20021206Land Water Fund Comments.pdf

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Jean Jewell, Commission Secretary
Idaho Public Utilities Commission
Box 83720
Boise, ID 83720
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RE:Docket IPC-02-, Idaho Power Residential Time of Use Studyt
NW Energy Coalition and LAW Fund Comments
Dear Ms. Jewell:
Please accept the following comments of the NW Energy Coalition and the Land and Water
Fund of the Rockies for the Commission s review in the above-referenced matter.
The NW Energy Coalition is a multi-state association of energy efficiency, clean energy,
environmental, and other public interest organizations engaged in promoting a clean, reliable
and economic energy future for the Pacific Northwest. Our members include numerous
organizations and individuals within the State ofldaho. The Land and Water Fund of the
Rockies works across the Intermountain West to reduce the environmental impacts of electricity
production.
NWEC has been intimately involved in the pilot time-of-use (TOU) rates program operated by
Puget Sound Energy (PSE), and is a member of the collaborative established to evaluate that
program. Weare concerned with the prospect of another time-of-use program being initiated in
the Pacific Northwest without adequate economic and environmental analysis. Our concern with
TaU programs include the following:
1) TOU programs are not a substitute for energy efficiency programs, but may divert utility,
consumer, and regulator attention away from cost-effective efficiency programs.
2) The data collected to date in the PSE program suggests that the cost of the TOU program
is approximately ten times the economic benefit.
3) We are concerned that the environmental impacts ofTOU pricing and associated load
shifting may be adverse.
4) Alternative programs such as critical period pricing and energy efficiency can provide
deeper benefits.
Idaho Office
O. Box 1612
Boise, ID 83701
208-342-7024
Fax: [phone]
E-mail: lawfund(Q)rmci.net
Colorado Office
2260 Baseline Road, Suite 200
Boulder, CO 80302
303-444-1188
Fax: [phone]
E-mail: landwater(Q)lawfund.org
Utah Office
1473 South 1100 East, Suite F
Salt Lake City, UT 84105
801-487-9911
Fax: [phone]
E-mail: utah(Q)lawfund.org
TOU Programs are Not A Substitute for Efficiency Programs
In the first year of its TOU program, PSE promoted load shifting as an alternative to energy
efficiency and other programs to reduce total electricity consumption. Experience shows that
when customers invest in energy efficiency, everyone wins. The consumer sees a lower bill, the
utility has a more stable load, the service territory a healthier economy, and the environment
suffers less from energy production. TOU load shifting does not produce equivalent benefits.
Our principal concern here is that excessive attention to time of use pricing may divert the
attention of the utility, its customers, and its regulators away from cost-effective energy
efficiency programs that produce durable economic and environmental benefits.
PSE Program Has High Costs Relative To Benefits
NWEC has been engaged in the PSE Time-Of-Use pilot program as intervenors in recently
completed rate proceeding, and as members of both the least cost planning technical advisory
committee and the TOU evaluation collaborative.
In reaching a settlement in the recent rate proceeding (WUTC Docket UE-011570), PSE agreed
to several changes in its program. First, participants were to be assessed a $1.00/month
additional charge, to cover approximately 80% of the incremental meter reading and data
handling costs of the program. Second, the Company agreed to provide quarterly reports to
customers, informing them of their savings or additional costs from the program. Third, it
agreed to discontinue any representation of environmental benefits of the program until the
evaluation collaborative completes its work. Finally, it agreed to automatically transfer all
customers to the standard inverted rate schedule in September 2003 if they are not achieving
economic savings on the TOU rate.
The parties to the rate proceeding did NOT challenge the costs of the automated meter reading
(AMR) system that facilitates the TOU program. We were only addressing the incremental costs
of the TOU program over and above the cost of the AMR system. We would note that for Idaho
Power, both of these would be incremental costs, so the cost threshold would be much higher
than for PSE.
The first of the required quarterly reports was released in October. It showed that 94% of
customers were not able to save enough with TOU to offset the $1.00 incremental meter reading
charge. We note that the actual cost of the TOU program is $ 1. 26/month per customer, but the
parties to the rate case settlement agreed to subsidize participants by having the balance taken
from other sources.
Preliminary information developed by the TOU evaluation collaborative makes it pretty clear
that the economics of the TOU program are doubtful. We agreed to have a multi-stage
evaluation process, so that if the program is clearly not meeting cost-effectiveness tests, the
expenditure on evaluation will be limited.
In mid November, PSE submitted a request to the Utilities and Transportation Commission to
end the pilot-program nine months prior to the original pilot completion date. The UTC
approved the request.
Environmental Impacts are Potentially Adverse
One of our principal concerns with TOU is that load shifting may actually have adverse
environmental impacts. It is generally recognized that the incremental resource during on-peak
periods in the western grid is natural gas. It is less generally realized that during off-peak
periods, the incremental resource is often coal. This is one of the principal reasons that off-peak
prices are lower - coal has a lower variable running cost than gas.
Typical coal plants have annual availability factors in the range of 80% - 90%, and annual
capacity factors in the range of 65% - 75%.
One possible result of TOU pricing, if it is effective at shifting loads from on-peak periods to off-
peak periods, may be an increase in the amount of coal-fired generation in the west. Since coal
generation produces 2 - 3 times as much CO2 as gas generation, as well as emitting much larger
amounts of oxides of nitrogen (NOx), sulfur dioxide (SOx), particulates, mercury, and other
pollutants, a shift from gas to coal carries significant environmental consequences.
The PSE evaluation collaborative will be examining the environmental effects of load shifting, as
will the Northwest Power Planning Council. Until these studies are completed, we are very
concerned about the potential adverse environmental effects of load shifting -- particularly if
there is broader application ofTOU pricing among Northwest utilities.
Critical Period Pricing Is Useful Alternative
On a hydro-based grid, the economic value of load shifting is very modest. Data presented in the
PSE rate proceeding, from the Aurora analysis model, suggested that the on-peak off-peak
power cost differential was about a half-cent per kwh over the next five years. This is not the
type of differential that justifies TOU pricing.
There are, however, a few hours per year when the differential gets much larger. At these times
creative pricing may help to contain market price spikes, and this may be beneficial to consumers
and utilities. Examining options for critical peak pricing may be useful, as suggested by the
Idaho Power consultant report.
Perhaps more important, however, is the experience we have had with droughts. In a drought
the value of power soars not just during peak hours, but during all hours. In a hydro-based grid
developing a strategy to help reduce loads during droughts would seem to be much more
important than TOU pricing. BP A is currently working on a long-term drought-response
strategy, and this may also be a worthwhile endeavor for the IPUC and for Idaho Power and
A vista Utilities, both of which are highly hydro-dependent.
Energy Efficiency Programs Produce Peak Load Mitigation
The Northwest has properly focused on energy loads, not peak demand, for many decades, and
for that reason has not historically measured the peak load impacts of our energy efficiency
programs. The Northwest Power Planning Council's Regional Technical Forum has recently
done a significant amount of research on the peak demand impacts of efficiency, and the results
are very instructive.
Investments in residential weatherization can produce up to 5 kilowatts of peak load reduction
for each average kilowatt of energy load saved. These savings benefit generation, transmission
and distribution capacity requirements. This research was relied on by the parties to PSE'
recent rate case to support approximately doubling the maximum payment made by the utility for
residential weatherization.
Similarly, investments in new construction energy efficiency, industrial motors, and other
measures produce significant peak load savings. Simply put, efficiency provides double benefits
- both peak AND energy, while TOU programs typically benefit only one aspect of the equation.
Conclusion and Recommendations
NWEC and the LA W Fund recognize that they have largely favored exploration of TOU
strategies in recent proceedings before this Commission. However, the recent experience with
PSE's failed TOU effort has been highly instructive.
We recommend that the Commission defer any further consideration of TOU pricing for Idaho
Power s residential customers until the economic and environmental impacts are better
understood. Industrial and large commercial customers may enjoy economies of scale that
would create more financial benefits to those customers under TOU rates; however we hesitate to
support such programs until more information is available on the environmental consequences of
load shifting. We do encourage the Commission and Idaho Power to explore a critical peak
pricing strategy as one response tool for drought and high energy cost periods.
The PSE evaluation collaborative will produce a final report that should be instructive in this
regard. In any event, more detailed environmental analysis is needed before consideration of
TOU should be pursued. We believe that a focus on energy efficiency will produce very
meaningful peak load reduction for the utilities, lower bills for consumers, and beneficial
environmental impacts.
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(for) Nancy Hirsh, Policy Director
NW Energy Coalition
William M. Eddie, Idaho Office Director
Land and Water Fund of the Rockies