20030117Reply Comments.pdf

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Senior Attorney
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UTILITiES COF1f1lSSION
January 17 2003
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Ms. Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington Street
O, Box 83720
Boise, Idaho 83720-0074
Re:Case No, IPC-O2-
Reply Comments of Idaho Power Company
Dear Ms. Jewell:
Enclosed herewith for filing with the Commission are an original and
seven (7) copies of the Reply Comments of Idaho Power Company regarding the
above-captioned case.
I would appreciate it if you would return a stamped copy of this transmittal
letter for our files.
Very truly yours
Barton L. Kline
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Enclosures
Telephone [phone]. Fax [phone] Email BKline iJjJidahopower, com
LARRY D. RIPLEY ISB #965
BARTON L. KLINE ISB #1526
Idaho Power Company
P. O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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Attorney for Idaho Power Company
Street Address for Express Mail
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
INVESTIGATION OF TIME-OF-USE
PRICING FOR IDAHO POWER
RESIDENTIAL CUSTOMERS.
REPLY COMMENTS OF IDAHO
POWER COMPANY
CASE NO. IPC-O2-
COMES NOW , Idaho Power Company ("Idaho Power" or "the Company
by and through its attorney of record, and in response to the comments of the
Commission Staff and the Northwest Energy Coalition and Land and Water Fund of the
Rockies, hereby submits the following reply comments.
COMMENTS OF THE COMMISSION STAFF
The Company will address several comments made by Staff in reference
to the Company s Residential Time-of-Use Pricing Viability Study (the "Report"
regarding the potential benefits of time-oJ-use (TOU) pricing and the implementation of
an automated meter reading (AMR) system.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page
Potential Benefit of Time-of-Use Pricinq
Staff's comments on the potential benefit of TOU pricing provide an
incomplete representation of the results included in the Report. In its comments, Staff
states that the Christensen portion of the Report concluded that mandatory, critical peak
time-of-use (CP TaU) retail pricing provides the potential for benefits exceeding
million (Staff Comments, p. 2). While this representation, read in isolation , is correct, it
represents only a portion of the Report's ultimate conclusion. Staff's comments blur the
important distinction between the value associated with load reductions (Le., the value
associated with reductions in power supply costs) with the value associated with
customer bill reductions. At page 5 Staff commented
, "
Under mandatory, critical peak
TOU pricing, the value of load reductions and cost savings potential exceed $1 million
annually" (emphasis added). A more careful reading of the section of the Report
referenced by Staff (Report, p. 23), indicates that the $1 million in potential benefits
referred to by Staff represents the benefit customers could realize as a result of reduced
bills associated with the time-of-use pricing. This potential benefit to individual
customers has no correlation to the value associated with reduced power supply costs
attributable to load shifting.
As designed and analyzed in the Report, mandatory, CP TOU pricing has
the potential to provide an immediate aggregate bill reduction benefit to residential
customers in excess of $1 million (the benefit, or detriment, to individual customers
would vary depending on each customer s usage characteristics and/or ability to shift
load off of the peak period). However, the Christensen portion of the Report referenced
by Staff (Report, p. 23) concurrently concludes that the key factor affecting potential
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 2
long-term benefits from Idaho Power's perspective is the nature of the costs that would
be avoided by customers' load shifting. As was concluded in the Report. under the
base cost scenario for mandatory, critical peak TOU pricing, in which customers have
the potential for over $1 million in immediate bill benefits, the reduction in power supply
costs associated with load shifting is only $370 000 (Report, p. 23; Report, Table 2
p. 29). The true long-term value of any TOU pricing structure is the potential to reduce
total power supply costs by encouraging load shifting. Permanent customer bill
reductions would ultimately flow from those reduced power supply costs. A pricing
mechanism that provided $630 000 more in bill reductions than are supported by cost
reductions is not economically viable and will ultimately lead to overall increased rates
for all customers, negating any customer benefit that might be available under TOU
rates.
In summary, the real value of time-of-use pricing comes from a reduction
in power supply costs resulting from load shifting, which in turn leads to the reduction in
rates paid by all customers, not just the amount of near-term reduced rates passed on
to some customers through bill reductions. As was illustrated in the Report (Report,
Table 2 , p. 29), on Idaho Power s system , the net reductions in costs resulting from
time-of-use pricing are modest.
Ability to Track Market Prices with an AMR System
In its comments Staff stated
, "
With either existing meters or traditional
Tau meters , TOU electricity rates will not reflect the actual cost of production or
wholesale market prices during most hours of the year". (Staff Comments, p. 3). Staff
further states
, "
With AMR , retail prices can vary as necessary to track costs while
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 3
treating all customers the same regardless of billing cycle because the monthly meter
reading schedule is no longer a limiting factor . (Staff Comments, p. 4). The Company
agrees with Staff's statement that TOU electricity rates will not reflect the actual cost of
production or wholesale market prices during most hours of the year. However, this
statement is correct regardless of whether existing meters, traditional TOU meters, or
an AMR system is used to record and gather customer usage information. Unless
dynamic pricing, which could vary hour by hour, is approved by the Commission, the
prices charged customers under any TOU pricing structure will not match energy costs.
Although the critical-peak TaU pricing structure overcomes several of the issues
associated with standard TOU pricing, it does not eliminate the mismatch between
prices and costs.
The Staff's assertion that with an AMR system the monthly meter-reading
schedule is no longer a limiting factor is incorrect. While an AMR system allows for
more flexibility in obtaining usage information than a manual read system , monthly
meter reading and billing schedules will still be necessary in order to generate bills
manage work flows, and integrate usage information into the Company s customer
billing system.
EnerQY Efficiency Advisory Group
Staff was critical of Idaho Power s assessment of the conclusions reached
by the Energy Efficiency Advisory Group (EEAG) regarding time-of-use pricing for
residential customers (Staff Comments, p. 6). The Company would point out that while
individual impressions of the results of a meeting can vary, Idaho Power
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 4
representation of the conclusions reached by the EEAG is consistent with the minutes
of the meeting as reviewed and approved by the individual EEAG members.
Implementation of an AMR System
In its comments
, "
Staff questions why the Company has not yet
implemented a plan to install an AMR system and apparently is not planning to do so in
the near future" (Staff Comments , p. 7). The Company is surprised at Staff's comment.
In response to informal questions posed by Staff prior to the deadline for the filing of
Staff Comments, the Company indicated that it is currently experiencing a very tight
capital market. The capital budget approved by the Company s board of directors for
2003, although increased over the 2002 capital budget , is still constrained and includes
funding only for those items that are deemed critical to reliable operations. While an
AMR system would provide many benefits, its immediate implementation is not critical
for reliability or ongoing business operations during 2003. The Company expressed to
Staff its intent to request 2004 budget approval of the capital needed to begin
implementation of an AMR system during 2004.
COMMENTS OF NW ENERGY COALITION AND LAW FUND
The NW Energy Coalition and Land and Water Fund of the Rockies stated
that on a "hydro-based grid, the economic value of load shifting is very modest" (NE
Energy Coalition, et. aL , p. 3). Idaho Power agrees with this assessment. The analysis
performed by Christensen Associates and included in the Report indicates that the
benefits from load shifting (i.e., reductions in power supply costs) are very modest and
in most cases are less than the benefits passed on to customers in the form of bill
reductions (Reference Table 2 of the Report , p. 29). The Company also agrees with
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 5
the NW Energy Coalition s and the land and Water Fund of the Rockies
recommendation that further consideration of TOU pricing for Idaho Power s residential
customers be deferred until its impacts are better understood (NE Energy Coalition , et.
aI., p. 4).Idaho Power has been monitoring Puget Sound Energy s (PSE) pilot time-of-
use program from its inception and agrees that the evaluation of PSE's program will
provide information that will be helpful in evaluating potential impacts of TOU pricing on
Idaho Power s customers.
CONCLUSION
Idaho Power filed its Repol1 in compliance with Commission Order No.
29026. In the Report, the Company concluded that it is not economically viable to
implement time-of-use pricing prior to the implementation of an AMR system. Idaho
Power acknowledges that automated meter reading capability provides multiple
benefits, many of which are unrelated to its ability to enable time-based pricing
" '
structures. As indicated in these ReplyComments , Idaho Power plans to request
budget approval for the capital necessary to begin AMR implementation in 2004. This
approval of course would be subject to the Company s financial situation, capital
markets, and other resource needs. Idaho Power has been evaluating the potential
costs and benefits of implementing TOU pricing for its various customer classes for
several years and plans to continue evaluating it in the future. As additional information
regarding the impacts of TOU pricing becomes known , Idaho Power believes it will be
useful in its own evaluation. Idaho Power believes that no further action on the
Commission s part regarding time-of-use pricing as it relates to the Company is
necessary at this time and that this docket should be closed.
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 6
Respectfully submitled this
BAR ON L. KLINE
Attorney for Idaho Power Company
REPLY COMMENTS OF IDAHO POWER COMPANY, Page 7
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on the 17th day of January, 2003, I mailed a true
and correct copy of the above and foregoing REPLY COMMENTS OF IDAHO POWER
COMPANY to the following named commenters at the addresses listed below:
Lisa D. Nordstrom, Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, Idaho 83720-0074
William M. Eddie, Idaho Office Director
Land & Water Fund of the Rockies
Nancy Hirsh, Policy Director
NW Energy Coalition
O. 1612
Boise, Idaho 83701
Don Campbell
O. Box 70
Idaho City, Idaho 83631
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CERTIFICATE OF MAILING