2001517_jh.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
TONYA CLARK
DON HOWELL
RANDY LOBB
DAVE SCHUNKE
KEITH HESSING
TERRI CARLOCK
BEV BARKER
GENE FADNESS
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: MAY 17, 2001

RE: PETITIONS FOR CLARIFICATION REGARDING IDAHO POWER COMPANY’S IRRIGATION BUY-BACK PROGRAM. CASE NO. IPC-E-01-3.

On May 11, 2001, Idaho Power irrigation customers Armand M. Eckert and Mike Larson (“Petitioners”) filed Petitions for Clarification of the Commission’s Interlocutory Order issued in Case No. IPC-E-01-3. See Order No. 28676. The Petitioners are participants in Idaho Power Company’s Irrigation Buy-Back Program and request that the Commission resolve certain issues prior to the issuance of a final order in this case. Idaho Power Company filed a response to these Petitions on May 16, 2001.
IDAHO POWER COMPANY’S IRRIGATION BUY BACK PROGRAM
Idaho Power has developed and implemented the Irrigation Buy-Back Program as a way to cost-effectively reduce its total purchase power expense during 2001. Specifically, Idaho Power has encouraged irrigation customers to reduce their energy consumption during this growing season, defined as March 1, 2001 through November 30, 2001, in exchange for compensation from the Company. Application at 2; Brilz, Tr. at p. 13. Through a bidding process approved by the Commission, see Order No. 28647, Idaho Power solicited bids from certain irrigation customers, taking service under Tariff Schedule 24, by sending them a Request for Proposals (“RFP”). Brilz, Tr. at p. 14. The RFP explained the specific requirements and commitments that the Company required the bidding irrigation customer meet in order to participate in the Program. See generally RFP.
The RFP also contains provisions regarding how monthly payments will be made to participating customers. To measure energy reductions upon which payments will be based the RFP states:
Energy reductions will be measured by comparing the average kWh consumption at each metered service point during the immediately preceding five years (“Base Energy Consumption Amount” or “BECA”) with the amount of annual electric energy consumption that the Bidder actually consumed at the metered service points during the 2001 growing season. The difference between the Base Energy Consumption Amount and the actual amount of annual energy consumption during the 2001 growing season will be the amount of energy reduction to be compared to the OER [the amount of kWh an irrigator bid into the Program](“Actual Energy Consumption Amount”).

RFP at pp. 5-6, § 3.4. The RFP also states that, “[t]he Bidder’s Offered Energy Reduction will be converted into calendar month equivalents based on the proportionate share of each calendar month’s contribution to the total Base Energy Consumption Amount.” RFP at p. 6, § 3.6. The Company will then use this proportional monthly amount as the basis for payment for each month as the RFP explains:
The basis for the payment to Bidders will be the difference between the annual Base Consumption Amount and the annual Actual Energy Consumption Amount. Idaho Power will pay Bidder monthly for the portion of the Offered Energy Reduction actually provided during that month. For each month in which Bidder actually reduces its energy consumption from the monthly Base Energy Consumption Amount by at least 95% of the OER for the equivalent calendar month, Idaho Power will multiply the reduction amount by the accepted offer price and pay Bidder 75% of that amount. The remaining 25% balance will be retained by Idaho Power and paid to Bidder prior to November 30, 2001, after confirmation that the Bidder has delivered the full Offered Energy Reduction and has otherwise fully performed the Agreement between Idaho Power and the Bidder. Idaho Power will deduct from any payment to Bidder any balance owing to Idaho Power which is in arrears.

RFP at p. 9, § 4.2.
Initially the Company did not address whether it would pay interest on the 25% balance to be retained by it until the end of the season. Idaho Power also did not address whether it would pay interest on amounts carried to the end of the Program as a result of a customer failing to save 95% of the proportional monthly amount of kWh bid into the Program. The Commission in Order No. 28676 required the Company to pay interest at a rate of 6% on the 25% of the monthly payments to be held back until the Program ends in November, Order No. 28676 at 3, but did not address whether the Company should pay interest on amounts carried to the end of the Program because of the failure of a customer to save 95% of the proportional monthly amount that was bid into the Program.
THE PETITIONS
The Petitioners first seek clarification on how Idaho Power will calculate and make monthly payments to participating irrigation customers. Petitioners contend they should be paid monthly for any actual energy reductions they are able to produce. However, after discussions with the Company they contend that if they do not save 95% of the proportional monthly amount of their total Offered Energy Reduction for any given month they will not receive payment for that month until the Program conclusion. Furthermore, Petitioners allege that the Company would carry that balance owed to the customer until the end of the Program without the accrual of interest. Petitioners request that the Commission either clarify or amend its Order to require the Company to pay participating customers 75% of the total amount owed for energy reductions “monthly for the portion of the Offered Energy Reduction actually provided during that month,” as stated in § 4.2 of the RFP rather than requiring them to save 95% of the proportional monthly amount before receiving a payment. Petitioners also request that if the Commission does not find in their favor on this issue that it at least should require the Company to pay interest on any balance not paid to a customer for failure to hit the 95% monthly energy reduction mark.
Petitioners also contend that there will be almost a 60-day lag from the time their meters are read until they receive monthly payments. Accordingly, Petitioners contend that they would not be paid for power savings they produced in April until July. Petitioners argue this delay is unreasonable when compared to the Company’s ability to bill its customers within five days of reading meters. Therefore, the Petitioners request that the Commission order Idaho Power to make monthly payments to irrigators within five days after the immediate billing cycle to which the payment is due.
IDAHO POWER COMPANY RESPONSE
First, the Company contends that as stated in the RFP, “as long as the customer reduces energy consumption by at least 95% of the Offered Energy Reduction for the equivalent calendar month, a payment will be made.” The Company states that it devised this payment method recognizing that not all customers would provide energy reductions on a uniform monthly basis. However, the Company specifically designed this payment methodology in this fashion to insure that participating customers provide their total Offered Energy Reduction and are not overpaid for failure to reach that mark.
Second, the Company addresses the timing of payments. Idaho Power states that monthly payments will be made around the first of each month after the last billing cycle for the previous month, thus, payments will be made around the first of June after the last billing cycle for May has been processed. The Company states that participating customers who are in early cycles of the billing process may have to wait 35 to 40 days after their billing to receive payment. However, those late in the cycle will wait a much shorter period to receive their payments from the Company. The Company also contends that approximately 10% of its customers participating in this Program have metered service points which are billed in different cycles, thus the calculation of the actual energy reduction and amount of payment per month cannot be made for these customers until all 21 cycles have been billed. Finally, the Company alleges that only 150 customers have historical usage for these months and will be eligible to receive a payment. Accordingly, the Company contends that because this Program is a temporary, one-year program, creating an elaborate computer system that can accommodate daily or semi-monthly payment processing would be unreasonably costly. Thus, the Company requests that the Commission deny the Petitioners, Petition for Clarification on this point and allow it to continue to process payments on a monthly basis as this will help to minimize costs associated with the Program.
The Company also contends that interest should not be paid on amounts retained by it for failure of its customers to save 95% of the proportional monthly amount of the total Offered Energy Reduction as they have not complied with the RFP and it would not be consistent with Commission Order No. 28676.
STAFF RECOMMENDATION
Staff believes that despite the alleged contradictory language in § 4.2 of the RFP the third sentence in that section, the more specific should control. Specifically, “[f]or each month in which Bidder actually reduces its energy consumption from the monthly Base Energy Consumption Amount by at least 95% of the OER for the equivalent calendar month, Idaho Power will multiply the reduction amount by the accepted offer price and pay Bidder 75% of that amount.” Staff believes this sentence clearly delineates the method by which the Company would make monthly payments. Furthermore, until now no party, person or customer questioned this provision. Accordingly Staff recommends denying this portion of the Petitioner’s request. Furthermore, Staff does not believe that interest should be paid on monthly amounts not paid to irrigators and carried by the Company until the end of the Program because they did not hit the 95% monthly savings mark.
Staff also recommends that the Commission direct the Company to make monthly payments to participating customers who have hit their 95% savings mark for a given month as quickly as possible under the system they are operating.

COMMISSION DECISION:
Does the Commission wish to clarify or amend its Interlocutory Order No. 28676 as stated above?

John R. Hammond

Staff: Keith Hessing

M:ipce013_jh5
The RFP was sent to irrigators on this tariff schedule who according to Company records, had historically consumed enough energy to be able to offer at least a 100,000 kWh reduction for the 2001 growing season. Application at 3; Brilz at p. 13.
Because of the volume of date associated with the Program and the need to create a new system for tracking monthly usage and computing payment amounts the first payments may be delayed a bit longer.

DECISION MEMORANDUM 5