20030310_404.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:MARCH 6, 2003
RE:IN THE MATTER OF IDAHO POWER'S APPLICATION FOR AUTHROITY
TO IMPLEMENT A RESIDENTIAL AIR CONDITIONER CYCLING PILOT
PROGRAM AND TARIFF SCHEDULE 81. CASE NO. IPC-02-13.
On December 2002 Idaho Power Company filed an Application seeking authority
to institute a Residential Air Conditioner Cycling Pilot Program (AC Pilot Program or Program)
and implement proposed Tariff Schedule 81. In Idaho Power s 2002 Integrated Resource Plan
(IRP), the Company identified peak resource deficiencies facing its system in upcoming years.
To address those deficiencies, Idaho Power s IRP suggested targeting demand-side measures that
reduce peak-hour demand. The voluntary Program would enable Idaho Power to begin testing
summer peak load reduction by directly controlling residential air conditioning load. This could
potentially decrease Idaho Power s overall energy costs, which would in turn result in savings
for all customers.
THE PROGRAM
In exchange for an intelligent programmable thermostat installed in their homes and a
$5 monthly monetary incentive, participating customers would voluntarily permit the Company
to cycle their central air conditioners. Idaho Power would cycle the air conditioners no more
than four hours per day between the hours of 1:00 m. and 9:00 m. for no more than 10
weekdays per month in June, July and August. Limited to 500 Boise and Meridian homeowners
the two-year Program would begin in the spring 2003 and expire on September 30, 2004.
Each participant would be allowed to temporarily "opt out" of the Program for one
day each month after providing Idaho Power with notification by 4:00 m. the preceding day.
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If a customer notifies the Company that he/she wishes to cease participating in the Program
altogether before completing an entire Air Conditioning Season (June, July, August), the
customer may terminate participation and either return the thermostat in working condition to the
Company within a certain period of time or be charged $100 for the thermostat. There would be
no penalty for terminating participation if a customer satisfactorily took part in a minimum of
one complete Air Conditioning Season.
The Application indicated that the Energy Efficiency Advisory Group ("EEAG") has
concurred with the Company s proposal to use Energy Efficiency Rider funds, collected under
Idaho Power Schedule 91 , to finance the AC Cycling Pilot Program. The cost of the Program
would be approximately $410 000 per year for each of the two Program years. Although the AC
Cycling Pilot Program may result in reduced revenues for Idaho Power, the Company
Application indicated that it would not request recovery of the reduced revenue.
The Application indicated that other electricity providers have reported load
reductions of approximately two-kilowatts per household with similar air conditioner cycling
programs. Because half of the participant houses will be cycled at anyone time, this number
would translate into one-kilowatt load reduction per participant. Idaho Power stated that it hopes
to achieve a 200-kilowatt load reduction per cycling episode the first year and a 500-kilowatt
load reduction the second year with full participation.
According to the Company, the goal of the AC Cycling Pilot Program is to assess the
effectiveness of air conditioning thermostat control in reducing peak load. Idaho Power would
also assess customer participation, volunteerism, satisfaction and retention. Furthermore, Idaho
Power would gain operating experience in management of the Program itself, test the chosen
equipment, and evaluate different marketing strategies. Idaho Power s Application stated that
the Company will include the results of the AC Cycling Program in the annual report to the
Commission detailing the EEAG's activities. This report will include the Company s response
to EEAG recommendations, the associated Program costs, the DSM accounting numbers and
customer response data.
PUBLIC COMMENTS
The Commission received five comments from Idaho Power ratepayers regarding the
Company s Application. A Meridian resident noted that he participated in a similar program in
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North Carolina and found the equipment to be "almost unnoticeable." Moreover, the monthly
credit was "worth whatever inconvenience the irregularity of air conditioning may have caused.
The other four public comments opposed approval of the AC Pilot Program. One
commentor did not believe Idaho Power should be allowed to regulate residential air
conditioning because "the government already controls enough of our lives." She also stated that
a $5 monthly incentive is not enough to warrant the "discomfort and foul moods" of those living
in participating households. A second Meridian resident thought the proposal was "a horrific
idea" and threatened to install a generator rather than continue as an Idaho Power customer if the
pilot was implemented system wide.
A commentor from Boise argued that the proposed AC Pilot Program proposal is
unnecessary and expensive given that models can effectively predict the success of the proposed
direct load control program for a small fraction of the cost of an actual pilot program. This
commentor also indicated that the monetary incentive should be based on unit tonnage to
recognize the relative contribution of different sized units to load reduction.
Finally, an Idaho Power ratepayer from Kuna was concerned that the Program might
extend beyond two years without Commission approval, lack independent oversight over the
customer selection process, and be unduly expensive. This commentor also noted that the
proposal was unclear about a number of topics, including how the Program s effectiveness would
be assessed and Company access to participants' homes.
NW ENERGY COALITION et at. COMMENTS
The NW Energy Coalition, Idaho Rivers United, and Advocates for the West
(referred to collectively as the "NW Energy Coalition ) questioned the need for an AC Pilot
Program given that AC cycling programs have been implemented around the country for
decades.However, the NW Energy Coalition largely supported the Company s proposed
Program as a more simple, direct and manageable approach to load management than time-of-
use metering. However, they requested two modifications to Idaho Power s proposed Program.
First, the NW Energy Coalition requested the Commission increase the financial
incentive offered to customers.While recognizing that a higher incentive may marginally
decrease the Program s cost-effectiveness, it also will result in broader Program appeal. Of the
proposed $410 000 annual Program budget, only 000 would be spent on financial incentives
to customers in the first year and 500 in the second year, assuming the Program
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implemented as proposed. An incentive of $8 to $10 would only marginally increase Program
costs, but would undoubtedly result in a more enthusiastic customer response.
The NW Energy Coalition also requested the Program be expanded to seek
participation of 500 customers in year one, and an additional 000 customers by the end of the
second year. This approach will increase Program costs, but broader participation will likely
increase cost-effectiveness, result in greater peak shaving, and thus create financial benefits for
all Idaho Power customers. The NW Energy Coalition also noted that Idaho Power has not fully
allocated funds available under the Company s DSM tariff rider, and thus an expanded Program
should fall within the Company s DSM budget.
STAFF COMMENTS
Staff generally supported the Company s Application as a method to achieve peak-
hour demand reductions. In short, Staff recommended approval of the Company s Application
with Program modifications that include utilizing all three AC cycling options, two control
groups, and an AC maintenance control group.According to Staff, this would provide a full
spectrum of data and allow the Company and the Commission to determine which AC Program
variation is the most energy efficient and acceptable to customers.
Evaluate All Options Staff believes that all three options listed in the
Company s proposed tariff (i., cycling the AC unit for a specified length of time, cycling
the AC unit until specified temperature change is attained, and changing the temperature set
point) should be tested and evaluated. If the Company believes it can implement and
evaluate only one of those options, Staff identified the thermostat adjustment is the best
single option because the other options may result in temperatures that are too hot for some
participants.
Effects on Compressor Life Staff was concerned about the possible detrimental
effect of cycling air conditioners on the life of the AC compressor. While Staff believes the
potential incremental effects from the Program may be small due to the limited hours of cycling
proposed, Staff cannot dismiss the likelihood that some of Idaho Power s proposed Program
options will accelerate wear on air conditioners - especially AC units that are sized correctly,
, sized to run at optimum efficiency rather than sized to compensate for inadequate building
envelopes and/or poor ductwork. Staff believes the option of adjusting the thermostat'
temperature set point will not have this effect because it will not cause compressors to cycle
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more frequently. Thus, Staff believes it would be prudent for Idaho Power to advise its Program
participants of DOE's findings regarding the detrimental effects of frequent cycling on
compressor longevity and efficiency, and the reasons why the Company does not believe that
this should cause concern.
Evaluate Effects of Advanced Thermostat:Staff is also concerned that the
Company does not intend to evaluate the thermostats' effects on either energy consumption or
demand, instead focusing only on the effects of the AC cycling. If so, the Company would miss
an opportunity to evaluate the effects of such thermostats and be unable to isolate the effects of
the thermostats from the AC cycling effects. Staff believes that assessing the effects of the
programmable thermostats is important and could be achieved through the analysis of the load
profiles of customers in a control group.
Need for Pilot Prot!ram Staff agreed that the climate, housing, topographic and
demographic characteristics in Idaho Power s service area combined with its relatively low
electricity rates warrant a pilot program. However, Staff was concerned that Idaho Power does
not plan to include a control group in its evaluation, instead evaluating Program effectiveness by
comparing average load profiles of the participants on cycling days with the average load
profiles of the participants on similar non-cycling days. Staff noted that days with similar
cooling degree-days are not necessarily similar in other important ways, such as cloud cover
humidity, wind speed and direction, hours of daylight and solar angle and intensity. A control
group would help explain the variability between so-called similar days and determine the extent
to which the volunteers' electricity usage is influenced by the fact that they are part of a test.
Additional Air Conditionint! Prot!ram Options Staff stated that monitoring the
energy use of two control groups, one with the advanced thermostats and one without, would
provide valuable data necessary to evaluate the success of this Program. Programs that promote
the proper sizing, installation, and maintenance of air conditioners and ducts could also reduce
summer peak and overall energy use. Staff also suggested that the Company and its EEAG
consider a program that promotes the use of evaporative coolers, which cost half as much and
use one quarter the energy required by air conditioners.
Importance of Reportint!Although information gathering is the primary goal of a
pilot Program, Staff noted that it has still not received a full report for the Company s 1999 Idaho
City automated meter reading trial. Absent a report containing detailed evaluation of the effects
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of the proposed AC cycling options and a comparison to appropriate control groups, the
Commission may have difficulty finding that the costs of this AC Pilot Program were prudently
incurred given that the program did not meet its informational objectives.
Costs of Customer Incentives and Prot!ram Promotion and Recruitment The
Company s estimated $810 220 budget for this 2-year AC Pilot Program contains $200 000 for
promotion and an additional, unspecified amount for recruitment, but allocates only $10 500 for
customer incentives. Staff believes that tripling of the budget for customer incentives (i., $15
per month instead of $5 per month) would reduce the budget requirements for recruitment and
promotion to a more reasonable level. If the Company were to spend an additional $21 000
incentives to make the Program more attractive to customers, it would likely save a couple
hundred thousand dollars on promotion and recruitment. Some of the savings from reduced
promotion and recruitment costs could be spent on monitoring control groups and more
comprehensive Program evaluation.
IDAHO POWER REPLY COMMENTS
Idaho Power submitted reply comments to address assertions made by Staff and the
NW Energy Coalition in reference to the Residential Air Conditioner Cycling Pilot Program. As
a point of clarification, the Company noted that although Staff referred to the meters used in the
Program as time-of-use meters, the Company proposes to use a mass memory meter capable of
recording and storing interval load data and monthly kilowatt-hour data for billing purposes.
Proposed Cvclint! Options Idaho Power recently selected a vendor to provide
thermostats and provide support for this Program. The vendor s representatives recommend that
because ofldaho s hot dry climate, the cycling option that is likely to be the most successful for
Idaho Power would be a 50 percent cycling routine (cycling for a specified length of time on a
percentage basis). This routine would turn off a customer s AC compressor 15 minutes out of
every 30 minutes during a cycling event.
The thermostat purveyors and other utilities report that the temperature set point
routine is a less effective cycling routine for reducing peak load over a set period of hours.
Under this cycling routine, the load is immediately reduced, but electrical load reduction
gradually decreases as the cycling event progresses. Idaho Power does not discount this option
given the need to balance customer comfort and load reduction. However, the Company argued
that it should not be limited to exploring strategies that have been shown to be less optimal
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elsewhere or to ignore new system capabilities that have the potential to increase load reduction
and/or improve participant comfort.
Effects on AC Compressor Life Contrary to Staff s contentions, the Company
stated that does not dismiss the concern that frequent cycling will have detrimental effect on AC
compressor life. Instead, the Company drew different conclusions from the DOE "Energy-
Efficient Air Conditioning" report and other evidence the Company gathered concerning
premature wear on AC compressors. The Company pointed out that the emphasis of the DOE
report was on the sizing of AC units and did not address load control cycling. In fact, the report
affirmed that if a customer s AC compressor is oversized, it will "over cycle" whether the
customer is a participant in this Pilot Program or not. Thus, load control cycling will not be
detrimental, but over sizing would be. If a 50 percent cycling routine is used, the AC compressor
will turn off only twice per hour. This operation is well within the industry guidelines.
Although Staff suggested Idaho Power provide each Program participant with a copy
the DOE Energy Efficient Air Conditioning report and ARI Guideline A, Idaho Power believes
this would imply that the Company has concerns with the proposed Program when, in fact, it has
no such concerns. Idaho Power stated that it would not choose to implement this Program if the
Company believed the Program could cause damage to a customer s air conditioner compressor.
The Company noted that other utilities operating air conditioner cycling programs in the United
States report that damage to air conditioning units has not been a problem, despite the fact that
these programs have been in operation for over 20 years.
The Company also disagreed with Staff s assertion that "the option of adjusting the
thermostat's temperature set-point will not have this effect because it will not cause compressors
to cycle more frequently." At a 50 percent cycle, a customer s AC compressor will be turned off
twice an hour, which is within normal industry standards. By changing the temperature set point
the Company has no idea how many cycling events would occur.
uncertainty to the Program.
This would only add
Evaluate Effects of Prot!rammable Thermostats The Company emphasized that
the primary goal of this AC Pilot Program is to reduce summer peak loads by cycling residential
customers' AC compressors - not evaluate the effects of programmable thermostats on either
energy consumption or average demand. When the Company stated that these thermostats "may
reduce overall energy use" it was identifying a possible secondary potential benefit of the
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Program. Some of the energy savIngs participants may obtain from these sophisticated
thermostats may be attributed to potential reduced heating costs in the winter months in the form
of reduced use of fuels other than electricity which the Company has no ability or desire to
monitor.
Reportint! and Sut!t!ested Prot!ram Modifications The Company agreed with
Staff that information gathering is the primary goal of a pilot program. However, the Company
believes that the information gathered analyzed and reported in a pilot program should be
directed at the viability of the pilot program s objectives and scope. Adding participants, testing
more and different Demand Side Management programs, or enlarging the scope of this pilot
could delay the deployment of this Program and analysis of the data collected. The Company
also believes that increasing Program incentives and adding multiple control groups would add
significant costs to the Program with little or no statistical or analytical benefits. The Company
argued that the additional analyses and reporting recommended by Staff are not related to the
goal of the Program, will not be beneficial to its overall evaluation, and will likely delay the
Program.
In its comments, Staff noted "it has still not received a full report for the Company
1999 Idaho City automated meter reading trial." The Company maintained that although it did
not have any reporting obligation on the Idaho City AMR trial, it nevertheless met with Staff in
March and April 1998 to demonstrate the system and access meter information. Idaho Power
believes that it has acted in good faith and has been forthcoming in all matters related to the 1999
Idaho City AMR trial.
COMMISSION DECISION
Does the Commission wish to approve Idaho Power s Application for authority to
implement a Residential Air Conditioner Cycling Pilot Program?
& '?
~b~
Lisa D. Nordstrom
M:IPCEO213 1n2
DECISION MEMORANDUM