20020125IPC Reply Comments.pdf

lilt[:IVED
i: iLIi]t- _lBARTON L. KLINE ISB #1526
ldaho Power Company
P. O. Box 70
Boise, ldaho 83707
Telephone: [phone]
FAX Telephone: [phone]
Attorney for ldaho Power Company
Street Address for Express Mail:
1221 West ldaho Street
Boise, ldaho 83702
!N THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF A NEW SCHEDULE 84 --
NET METERING.
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CASE NO. !PC-E-o1-3e
REPLY COMMENTS OF
IDAHO POWER COMPANY
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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INTRODUCTION
When it filed its Application in this case in early November,2OOl, ldaho
Power Company ("ldaho Powe/'or "the Company") had two primary goals: First, to
replace its existing net metering option with a net metering program that would provide
a simplified process targeted at small, non-sophisticated customer-generators. Second,
to implement a net metering program that would operate in an etficient and safe manner
without causing unreasonable cost shifting among customers.
With the exception of the comments of the ldaho PUC Staff, all of the
other commenters (State of ldaho Department of Water Resources ("lDWR"), ldaho
Farm Bureau Federation ("Farm Bureau"), ldaho Rural Council ('lRC') and the
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 1
Renewable Energy Advocates ("Advocates")) are requesting that the Commission
require ldaho Power to expand the scope and magnitude of the net metering program
presented in Schedule 84.1 This expansion would be accomplished in three ways:
o Expansion of Eliqible Customer Classes. ldaho Power proposed
limiting net metering to rate Schedules 1 and7. The commenters
recommend expanding eligibility to all customers, including
customers with demand meters.
o lncrease Size of Eliqible Generatinq Facilities. With the exception
of the Commission Staff, the commenters uniformly recommend
that a single-system capacity limit ol 25 kW requested by ldaho
Power be increased to a minimum of 100 kW (Advocates) to no
limits as proposed by the Farm Bureau and lRC.
Cumulative Generatinq Capacitv Limit. ldaho Power proposed toa
initially limit net metering to approximately three MW. Again, with
the exception of the Staff, all of the commenters seek significant
expansions of that limit. Advocates recommends an approximately
30 MW limit, while the Farm Bureau and IRC would place no limit
on the amount of energy ldaho Power would purchase at net
metering prices.
Commenters also proposed a number of other expansions and modifications to
Schedule 84 and the related Schedules 72 and 86 that would impact
Schedule 84. ldaho Power will address some of those proposed modifications to
Schedule 84 in its reply comments in SchedulesT2 and 86.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 2
As will be discussed in greater detail in ldaho Power's following reply
comments, expanding access to net metering as proposed by Advocates, Farm Bureau,
and to a more limited extent, IDWR, would result in costs being shifted from customers
developing generation projects to all of the rest of ldaho Power's customers. The total
magnitude of that cost shift will depend on the amount of expansion the Commission is
willing to accept.
ADOPTING IDAHO POWER'S SGHEDULE 84 AS
PRESENTED WOULD NOT LIMIT DEVELOPMENT
OF CUSTOMER.OWNED RENEWABLE
GENERATING RESOURCES
Explicitly in the comments of the Farm Bureau and IRC and implicitly in
the comments of Advocates is the assertion that Commission adoption of Schedule 84
as presented by ldaho Power would preclude ldaho Power's customers from fully
developing renewable resource generating projects. That assertion is simply incorrect.
As the Commission is well aware, ldaho Power is currently purchasing approximately
100 aMW of energy from 67 small generating facilities located in ldaho and Oregon.
The bulk of these purchase arrangements are for very small, renewable resource
projects. This Commission has previously approved policies and procedures that would
accommodate purchases from any type of renewable resource including wind
generation, generation from methane gas produced by anaerobic digesters, small hydro
generation, and geothermal generation. lrrigation customers, farmers, dairymen, and all
other customers currently have the ability to develop any type of renewable resource
project with Idaho Power purchasing the energy generated by those projects. ldaho
Power has been and continues to be willing to negotiate firm or non-firm (whichever is
appropriate) energy purchase contracts for renewable resource projects of any size.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 3
It is also important to remember that even without a net metering
arrangement, customers are free to use their generation to reduce their purchases of
power from ldaho Power and sell any excess generation to ldaho Power at Schedule 86
prices. This type of power sales arrangement is already being successfully used by
several ldaho Power customers. Thus no customer is precluded from offsetting its load
by its own generation even if net metering is not involved.
ldaho Power's net metering proposalwas specifically designed to provide
a simple, standardized interconnection arrangement utilizing a single, inexpensive watt-
hour meter that was targeted to facilitate development of small resources. As will be
shown in the balance of these comments, net metering has some serious drawbacks
when it is applied to bigger generating projects.
EXPANSION OF ELIGIBILITY FOR NET
METERING COULD RESULT IN
UNACCEPTABLE LEVELS OF SUBSIDY
On pages 3 and 4 of its comments Staff describes the various subsidies
that are implicit with a net metering proposa! like Schedule 84. Staff's comments focus
primarily on the fact that the net metered generation customer does not pay its fair
share of the system cost of transmission and distribution facilities. ldaho Power's
existing Option B under Schedule 86 recognizes this revenue shortfall and charges the
net metering customer an amount to make up some of the disparity. However,
computing this charge is complex and its complexity was the primary source of
dissatisfaction with ldaho Power's existing Option B, net metering tariff. Staff's
comments note that this lost revenue will be borne by ldaho Power's shareholders until
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 4
it is included in ldaho Power's rates, either as a result of a general rate case or as an
adjustment to the PCA.
Another cost shifting effect implicit in any net metering scheme that is not
fully addressed in any of the comments is the potential differential between the net
metering purchase price at retail rates and the wholesale cost of alternative power
supplies available to ldaho Power. Depending on how much ldaho Power's net
metering proposal is expanded, this differentia! could result in cost shifting between
customers that would potentially be much bigger than the lost revenue from
unrecovered transmission and distribution expenses.
As noted by Commission Staff testimony in Case No. IPC-E-01-43,
monthly fonryard market prices for purchases of energy on the wholesale market for the
next year range from approximately $20 per MWh to $30 per MWh. Retail rates,
depending on the rate schedule, currently range from $55/MWh to $80/MWh.2 As a
result generation projects eligible for net metering could be paid substantially higher
prices for non-firm energy than ldaho Power would have otherwise paid for firm energy
purchased on the wholesale market.
As Commission Staff comments correctly noted, power purchased under net
metering is non{irm energy and is of less value for meeting system loads than would be
an alternative wholesale purchase of firm energy. This disparity is not addressed in any
of the comments of the parties, but could be of significance if the Commission decides to
expand eligibility for net metering as advocated by some commenters.
Hopefully after current PCA balances are amortized, retail rates will return to
lower, pre-California debacle levels.
2
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 5
Idaho Power recognizes that its proposal would result in some subsidy to
those customers that choose to develop net metered generation projects. However, so
long as the eligibility for net metering is limited to small (25 kW and less) projects,
projects utilizing watt-hour meters and capped at a reasonable level (3 MW), this
subsidy would be limited to a reasonable leve! and would be partially offset by savings
resulting from the simplification of the net metering program.
LIMITING THE AVAILABILITY OF NET METERING IS APPROPRIATE
All of the commenters proposed that eligibility for net metering be opened
to all classes of customers. Some commenters further proposed to expand eligibility to
generation facilities with a nameplate capacity above the 25 kW proposed by ldaho
Power. ldaho Power recommended that net metering be limited to Schedules 1 and 7
and generators smaller than 25 kW for several reasons:
ldaho Power proposed to limit eligibility to customers without demand
meters. ldaho Power believes that the primary purpose of net metering is to allow
customers to realize the value of their generation by directly and immediately offsetting
their energy consumption, with any excess generation delivered to ldaho Power causing
the inexpensive watt-hour meter already in place to run backwards or "net" their
recorded consumption against their excess generation, Demand metered customers
will also be able to directly and immediately offset their consumption with their own
generation if they so choose. However, because the existing meters and meter-bases
of demand metered customers cannot "run backwards", they would have to be modified
and/or replaced to record any excess generation delivered to ldaho Power. Once
metering has been installed to record the actual deliveries of excess generation to ldaho
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 6
Power, it makes no sense to increase the net metering subsidy and pay full retail rates
for what clearly is separately metered and can be paid at Schedule 86 or negotiated
contract rates. lncluding customers with demand meters and with facilities greater than
25 kW in net metering programs would require modification of the Company's billing
system and the expenditure of additional programming costs to allow the Company to
bill for the energy consumed, the energy generated and delivered to ldaho Power, and
the computed difference. Requiring these additional expenditures is inconsistent with
the idea of net metering as a simple, cost-effective program that directly and
immediately compensates customers for their generation but does not impose additional
costs on customers that do not choose to develop generation facilities.
ln addition to the potential for increasing non-generating customer costs,
expanding the eligibility for net metering to generating facilities larger than 25 kW will
require that net metering projects be subject to individual analysis of interconnection
requirements to avoid adverse impacts on system safety and service quality. For
example, any time customer generation is interconnected with ldaho Power's system,
distribution planning engineers need to consider the risk of "islanding." lslanding can
occur when a customer's generation is capable of supporting the Ioad of other
customers physically located near the customer's generator. For example, if the power
line serving retail customers, including a generating retail customer, goes down, the
non-generating customers' loads can pull from the customer generator and energize the
downed line. This can create a hazard to ldaho Power's personnel attempting to
restore the downed line as wel! as causing damage to the non-generating customer's
household equipment from distortions in voltage, frequency and harmonics while in the
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 7
islanded condition. ldaho Power has developed interconnection equipment packages to
deal with "islanding." However, setting the cutoff for participation in net metering at
25 kW would substantially reduce the risk of "islanding" thereby expediting the process
for reviewing interconnections at net metering locations.
CUMULATIVE GENERATION CAPACITY LIMIT
ldaho Power proposed a generation capacity limit of approximately 3 MW.
Renewable Energy Advocates recommends that the cumulative capacity limit be set at
approximately 30 MW and the Farm Bureau recommends that no limit be imposed.
Recognizing that the magnitude of cost shifting will increase with the increase in the
level of net metering generation purchases, ldaho Power urges the Commission to
retain Idaho Power's proposed 2.9 MW limit.
DATED at Boise, ldaho, this 25th day of January, 2002.
N L. KLINE
Attorney for ldaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 25th day of January, 2OO2,l served a true
and correct copy of the within and foregoing REPLY COMMENTS OF IDAHO POWER
COMPANY upon the following named parties/commenters by the method indicated
below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
ldaho Public Utilities Commission
472 W . Washington Street
P.O. Box 83720
Boise, ldaho 83720-0074
Robert W. Hoppie
Administrator, Energy Division
ldaho Department of Water Resources
P.O. Box 83720
Boise, ldaho 83720-0098
Frank Priestley, President
ldaho Farm Bureau Federation
P.O. Box 167
Boise, ldaho 83701-0167
Bill Chisholm
Energy Coordinator
ldaho Rura! Council
P.O. Box 118
Bliss, ldaho 83314
William M. Eddie
Land and Water Fund of the Rockies
P.O. Box 1612
Boise, ldaho 83701
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CERTIFICATE OF SERVICE
RTON L. KLINE