20030905Reply Comments.pdf

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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.
IDAHO POWER COMPANY'
REPLY COMMENTS
CASE NO. IPC-02-
BACKGROUND
To put all of the comments in the proper context, the Commission needs
to consider the history of this case beginning with the Commission s Order No. 29226
dated April 15 , 2003. In that order the Commission directed Idaho Power to update its
automated meter reading (AMR) analysis and file a report with the updated analysis no
later than Friday, May 9 2003. Order No. 29226 specified that the analysis should
contemplate the use of a two-way advanced metering system with both automated
meter reading and time-of-use capability. The Commission also directed the Company
IDAHO POWER COMPANY'S REPLY COMMENTS , Page
to include in the report the functionality of the selected AMR system , a timetable for
implementation of an AMR system that targets areas that would receive the most
benefit and a cost analysis of the AMR system including the achievable cost savings. In
addition , Order No. 29226 scheduled a public workshop for Wednesday, May 19 , 2003
to allow interested parties the opportunity to offer input on the Company s updated AMR
analysis.
On March 20 , 2003 , prior to the issuance of Order No. 29226, the
Commission held a public meeting to discuss AMR issues with the Company and
interested parties prior to ruling on the Company s March 12 , 2003 Petition for
Reconsideration. At the conclusion of that public meeting, the Commission directed
Idaho Power and Commission Staff to hold a scoping meeting to identify the specific
AMR capabilities to be included in the Company s updated analysis. At the scoping
meeting Staff and Idaho Power agreed that the Company s updated analysis would
focus on only a "plain vanilla" system that would simply replace the Company s existing
meter reading function with the addition of the ability to read and store hourly meter
usage information. Although both Staff and the Company agreed that AMR may have
other features or capabilities that might have value , it was determined that none of
these features or capabilities were to be included in the analysis.
The Company timely filed its updated analysis with the Commission on
May 9 , 2003. On May 19 , 2003 the Company participated in the AMR public workshop.
Subsequent to the workshop, the Company responded to numerous questions from
both Staff and other interested parties. At Staff's request the Company expended
hundreds of hours and prepared over a dozen different analyses, including numerous
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 2
scenarios in which revised assumptions provided by Staff were utilized , in an attempt to
identify any potential area or combination of areas within our service territory where the
installation of a "plain vanilla" AMR system had the potential to be economically
beneficial. None of the analyses showed automated meter reading to be an economic
alternative to the Company s existing meter reading process at this time.
REPLY TO COMMENTS
All of the comments urging the Commission to require Idaho Power to install
AMR on a broad scale rely on the potential benefits of AMR beyond the reduced costs
of meter reading to support their case. There is a good reason for this reliance. AMR
cannot be justified based solely on reduced meter reading costs. Both Staff and DRAM
acknowledge this difficulty. The Company recognizes that other capabilities enabled by
AMR , such as outage and theft detection, demand response , and load control , have the
potential to provide a benefit to both customers and the Company if they result in
improved systems or processes and reduced costs. Idaho Power currently has systems
or processes in place to address most if not all of the identified operational capabilities.
Among the systems currently in place at Idaho Power are:
. An "active" outage monitoring system in the form of "sentry" meters at critical
points on our distribution system (a power line carrier based AMR system would
provide only "passive" outage monitoring and restoration confirmation)
. An ISO 9000 based meter quality program that results in:
low overall meter reading costs through activity based management
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 3
early detection of energy theft through an effective meter sealing policy
and an effective policy of close follow up of customers whose service is
terminated due to non-payment
0 a meter read rate of 98.8% of all installed meters, both active and inactive
including meters for irrigation customers out of season and seasonal use
cabins during the winter months
0 a meter reading accuracy rate of 99.
an in-service meter accuracy performance rate of 99.9% due to effective
meter maintenance programs
. A fully installed and operating advanced metering system for 325 large power
intertie, and cogen customers.
Due to the effectiveness of its exiting operations , the Company believes
the potential for AMR to provide operational savings , other than in the actual meter
reading function, is minimal. Since the savings in meter reading O&M costs provided by
an AMR system would account for only about 50% of the total cost of AMR installation
significant benefits from demand response, load management , and time-of-use pricing
programs would be necessary in order to fully support the significant cost of
implementing an AMR system.
Staff's and DRAM's comments refer to Kootenai Electric and the fact that
the northern Idaho cooperative expects to see a reduction in its costs almost
immediately as a result of installing the same power line carrier (PLC) technology
analyzed by Idaho Power. Through discussions with Kootenai Electric, it is Idaho
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 4
Power's understanding that the average overall meter reading cost for Kootenai is
currently 20% higher than Idaho Power s current average cost. In addition , it is the
Company s understanding that Kootenai was in the third year of a ten-year project to
change out its entire meter population due to performance issues related to its existing
meters when it decided to shift to an AMR implementation. If Idaho Power s average
cost to read a meter were higher and if the Company were planning to replace its
existing meters with or without the installation of AMR, the business case for
implementing AMR on Idaho Power s system would change dramatically.
Staff commented that the 50% of total metering-related costs remaining
after AMR implementation seemed high, especially when compared to information
provided by other utilities. Idaho Power does not have access to the specific
information Staff refers to regarding the costs incurred by other utilities. However, Idaho
Power s low average read cost per meter results in an overall low cost for the meter
reading function. In its analysis', the Company removed 100% of the cost associated
with manual meter reading. The 50% of total metering-related costs remaining after
AMR implementation is associated with meter installations , collections, system support
meter maintenance, and service connects and disconnects.
The Company acknowledges that other utilities , as suggested by the
comments of Landis+Gyr, have chosen to offer their customers optional enhanced
services such as home monitoring or home security services as a means of recouping
their investment in an AMR system. While these services may have the potential to
help justify an investment in AMR, the Company has no appetite at this time to diversify
into the home monitoring or home security business nor does it desire to have its
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 5
customers make a substantial investment in the hope that it can sell the ability to
provide these advanced services to others.
MOVING FORWARD
The Company believes that in time both automated meter reading and
advanced meter reading may become the common standard for most utilities. In order
to be knowledgeable about the technology and how it might be utilized on our system
the Company tested AMR in our 1998 Idaho City Pilot. Because of that pilot, Idaho
Power knows the power line carrier technology works on our system. In addition
beginning this September, all new residential meters Idaho Power purchases will be
able to be retrofitted with PLC AMR by inserting a module into the meter (Idaho Power
does not plan to purchase the AMR module at this time). Although the initial purchase
price of these meters is slightly higher than the price of the current meters purchased for
residential customers, these new meters will not need to be replaced in order to
implement AMR, assuming the technology is still compatible. Also, as the Company
current stock of commercial meters is eliminated, and where prices are comparable to
the current meters, the Company will begin to purchase commercial meters that could
be retrofitted with PLC AMR by inserting an AMR module. The Company anticipates
the installation of AMR capable meters for new commercial customer installations could
begin as early as late fall. This purchase strategy will ultimately lower the total cost of
implementing AMR in the future.
Based on the Company s analysis of both its entire service territory and
various operating areas , it does not appear to be cost-effective from a financial
IDAHO POWER COMPANY'S REPLY COMMENTS, Page 6
perspective to implement AMR at this time. The best-case alternative scenario
analyzed , and referred to by Staff in its comments , identified a consolidated area
consisting of five separate operating areas. Even under this best-case scenario , the
revenue requirement would be higher than under the existing condition for the first nine
years following implementation and not until year 28 would a total payback occur.
Idaho Power recognizes, however, that the Commission may wish the
Company to move forward with AMR implementation for purposes of public policy.
Should the Commission desire Idaho Power to move forward with AMR implementation
at this time, the Company suggests a limited implementation in which various features
enabled by AMR technology could be fully tested and evaluated. Such an
implementation would allow for the "live" demonstration of these capabilities and their
actual value to Idaho Power compared to our current systems and processes. If the
Commission so desires, the Company suggests an AMR implementation in the Emmett
operating area. The Emmett area offers a cross-section of customers with usage
patterns very similar to the overall customer base and usage pattern for the Company
service territory as a whole. The following tables illustrate the homogeneity of the
Emmett operating area to the Company s service territory as a whole.
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 7
Customer Classes
Area
Emmett
Company
Residential124 84%
350,214 84%
Number and Percent of Customers
Small Comm. LQ. Comm. IrriQation067 10% 378 3% 373 950 8% 17.907 4% 16 993
Residential Customer Monthly kWh Usage - Winter (January 2003)Area 0( 600 kWh 601-1000 1001-1500 1501-2000 ::-2000 kWhEmmett 31% 20% 17% 13% 20%Company 33% 24 % 17% 1 0% 16%
Residential Customer Monthly kWh Usage - Summer (July 2003)Area 0( 600 kWh 601-1000 1001-1500 1501-2000 ::-2000 kWhEmmett 32% 18% 22% 14% 14%Company 29% 22% 23% 14 % 12%
The geographic location and number of customers in the Emmett area as
well as its similarity to the Company as a whole make Emmett a model area for
evaluating the advanced features of an AMR system. Should the Commission direct
Idaho Power to proceed with AMR implementation in the Emmett area, the Company
would need approximately six months lead time for equipment acquisition and at least
two months for "plain vanilla" equipment installation. The Company then suggests that
the hourly usage of each customer in the Emmett area for the summer of 2004 be
obtained to be used as a baseline for evaluating the impact of any demand response
load management, or time-of-use pricing options subsequently implemented. After the
initial baseline information is collected , a determination of the additional equipment
needed to implement and evaluate advanced features could be made.
Based on the Company s current analysis, the initial cost to implement the
plain vanilla" AMR system capable of capturing and storing hourly usage data in the
Emmett operating area is approximately $1.8 million for the metering, transformer, and
station equipment and $1.5 million for the software and equipment needed to interface
hourly data into our customer billing system. The anticipated meter reading O&M
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 8
savings in the first full year after AMR implementation in the Emmett area is
approximately $125 000. An implementation in which enhanced AMR features could be
fully tested would provide useful data in determining whether these features , which will
increase the total cost of the AMR installation , offer enough value to support an
economic business case for AMR.
If it is the Commission s desire that Idaho Power move forward with the
limited implementation in Emmett as described , the Company would commit to work
with Staff and other interested parties to determine the enhancements to be
implemented and evaluated.
Dated at Boise , Idaho, this 5th day of September, 2003.
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BARTON L. KLINE
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS , Page 9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 5th day of September, 2003, I served a
true and correct copy of the within and foregoing IDAHO POWER COMPANY'S REPLY
COMMENTS upon the following named parties by the method indicated below, and
addressed to the following:
Lisa Nordstrom
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise , Idaho 83720-0074
Hand Delivered
S. Mail
Overnight Mail
FAX
William M. Eddie
Land & Water Fund of the Rockies
O. Box 1612
Boise, Idaho 83701
Hand Delivered
S. Mail
Overnight Mail
FAX
Dan Delurey, Executive Director
Demand Response and Advanced
Metering Coalition (DRAM)
O. Box 33957
Washington , D.C. 20033
Hand Delivered
S. Mail
Overnight Mail
FAX
lliJtxBARTON L. KLI N E
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CERTIFICATE OF SERVICE