20020523Idaho Power's Program Performance Report.pdf

An IDACORP Company
PETER P PENGILLY .[phone]
Senior Analyst 'FAX [phone]
Pricing &Regulatory Services openqilly idahopower.com
May 23,2002
Ms.Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise,Idaho 83720-0074
RE:Case No.IPC-E-01-04
Program Performance Report -Per Order No.28707
Dear Ms.Jewell:
Commission Order No.28707 approving Idaho Power Company's Energy Buy Back
Temporary Program,directed the Company to submit a program performance report uponcompletionoftheProgram.Enclosed is a copy of the Company's report of the results of the
Energy Buy Back Temporary Program.
Please feel free to contact me if you have any questions.
Peter P.Pengilly
PPP:ma
Enclosures
c:Ric Gale
Bart Kline
Maggie Brilz
An IDACORP Company
Idaho Power Energy Exchange
Schedule 22
Program Performance Report
May 2002
Background
On February 12,2001,Idaho Power Company ("Company")filed anapplication(Case No.IPC-E-01-04)with the Idaho Public Utilities Commission ("IPUC")requesting approval of Tariff Schedule 22,Energy Buy Back Temporary Program("Energy Exchange").The IPUC approved Schedule 22 in Order No.28707 dated April
24,2001.
The Energy Exchange was a voluntary load reduction program for commercial,industrial or large irrigation customers.Through this program,Idaho Power Companywouldcreditacustomer's account for reducing electrical load during specific hours.The
goal of this program was to reduce Idaho Power's system peak(s)and to reduce the
amount of high priced wholesale power the Company purchased.The Energy Exchange
was intended to benefit the Company and the participating customers,as well as allIdahoPowercustomers.
The Energy Exchange was modeled after similar successful programs at otherutilitiesintheNorthwestandacrossthecounty.Through the Idaho Power Energy
Exchange,an interactive website,Idaho Power would declare an Exchange Event.An
Exchange Event was a set of hours during which Idaho Power would ask participants to
reduce their electric load during specific hours on specific days in exchange for a credit
on their bill.Hourlyprices would be approximately one-half of wholesale market prices.
Exchange Events would be announced for the day of,day ahead,or two days ahead of
an Event.Participating customers could then specify through the Idaho Power Energy
Exchange which hours and days that they wished to reduce their load.Idaho Power
could then accept or reject the offer of load reduction.Exchange Events wereguaranteedtobeaminimumoftwoconsecutivehoursandiftheyparticipated,
customers would commit to a load reduction for at least two consecutive hours.
Participating customers were required to be able to reduce their electrical load by
1,000 kW at each meter point,have Internet access,and have interval meters.
Participants were encouraged to keep their load reduction within 15%of the amounttheycommittedtoreduce.The Tariff stipulated that Idaho Power would credit
customers for up to 115%of the committed reduction but penalize them for reducingtheirloadbylessthan85%of the committed reduction.
May 2002
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Results
Idaho Power has chosen not to request an extension of Tariff Schedule 22.A
series of events in the western wholesale energy market,a lack of panicipation,and the
costs of continuing the Idaho Power Energy E×change have made this program
economically impractical to continue.
To facilitate the Energy Exchange Idaho Power contracted with a third pany
service provider,Apogee Interactive,to design and administer the Idaho Power Energy
Exchange website.Idaho Power and Apogee Interactive finalized a services agreement
on June 11,2001.The Idaho Power Energy Exchange became active on June 15,2001.
On June 19,2001 the Federal Energy Regulatory Commission (FERC)approved
the west-wide mitigation plan for wholesale electric markets.In this plan FERC capped
western wholesale electric prices at a level based on the market clearing prices in
California during stage 1 emergencies.This price cap was and still is approximately $91
per megawatt hour.In the Energy Exchange,Idaho Power anticipated offering
customers hourly bid prices equal to approximately one-half of wholesale market price
during Exchange Events.Within this bid price framework,the western price cap of $91
per megawatt hour resulted in a maximum bid price of about $45 per megawatt hour.
This price was too low to make it economically feasible for participating customers to
reduce their load.While the approval of the western price caps lowered western
wholesale electric prices,overall energy conservation in the Nodhwest and other load
reduction programs reduced demand for wholesale power.These events helped make
the Idaho Power Energy Exchange unnecessary as a price and load reduction tool.
To market the Energy Exchange,Idaho Power's delivery service representatives
identified the 35 eligible customers most likely to participate and solicited their
participation in this optional program.Representatives from Idaho Power gave formal
Energy Exchange presentations to three special contract customers and several large
power users.The goal for the Company was to have ten meter points active in the
Idaho Power Energy Exchange.
Two companies signed agreements to participate in the Idaho Power Energy
Exchange.Between these two customers,there were three service points in Idaho and
two in Oregon.These five service points had the combined potential of providing a
maximum of approximately 13 MW of load reduction.The level of reduction is an
approximation based on historic hourly load levels and the customer's reduction
projections.
While marketing this program,Idaho Power found that unlike some of the other
utilities that had initiated successful energy exchanges,the characteristics of Idaho
Power's customer base make voluntary load reduction for short periods of a few hours
per day difficult and usually not economically viable.Manyof Idaho Power's large power
users are food processors.These companies have spollage issues,cold storage capacity
limitations,inflexible shipping and delivery schedules,and maintenance schedules that
prohibit them from participation in this type of program.The Company found that most
May 2002
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of the large power users in Idaho Power's service territory do not have any load
monitoring equipment,a fact that made accurate load reduction difficult.Several
companies required earlier notification of Exchange Events,as well as,reduction of
loads for longer periods to allow more time for ramping loads up or down than the
design of the Energy Exchange provided.Some companies hesitated to padicipate
because of labor management challenges during periods of load reduction.Others
expressed the view that the electric energy component was such a small part of their
overall cost of production that compensation for load reduction generally did not make
good economic sense.
Idaho Power paid Apogee Interactive $23,500 to design,program,and
administer the Idaho Power Energy Exchange for the first year.For this initial fee,Idaho
Power could have up ten customers (meter points)active in the Energy Exchange and
could have up to ten Exchange Events per customer without additional fees.The
contract with Apogee Interactive ended May 1,2002.The cost to Idaho Power to keep
the Idaho Power Energy Exchange in 'warm stand-by'mode until May 1,2003 would
have been $10,000.Warm stand-by would have kept the Idaho Power Energy Exchange
website accessible but not interactive.The cost for Idaho Power to activate the Energy
Exchange during the contract year would have been $10,000 in additional fees.
Considering the results of the first year of the Energy Exchange,Idaho Power did not
believe it prudent to renew this contract.
When Idaho Power Company filed its application,the below-normal stream
flows in the Snake River and its tributaries,coupled with the volatile wholesale energy
market in the western United States,had created a situation where Idaho Power
believed it would be cost-effective for the Company to undertake this program.Because
of changes in wholesale electricity market conditions,the western price caps,and the
composition of Idaho Power's customers,Idaho Power found that the Energy Exchange
was not a useful method of load reduction.
Idaho Power Company did gain valuable knowledge and experience in
administering and managing load reduction programs like the Energy Exchange.If the
wholesale electricity market conditions were to change and if the Company deemed it
necessary,electric load reduction agreements could be established with individual
customers with regulatory approval as has been done in the past.Considering the fact
that few customers would be interested in or capable of this type of load reduction
agreement,an interactive website would not be essential and the load reduction could
be administered with normallyavailable resources.
May 2002
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