20030103Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
COMMISSION STAFF
LEGAL

FROM: LISA NORDSTROM

DATE: JANUARY 3, 2003

RE: IN THE MATTER OF IDAHO POWER’S APPLICATION FOR AUTHROITY TO IMPLEMENT A RESIDENTIAL AIR CONDITIONER CYCLING PILOT PROGRAM AND TARIFF SCHEDULE 81. CASE NO. IPC-E-02-13.

On December 23, 2002, Idaho Power Company filed an Application seeking authority to institute a Residential Air Conditioner Cycling Pilot Program (AC Cycling Pilot Program or Program) and implement proposed Tariff Schedule 81. In Idaho Power’s 2002 Integrated Resource Plan (IRP), the Company identified peak resource deficiencies facing its system in upcoming years. To address those deficiencies, Idaho Power’s IRP suggested targeting demand-side measures that address peak-hour demand reduction. The proposed Program would enable Idaho Power to begin testing reduction of summer peak loads by directly controlling residential air conditioning load. This could potentially decrease Idaho Power’s overall energy costs, which would in turn result in savings for all customers.
THE PROGRAM
The AC Cycling Pilot Program is a voluntary program for residential customers that would enable Idaho Power to directly address summer peaking requirements by reducing the system’s air conditioning load, which is a major contributor to the summer peak. The Application described it as a dispatchable direct load control program, similar to the dispatch of a peaking generation source, that would attempt to manage capacity. In exchange for an intelligent programmable thermostat installed in their homes and a monthly monetary incentive, participating customers would voluntarily permit the Company to cycle their central air conditioners. The two-year Program would begin in the spring of 2003 and expire on September 30, 2004.
Eligibility and Terms of Participation
The Program would be offered to residential customers in Boise and Meridian who are homeowners with central air conditioning. The AC Cycling Pilot Program will be limited to a total of five hundred customers. Idaho Power would solicit two hundred customers to participate in the Program the first year and an additional three hundred customers for the second year. The Application stated that the Company would solicit customers for participation based on their energy usage, physical location, size of home or other factors aimed at creating a diverse population for the Program. The Company might also solicit participants to fill any vacancies caused by attrition in order to maintain the participation objectives. The Company would retain the sole right to ultimately select or reject Program participants.
Participants would receive an intelligent programmable thermostat from the Company, which would install it and set the thermostat’s initial program. These programmable thermostats would receive a signal from Idaho Power to initiate load control when peak load reduction was needed for system reliability or economic reasons. Air conditioner cycling wwould be limited to a maximum of four hours per day between the hours of 1:00 p.m. and 9:00 p.m. for no more than 10 weekdays per month in June, July and August.
Participants would also receive a $5 credit on their July, August and September Idaho Power bills for each month that they successfully participate in the Program. Each participant would be allowed to temporarily “opt out” of the Program for one day each month after providing Idaho Power with notification by 4:00 p.m. the preceding day.
Termination of Participation
The term of the agreement for Program participation is from the time the agreement is signed until September 30, 2004, unless the customer notifies Idaho Power in writing that the customer does not desire to continue Program participation. If a customer notifies the Company that he/she wishes to cease participating in the Program before completing an entire Air Conditioning Season (June, July, August), the customer may terminate participation and either return the thermostat in working condition to the Company within a certain period of time or be charged $100 for the thermostat. There would be no penalty for terminating participation if a customer satisfactorily took part in a minimum of one complete Air Conditioning Season.
Funding
The Application indicated that the Energy Efficiency Advisory Group (“EEAG”) has concurred with the Company’s proposal to use Energy Efficiency Rider funds, collected under Idaho Power Schedule 91, to finance the AC Cycling Pilot Program. The cost of the Program would be approximately $410,000 per year for each of the two Program years. Although the AC Cycling Pilot Program may result in reduced revenues for Idaho Power, the Company’s Application indicated that it would not request recovery of the reduced revenue.
Program Goals
The goal of the AC Cycling Pilot Program is to assess the effectiveness of air conditioning thermostat control in reducing peak load. Idaho Power would also assess customer participation, volunteerism, satisfaction and retention. Furthermore, Idaho Power would gain operating experience in management of the Program itself, test the chosen equipment, and evaluate different marketing strategies. Idaho Power’s Application stated that the Company will include the results of the AC Cycling Program in the annual report to the Commission detailing the EEAG activities. This report will include the Company’s response to EEAG recommendations, the associated program costs, the DSM accounting numbers and customer response data.
The Application indicated that other electricity providers have reported load reductions of approximately two-kilowatts per household with similar air conditioner cycling programs. Because half of the participant houses will be cycled at any one time, this number would translate into one-kilowatt load reduction per participant. Idaho Power stated that it hopes to achieve a 200-kilowatt load reduction per cycling episode the first year and a 500-kilowatt load reduction the second year with full participation.
Procedure
According to the Application, the Company believes that the Commission can properly consider the proposal with written submissions rather than an evidentiary proceeding. Accordingly, the Company requested that this Application be processed under modified procedure.
STAFF RECOMMENDATION
Staff recommends that this case be processed under Modified Procedure with a comment period that will accommodate production requests and responses. Staff anticipates that interested parties will be able to conduct discovery and file comments by February 21, 2003. Idaho Power has indicated its desire to receive a Commission Order by March 14, 2003 to allow enough lead-time to institute the program this summer.
COMMISSION DECISION
Does the Commission wish to process Idaho Power’s Application for authority to implement a Residential Air Conditioner Cycling Pilot Program under Modified Procedure?

___________________________
Lisa D. Nordstrom

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