20080725Reply Comments.pdf

esIDA~POR~
An IDACORP Company
DONOVAN WALKER
Attorney II
July 24, 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-08-12
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho Power
Company's Reply Comments in the above-referenced matter.
I would appreciate it if you would return a stamped copy of this transmittal letter
to me in the enclosed self-addressed stamped envelope.
V~yours,~Y:u/~
Donovan Walker
DW:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. ID 83702
DONOVAN E. WALKER, ISB No. 5921
BARTON L. KLINE, ISB No. 1526
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Tel: [phone]
Fax: [phone]
dwalker(ëidahopower.com
bkline(ëidahopower.com
58
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF AN AIR CONDITIONER
CYCLING PROGRAM AGREEMENT FOR
MOUNTAIN HOME AIR FORCE BASE.
)
) CASE NO. IPC-E-08-12
)
) IDAHO POWER COMPANY'S
) REPLY COMMENTS
)
Idaho Power Company ("Idaho Power" or "Company") submits the following
Comments in response to the Comments filed by the Commission Staff on July 16,
2008.
1. Introduction
Commission Staff, although ultimately stating that it "is not opposed to the
Agreement," was very critical of the Agreement and the Company's negotiation and
evaluation of the same. These Reply Comments wil address three general categories,
and hopefully provide some clarity, and possibly resolution to Staffs concerns. These
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
comments wil address: (1) Cost-Effectiveness, (2) Post-Installation Evaluation of the
Program, and (3) the Prudency of Implementing the Program.
2. Cost-Effectiveness
Demand Charge Revenue Losses - The Air Conditioner Cycling Program ("AC
Cycling Program" or "Program") for the Mountain Home Air Force Base ("Air Base"), as
set out in the Agreement, is cost-effective. Commission Staff in its Comments is highly
critical of the Agreement to extend the AC Cycling Program to the residences located on
the Air Base. It appears that Staffs primary criticism of the Company revolves around
what Staff perceives to be a lack of cost-effectiveness, or lack of cost-effectiveness
analysis. Staffs criticism seems to be based upon the Company's application of the
same $7.00 credit per participating residence that is utilized in Tariff Schedule 81, the
AC Cycling Program for Residential Customers, to the participating residences on the
Air Base. Staff is critical that the Company did not drive a harder bargain and negotiate
to reduce the benefits that the Air Base would receive from bringing a large group of
residents into the Program. After projecting an anticipated reduction in the Air Base's
demand charges for participation in the Program, Staff states, "Curiously, demand
charge revenue losses were not mentioned in the Application." Staff Comments at 3.
The Company believes that Staffs concerns are unfounded. The Program is
cost-effective by all accepted measurements. First of all, as Staff is well aware, Idaho
Power uses the Total Resource Cost ("TRC") and the Utilty Cost ("UC") tests, as
defined in the California Standard Practice Manual: Economic Analysis of Demand-side
Programs and Projects, 2001, ("CSPM") and the Electric Power Research Institute End-
Use Technical Assessment Guide, 1991, ("End-Use TAG") to determine if all of its
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
energy effciency and demand response programs are cost-effective. See, Order No.
28894 at 7, Case No. IPC-E-01-13 (where the Commission directed the Energy
Efficiency Advisory Group to use the TRC, UC, and Participant Cost tests to screen the
cost-effectiveness of potential DSM projects). Staff has recently described both the
CSPM and the End-Use TAG as "Both manuals are good, commonly used tools for
evaluating DSM cost-effectiveness. . ." Staff Comments at 7, n1, Case No. IPC-E-08-
03. Additionally in Case No. IPC-E-08-03, Idaho Power's Application for Authority to
Revise the Energy Effciency Rider, Staff indicated that it had "reviewed the Company's
program cost-effectiveness screening method and believes it is reasonable." Id., at 10.
One of the programs it reviewed was the Residential AC Cycling Program. Id., at 4.
The Total Resource Cost test is designed to measure the total benefits and costs
of a demand-side management ("DSM") program from the standpoint of a utility and its
customers as a whole. The Utility Cost test measures the net costs of a DSM program
as a resource option based on the costs incurred by the utility and excluding any net
costs incurred by the participant. Neither the TRC nor the UC test includes customer
bil reductions as an input for analysis. Thus, since the two cost-effectiveness tests
utilized to determine if a given program is, in fact, cost-effective do not consider
customer bil reductions in their analysis, the potential demand charge revenue losses
for the Air Base are not relevant to this consideration.
As stated in the Application, and apparent from its structure, the Agreement with
the Air Base is closely modeled upon the Company's approved Tariff Schedule 81, the
Residential Air Conditioner Cycling Program. The Residential Program was initially
rolled out as a pilot program in March 2003. Case No. IPC-E-02-13. After thorøugh
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
evaluation, it was then made available to all of Idaho Power's customers as an optional
service through Tariff Schedule 81. Case No. IPC-E-04-27. The cost-effectiveness of
Schedule 81 has been established. As noted by Staff:
Idaho Power further explained that it expected the Air Force
Base program to have some cost reductions due to
eliminating marketing costs, having the need to contact only
one customer as opposed to each residence as a customer,
the close proximity of individual houses, and not having to
remove the load control device each time occupancy of a
residence changes.
Staff Comments at 2. The AC Cycling Program offered under Schedule 81 is cost-
effective. If a program is cost-effective and the costs of the program are further reduced
as stated above, the program becomes more cost-effective. This, coupled with the fact
that customer bil reductions do not factor into the cost-effectiveness tests,
demonstrates that the Air Base's program is also cost-effective, with no further analysis
required.
The intent of the Company was to keep the Program for the residential housing
on the Air Base, as close as possible to the AC Cycling Program offered to all
residential customers through Schedule 81. As stated in the Application, the Agreement
executed with the Air Base, in fact, closely mirrors the Company's approved Tariff
Schedule 81, both in form and content. Staff stated, "There is no indication that Idaho
Power attempted to negotiate a lower incentive payment in consideration of the
likelihood of reduced demand charges." Staff Comments at 3. Staff also stated, "Staff
is concerned that Idaho Power has given no indication that it diligently negotiated the
amount of the Agreement's monthly credit in consideration of the Air Force Base's
Schedule 19 customer status." Staff Comments at 4. The Company has worked
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
diligently with representatives of the Air Base since approximately February of this year
to come to a mutually agreed upon Agreement to implement the AC Cycling Program on
the Air Base for its residential housing. The Company was and is confident that the
Program is cost-effective with a $7.00 per month, per household incentive offered for
both Schedule 81 as well as the Air Base's Program. The Air Base was and is well
aware of the Program offered under Schedule 81 and the incentive offered under that
Schedule. Program incentives are based on cost-effectiveness calculations and DSM
avoided costs. It would have been inconsistent with accepted cost-effectiveness tests,
(and perhaps discriminatory) to offer the Air Base less incentive for the same load
reduction as other residential customers at the same or perhaps slightly reduced costs.
Additionally, even if the demand charge lost revenues were relevant to the cost-
effectiveness calculations, the potential lost revenue for the Air Base would not be
significant. First, in order for the Air Base to achieve a savings of the magnitude
calculated by Staff by participating in the Program, the AC Cycling Program's load
reduction would have to coincide with every weekday peak of the Air Base during the
highest usage days of each biling cycle. Because of the way the Program is operated,
and the hours and days the units are actually cycled, this is unlikely. Secondly, even if
the AC Cycling Program offered to the Air Base does reduce the Air Base's peak billng
demand, this is one of the goals of the Program and indicates the Program is operating
effectively. Almost all energy effciency and demand response programs reduce the
participants' energy usage and/or demand - that is the point. Reduced billng demand
helps incent customers to participate in energy effciency and demand response
programs.
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
Magnitude of Cost-Effectiveness - Staff also stated, "Staff believes prudent
program management requires not only that programs be cost-effective, but that they be
as cost-effective as practicable." Staff Comments at 4. As stated above, Idaho Power
uses the standardized Total Resource Cost and the Utility Cost tests as set out in the
CSPM and the End-Use TAG to determine if energy effciency and demand response
programs are cost-effective. For any program, if the TRC and UC test benefit/cost
ratios are greater than one, that program is determined to be cost-effective for the
Company and all Idaho Power customers.
Idaho Power has used this method of cost-effectiveness screening to select and
evaluate programs for many years. The Company selected the majority of its energy
effciency and demand response programs through the Integrated Recourse Plan
("IRP") process, and in conjunction with the Energy Effciency Advisory Committee. As
stated in the 2004 IRP:
Idaho Power Company has worked with the Energy
Effciency Advisory Committee and outside consultants to
identify potential demand-side programs that may be cost-
effective. Potential programs were identified in all four major
customer classes - residential, commercial, irrigation, and
industriaL. The pre-screening analysis resulted in eight DSM
options -six energy effciency options and two demand
response- that had benefit to cost rations greater than 1.0.
2004 IRP at 56, See also, 2006 IRP.
Idaho Power is not only committed to pursuing all cost-effective energy effciency
and demand response programs but also committed to providing programs to all
customer sectors. Beginning in 2002, the Commission has directed Idaho Power and
the Energy Efficiency Advisory Group to "create and implement a balanced portolio of
DSM programs for all customer classes over the long-term." Order No. 29065. If
IDAHO POWER COMPANY'S REPLY COMMENTS ~ 6
prudency were measured on the magnitude of cost-effectiveness, the Company would
pursue only a few very cost-effective programs, most likely in one sector. Since 2002,
Idaho Power has implemented six energy effciency programs and two demand
response programs. These programs have all been screened and/or evaluated based
on having a TRC and UC cost-benefit ratio greater than one. Idaho Power currently
offers programs to all sectors.
3. Post Installation Evaluation of the Program
Lack of Individual Meters - Staff was also concerned about the effects of
evaluating the program, once started, because of the lack of individual meters for the
residences. Staff stated, ". . . it is noteworthy that the Air Force Base's residences are
not individually metered and thus Idaho Power wil not be able to determine individual
residence historical or current energy usage. It is not clear how Idaho Power wil even
know whether or not participating residences are occupied." Staff Comments at 3.
"Staff believes that lack of sub metering at individual Air Force Base homes may
increase the diffculty and uncertainty of the Company's post-100 home analysis." Staff
Comments at 4.
Historical energy usage is used as a factor when considering if a Schedule 1,
residential customer, once they request to participate in the program, is a suitable
residence for installation of the equipment and participation in the program offered by
Schedule 81. This information is not necessary for the residences located on the Air
Base because the Company did a site visit and inspected the various residences that
make up base housing, and determined that the residences were suitable for installation
of the equipment and participation in the program.
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
More importantly, the fact that the Air Base residences do not have whole house
meters wil not affect any post installation analysis of the program because any post
analysis wil be conducted, as it is with all Schedule 81 participants, with the use of data
loggers for load use information. A data logger is a small device, approximately the size
of a cell phone, installed by the Company at a residence's Air Conditioning unit that
records energy usage for that specific Air Conditioning unit. The Schedule 81 program
has been heavily evaluated and analyzed. The Company hired a third-part consultant
to evaluate and report on the savings from the AC Cycling Program in 2004, 2005, and
2006. In 2004 a sample of whole house load research meter data and in home
temperature data was used to evaluate the savings to assess the Program. The
consultant and Idaho Power realized through the 2004 analysis that whole house meter
data did not have as good of a resolution as desired to analyze the demand savings. In
2005 and 2006, end use data loggers attached to a sample of participants' AC units
were used to analyze the Program, and provided much more useable data. In all of
these studies the day-to-day occupancy of the participating houses was unknown. The
fact that Air Base homes do not have whole house meters wil not affect the post
installation analysis of the Program because any post analysis wil depend on end use
data loggers for load use information.
Additional Installations - Staff also stated, "Under the assumption that Idaho
Power must also be 'comfortable with how the program operates' with the first 100
homes, the Company should determine whether the terms of the Agreement are likely
to maximize cost effectiveness for its total body of customers before it allows more Air
Force Base homes into the Agreement." Staff Comments at 4. Idaho Power is
IDAHO POWER COMPANY'S REPLY COMMENTS - 8
comfortable with how the Program wil operate. As previously stated, the Company's
approach is to attempt to treat the residences located on the Air Base as non-
discriminatory as possible compared with residences located off of the Air Base. Idaho
Power intends to operate, analyze, and evaluate the Program under the Agreement as
part of the overall AC Cycling Program. The Company does not plan any change, at
this time, in the terms of the Agreement after the first 100 homes are installed. The
Availability as specified in the Agreement is "Service under this Agreement wil be
available to Customer's residential housing units (base housing) that have Central Air
Conditioning located at the Residences." Agreement at 2.
4. Prudency of Implementing the Program
Idaho Power requests, with the filing of the Agreement in this case, that the
Commission approve the Agreement that provides for the implementation of the AC
Cycling Program for the Air Base, i.e., that the Commission find this to be a prudent
program to pursue and implement. After a highly critical analysis by Commission Staff
which called into question the prudency of the Program for the Air Base, and the
Company's consideration of the same, Staff ultimately states:
Nevertheless, Staff suggests this Application is not the
appropriate case for prudency of the Agreement to be
judged. Staff wil analyze the reasonableness of Idaho
Power's planning, implementation and evaluation of all of its
energy effciency and demand response programs, including
this one, during the usual course of a future rate case.
With due consideration of the above caveats, Staff is not
opposed to the Agreement.
Staff Comments at 5.
IDAHO POWER COMPANY'S REPLY COMMENTS - 9
The Company would respectfully disagree. The purpose of filing this case with
the Commission is to gain approval of the Agreement and have the prudency of
implementing the described Program determined. If Staff believes that the Program, or
Idaho Power's consideration of the Program, is not prudent, why would it recommend
that it be implemented? If the Commission determines that this is not a prudent
program to pursue, then the Company wil not move forward with its implementation.
The Company is confused by Staffs reaction to this proposed .Ioad reduction
program. The AC Cycling Program is one of the more successful programs that has a
direct result of reducing peak energy usage during the most costly time of year, the
summer peaking season. However, it only operates during the months of June, July,
and August. As stated above, the Company has worked dilgently since approximately
February of this year to reach an agreement with the Air Base for this program, and
timing has always been a big consideration. The final, signed Agreement was not
obtained until May 23 and was filed with the Commission that same day. Unfortunately,
the matter did not appear on the next three decision meetings and over thirt-three (33)
days after the initial filing, it was Noticed for Modified Procedure with a 21-day comment
period. Staff used the fift-four (54) days to write comments that concluded that the
Company should have driven a harder bargain and reduced the benefits the Air Base
wil receive from participating in a cost-effective, energy effciency program. The
Company knew that it would be impossible to process a case and possibly have the
Program in place for the entire summer season, but was hopeful that it could at least
have July and August participation. Because of the processing time, that has been cut
IDAHO POWER COMPANY'S REPLY COMMENTS -10
down to possibly one month, August. The lost opportunity cost of the possibility of
having 850 residences participating in the Program for the month of July is significant.
5. Conclusion
The Company is confident that the possible inclusion of up to 850-1100
residential homes on the Air Base into the AC Cycling Program wil be a cost-effective,
beneficial, and a welcome addition to a successful load control program that saves
energy during the Company's most costly time to provide that energy to its customers.
The Company's intent is to operate the Program in conjunction with and as closely as
possible to the currently offered Schedule 81 service. Obviously, there are some
differences and adjustments that were required because of the fact that the residences
on the Air Base are not technically customers of the Company and reside behind the Air
Base's Schedule 19 service. However, the Company believes that this Program is cost-
effective, that the residences are compatible with how the AC Cycling Program
operates, that this is a prudent load reduction program to pursue, and that the Company
acted reasonably and prudently in reaching this Agreement with the Air Base.
The Company respectfully requests that the Commission issue an Order: (1)
finding that the Air Conditioner Cycling Program for Mountain Home Air Force Base is a
prudent Program for the Company to pursue and implement and (2) approving the
Agreement between Mountain Home Air Force Base and Idaho Power attached as
Exhibit 1 to the Application.
Respectfully submitted this 24th day of July 2008.~t(W~
DONOVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 24th day of July 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 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
--Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-X Email Weldon.stutzmantãpuc. idaho.gov
~ 4l fkkí ~
Donovan E. Waïk
IDAHO POWER COMPANY'S REPLY COMMENTS - 12