20080716Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN
ORDER AUTHORIZING AN AIR
CONDITIONER CYCLING PROGRAM
AGREEMENT FOR MOUNTAIN HOME AIR
FORCE BASE.
)
) CASE NO. IPC-E-08-12
)
)
) COMMENTS OF THE
) COMMISSION STAFF
)
COMES NOW the Staf of the Idaho Public Utilties Commission, by and through
its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 30582 on
June 25, 2008, submits the following comments.
BACKGROUND
On May 23,2008, Idaho Power Company (Idaho Power, the Company) fied an
Application requesting Commission approval of an Air Conditioner Cycling Program Agreement
(Agreement) for Mountain Home Air Force Base. Idaho Power curently operates a residential
air conditioning cycling program under tarff Schedule 81. That program is an optional service
that allows the Company to cycle paricipating customers' central air conditioners by use of
direct load control devices. The Application states that durng 2007 approximately 13,600
STAFF COMMENTS 1 JULY 16, 2008
customers paricipated in the program and the Company estimates the program reduced demand
in July 2007 by 10.8 MW.!
Idaho Power and Mountain Home Air Force Base executed the Agreement to provide an
air conditioner cycling program on base housing similar to the Schedule 81 program, which is
available only to Schedule 1 residential customers. The Air Force Base is a Schedule 19 large
power service customer and provides electricity to approximately 1,100 individual residences on
base property. The Agreement allows qualified Air Force Base residences' air conditioners to be
cycled by Idaho Power much the same way as Schedule 81 curently operates. The Air Force
Base would receive a $7 per month credit for June, July, and August for each residence in the
program. However, the Agreement provides for a single, cumulative credit on the Air Force
Base's September bil at the end of the air conditioning season. Other differences noted in
Application between the Agreement and Schedule 81 are that the Air Force Base will be
responsible for notifying occupants of its residences in the program and the Air Force Base may
request to add or remove residences from the program at any time, while the individual
residences will not have Schedule 81's one day per month "opt out" opportunity.
STAFF REVIEW
In response to a Staff query, Idaho Power stated:
.. .no additional cost effectiveness or business case analyses were
performed. There is no significant difference in this type of
installation and a normal home installation that would affect the
costs incured or benefits received. The cost-benefit would essentially
be the same as adding the same number of residential customers to the
program that were not on the Air Base.
Neverteless, Idaho Power fuher 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.2
i The Company clarifed that if the 13,600 paricipants who were enrolled by December 2007 had all been enrolled
in July 2007, then the Company estimates that the peak load reduction in that month would have been 15 MW
(about 1. kW per participant). (Lynn Anderson's telephone conversation on 7/14/08 with Pete Pingily, Customer
Research and Analysis Leader.)
2 Based on or directly quoted from June 5, 2008, e-mail from Courtey Waites, Idaho Power Pricing and Regulatory
Services, in response to June 2, 2008, e-mail query from Lyn Anderson.
STAFF COMMENTS 2 JULY 16, 2008
Idaho Power's responses to additional Staff questions revealed that as a result of the
Agreement, the Air Force Base likely will reduce its Schedule 19 Primar Service monthly
demand charge ($3.36 per kW) and on-peak demand charge ($0.44 per kW). Thus, for the 850
expected "paricipating" residences, the Air Force Base could reduce its total demand charges by
about $3,553 per month (850 x 1.1 kW x $3.80) in addition to receiving a $5,950 per month
credit from the $7 per participating residence.3 Curiously, demand charge revenue losses were
not mentioned in the Application. Considering the Air Force Base's likely reduction in demand
charges, it quite possibly would have signed an AC cycling agreement for less than the $7 per
month per paricipating residence that was determined to be necessar in the residential Schedule
81 program. The Application states that the Air Force Base expressed interest in the AC cycling
program and the Agreement was executed (pp. 2-3). There is no indication that Idaho Power
attempted to negotiate a lower incentive payment in consideration of the likelihood of reduced
demand charges.
The Agreement states: "The Company shall have the right to select and reject Program
paricipants (Residences) at its sole discretion based on criteria the Company considers necessar
to ensure the effective operation of the Program. Selection criteria may include, but wil not be
limited to, energy usage..." (Agreement, Availabilty, p.2) In spite of this language in the
Agreement and notwithstanding that the Company normally selects paricipants in the Schedule
81 program based in par on historical energy usage, 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 curent energy usage. It is not clear how Idaho Power will even
know whether or not paricipating residences are occupied.
Staff notes that according to the Definitions section of the Agreement "Cycling Events
occur during a four hour period between 3:00 p.m. and 7:00 p.m. ..." (Agreement, p. 1), while the
Program Description (p. 3) states: "A Cycling Event may occur over a continuous 4-hour period
or may be segmented throughout the day at the Company's discretion in order to optimize
available resources." In its explanation of this discrepancy, Idaho Power said that the 3:00 p.m.
3 The Application mentions approximately 1,100 Base houses, but Idaho Power's 6/5/08 e-mail response suggests
that 850 occupied homes might eventually paricipate in the Agreement. In a 6/20/08 e-mail response to Staffs
6/18/08 query, Idaho Power provided data showing that the Air Force Base's 15-minute peak demands for June, July
and August of 2006 and 2007 occurred consistently between 2:30 p.m. and 4 p.m., which generally coincides with
the times that Idaho Power says it typically schedules AC cycling events.
STAFF COMMENTS 3 JULY 16, 2008
to 7:00 p.m. reference was intended as "typical" practice, rather than as a restriction. Staff does
not know if the Air Force Base's understading of cycling events is the same as Idaho Power's.
CONCLUSION AND RECOMMENDATIONS
The Application did not include data or analysis to demonstrate that this Agreement will
be cost-effective from the perspective of all Idaho Power customers. As previously noted, in
response to a Staff query, Idaho Power acknowledged that it did no such analysis. Staff is aware
that in 2005 the Company reduced the monthly credit for Schedule 81 paricipants by $3 per
month (from $10 to $7) to enable that AC cycling program to be cost-effective, while
maintaining sufficiently high paricipation.4 Staf is concerned that Idaho Power has given no
indication that it dilgently negotiated the amount of the Agreement's monthly credit in
consideration of the Air Force Base's Schedule 19 customer status. Staff believes prudent
program management requires not only that programs be cost-effective, but that they be as cost-
effective as practicable. The Company does not appear to have thoroughly evaluated the
necessity of extending the same $7/month/ouse incentive, said to be cost-effective for the
residential program, to the Air Force Base, which will likely also benefit from substatial
demand charge reductions.
Staffhas some misgivings about Idaho Power's apparent lack of thorough pre-
implementation analysis of the Agreement. However, in its June 5 response to a Staf question
the Company did state: "The initial instalation (of AC load control devices) would be at
approximately 100 homes. Once the (Air Force Base) is comfortable with how the program
operates, there would be approximately 750 more occupied homes that could be included in the
program." 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 believes that the lack of sub-
metering at individual Air Force Base homes may increase the diffculty and uncertinty of the
Company's post-l 00 home analysis.
4 In IPC-E-04-27 the Company's Application said that the proposed Schedule 81's benefit cost ratio with a $7 credit
was expected to be just 1.07 by the 10tl year and increase to 1.42 over a 30-year period.
STAFF COMMENTS 4 JULY 16, 2008
Neverteless, Staff suggests this Application is not the appropriate case for prudency of
the Agreement to be judged. Staffwill analyze the reasonableness of Idaho Power's planng,
implementation and evaluation of all of its energy efficiency 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.
Respectfully submitted this i~Ll day of July 2008.
4.1 1~-..~
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Lynn Anderson
i:umisc:commentsipce08.12wsla
STAFF COMMENTS 5 JULY 16, 2008
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 16th DAY OF JULY 2008,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-08-12, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOV AN E WALKER
BARTON L. KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: bkline(ßidahopower.com
dwalker(ßidahopower .com
JOHN R GALE
VP - REGULATORY AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rgale(ßidahopower.com
CERTIFICATE OF SERVICE