20061219Application.pdf

IDAHO
POWER CB)
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BARTON L. KLINE
Senior Attorney
An IDACORP Company
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December 18, 2006
Jean D. Jewell , Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-06-
Application of Idaho Power Company to Implement Demand Side
Management Incentive Pilot Program
Dear Ms. Jewell:
Please find enclosed an original and seven (7) copies of the following
documents for filing in the above-referenced matter.
Application; and
Direct Testimony of Timothy E. Tatum.
I would appreciate it if you would return a stamped copy of this transmittal
letter in the enclosed self-addressed, stamped envelope.
?rH~
Barton L. Kline
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Enclosures
Telephone [phone] Fax [phone] E-mail BKlinerBJidahopower.com
BARTON KLINE , ISB# 1526
MONICA MOEN , ISB # 5734
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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2006 DEC 18 PH 3: ~9
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Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO
IMPLEMENT A DEMAND SIDE
MANAGEMENT INCENTIVE
PILOT PROGRAM
) CASE NO. IPC-06-
APPLICATION
COMES NOW Idaho Power Company ("Idaho Power" or "the Company ), by
and through its attorneys, in accordance with RP 052 and hereby requests that the
Commission issue its order authorizing Idaho Power to implement a pilot program that
provides for positive incentives ("increased revenue" or "payments ) or negative incentives
reduced revenue" or "penalties ) for achieving, or failing to achieve , agreed-upon levels of
performance in implementing Demand-Side Management ("DSM") programs.
Idaho Power proposes that the DSM incentive program first be operated as a
pilot program and only applied to a single DSM program for a three year period. This
Application is separate from but related to the Joint Motion for Approval of Stipulation filed
by the Company, the staff of the Idaho Public Utilities Commission ("Staff") and the NW
APPLICATION - 1
Energy Coalition ("NW Energy ) filed in Case No. IPC-04-15, which Motion is currently
pending before the Commission.
BACKGROUND
On August 10 , 2004 , the IPUC in Order No. 29558 established Case
No. I PC-04-15 ("04-15 Case ) to investigate financial disincentives to investment in energy
efficiency by Idaho Power. In its Order, the Commission directed the parties to participate in
a series of workshops and to provide a written report to the Commission following the
workshop proceedings.
On December 15, 2004, the workshop participants filed a status report
with the Commission. The final report on the workshop proceedings was filed on February
, 2005. The final report called for two action items: (1) the development of a true-up
simulation to track what might have occurred if a decoupling or true-up mechanism had been
implemented for Idaho Power at the time of the last general rate case; and (2) advocacy for
filing of a pilot energy efficiency program that would incorporate both performance incentives
and fixed cost recovery adjustments. A final order was not issued and the 04-15 Case
remained open.
On January 27 , 2006, Idaho Power filed an Application in the 04-
Case requesting authority to implement a rate adjustment mechanism that would adjust the
Company s rates upward or downward to recover the Company s fixed costs , independent of
the volume of Company energy sales ("FCA Mechanism ). With its Application in the 04-
Case the Company filed the direct testimony of witnesses Ric Gale, Mike Youngblood and
Ralph Cavanagh. Idaho Power witness Cavanagh discussed the desirability of implementing
a ratemaking mechanism that would provide a positive incentive to the Company for superior
APPLICATION - 2
performance in implementing DSM programs. (Cavanagh Testimony p. 24-25).
On March 3, 2006, the Commission issued a Notice of Application in the
04-15 Case and acknowledged the intention of the Company and the Staff, together with
other parties of record , to initiate and engage in settlement discussions. The parties
engaged in several settlement negotiation sessions.
Based on the settlement discussions in the 04-15 Case, the Parties
agreed to resolve and settle all of the issues in the 04-15 Case. A settlement Stipulation
evidencing that settlement was filed with the Commission on December 18 , 2006.
During the course of the settlement discussions in the 04-15 Case , the
parties continued to discuss Mr. Cavanagh's proposal for an incentive mechanism that would
provide additional ratemaking to Idaho Power if it exhibited superior performance of DSM
programs or levied penalties if the Company s efforts did not meet prevailing agreed-upon
targets.
Based on the consensus developed in the 04-15 Case discussions
Idaho Power is, in this case , proposing a DSM incentive pilot program similar to the one
proposed by Mr. Cavanagh.
II.PROPOSED PILOT PROGRAM
In this Application Idaho Power requests authority to implement a DSM
incentive mechanism which would allow the Company to retain a portion of the cost-
reducing benefits accruing from a DSM program operated by the Company. The incentive
would only be earned if the Company has done an exceptional job in implementing the
DSM program. The incentive mechanism would also allow for a "penalty" payment by the
APPLICATION - 3
Company if Idaho Power s performance of the selected DSM program falls below
previously agreed-upon goals.
Based on discussions between the parties in the 04-15 Case
workshops , Idaho Power has selected the ENERGY STARCID Homes Northwest program as
the DSM program to be used as the pilot to test the efficacy of a DSM incentive program.
The ENERGY STAR Homes Northwest program is currently operated by the Company to
acquire the resources identified in the Residential New Construction Option in the
Company s 20041RP. The ENERGY STAR Homes Northwest program , the mechanics of
the incentive program proposed by the Company and the rationale supporting the DSM
incentive program are more particularly described in the testimony of Company witness
Timothy E. Tatum which is filed concurrently with this Application.
10.In summary, the Company is proposing a three year pilot beginning in
2007 and ending at the end of 2009. Under the pilot the Company would receive an
incentive payment if the market share of homes constructed under the ENERGY STAR
Homes Northwest program exceeds: (1) 7% of the total number of homes constructed in
Idaho Power s service area in 2007, (2) exceeds 9.8% of total service area homes in 2008
and (3) exceeds 11.7% of total service area homes in 2009. These percentage levels
would be the target goals and if Idaho Power exceeds these targets, it would receive an
incentive payment equal to the percentage benefit that exceeds the target. For example, if
Idaho Power is able to achieve 105% of the 7% target percentage in 2007, Idaho Power
would receive a payment equal to 5% of the total program net benefits. The incentive
program would be capped at 10% of program net benefits. For example, if Idaho Power
APPLICATION - 4
achieved 115% of the 7% target percentage in 2007 , Idaho Power s incentive payment
would be 10%
11.Penalties would be levied for 2007 2008 or 2009 if in any of those
years Idaho Power s ENERGY STAR Homes Northwest program fails to reach the market
share of 4.9% achieved in 2006.
12.Idaho Power recommends that the Commission process this
Application under modified procedure pursuant to RP 201 et seq.but the Company stands
ready to present its testimony and support the program in a technical hearing if the
Commission determines that such a hearing is required.
NOW , THEREFORE , the parties respectfully request that the Commission
issue its Order granting this Application and authorizing the Company to implement, as a
pilot program , the DSM incentive mechanism proposed by the Company in this Application.
Respectfully submitted this
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day of December 2006.
(Jit BARTON L. KLINE
Attorney for Idaho Power Company
APPLICATION - 5