20080516Reply Comments.pdf

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An IDACORP Company
LISA D. NORDSTROM
Attorney II
H: 44
May 16, 2008
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-04
Fixed Cost Adjustment Rates
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho Power's
Reply Comments in the above-referenced matter.
I would appreciate it if you would return a stamped copy of this letter for my
file in the enclosed stamped, self-addressed envelope.
Very truly yours,
;t~£J. rc ~
Lisa D. Nordstrom
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Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise, ID 83702
LISA D. NORDSTROM, ISB # 5733
BARTON L. KLINE, ISB # 1526
Idaho Power Company
1221 West Idaho Street
P. O. Box 70
Boise, Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
Inordstromcæidahopower.com
bklinecæidahopower.com
H: 4:i
Attomeys for Idaho Power Company
Express Mail Address
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-08-04
AUTHORITY TO IMPLEMENT FIXED-COST )
ADJUSTMENT (FCA) RATES FOR )
ELECTRIC SERVICE FROM JUNE 1, 2008 ) IDAHO POWER'S REPLY
THROUGH MAY 31,2009. ) COMMENTS
)
COMES NOW, Idaho Power Company ("Idaho Power" or "the Company"), and in
response to the Comments of the Commission Staff filed in this docket on May 9, 2008,
submits the following Reply Comments.
RESPONSE TO STAFF'S COMMENTS
1. Role of the FCA in Idaho Power's Current and Future DSM Activities
Idaho Power has worked with the Commission and members of the
environmental community to create a financial and regulatory environment supportive of
utility demand-side management (DSM) resource acquisition. As a result of those
IDAHO POWER'S REPLY COMMENTS, Page 1
collaborative efforts, a framework has been put in place that encourages Idaho Power's
support of energy effciency programs. This framework includes: (1) the DSM tariff first
authorized in 2002 to fund energy effciency expenditures, (2) the Fixed Cost
adjustment (FCA) true-up mechanism that "decouples" energy sales from revenue to
remove the financial disincentive that exists when Idaho Power invests in DSM
resources, and (3) a Performance-Based DSM Incentive mechanism that allows Idaho
Power to retain a portion of the financial benefits resulting from DSM activities when
energy savings targets are exceeded and a penalty if Idaho Power fails to meet energy
savings levels previously achieved. Both the FCA and the Performance-Based DSM
Incentive mechanisms are three-year pilot programs that were approved just over a
year ago in March 2007.
In response to the Commission's approval of the FCA mechanism, Idaho Power
has begun efforts to extend its DSM activities beyond those previously contemplated in
its Integrated Resource Plans. As is standard and prudent when considering new
effciency programs, Idaho Power issued a request for proposal (RFP) last fall seeking
professional services to measure DSM energy savings potential and peak load
reduction potential within Idaho Power's service territory. The primary goal of this study
is to identify opportunities for enhancing current DSM program activities and to further
develop practical cost-effective energy efficiency and demand response programs.
Additionally, the RFP requested development of a DSM simulation model that would
allow Idaho Power to update achievable potential given future economic scenarios. San
Francisco-based Nexant was selected to conduct the study and create the model, both
IDAHO POWER'S REPLY COMMENTS, Page 2
of which are expected to be complete by July 31, 2008. The information provided by
the study wil.serve as the basis for new and enhanced DSM offerings going forward.
2. Spread of Deferred Fixed Cost Accrual between Classes
Idaho Power's proposed Tate spread complies with the Stipulation
approved in Order No. 30267. Although Staff raises concerns regarding the validity of
deferred fixed cost accrual and spread of the deferral between classes on page 6 of its
Comments, the Company does not believe that either of these issues are solved by
Staffs recommendation of spreading the deferral on an equal cents per kWh basis to
both classes. However, the Company recognizes that spreading the deferral equally
between the classes may have merit, albeit for a different reason. Spreading the
deferral equally between the classes recognizes a power supply "portolio" approach to
energy effciency that reflects the fact that all customers benefit financially from
conservation - either through reduced consumption or lower rates from avoiding the
construction of additional generation to serve growing loads. For this reason, Idaho
Power supports spreading the deferral equally between the classes on a per kWh basis.
3. Resolution of Calculation Uncertainties
To improve its ability to audit the FCA mechanism, Staff recommended
that Idaho Power provide customer counts and weather normalized energy data in its
monthly FCA report. Idaho Power has no objection to providing this information and wil
do so going forward.
Idaho Power agrees that the FCC should be established in the context of
a general rate case, as should the FCE. The Company agrees that Staff, Idaho Power,
and other interested parties should work together to develop a procedure to assign
IDAHO POWER'S REPLY COMMENTS, Page 3
class fixed cost responsibility during years with no general rate change, for years with a
general rate change, and for years when general rate cases are settled (e.g., 2007).
Idaho Power intends to specifically identify the FCC and FCE rates in its general rate
case direct testimony and is willng to make a post-rate case compliance filing to
formally establish these rates.
4. Idaho Power's Enhanced Commitment to DSM
Idaho Power has committed to aggressively pursue all cost-effective demand-
side management opportunities. In recent years, this commitment has become
increasingly integrated into the Company's corporate culture affecting the strategies and
decisions at all levels. The Northwest Power and Conservation Council recently
recognized Idaho Power's DSM efforts in the context of regional efforts to ramp up
energy effciency. The Council specifically noted that Idaho Power doubled its annual
energy effciency budget in 2007 and exceeded its 2007 energy efficiency goals by
20%.1
The Company is encouraged by the significant progress that has been made
toward creating a regulatory model that is supportive of its continued pursuit of that
commitment. As mentioned earlier, this regulatory model is comprised of three essential
components: DSM program cost recovery, the removal of financial disincentives and the
availability of financial incentives. While the current mechanisms being piloted (i.e., the
FCA and Performance-Based DSM Incentive Pilot) mayor may not ultimately be
employed permanently, the Company feels that these efforts are indicative of the long-
term sustainability of this type of environment.
1 Northwest Power and Conservation Council presentation, Overview of Conservation in the PNWand
Issues for BPA Post-2011 Programs, slide 13 (March 2008) at
http://ww.nwcouncil.org/energy/present/Default.htm.
IDAHO POWER'S REPLY COMMENTS, Page 4
As part of this broader effort, the Company is committed to pursuing energy
effciency and DSM in several key areas that were detailed in the FCA Settlement
Stipulation and referred to by Mr. Youngblood in his testimony. On page 7 of Mr.
Youngblood's testimony and in Mr. Youngblood's Exhibit No.1, Annual Demand-Side
Management 2007 Annual Report, pages 47 through 50, he provided several examples
of ways in which Idaho Power pursued these specific objectives during the first nine
months of the three-year pilot. While diffcult to identify every incidence that
demonstrates the Company's enhanced commitment, the Company felt it was important
to provide a few examples that demonstrate ways in which the commitments detailed in
the Stipulation are being honored. As the three-year pilot progresses the Company
plans to take every opportunity to fulfil its commitment in both the key areas detailed by
Mr. Youngblood and in the broader sense.
Conclusion
For the foregoing reasons, Idaho Power respectfully requests the Commission
authorize Idaho Power to implement the Fixed Cost Adjustment rates for electric service
from June 1, 2008 through May 31, 2009 as set forth in its Application with Staffs
recommendation for rate design as discussed above...
Respectfully submitted this Ä day of May, 2008.
ISA D. NORDST
Attorney for Idaho
IDAHO POWER'S REPLY COMMENTS, Page 5
CERTIFICATE OF SERVICE..I HEREBY CERTIFY that on the Jk day of May 2008, I served a true and correct
copy of the within and foregoing document upon the following named parties by the
method indicated below, and addressed to the following:
Commission Staff
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
-.Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-X Email weldon.stutzmancæpuc.idaho.gov
IDAHO POWER'S REPLY COMMENTS, Page 6