20050204Final Order No 29702.pdf

Office of the Secretary
Service Date
February 4 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AUTHORITY
TO IMPLEMENT A RESIDENTIAL AIR
CONDITIONER CYCLING PROGRAM.
CASE NO. IPC-04-
ORDER NO. 29702
On November 15 , 2004, Idaho Power filed an Application for authority to implement
an expanded residential Air Conditioner Cycling Program ("AC Program" or "Program ). Idaho
Power sought authority to modify and expand its voluntary two-year "pilot" AC Cycling
Program that expired in October 2004. The Company requested that its Application be
processed under Modified Procedure.
On December 20, 2004, the Commission issued its Notice requesting comments on
the Company s Application. Two members of the public and the Commission Staff filed
comments in response to the Commission s Notice. As set out in greater detail below, the
Commission authorizes the Company to implement the AC Program.
BACKGROUND
In March 2003 , the Commission authorized Idaho Power to implement the pilot AC
Program for residential customers in Boise and Meridian during the summer months. The
purpose of the pilot program was for Idaho Power to evaluate the costs and benefits of reducing
summer peak loads by cycling residential air conditioners. Reducing summer peaking loads
could potentially reduce Idaho Power s overall capacity costs and could result in savings to
customers.
Idaho Power experimented with two methods of controlling AC cycling: installing
programmable thermostats and installing direct control equipment. To encourage participation in
the pilot program, the Company provided $10 monthly incentives and, in some cases, the
programmable thermostats. Based upon the results of the pilot program, the Company now
desires to increase the number of participants and to make the Program permanent with some
modifications.
ORDER NO. 29702
THE CURRENT APPLICATION
In its Application, the Company proposed to expand the reach of the voluntary
program to all residential customers residing in Ada or Canyon Counties and in the Emmett area.
Emmett was included because the Company has installed new meters with advanced meter
reading (AMR) capabilities. By including Emmett in the Program, the Company will be able to
evaluate economies of scale that may occur by coupling the AC Program with the AMR
capabilities.The Program would allow the Company to cycle air conditioners during the
summer months of June, July and August.
Eligibility to participate in the Program would be determined by several factors
including: a residential customer s energy usage, residential location, size of home, and the
presence of a fully functional central air conditioner installed in compliance with the National
Electric Code. Residential customers who rent or lease their homes must provide the Company
written proof of the owner s permission to participate in the Program. Participating customers
will receive a monetary incentive of $7.00 per month as a credit on their monthly bills beginning
with July and ending with their September bills. To receive the incentive payment, eligible
customers must begin participating in the Program no later than the 20th day of the month in
order to receive an incentive payment for that initial month.
The Company s research indicates that the Treasure Valley experiences an average of
about 20 days each summer when the ambient air temperature reaches at least 95 degrees. At an
ambient air temperature of at least 95 degrees, the average load reduction during a cycling event
was 1.11 kW per participant. A cycling event may be up to four hours per day for any weekday
during the three-month season. A cycling event may occur over a continuous four-hour period or
may be segmented throughout the day at the Company s discretion to optimize available
resources. Cycling events may total up to 40 hours each month and will not exceed a total of 120
hours during the three-month season.
Based upon the pilot program, the Company proposed to use direct AC control
devices to control the AC units. These devices will be installed by the Company. Each
residential participant will be permitted to temporarily "opt out" of the Program one day per
month after providing Idaho Power with advanced notice. Customers would be free to terminate
the Program at any time without penalty.
ORDER NO. 29702
The Company anticipates that there will be 40 000 participants in the AC Program
within five years. During the first five years, the Company estimates that the annual Program
costs will average approximately $2.2 million. Once fully implemented, the Company estimates
that the annual Program costs will be approximately $1.5 million per year. The higher initial
costs are attributable to the Company s purchase and installation of the direct load control
devices. The Company requests that it be permitted to recover the Program costs from the
Energy Efficiency Rider (Schedule 91).
The Company also noted that its Energy Efficiency Advisory Group generally
supports implementation of the AC Program. The Company asserts that the AC Program will be
cost-effective. In particular, the Company performed a benefit-cost analysis that showed a
positive benefit-cost ratio of 1.42 over a 30-year period, based on the benefit of avoiding costs
associated with a simple-cycle combustion turbine.
THE COMMENTS
In response to the Commission s Notice of Modified Procedure, two members of the
public and the Commission Staff submitted comments. One customer supported the Program.
The other customer did not oppose the Program but suggested that evaporative cooling (as
compared to refrigerated cooling) was a better solution. This latter customer noted that the "real
problem" was that customers are not generally interested in conserving electricity until the price
of electricity increases.
The Staff recommended that the Commission approve Idaho Power s Application.
Staff noted that the Company s evaluation of the pilot program showed that AC cycling results in
an average of less than two degrees increase inside participants' homes during the last hour of a
cycling event. In addition, Staff noted that most participants' total electric usage during the
month stayed the same or declined slightly.
Staff also observed that the Company estimates that 40 000 customers will participate
in the Program by 2009. Based on an average load reduction of 1.11 kW per participant when
outside temperature is at least 95 degrees, the Staff calculated that 40 000 participants equates to
44.4 MW of peak load reduction. Given the Company s estimate of costs and the level of
customer participation, Staff opined that this demand-side program offers a better alternative of
shaping or reducing customer load than purchasing a supply-side generation resource.
ORDER NO. 29702
The Staff maintained that there is a sufficient fund balance in the Company s Energy
Efficiency account to implement the AC Program. The Staff also noted that the Company has
requested that its Energy Efficiency surcharge be increased in Case No. IPC-04-29.
DISCUSSION
Based upon our review of the Application and the comments, we authorize the
Company to implement the residential AC Program. Successful implementation of the voluntary
AC Program during the months of June, July and August will allow Idaho Power to reduce its
summer peaking load and to lessen its reliance upon purchasing power or constructing supply-
side generation. Although most participants' total electric usage during the three-month season
may stay the same or decline slightly, the Staff calculated that 40 000 participants equates to
approximately 44 MW of peak load reduction. Under some conditions the potential peak load
reduction is even greater.
We note that the Company has calculated a positive cost benefit ratio for the Program
and expects it to be cost effective over its 30-year life. The Energy Efficiency Advisory Group
also generally supported the Program. Consequently, we find that it is in the public interest for
Idaho Power to implement its AC Program.
The Staff maintained that there is a sufficient balance in the Company s Energy
Efficiency account to begin implementing the AC Program. We direct the Company to report on
the implementation results and cost effectiveness of the AC Program in its annual demand-side
management (DSM) report.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company s Application to implement
its revised residential AC Program is granted. The Commission also approves Tariff Schedule
81 that implements the voluntary AC Program.
IT IS FURTHER ORDERED that the Company report on the results and cost
effectiveness of its AC Program in its annual DSM Report.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-04-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this Case No. IPC- E-04- 2 7.Within seven (7) days after any person has petitioned for
ORDER NO. 29702
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~ 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this If#'
day of February 2005.
, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
, OMMISSIONER
ATTEST:
D. Jewel
Commission Secretary
vld/O:IPCE0427 dh2
ORDER NO. 29702