20021206Northwest Energy Comments.pdf

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Ed Howell
Friday, December 06, 2002 5:32 PM
Jean Jewell; Ed Howell; Gene Fadness; Tanya Clark
Comment acknowledgement
WWW Form Submission:
Friday, December 06, 2002
5:32:08 PM
Case: IPC-E-02-
Name: Nancy Hirsh
Street Address: Northwest Energy Coalition
City: Seattle
State: WA
ZIP: 98104
Home Telephone:
E-Mail: nancy~nwenergy. org
Company: Idaho Power / Avista
mailing list yes no: yesComment=descriptIon: Idaho Public Utilities Commission
Box 83720Boise, 10 83720
219 First Avenue Sout
RE:Docket IPC-E-02-12
Idaho Power Time of Use Study
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 of Idaho.
NWEC has been intimately involved in the pilot time-of-use (TOU) rates program operated byPuget Sound Energy (PSE), and is a member of the collaborative established to evaluate
that program. We are concerned with the prospect of yet another time-of-use program being
initiated in the Pacific Northwest without adequate economic and environmental analysis.
Our concern with TOU 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 of TOU pricing and associated load
shifting may be adverse.
4) Alternative programs such as critical period pricing and energy efficiency can provide
deeper benefits.
TOU Programs are Not A Substitute for Efficiency Programs
In the first year of its TOU program , PSE promoted load shifting as an al ternati ve 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
We have been engaged in the PSE Time-Of-Use pilot program as intervenors in the 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. OO/month
additional charge, to cover approximately 80% of the incremental meter reading and datahandling 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 meterreading (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 thatduring off-peak periods, the incremental resource is often coal. This is one of the
principal reasons that off-peak prices are lower a€" 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 inthe west. Since coal generation produces 2 a€" 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 loadshifting. Particularly if there is broader application of TOU pricing among Northwestutilities.
Critical Period Pricing Is a 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 ahydro-based grid, developing a strategy to help reduce loads during droughts would seem to
be much more important than TOU pricing. BPA is currently working on a long-termdrought-response strategy, and this may also be a worthwhile endeavor for the IPUC and forIdaho Power and Avista Utili ties, both of which are highly hydro-dependent. The all-
customer buy-back programs operated during 2000-2001 are but one example of creative
pricing during a drought, and these programs paid significant dividends.
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 energyefficiency programs. The Northwest Power Planning Councila€~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 benefitgeneration, transmission, and distribution capacity requirements. This research was
relied on by the parties to PSEa€~s 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 a€" both peak AND energy, while TOU
programs only benefit one aspect of the equation.
IPUC Should Defer Further Action on TOU
We recommend that the IPUC defer any further consideration of TOU pricing for Idaho Power
(or Avista Utilities) until the economic and environmental impacts are better understood.
The PSE evaluation collaborative will produce a final report that should be instructive inthis 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 utili ties, lower bills for consumers,
and beneficial environmental impacts.
Sincerely,
Nancy Hirsh, Policy Director
Northwest Energy Coalition
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