20240418IIPA Comments.pdf

RLC EMD
Thursday,Apri118,2024 3:35:35 PM
IDAHOPUEIC
Eric L. Olsen(ISB#4811) LTIIITHSC01VMS40N
ECHO HAWK& OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6119
Pocatello, Idaho 83205
Telephone: [phone]
Facsimile: [phone]
Email: elo a,echohawk.com
Attorney for Intervenor Idaho Irrigation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION CASE NO. PAC-E-24-02
OF ROCKY MOUNTAIN POWER
REQUESTING APPROVAL FOR COMMENTS OF IDAHO
ADJUSTMENTS TO THE IRRIGATION IRRIGATION PUMPERS
LOAD CONTROL PROGRAM ASSOCIATION,INC.
COMES NOW Idaho Irrigation Pumpers Association, Inc. ("IIPA") and pursuant to Order
No. 36128 provide comments in support of Rocky Mountain Power's ("RMP") Application for
Adjustments to the Irrigation Load Control Program, as follows:
INTRODUCTION
The IIPA has partnered with RMP for over last two decades to help improve its Irrigation
Load Control Program("Program"). Prior to the filing of its Application, RMP discussed with the
IIPA the proposed changes and gave suggestions on the same.
INCENTIVE STRUCTURE
The IIPA generally supports the new incentive structure. However, the IIPA is concerned
that the proposed escalation rate of 2.5 percent per year may not be sufficient to reflect annual
increases in RMP's avoided costs, the system benefits of the Program, or the opportunity costs to
irrigators from continuing to participate in the program.
The incentive structure should be designed to maximize the Program's total benefits.
Demand response programs can be thought of as an economic market where participants are selling
a service and the utility is purchasing a service, and the incentive is the market price. A well
established economic principal is that benefits are maximized when the price(incentive)is set such
that marginal costs equal marginal benefits.Participating in the expiring Program has been waning
because the program incentives were static.
RMP designed the new Program incentives to reflect the benefits of the Program, which
will maximize the overall Program benefits. However, under inflation, the benefits to RMP will
COMMENTS OF IDAHO IRRIGATION PUMPERS ASSOCIATION,INC.—Page 1
CASE NO.PAC-E-24-02

increase, suggesting that the Company should seek greater participation. Unfortunately, inflation
has the opposite impact on participation by irrigators in general.
As inflation increases the general price levels, the cost to irrigators to participate in the
Program increases. Higher crop prices increase the economic loss due to suboptimal crop growth
caused by irrigation curtailment.Higher fertilizer and seed cost will increase the risk to participants
should a curtailment cause crop failure. Higher wage costs will increase the cost to restart and
monitor irrigation systems after a curtailment event. This means that in times of inflation, irrigator
participation will decrease. In fact, current participation in the program is lower than optimal
precisely because incentives did not increase with benefits during the prior contract period.
Stagnant incentive prices have a secondary affect of cross subsidization. This is because,
as prices deviate from benefits, benefit shift from irrigators, who bear the costs of demand
response, to other non-participating customers. Thus failing to account for inflation will decrease
the total value of the program and unfairly shift the benefits of the program participating to non-
participating customers.
While under fixed prices, inflation will cause irrigator participation to decrease, escalating
incentives will help ensure continued participation. The proposed escalation rate of 2.5 percent is
a reasonable estimate of inflation over the next five years. The table below summarizes the
inflation rates implied by bond yields over the next 5 to 20 years.I
Yield
Maturity Treasury Implied
Period Bond TIPS Inflation
5 YR 4.69 2.17 2.52
7 YR 4.69 2.2 2.49
10 YR 4.67 2.24 2.43
20 YR 4.88 2.34 2.54
However, current and recent inflation has greatly exceeded the 2.5 percent forecast. The
March 2024 12 month increase in the Consumer Price Index was 3.5 percent.2 Given the risk that
actual inflation could greatly exceed the forecasted inflation rate, the IIPA recommends that the
incentive rates be updated annually proportionately to changes in the Consumer Price Index over
the prior 12 months.3 This formulaic update will minimize administrative burden while ensuring
that the incentive rate keeps pace with both costs and benefits.
1 https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-
statistics. A market forecast of inflation can be calculated as the difference between the yield on
treasury bonds and inflation protected treasury bonds. The current difference
2 https://www.bls.gov/cpi/.
3 The initial could should be timed to coincide with the Company's other annual update
filings.
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CASE NO.PAC-E-24-02

CONCLUSION
The IIPA supports RMP's overall changes to the Program. The IIPA believes that the
incentives under the Program need to have an appropriate escalator to ensure sufficient
participation over the contract term. Having the escalator tied to changes in the CPI would ensure
participation in the Program over this next contract term.
DATED this 18th day of April, 2024.
ECHO HAWK& OLSEN
ERIC L. OLSEN
COMMENTS OF IDAHO IRRIGATION PUMPERS ASSOCIATION,INC.—Page 3
CASE NO.PAC-E-24-02

CERTIFICATE OF SERVICE
I HEREBY CERTIFIY that on this 18th day of April, 2024, I served a true, correct and
complete copy of the Petition of Idaho Irrigation Pumpers Association, Inc. for Leave to Intervene
to each of the following, via U.S. Mail or private courier, email or hand delivery, as indicated
below:
Monica Barrios-Sanchez, Commission Secretary ❑ U.S. Mail
Idaho Public Utilities Commission ❑ Hand Delivered
P.O. Box 83720 ❑ Overnight Mail
Boise, ID 83720-0074 ❑ Telecopy (Fax)
jan.noriyuki(a�puc.idahogov ® Electronic Mail (Email)
Mark Alder ❑ U.S. Mail
Michael Snow ❑ Hand Delivered
Pacificorp ❑ Overnight Mail
1407 W. North Temple, Suite 330 ❑ Telecopy (Fax)
Salt Lake City, UT 84116 ® Electronic Mail (Email)
mark.aldergpacificorp.c om
michael.snow(&,pacificorp.com
Joseph Dallas ❑ U.S. Mail
Pacificorp ❑ Hand Delivered
825 NE Multnomah, Suite 2000 ❑ Overnight Mail
Portland, OR 97232 ❑ Telecopy (Fax)
joseph.dallasgpacificorp.com ® Electronic Mail (Email)
Data Request Response Center ❑ U.S. Mail
PacifiCorp ❑ Hand Delivered
825 NE Multnomah, Suite 2000 ❑ Overnight Mail
Portland, OR 97232 ❑ Telecopy (Fax)
datarequestgpacificorp.com ® Electronic Mail (Email)
ERIC L. OLSEN
COMMENTS OF IDAHO IRRIGATION PUMPERS ASSOCIATION,INC.—Page 4
CASE NO.PAC-E-24-02