 and 3), Ameren Missouri will be allowed to recover the performance incentive, which is a percentage of NSB [net shared benefit]." The stipulation does not further define how net shared benefits are calculated for purposes of the performance incentive. But the implementing regulations do address how the performance incentive will be calculated, from expressly defining the incentive as "a portion of annual net shared benefits" and specifying the methodology that will be used to calculate NSB avoided costs (the same used in the utility's most recent IRP) to defining EM&V as "the performance of studies and activities intended to evaluate the process of the utility's program delivery and oversight and to estimate and/or verify the estimated actual energy and demand savings, utility lost revenues, cost effectiveness, and other effects from demand-side programs." 4 C.S.R. § 240.093(1)(Q) & (V) (emphasis added). Further, the stipulation does not waive the requirements of 4 C.S.R. § 240-20.093(1)(F), which thus subjects the performance incentive, based in the regulations on net shared benefits, to "the same methodology used in its most recently-adopted preferred resource plan to calculate its avoided costs." Lost revenue and a utility incentive are two discrete DSIM recovery components under the regulations, and the Commission's conclusion that the utility incentive was subject to a regulation that was not explicitly waived by stipulation was reasonable.

         According to Ameren, by including data inputs within the meaning of "methodology, " the Commission has rewritten section 240-20.093(1)(F) and effectively substituted the word "inputs" for "methodology." It asserts that the dictionary defines "methodology" as "a particular procedure or set of procedures, " or, in other words, "the 'how one goes about' achieving something or arriving at an outcome or a result." In its view, the rule includes the formula used to conduct a calculation, but does not include the inputs used in that formula. Because the methodology, but not the avoided-cost data, which Ameren used in its 2014 IRP filing, was the same as the methodology used in its annual DSIM report for 2014, it contends that under its interpretation, it complied with the rule.

         We believe that the Commission's rejection of this interpretation of the rule was reasonable for the simple reason that without knowing what data sets are to be used in a formula, it would be impossible to use the methodology to make a calculation. If the inputs are not defined as part of the procedure, any random data could be "plugged into" a formula. In other words, a methodology does not include the input of any specific data, but of necessity it does include and must specify which particular set of data will be used in the formula. Because the rule states that "[t]he utility shall use the same methodology used in its most recently-adopted preferred resource plan to calculate its avoided costs, " a utility must use the formula and data sets in its most recently adopted IRP as part of using "the same methodology" to calculate its avoided costs. 4 C.S.R. § 240-20.093(1)(F). We do not find that the Commission's understanding of section 240-20.093(1)(F) is unreasonable given the authorizing legislation's goal, i.e., that a utility adopting demand-side programs be allowed to recover "all reasonable and prudent costs of delivering cost-effective demand-side programs." § 393.1075.3. The record supports the Commission's understanding that the avoided-cost calculation is a long-range projection based on probabilities and assumptions about a volatile energy market that can trend up or down at any point in time. This was, in fact, explained in affidavits filed in support of Ameren's motion for summary determination. To allow a utility to use stale avoided-cost data and projections in calculating its performance incentive when markets are actually down, however, would allow the shareholders to recover a windfall rather than the reasonable and prudent costs of delivering demand-side programs. The record supports the Commission's conclusion that "to the greatest extent possible, the Commission encourages the use of actual numbers to calculate cost savings. In this case, that requires the use of updated estimates."

         It also makes little sense to require a utility to use the same methodology underlying its most recently adopted preferred resource plan to calculate its avoided costs without also using the most recent data, as well as the formula, in calculating those costs to recover a performance incentive. 4 C.S.R. § 240-20.093(1)(F). The dissent does not explain what benefit can be derived from making just the DSIM formula used for calculating avoided costs consistent with that used in the most recently adopted IRP. Nor can we think of any, thus leading one to question whether this rule would have any particular purpose, if "methodology" is not understood as the Commission interpreted it. The value of updated data to calculate achieved results, however, cannot be overstated. A methodology with stale data inputs will not fairly calculate the avoided costs on the basis of which periodic rate adjustments for the performance-incentive component of a DSIM are allowed.[13]

         Finally, Ameren argues that the Commission's interpretation of "methodology" is inconsistent with the use of the same term in another MEEIA rule. That rule defines a DSIM's utility-incentive component as "the methodology approved by the commission in a utility's filing for demand-side program approval to allow the utility to receive a portion of annual net shared benefits achieved and documented through EM&V reports." 4 C.S.R. § 240-20.093(1)(EE). According to Ameren, "methodology" as used here could not include 2014 updated data because this data did not exist when the program was approved. Because the term "methodology" as used in this section does not refer to the calculation of avoided costs, as it does in the contested rule, we do not believe that the Commission's "methodology" interpretation that includes data sets for purposes of making a performance-incentive calculation presents any inconsistency or is unreasonable. Point one is denied.

         2. Consideration of Certain Factors

         Ameren next contends that the Commission's order was unreasonable because it arbitrarily and capriciously failed to carefully consider certain important factors. It argues that the rules require a utility to submit a significant amount of information when seeking demand-side program approval. Part of that information is an estimate of "the impact of the DSIM on customer rates over the next five years, " which estimate is derived from comparing the utility's revenue requirements with and without the proposed DSIM. A "significant part" of the "with the proposed DSIM" revenue-requirement analysis, according to Ameren, depends on "the net benefits to be realized from the plan, which in turn depend heavily on the avoided costs estimates used in the plan filing." Because the Commission approves a MEEIA plan "at a given point in time, " its decision is based on information then available, i.e., the avoided cost estimates calculated in 2012. In its view, the Commission cannot "'de-approve' a plan two or three years later if the avoided cost estimates developed for a later IRP go down as compared to the estimates that underlie the MEEIA filing, any more than does the Commission 're-affirm' the MEEIA plan as being even better if avoided cost estimates go up." Thus, Ameren argues,

[I]t simply makes no sense to evaluate the level of the incentive the utility is to receive arising from the energy savings that its approved demand-side programs are determined to have achieved, by using a totally different set of avoided cost estimates than was used when the utility and the Commission effectively decided, collectively, that the utility should pursue the energy efficiency programs.

         Arguing from the premise that the Commission approved a plan that did not require it to update avoided costs for purposes of calculating its performance incentive, Ameren contends that the order reached an unjust result in ignoring these considerations.

         Even if we had not already determined that the modified plan required updated avoided costs to be used in calculating the utility's performance incentive, we do not believe that requiring it to use updated avoided costs constitutes a failure to consider important factors. A performance-incentive award, by its nature, would require that the original projections and estimates in an approved plan be updated to make rate adjustments that are based on more accurate estimates of costs expended or avoided in light of actual conditions over the course of the program. The Commission has not "de-approved" or "re-affirmed" Ameren's modified plan. It has applied its rule consistently with the statute which requires "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." § 393.1075.3(2). Where customers' savings are less because energy costs have declined, their incentives to use energy more efficiently evaporate if their bills are higher because the net-shared benefit is based on higher energy prices estimated at the program's inception, which price estimates have not proved accurate. This point is denied.

         3. Commission Rationale

         In the third point, Ameren argues that the Commission's rationales do not support its definition of the term "methodology." First, it contends that "whatever avoided cost estimates are used at whatever point in time they are used will not produce a determination of 'actual savings, '" thus no one will know what was "actually saved." This is so, because "no one knew (or knows) what those costs will actually be over the upcoming 20-year period, during which energy efficiency measures installed in 2014 will continue to 'live.'" Ameren claims that it makes no sense for the Commission to have connected the utility incentive to actual savings. We disagree.

         MEEIA mandates, as a matter of policy, that demand-side programs "[p]rovide timely earnings opportunities associated with cost-effective measurable and verifiable efficiency savings." § 393.1075.3(3). By requiring that a utility with an approved DSIM use updated avoided-cost data as part of its utility-incentive award calculation, the Commission ensures that shareholders receive "timely" earnings linked to "measurable and verifiable efficiency savings." According to Ameren's senior manager of corporate analysis, avoided costs "are based upon national and sometimes international market information for items such as gas, coal, electric energy and capacity, capital markets, and economic drivers." They include estimates of avoided energy, capacity, and transmission ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.