20050128Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:JANUARY 28, 2005
RE:IDAHO POWER'S APPLICATION FOR AUTHORITY TO IMPLEMENT A
RESIDENTIAL AIR CONDITIONER CYCLING PROGRAM, CASE
NO. IPC-04-
On November 15 , 2004, Idaho Power filed an Application for authority to implement
an expanded voluntary residential Air Conditioner Cycling Program ("AC Program" or
Program
).
Idaho Power sought authority to modify and expand its 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 AC Program Application. Two members of the public anei' Commission Staff
filed comments in response to the Commission s Notice.
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
DECISION MEMORANDUM
desires to increase the number of participants and to make the program permanent with some
modifications.
THE CURRENT APPLICATION
In its Application, the Company proposes 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 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 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 from AC cycling 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. 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.
DECISION MEMORANDUM
The Company anticipates full implementation of 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 and
memory meters. 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 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 resulted in a benefit-
cost ratio of 1.07 by the tenth year of operation and a ratio of 1.42 over a 30-year period. The
Company anticipates that the AC Program benefits are expected to exceed Program costs by the
tenth year of operation.
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 noted that the AC Program would not solve
the problem and suggested that evaporative 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 kilowatts 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. Based upon the Company s estimate of costs and
the level of customer participation, Staff opined that this demand-side program offers a better
alternative to meet customer load than purchasing a supply-side generation resource.
DECISION MEMORANDUM
The Staff maintained that there is a sufficient 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 Rider be increased in Case No. IPC-04-24.
COMMISSION DECISION
1. Does the Commission desire to authorize the Company to implement its proposed
AC Program and Tariff Schedule 81 ?
2. Does the Commission desire the Company to report on the cost effectiveness of
the Program in the annual DSM report?
3. AnYthing else?
Don Howell
Vld/M:IPCEO427 dh2
DECISION MEMORANDUM