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Home My WebLink About200142_jh.docDECISION MEMORANDUM TO: COMMISSIONER HANSEN COMMISSIONER SMITH COMMISSIONER KJELLANDER JEAN JEWELL RON LAW BILL EASTLAKE LOU ANN WESTERFIELD TONYA CLARK GENE FADNESS DON HOWELL RANDY LOBB DAVE SCHUNKE RICK STERLING TERRI CARLOCK BEV BARKER WORKING FILE FROM: JOHN R. HAMMOND DATE: APRIL 2, 2001 RE: IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO INSTITUTE A PILOT PROGRAM TO ALLOW IRRIGATION CUSTOMERS TO TAKE ELECTRIC SERVICE AT TIME-OF-USE ENERGY RATES, CASE NO. IPC-E-01-6. On February 21, 2001, Idaho Power Company filed an Application seeking authority to institute a pilot program to allow irrigation customers to take service at time-of use energy rates by implementing Tariff Schedule 25, Irrigation Service, Optional Time-of-Use, Pilot Program (the “Program”). Idaho Power states that the purpose of the Program is to ameliorate the pressure on its system peak demands and associated financial consequences resulting therefrom. Specifically, under this Program the Company will provide an appropriate price signal to its irrigation customers to encourage them to shift their energy usage away from peak times which in turn will be held to reduce the Company’s purchase power costs. Accordingly, Idaho Power believes that exploring the potential benefits of this Program is warranted. The Program will be made available to all of Idaho Power’s irrigation customers who are not participating in the Company’s Tariff Schedule 22 [Commercial] Energy Buy-Back Temporary Program, or the Irrigation Buy-Back Program. See Case Nos. IPC-E-01-4 and IPC-E-01-3. The Company also states that enrollment in this pilot program will be limited to 300 metered service points unless it chooses to waive this restriction. The Program tariff will have the same billing components and charges as Schedule 24 with two exceptions: 1. The irrigation in-season energy charges will no longer be one flat rate but instead be based on the hours in which the energy was utilized. 2. The installation of more expensive TOU (time-of-use) meter is required to participate in the pilot program. To contribute toward the increased cost of the meter as well as the increased meter reading and bill processing costs, a “TOU Meter Charge” of $3.00 per month during the irrigation season will be assessed. Application at p. 5, § VII. Idaho Power contends that if the Program is successful it may lead to a reduction in the amount of revenue the Company will receive. However, this reduction in revenue is not accounted for in Idaho Power’s Power Cost Mechanism (PCA) and thus the Company entirely absorbs it. Accordingly, Idaho Power requests authorization to include reduced revenues, resulting from this Program, as an adjustment to its PCA mechanism. On March 8, 2001, the Commission issued Order No. 28664, the Notice of Application and Notice of Modified Procedure. The Commission Staff and the Idaho Irrigation Pumpers Association and Montierth Farms filed comments. Idaho Power has filed reply comments. STAFF RECOMMENDATION Consistent with its analysis in its filed comments, Staff makes the following recommendations: Staff recommends that the Schedule 25, Irrigation Service, Optional Time-of-Use Pilot Program be approved. As Program results become available, and assuming the results are positive, Staff recommends that Idaho Power be prepared to offer the Program to as many eligible irrigation customers as demand warrants and as quickly as the Company is able. Staff recommends that Idaho Power closely monitor daily and seasonal price variations and adjust either the months and/or the hours during which time-of-use rates will apply to work towards pricing that accurately reflects the true value of load shifting. For the initial phase, Staff recommends Idaho Power screen out customers judged to have minimal ability to shift load and those customers whose participation will not be beneficial. Staff recommends customers be permitted to participate in both the irrigation buy-back and the time-of-use programs. Staff recommends that Idaho Power offer the expertise of its own irrigation specialists to counsel irrigators if requested on irrigation practices and system modifications that could enable them to successfully utilize time-of-use rates. Staff does not recommend that Idaho Power be allowed to recover lost revenues as a result of this Program. COMMENTS OF THE IDAHO IRRIGATION PUMPERS ASSOCIATION The Irrigators have submitted comments in support of Idaho Power’s Application in this case. The Irrigators urge the Company to develop this pilot program to enable them to explore the potential benefits and feasibility of pricing mechanisms that would encourage shifting energy usage from peak to off-peak times. The Irrigators believe that this Program may help reduce the Company’s power purchase costs and provide price incentives to irrigation customers who can shift their energy use away from peak times in exchange for lower prices. Finally, the Irrigators believe that this Program should develop information that will help to determine if the concept of time-of-use rates should be expanded to include more irrigation and other customers on a permanent basis. COMMENTS OF MONTIERTH FARMS Montierth Farms has filed comments requesting that the Commission require Idaho Power to allow them to participate in both the irrigation buy-back program and the time-of use Program. IDAHO POWER COMPANY’S REPLY COMMENTS First, the Company disagrees with Staff’s recommendation that it screen out customers judged to have minimal ability to shift load and those customers whose participation will not be beneficial. Because the Company believes that the role of a pilot program is to be an experiment and not a strategy to produce a preconceived result “it is important to put no artificial parameters to the experiment such as the size of previous energy usage or other criteria limiting participation.” Reply Comments at 2. Second, the Company disagrees with Staff’s recommendation that irrigation customers be permitted to participate in both the irrigation buy-back and time-of use programs. The Company argues that if customers are allowed to take advantage of both programs it undermines any purposeful analyses of time-of-use pricing as there is no reason to believe that customers participating in the buy-back program won’t return to their typical energy usage and patterns in following years. Reply Comments at 3. Furthermore, the Company contends that by limiting enrollment in the time-of-use program to those customers not participating in the buy-back program there is an opportunity for a larger number of irrigation customers, in aggregate, to participate in the Company’s various offerings. Reply Comments at 4. Third, the Company disagrees with Staff’s recommendation that Idaho Power offer the expertise of its own irrigation specialists to counsel irrigators if requested on irrigation practices and systems modifications that could enable them to successfully utilize time-of-use rates. The Company asserts that the availability of Company personnel with irrigation experience to counsel irrigation customers will be extremely limited this season and because this is a pilot program it also cannot underwrite the risk of yield reduction or crop loss or other results, either as a result of participation in the pilot program or as a result of relying on the advice of Idaho Power personnel. Reply Comments at 4. Fourth, the Company disagrees with the Staff’s recommendation that it not be allowed to recover lost revenues as a result of this Program. The Company argues that of all its programs the time-of-use program has the most predictable and quantifiable lost revenues. Furthermore, the Company states that without reduced revenue recovery, there are no net incentives, significant or otherwise, for the Company to offer this Program. Finally, the Company argues that without recovery of reduced revenues it will be the only party to lose and it will have no choice but to withdraw its proposal for this pilot program. COMMISSION DECISION: • Does this Commission wish to approve the Schedule 25, Irrigation Service, Optional Time-of-Use Pilot Program? • As Program results become available, and assuming the results are positive, does the Commission wish to require Idaho Power to offer the Program to as many eligible irrigation customers as demand warrants and as quickly as the Company is able? • Does the Commission wish to require Idaho Power to closely monitor daily and seasonal price variations and adjust either the months and/or the hours during which time-of-use rates will apply to work towards pricing that accurately reflects the true value of load shifting? • Does the Commission wish to require Idaho Power to screen out customers judged to have minimal ability to shift load and those customers whose participation will not be beneficial? • Does the Commission wish to require Idaho Power to allow eligible irrigation customers to participate in both the irrigation buy-back and the time-of-use programs? • Does the Commission wish to require Idaho Power to offer the expertise of its own irrigation specialists to counsel irrigators if requested on irrigation practices and system modifications that could enable them to successfully utilize time-of-use rates? • Does the Commission wish to allow Idaho Power to recover lost revenues as a result of this Program? John R. Hammond Staff: Rick Sterling M:ipce016_jh2 The Idaho Irrigation Pumpers Association also was granted intervention into this case. See Order No. 28675. DECISION MEMORANDUM 4