28707.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR APPROVAL OF TARIFF SCHEDULE 22, AN ENERGY BUY BACK TEMPORARY PROGRAM FOR CUSTOMERS THAT CAN REDUCE ELECTRICAL LOADS BY AT LEAST 1,000 KW. )
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CASE NO. IPC-E-01-4

ORDER NO. 28707

On February 12, 2001, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission (Commission) for approval of Tariff Schedule 22, an Energy Buy-Back Temporary Program (Program) applicable to the Company’s industrial customers, large commercial customers, and any customer capable of reducing electrical load by 1000 kW.
Current projections of below normal stream flows in the Snake River and its tributaries, coupled with the volatile wholesale energy market in the western United States, have created a situation where the Company believes that it is cost effective to acquire reductions in consumption of electrical energy in order to avoid the purchase of high cost power from the wholesale market.
The proposed Program encourages customers to voluntarily reduce electric load in exchange for credit against the customer’s Idaho Power account for the curtailed energy. The goal will be to make this credit, called the Exchange Credit, economically beneficial to both the customer, the Company, and the Company’s other customers as well. Benefits to the Company and other customers will result from reduced system demand as well as reduced costs.
To obtain the Exchange Credit, a customer must choose to exchange electrical load during a period of time called an Exchange Event. An Exchange Event will typically be initiated during peak load hours when the Company anticipates high electricity costs. Customers will receive notice the day of, the day ahead, or two days ahead of the Exchange Event. Exchange Events will be for a minimum of two hours. The price for kilowatt hour that the Company offers the customer is called the Bid Price. The Bid Price will vary hour to hour and the customer may commit to load reductions for specific hours. The minimum time limit for an Exchange Event will be two consecutive hours for both the customer and the Company. There can be multiple Exchange Events in one day. Customer load reduction will be a voluntary decision by the customer for a set number of hours in exchange for an agreed upon monetary consideration that will vary hourly and between Exchange Events.
In order to participate, a customer must satisfy certain conditions. The customer may be required to demonstrate to the satisfaction of the Company that the customer is able to reduce its electrical load by at least 1000 kW. The customer must have a meter provided by the Company that is capable of recording interval usage data for intervals no greater than 60 minutes. Customers are required to pay for costs associated with any load monitoring and communications equipment necessary to participate in the Program. Other conditions are set forth in the Application and the Company’s tariff. A secured internet site will allow participating customers and the Company to communicate with one another.
The Energy Buy-Back Temporary Program will expire March 14, 2002, unless extended. This Program will not affect the calculation of Demand, Customer, Basic, or Facilities charges associated with a customer’s normal rate schedule. The Company will ask that each customer remain on this schedule for a minimum of one year or until the termination date, whichever is sooner. If a customer voluntarily terminates the agreement, the customer will be responsible for reimbursing the Company for setup costs associated with enrolling the customer in the Program.
Commencement of the Program is dependent upon Idaho Power being assured that it will be entitled to recover through retail sales the payments that the Company will make to the customers participating in the program and that the Company will also be entitled to recover through retail sales its lost revenues resulting from the implementation of the Program. The Company’s ultimate implementation of the Program is conditioned upon the receipt of an appropriate accounting and ratemaking Order which would authorize utilization of the Power Cost Adjustment (PCA) rate mechanism or similar type of mechanism to recover the Company’s costs.
Idaho Power requested that its tariff be effective March 14, 2001, and that its Application be processed pursuant to Modified Procedure, i.e., by written comment rather than by evidentiary hearing. The Company proposed effective date was suspended by the Commission in Order No. 28653 to March 30, 2000, and was stayed for a further indeterminate period by informal agreement with the Company.
On February 22, 2001, the Commission in Case No. IPC-E-01-4 issued Notices of Application and Modified Procedure. The deadline for filing written comments was March 14, 2001. Timely comments were filed by the Industrial Customers of Idaho Power (ICIP), the Land and Water Fund of the Rockies (LAW Fund), Astaris, LLC, Commission Staff and Jeffrey C. Brooks, one of the Company’s many customers. On March 30, 2001, Idaho Power filed a response to comments. The comments can be summarized as follows:
Idaho Customers of Idaho Power (ICIP)
The Idaho Customers of Idaho Power express approval of the Company’s creative efforts to reduce dependence on high cost wholesale markets and qualified approval of the Company’s Application. ICIP cautions that there are instances when buying down load may not be in the interest of the Company’s other customers, i.e., (1) when payment is made to achieve reductions in load that would occur for other reasons without payment or (2) when cost reductions are small, the load reduction is large and the resultant percentage increase to remaining customers is greater than realized savings. In its analysis of the Company’s proposal, ICIP makes the following comments and recommendations.
Non-symmetrical response to variances in actual load reduction.
ICIP proposes elimination of the penalty imposed for failure to achieve 85% of committed load reduction, recommending instead that the bid price in such instance be simply reduced by 50% for any load reduction actually realized. This it states, mirrors the cost for exceeding committed load by 115% and still encourages load reduction and full participation.
ICIP suggests also that potential cost recoveries by the Company (i.e., Schedule 22 customer pays tariff rates on actual power consumed; the Company in the PCA recovers market costs associated with serving unrealized load reduction) obviate the need to debit the difference between actual load reductions and committed load.
Load Reduction Impact on Demand Charges
The potential for reductions in customer billing demand caused by participation, ICIP contends, creates a disincentive to participate and is a violation of existing tariffs. The same, it states, is also true for calculation of the customer’s basic charge for basic load capacity. This fact, ICIP states, should be recognized in the customer’s bill.
Payment/Credit to Bill
Absent a compelling reason to do otherwise, ICIP contends that a customer’s bill should be credited in the same billing period in which it receives notification, not 45 days after notification.
Ratemaking Treatment
ICIP objects to any recovery of lost revenues. Additionally, program costs, it argues, must be subject to a full prudence review prior to any recovery.
Termination
Noting that customer participation is voluntary, ICIP queries whether failure to accept any bid during the life of the program equates to premature termination, triggering a reimbursement of program enrollment costs.

Land and Water Fund of the Rockies (LAW Fund)
The LAW Fund supports the Company’s Application. The LAW Fund expresses its deep concern, however, that while the Company may achieve short-term benefit through programs such as this, it is forsaking investment in permanent long-term conservation and efficiency solutions (e.g., cooperative programs between Idaho Power, large industrial customers, and organizations such as the Northwest Energy Efficiency Alliance (NEEA). It encourages the Company to pursue both.
The LAW Fund also recommends that Idaho Power invest in long-term demand side management (DSM) programs for its residential and small customers. E.g., greater investment in low-income weatherization, and financial and technical assistance for conservation and efficiency improvements.

Astaris
Astaris supports the Company’s proposed tariff and use of the PCA for recovery of actual Program costs. Its support, however, is subject to the following conditions:
Before cost recovery begins, Idaho Power should be required to prove that it has prudently managed its energy supply. Ratepayers, Astaris states, are entitled to reasonable assurances that they are not being asked to pay for errors in judgment or earlier attempts to maximize the regulated or unregulated profits at the expense of system resources.
There is a significant probability, Astaris contends, that the buy-back or curtailment of power will at times be oversubscribed, thus producing excess system capacity. Astaris recommends that ratepayers be credited for all profits from market sales of any such oversubscribed power.
Astaris objects to any recovery of lost revenues. Authorized recovery of same, it states, ignores that some of the purchased or curtail power usage would be lost anyway as a result of normal demand elasticity. Noting that the Company has experienced considerable load growth since its last rate case in 1994, Astaris contends that any recovery of lost revenue would be unfair until such time as an earnings review can be conducted. Recovery of lost revenue also, Astaris contends, unfairly insulates the Company from any share of the economic losses caused by present circumstances.
While agreeing that the PCA is an acceptable mechanism for Idaho Power’s recovery of buy-back program costs, Astaris contends that there should be no change to the normal PCA modeling and deferral process. The buy-back should be treated as if the Company were buying supplemental power from the wholesale market.
5. To enable Program participants to accurately assess the risks and rewards of the Company’s voluntary buy-back program, Astaris contends that prior to Program implementation Idaho Power should be required to fully disclose any involuntary curtailment plans it may have developed in response to the existing power supply situation (i.e., notice, duration or level of any involuntary reductions they may face in an emergency situation).
6. Astaris recommends that the Commission combine the voluntary buy-back and curtailment program cases (IPC-E-01-3 and IPC-E-01-4) with the emergency surcharge (IPCE-01-7) and annual PCA case and schedule a single hearing to deal with all relevant cost recovery issues.
Commission Staff
Staff in its comments, recommends approval of the Company’s proposed Schedule 22 Program. Staff further recommends that
Subaccounts be established in the Purchase Power Account 555 to specifically identify and track Program costs and lost revenue,
Staff be provided read-only access to the secure internet site,
The Company be required to provide a summary Program performance report following completion of the pilot program and,
The Company within the Program structure be required to continually monitor and modify Program bid prices to develop the most economic power purchase decisions.

Jeffrey C. Brooks
Mr. Brooks opposes the Company’s proposed Schedule 22 Program, identifies changes that have occurred since the Company’s last rate case in 1994 and contends that it is time for a full rate case proceeding. Mr. Brooks contends that a piecemeal approach to ratemaking provides the Commission with an incomplete picture and in the context of a partially deregulated electricity environment existing outside the borders of Idaho is not conducive to a comprehensive and appropriate allocation of costs and benefits associated with providing electricity supply and delivery operations.
Idaho Power, Mr. Brooks contends, by its deliberate actions has also seemingly helped to create the energy shortage in Idaho. By its actions, he states, it has encouraged increased electrical consumption in at least three ways:
Through economic development activities designed to lure new industrial customers to Idaho Power’s service territory with a promise of low cost power.
Through the practice of converting all large power rate 19 customers to special contract sales agreements at rates far below prices available to the average customer for the same power on the same system.
Through the Company’s abandonment of proactive DSM activities to foster cost effective energy improvements, to provide demand side energy supply resources and collateral societal benefits.
Further, these activities, he states, were undertaken with no corresponding plan to acquire additional electricity supplies or a reasonable effort to stretch existing power supplies through ongoing energy efficiency or DSM programs.

Idaho Power Response
Idaho Power in its response stresses that the Schedule 22 Program offered is voluntary. Customers are not required to sign up for the Program and if signed up are not obligated to participate.
Under Schedule 22, the Company states that there is very little risk that the Company will buy load that would have been reduced without an Exchange Event. This Program, it states, is based on buying reduced load on the day of, on the day ahead or two days ahead, on an hour by hour basis. The risk that a customer was planning to “shut down” during the same short period of time on such short notice is very small. The Company concludes that the probability of gaming the program is low.
The Company states that it has included a penalty payment in Schedule 22 because the value of electrical load that is reduced during an exchange is based on the Company’s ability to plan on that load reduction. If the customer does not reduce load by the committed amount, the Company would need to buy energy on the spot market to serve the unplanned load. Under Schedule 22, the participating customer is given one exchange event with no penalties and is given a 30% compliance band with no penalties after the first event in which they participate.
Noting that references had been made to the reduction in a customer’s demand charges caused by the Program, the Company states that it is almost impossible for participation in Schedule 22 to affect a customer’s demand charge in any way. The demand charge is the average kW supplied during the 15 consecutive minute period of maximum use during the billing period. The same is true for the customer’s basic charge for basic load capacity. The basic load capacity is the average of the two greatest non-zero month billing demands established during the 12-month period, which includes and ends with the current billing period. It is almost impossible, the Company states, and extremely improbable that participating in this Program would adversely affect a customer’s basic charge.
With respect to the timing of any credit, the Company states that normally a customer’s credit would appear on the next bill after an exchange event. The exception would be if the exchange then falls so close to a billing cycle that it is administratively impossible for the credit to appear on the customer’s bill for that billing cycle, in which case the credit would appear on the customer’s bill for the next billing cycle, i.e., approximately 45 days.
As to the issue of recovery of reduced revenues that occur as a result of the Program, it remains the Company’s position that the revenue impacts of the Program should be treated as a purchase power expense in the Power Cost Adjustment mechanism, in the same manner that the revenue impact of the Company’s irrigation “buy-back” program will be treated. Reference Order No. 28676, Case No. IPC-E-01-3.

COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. IPCE01-4, including the related comments and recommendations of Commission Staff, ICIP, the LAW Fund, Astaris, and Jeffrey Brooks. We have also reviewed the Company’s reply. We found the comments of all parties to be constructive. We have considered the public interest and the issues presented in this case and continue to find it reasonable to process the Company’s Application pursuant to Modified Procedure. We find that the record is sufficient to make an informed decision and that no further notice or public comment is required. IDAPA 31.01.01.204.
Idaho Power has requested approval of an Energy Buy-Back Program available to tariff customers capable of reducing electrical load by 1,000 kW. We find that the proposed Program should be of economic benefit to both participating and non-participating customers alike. At a time of regional supply shortage, increasing demand and unprecedentedly high and volatile market prices, this Program provides the Company with an additional method or tool for load reduction. Reducing system load requirements through strategically timed buy-backs from eligible customers enables the Company to avoid high priced market purchases. The savings realized reduce the power costs that the Company would otherwise seek to recover from its customers in its Power Cost Adjustment (PCA) mechanism. Customers through the PCA will also benefit from the market sale by the Company of available excess system energy.
We approve this Schedule 22 Energy Buy-Back Program as filed. The Commission finds that the direct costs and lost revenue impacts of this Buy-Back Program may be treated as a purchased power expense in the Company’s Power Cost Adjustment mechanism. We expect Idaho Power and the parties to develop and present a proposal to the Commission recommending a procedure to calculate the amount of revenue impact that should be passed through the Company’s PCA mechanism. Idaho Power is to record the purchase cost paid to Tariff Schedule 22 participants and any calculated lost revenue in separate Purchased Power subaccounts (Account 555). The separate subaccount detail with all supporting documentation should be such that the costs for the Energy Buy-Back Program and any lost revenue amounts can be easily identified for audit. The PCA filing should also include a separate line to identify these costs.
The Commission finds that the difficulties pointed out in the comments and recommendations of Industrial Customers of Idaho Power were adequately addressed by the Company. We find that the tariff provides reasonable provisions for participating customers to avoid the penalty for not providing the energy that was voluntarily committed (i.e., no penalty for first failure; 30% compliance band for subsequent Exchange Events). Because failure to keep this commitment will have negative impacts on the remaining customers, we find it is appropriate for the tariff to include a penalty.
ICIP raises a concern regarding the timeliness of posting credits. As the Company indicates, customer credits for load buy-back should appear on the next bill after an Exchange Event. If the event is so close to the end of the billing cycle that it is administratively impracticable for the credit to appear, then it should be on the following bill. Furthermore, as clarified by the Company, we find that a Program enrollee’s failure to accept any bid price will not be deemed to be a premature termination that triggers a reimbursement of Program enrollment costs.
We share the concern raised by the LAW Fund that the Company might rely on a variety of short-term load reduction tariffs and forego continuing and future investment in long-term conservation, energy efficiency or demand side management (DSM) programs. We note that the Company has not presented these tariffs and programs as alternatives to investment in long-term conservation and we reaffirm our previous support of such programs. We find that it would be a disservice to customers, unwise and perhaps imprudent for a utility without sufficient generation resources to serve its system load to fail to consider the cost effectiveness of all measures and programs in its resource planning.
Astaris, ICIP and Jeffrey Brooks recommend a prudence review prior to any allowed recovery of Schedule 22 program and/or related costs. We note that Idaho Power is a public utility and is accountable for its decisions and actions. It is also worth noting that the reasonableness of the Company’s load/resource planning decisions can only be fairly assessed on the information that was available to the Company when the decisions were made. It is too easy to look backward with today’s knowledge and critique those prior decisions. The context in which electric utilities have been making their decisions is an industry in the midst of change—customer choice, retail competition, open market, and restructuring. We note parenthetically that the Company’s Year 2000 Integrated Resource Plan (IRP) is on file with the Commission. The IRP is a biennial planning document that is compiled with an opportunity for public participation and input. We encourage the parties in this case to participate in future discussions to establish a method for determining the revenue impact of Schedule 22.
Astaris contends that full disclosure by the Company of involuntary curtailment plans is necessary for a customer to make a fully informed decision to accept a Schedule 22 Bid Price. While this Commission expects that the Company would be willing to share general plans for maintaining system integrity, we hope that Astaris can appreciate that specific operational aspects of such plans may be confidential.
In conclusion, the Commission finds it reasonable to approve the Tariff Schedule 22 Buy-Back Program proposed by the Company and recovery of Program costs through its PCA rate mechanism. If properly implemented, all customers should benefit. Staff has requested that the Company provide it with read-only access to the program secure Internet site. We find Staff’s request to be reasonable. This is a new program that needs to be monitored. As proposed, the Program, unless extended, will expire in one year. Following completion of the Program or accompanying any requested extension, the Company is directed to file a summary Program performance report.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over this matter and Idaho Power Company, an electric utility, pursuant to the authority and power granted under Title 61 of the Idaho Code and the Company’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing and as more particularly described above and qualified herein, IT IS HEREBY ORDERED and the Commission does hereby approve the proposed Idaho Power Electric Tariff Schedule 22—Energy Buy-back Temporary Program. Approval is for a one-year period effective and to commence on the service date of this Order.

IT IS FURTHER ORDERED that the direct costs and lost revenue impacts of the Tariff Schedule 22 Buy-Back Program may be treated as a purchased power expense in the Company’s Power Cost Adjustment mechanism. The Commission also directs Idaho Power and interested parties to develop and present a proposal to the Commission recommending a procedure to calculate the appropriate amount of lost revenues that should be passed through the Company’s Power Cost Adjustment mechanism prior to actual recovery in rates.
IT IS FURTHER ORDERED and the Company is directed to segregate and specifically identify and track Tariff Schedule 22 Program costs and benefits (including any lost revenue amounts) in Purchase Power Account 555 subaccounts.
IT IS FURTHER ORDERED that the Company provide the Commission Staff with read-only access to the Tariff Schedule 22 secure Internet site.
IT IS FURTHER ORDERED and the Company is directed to prepare and submit a summary Tariff Schedule 22 Program performance report upon completion of the Program or accompanying any requested extension.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of April 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:ipce0104_sw2

ORDER NO. 28707 1

Office of the Secretary
Service Date
April 24, 2001