20030310_405.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:MARCH 5, 2003
RE:CASE NO. PAC-03-3 (PacifiCorp)
SCHEDULE 72-IRRIGATION LOAD CONTROL CREDIT RIDER
On January 31 , 2003 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with the Commission requesting approval of a proposed amended
electric service Schedule 72 - Irrigation Load Control Credit Rider program.PacifiCorp
contends that its filing complies with the Company s commitment to irrigators and Commission
Order No. 29034 wherein the Company agreed to work with irrigators to develop an optional
load control program beginning with the 2003 irrigation season. Under the proposed tariff
schedule, customers opting to participate in the program will receive credits during the irrigation
season for the Company s ability to interrupt a designated amount of the customer s load. The
Company will determine the value of the credits each year and advise customers of those values.
Schedule 72-Program Description
The Schedule 72 program is an optional tariff allowing customers to participate in
prescheduled controlled service interruptions in exchange for a Load Control Service Credit
(LCSC). The tariff is available to qualifying customers served on Schedule 10. Prior to
participation, and in order to qualify under the schedule, customers must execute a Load Control
Service Agreement with the Company. The Rider is applicable only during the irrigation season
from June 1 to September 15 each year.
Commencing in 2004 the Company will determine the fixed monthly participation
credit and the kWh credit and shall provide notification of the LCSC to Schedule 10 customers
DECISION MEMORANDUM
by January 15 of each calendar year. In 2003, notification of the LCSC shall occur no later than
February 28.
Customers desiring to participate in the load control program for the upcoming
irrigation season shall submit Intent to Participate notification to the Company by February 15 of
each calendar year commencing in 2004. In 2003 , customers shall submit Intent to Participate
notification to the Company by March 14. Customers failing to execute a Load Control Service
Agreement after submitting Intent to Participate notification will be ineligible to participate in
the program the following year.
The Company will provide the participating customers the scheduled hours for load
control during the irrigation season by March 1 of each calendar year commencing in 2004.
2003, the Company will provide participating customers the scheduled hours for load control
during the irrigation season by March 31. Subj ect to limitations, the Company reserves the right
to establish at its sole discretion the scheduled load control hours for each participating customer
based on what the Company deems most beneficial to its operations.
On February 13 , 2003, the Commission issued Notices of Application and Modified
Procedure in Case No. PAC-03-3. The deadline for filing written comments or protests was
Thursday, March 6, 2003. Timely comments were filed by Commission Staff, the Idaho
Irrigation Pumpers Association and a number of the Company s customers. The comments filed
can be summarized as follows:
Commission Staff
Staff recommends that the Commission approve the irrigation load control program
with changes recommended by Staff for 2003. Staff proposes, with Company agreement, to tie
the trigger dates for the 2003 program to the date the final Order is issued. As proposed
notification of the LCSC will occur ten days following the issuance of final Order, customer
Intent to Participate within 31 days, notification of load control schedule within 46 days and
Load Control Service Agreement will be executed within 67 days of the Commission s final
Order.
Staff and Company have additionally agreed to the following changes, clarifications
and additions to Schedule 72 language:
DECISION MEMORANDUM
The Load Control Service Agreement will include typical costs that the
customer may incur for early termination.
Early termination costs will not include costs for replacement power.
The Company will delete the language from Special Condition No.
Metering, which states "Participation is subject to meter availability.
The following language will be added to Special Condition No.
PacifiCorp reserves the right to determine if the participating customer is
in violation of Special Condition 5, Load Shifting. Violation of Special
Condition No.5 shall result in Early Termination under the terms of
Special Condition No., forfeiture of the Load Control Service Credit for
the current month, and removal from the program for the remainder of the
Irrigation Season.
The following additional Special Condition will be added. "9. Free Riders
Customers may not participate in this program with accounts and meters
that would not have used power during the Irrigation Season irrespective
of participation in the program. PacifiCorp reserves the right to determine
if the participating customer is in violation of Special Condition 9, Free
Riders. Violation of Special Condition No.shall result in Early
Termination under terms of Special Condition No., forfeiture of the Load
Control Service Credit for the current month, and removal from the
program for the remainder ofthe Irrigation Season.
Staff points out that the Load Control Service Agreement (LCSA) requested from the
Company, is, at the time of this filing, still being developed and cannot be reviewed except for
the representations that the Company has made concerning what it will contain. With these
changes Staff is satisfied with program design, terminology and the obligations of the parties.
In response to Staff production request, PacifiCorp states that it intends to offer the
following load control credits for 2003. Each month has a monthly participation credit and a kW
hour credit. The kW hour credit is $0.000 for all months and the monthly participation credit
varies from $0.98 to $2.25 per kW-month. Reference Company Response, Staff Production
Request 1.1. PacifiCorp' s response to Staff s production request 1.2 describes the method used
to determine the credit. The Company s proposal, Staff states, is to credit the customers who
agree to be interrupted with 80% of the difference in the value of the energy at market and the
value of the energy that would otherwise be sold to the Irrigators at Schedule 10 irrigation rates.
The Company s proposed design of the credit rates is to "first, offset the Schedule 10 demand
DECISION MEMORANDUM
charge with a credit, then, if credit remains after the demand charge is completely offset, offset
Schedule 10 energy rates with the remaining credit. The design of the 2003 monthly credits
produced offsets to the irrigation demand charges but was not large enough in any month to
completely offset the demand charge and produce an energy credit.
Staff is concerned with the method employed by the Company in determining the
dollar amount of the credit. The method deducts what amounts to "lost revenue" from the
market value of the interrupted energy in determining the dollar amount of the credit. Staff notes
that the Commission in recent Orders has not accepted lost revenue as a legitimate allowable cost
that can be recovered from ratepayers. Therefore, Staff proposes that the Company s method be
adjusted to exclude lost revenue considerations. The dollar amount of the credit would then
become 80% of the market value of the interrupted energy. The exclusion of lost revenues from
the credit calculation, Staff contends, results in much higher Schedule 72 credits which should
encourage additional irrigator participation.
Staff recommends that at the end of the Schedule 72 program in 2003, the Company
prepare a detailed report on the program and file it with the Commission. The filing should be
made no later than December 1 , 2003 and should contain the number of irrigation customers who
1) were eligible to participate in the program, 2) filed a letter of intent to participate, 3) entered
into a load control service agreement, 4) participated in the program for the full three and one-
half months and 5) those not eligible to participate next year. The report should also include the
total dollar amount of credits provided under the program identified by month. The filing should
further include any proposed changes or recommendations to improve the program.Staff
recommends that the Company s report filing be noticed and that comments be solicited prior to
any reauthorization of the program for 2004.
Idaho Irrigation Pumpers Association
The Irrigators support implementation of the optional load control program but
contend that additional information is needed for irrigators to make a reasoned decision to
participate.
The Irrigators contend that the methodology for determining the load control service
credit has not been flushed out by the Company such that a determination can be made as to how
DECISION MEMORANDUM
the LCSC is determined. As a result, the Irrigators contend that the filing does not give
sufficient information to determine if PacifiCorp is offsetting the interruption savings with its
projected lost revenue as a result of the interruption. It also does not indicate whether the LCSC
is determined solely on the cost of avoided market power purchases or the cost of avoided supply
side resources, or some combination of both. The filing, the Irrigators note, also provides
PacifiCorp with the discretion to arbitrarily set the separate components of the LCSC, e., the
participation portion and the kilowatt-hour portion at zero for any given year. This makes it very
hard, the Irrigators contend, for an irrigator to determine what the long-term benefit would be for
participating in the program, especially if the irrigator has to initially invest in acquiring the
necessary load control devices. The Irrigators recommend (1) that some base participation credit
be set under the program such that irrigators could better quantify the minimum benefits of
participating in the program from year to year and (2) that further information be provided as to
how the value of the interruptibility credit is determined so that the Irrigators can consider the
method and provide further comment.
Another concern, identified by the Irrigators is that there is no information provided
by PacifiCorp as to what the terms and conditions of the Load Control Service Agreement will
be. This, they contend, needs to be reviewed by the Commission and interested parties to ensure
that said Agreement is understandable and fair to all the parties. The Company, further needs to
clarify, the Irrigators contend, whether it is requiring new load control devices, and if so, why
such devices are considered necessary for the operation of the program.
Finally, the Irrigators believe that a review of the actual benefits of the load control
program should be conducted annually. This, they contend, will allow the interested parties to
assess participation from the irrigators and quantify the benefit to PacifiCorp and its customers.
Thus, the Irrigators would recommend that an annual review provision be included in the
program.
COMMISSION DECISION
PacifiCorp has submitted a proposed Schedule 72 Irrigation Load Control Credit
Rider Program. Staff in its comments provides clarification regarding the Company s program
and recommends that the credit exclude any recovery for projected lost revenue.Staff
anticipates that the Company will file reply comments regarding Staff s proposal to eliminate
DECISION MEMORANDUM
lost revenue" from the credit calculation. Staff recommends that the program with proposed
modification be approved for 2003 , that the Company file a report at the end of the year and that
further comment be solicited prior to any re-authorization for the year 2004. The Irrigators
contend that the filing raises questions, that the program needs to be fleshed out and that further
information is required. The Irrigators suggest in a conversation with Staff s attorney that it may
be helpful to continue this matter until further information is provided by the Company. The
Irrigators in their filed comments recommend that a base participation credit be established and
that the program be annually reviewed. Does the Commission believe that further information is
required prior to program approval? Does the Commission agree with Staffs proposal? If not
how does the Commission wish to proceed?
Scott Woodbury
Vld/M:PACEO303
DECISION MEMORANDUM