20120119Compliance Filing of Time Variant Pricing.pdf

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IDA~POe
An IDACORP company
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LISA D. NORDSTROM
Lead Counsel
Inordstrom(êidahopower.com
January 19, 2012
Jean D. Jewell, Secretary
Idaho Public Utiities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Compliance filing of Time Variant Pricing Implementation Plan
Case No. IPC-E-08-16
Dear Ms. Jewell:
As of December 31, 2011, Idaho Power Company ("Idaho Powet' or "Company")
has completed deployment of its Advanced Metering Infrastructure ("AMI") system.
Attached is a Time Variant Pricing Implementation Plan ("Plan") filed to comply with the
following directive from Order No. 30726:
The Commission directs Idaho Power to submit a report detailng the
Company's plan to introduce its Time of Day, Energy Watch and/or other
pilot programs throughout its service territory once the requisite AMI
technology is fully deployed.
The overall goal of the 2012 Time Variant Pricing Implementation Plan is to
utilize the new AMI system and offer customers additional choices that will help them
better manage their energy usage. The Company will use this opportunity to further
study the effects of a time variant rate offering on customers' usage, to refine the
Company's communication efforts and to examine impacts on Company revenues.
Idaho Power plans to begin the implementation of the Plan by introducing Idaho
customers to the Time-of-Day pricing option in 2012. This offering will be limited to
those customers served by AMI equipment and wil be capped at 1,200 participants.
Potential participants will be randomly selected and solicited via a direct mail letter.
Invitees will be directed to access the Idaho Power web site and Energy Use Advising
Tool to explore rate options. The first geographic area to be targeted for solicitations is
the greater Boise area. This area was the first to have AMI meters installed and
customers in this area have at least 12 months of historic usage for pricing option
comparison purposes. Then, in 2013, Idaho Power plans to further expand customer
options by offering the Energy Watch pricing option to Idaho customers.
P.O. Box 70 (83707)
1221 W. Idaho St.
8oise. 10 83702
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
January 19, 2012
Page 2
Simultaneous to this compliance filing, Idaho Power is filng Tariff Advice No. 12-
02. This tariff advice requests modifications to Schedules 1, 4, and 5, that are
necessary to implement the Time Variant Pricing Implementation Plan.
If you have any questions regarding this 2012 Time Variant Pricing
Implementation Plan, please contact Darlene Nemnich at 388-2505.
Sincerely,
eX-. !1 '1 1J-l
Lisa D. Nordstrom
Lead Counsel
LDN:kkt
Enclosures
cc wI encls: Greg Said
RA File
Legal File
ÆSIDA~POe
An IDACORP Company
2012 Time Variant Pricing
Implementation Plan
Idaho Power Company 2012 TVP Rollout Plan
1. Executive Summary
In 2012, Idaho Power Company ("Idaho Power" or "Company") wil begin offering an expanded
Time Varant Pricing ("TVP") plan to residential customers in the Idaho serice terrtory. This
offerng wil be limited to those customers having Advanced Meterng Infrastrctue ("AMI")
equipment installed and wil be capped initially at 1,200 paricipants. Customers wil be invited
to paricipate in this pricing plan via a randomly selected list and a direct mail letter. Invitees
wil be encouraged to access the Idaho Power web site and the Energy Use Advising Tool
("EUAT") to assist them in determining if the pricing option would be advantageous for them.
The first geographic area to be targeted is the greater Boise metropolitan area because customers
in this area were the first to have AMI meters installed and have at least 12 months of historic
usage for plan comparson puroses.
The overall goal of the 2012 TVP Implementation Plan is to utilize the new AMI system to offer
customers a choice of pricing plans while providing them with better tools to manage their
energy usage, to provide the Company with the opportity to further study the effects of a time
varant rate on customers' usage, and to help shape the Company's future communication efforts.
This implementation project wil also provide an opportnity to evaluate the impact of this new
rate offerng on Company revenues and costs.
2. TVP Plan Offering
Idaho Power curently has two residential time varant pricing tarffs: Schedule 5, Time-of-Day
Pilot and Schedule 4, Energy Watch Pilot. Both pricing tariffs have seasonal Peak and Off-Peak
rates and the Energy Watch Pilot includes a critical peak price during the summer season. Both
of these tariffs wil be modified for use in this implementation plan.
Time-of-Day Plan
In March 2012, Idaho Power plans to remove the geographical limits currently imposed by
Schedule 5 and begin a limited offering of the Time-of-Day pricing plan to Idaho residential
customers. This plan wil be offered on an optional, voluntar basis with no minimum usage
requirement. The only requirement is that an AMI meter exists at the customer's residence.
Idaho Power proposes this pricing option be offered as a pilot in order to be able to limit the
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2012 TVP Rollout Plan Idaho Power Company
number of paricipants until Idaho Power's new customer biling and information system is in
place and in order to study TVP impacts on customer usage as well as Company costs and
revenues.
The Time-of-Day plan uses curently approved hourly pricing in the sumer and non-summer
months. The curent rates in this tarff approved Januar 1,2012, are:
Service Charge, per month $5.00
Energy Charge, per kWh Summer Non-Summer
Peak 1i.3500~ 8.2261~
Off-Peak 6.2582~ 6.2582~
Durng the summer season, June 1 through August 31 st, Peak hours are 1 :00 p.m. to 9:00 p.m. on
weekdays and all other hours are Off-Peak. During the non-sumer season, September 1
through May 31, Peak hours are 7:00 a.m. to 9:00 p.m. on weekdays, with all other hours being
Off-Peak. Holidays, as defined in the tarfT are Off-Peak.
The Time-of-Day pricing plan is designed to send price signals to customers that more closely
reflect the costs of sering those customers. The Time-of-Day plan also provides customers the
opportity to take control of when they use energy and possibly lower their bil by shifting
usage to lower cost time periods.
Suspension of Energy Watch Plan
Idaho Power is proposing to suspend the current Energy Watch Pilot tarff, Schedule 4, for
approximately one year. The Company plans to file in early 2013 to withdraw the temporary
tarff suspension.
The reason Idaho Power is offering only the Time-of-Day plan in the first year is to simplify the
offerng and make it easier for customers to understand. This phased-in approach provides
residential customers time to evaluate and value the benefits of a time variant rate compared to
their curent tiered rate design. Other utilities implementing TVP offerings have reported that
when a new pricing structue is introduced to customers, rollout is more successful when new
concepts are gradually introduced to customers. When only one option is provided, information
is easier for customers to understand and evaluate.
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Idaho Power Company 2012 TVP Rollout Plan
The Company believes that customers wil be more accepting of the transition to time varant
pricing if customers can become more comfortable with how they use energy under this
approach followed by the implementation of additional pricing options. It is expected that the
rollout wil be more successful iftime-of-use rates are introduced first so customers can become
more comfortable with how they use energy on an hourly basis. This approach makes sense
because the Energy Watch plan is a more complicated rate design with critical peak pricing
layered on top of a time-of-use rate. Because the Energy Watch plan has time varng rates all
year similar in strcture to the Time-of-Day plan, its introduction a year later should be easier for
customers to understand and adopt.
By delaying the implementation of the Energy Watch plan, Idaho Power wil be able to evaluate
proper integration of a critical peak pricing program with other options provided for the
Company's residential customers (i.e., how Energy Watch, and the Company's residential
demand response program (AIC Cool Credit), can best work together). The delayed star of the
Energy Watch plan wil also provide the Company time to evaluate the value of the Energy
Watch plan in comparson to other demand response resources.
Limited Enrollment
Idaho Power is planning a "soft" rollout of the Time-of-Day rate plan by limiting the number of
enrollments to 1,200 for the 2012 calendar year. With the current Idaho Power Customer
Information System (CIS) in place, the processes necessar to enoll a new customer onto a TVP
pricing plan are manual and time consuming. An enrollment cap is needed because of employee
resource and system limitations caused by the current customer information system. The 1,200
paricipation cap eliminates the possibility of having to add personnel only for this task. Idaho
Power is in the process of implementing a new customer biling system which wil be more
flexible in its ability to handle the new rate designs. The Company is planning to transition into
the new biling system at the end of 2012. The new customer biling system wil have the
functionality to process new customers to time varant rates more easily and rapidly, enabling the
Company to expand its TVP offering in 2013.
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2012 TVP Rollout Plan Idaho Power Company
3. Customer Enrollment
Idaho Power wil initiate its TV expansion by providing a sample of customers a direct mail
letter that wil include educational material descrbing the rate plan and what customers should
consider when evaluating whether to sign up for the Time-of-Day plan or whether to stay on the
Standard plan, Schedule 1.
Customers wil be invited to go to a link on the Idaho Power web site where they wil be
encouraged to sign into Account Manager and then into the new Energy Use Advising TooL. The
EUAT wil calculate monthly and anual bils for each customer under the curent Standard plan
and the Time-of-Day plan using their actual 12-month historical energy usage. A simple
calculator provided on the web site wil help customers determine the impact on their bil if they
use energy the same as the previous year or if they can shift a percentage of their usage to the
Off-Peak hours. Suggestions of actions necessar to make these changes wil also be provided in
the EUAT.
If customers decide they want to go on the new rate, they wil be encouraged to sign up on the
Company's web site. There wil also be a dedicated phone number for customers to call to sign
up over the phone or to ask for further information.
Informational materials and messaging wil be tested and refined durng this initial rollout year.
4. Participant Selection
For customers to properly evaluate whether or not to elect to go on the new pricing plan, it is
preferable for them to have at least 12 months of hourly usage available on the web in the EUAT.
Because the AMI meters were installed in specific areas across Idaho Power's serice tertory
over the three-year AMI implementation timeline, Idaho Power's direct mail invitation process
wil be first offered in those areas that have at least 12 months of historic hourly usage
information. The first waves of direct mail invitations wil target the first geographic area which
received AMI meters which are the Boise, Garden City, Eagle, Star, Meridian, Nampa, and
Middleton areas.
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Idaho Power Company 2012 TVP Rollout Plan
Based on the experience of other utilities when soliciting paricipation for pricing options, Idaho
Power expects around a 2-3 percent sign-up rate in response to the direct mail letters. With a 2-3
percent sign-up response, approximately 40,000 to 60,000 invitation letters wil need to be sent
out in order to achieve 1,200 paricipants. In order to manage the workload on the Customer
Serice Center, Idaho Power wil modulate the size and frequency of the direct mail "waves"
sent to residential customers.
The customers invited to paricipate wil be randomly selected from a sample population which
wil be stratified for the offering and for the subsequent analysis according to usage
characterstics of the entire Idaho Power residential customer population. In this way, Idaho
Power can use the resulting data from paricipants to help predict the overall acceptance of this
rate introduction as it is subsequently rolled out to the Company's entire residential class.
Once the entire 1,200 pilot paricipants are signed up for the rate, a closely matched control
group wil be selected to aid in evaluating effects of the pilot versus the overall residential
population.
The only general exclusion from this initial process is to customers who are identified as renters.
Rental customers generally move from one place to another at a high frequency. As mentioned,
the processes necessary to sign up a new customer onto a TVP pricing plan is ver manual and
time consuming. Rental customers wil remain eligible under the tarff; however, they wil not
be a part of the selected sample determination because of this constraint. It is anticipated that
after the new biling system is installed, this constraint wil not exist.
Idaho Power also plans to make this tarff available to owners of electrc vehicles ("EV")
throughout its Idaho serice tertory. Although Idaho Power has no direct way to determine who
owns an electric vehicle at this time, educational information about the Time-of-Day pricing plan
wil be provided to car dealerships to pass on to new EV owners. Idaho Power plans to
encourage residential customers who purchase an electrc vehicle to consider a time varant
pricing option. On the Time-of-Day plan, customers can charge their cars durng Off-Peak
hours, pay a lower rate, and receive a lower bil than if they charged their car durng Peak hours
and paid Peak hour rates. If customers charge their cars during Off-Peak hours instead of Peak
Page 5
2012 TVP Rollout Plan Idaho Power Company
hours, it wil reduce the potential negative impact of this new end-use load on the Idaho Power
system.
Even though the focus of the 2012 rollout will primarly be on customers invited from the
selected geographic area and, secondarly, on customers with electrc vehicles, other paricipants
wil not be excluded and can be analyzed separately from the customers in the targeted rollout.
At this time, customers electing to go on the Time-of-Day plan canot be a net metering
customer. This is due to the limitations of the current biling system which canot bil the
negative meter readings that could potentially occur if a customer's generation was greater than
his or her consumption.
Customers on the Time-of-Day plan are eligible to participate in the Company's residential
demand response plan, the AlC Cool Credit program.
The Emmett Valley customers who were previously on the Time-of-Day and Energy Watch
pricing plans have been transitioned to the Standard plan, Schedule 1. Because they had meters
that were incompatible with the time varant measurng component configuration of the proposed
new rate design, Idaho Power changed their meters to the new AMI meters and they now have
the correct component configuration. Idaho Power personnel wil work with each customer
previously on a time varant schedule in Emmett to explain the new TVP plan and determine if
they want to enroll under the revised Schedule 5.
5. Financial and Usage Impact
As par of this implementation plan, Idaho Power wil set up a study for the purpose of analyzing
the impacts of time varant pricing on paricipant usage patterns, identifying customer response
to different communication messages, and evaluating revenue impacts.
The expanded offering of TVP plans to residential customers may have a financial impact on
Idaho Power resulting from changes to costs and revenues. Idaho Power first raised this issue in
Case No. IPC-E-05-02, the request for the TVP pilot program in Emmett. The Commission, in
Order No. 29737, approving the pilot program stated: "However, the Company stated that the
issue of lost revenues, and any mechanism that may be adopted to address lost revenues, should
Page 6
Idaho Power Company 2012 TVP Rollout Plan
be fully investigated if either pilot program becomes permanent or is expanded beyond its
current scope." Idaho Power's TVP implementation team wil develop an analysis of the
potential financial impacts resulting in an expansion of TVP rate options to residential customers
and propose ways to address revenue requirement deficits after completion of the analysis. The
following section explores these issues.
Short-Term Adjustment Due to Customer Transitions
Customers selecting to participate in the TVP offerings may be "strctual winners" or "losers"
in that they wil experience bil reductions or increases, respectively, with no change in usage
patters. In this case, for each customer whose bil changes by simply changing rate options
without changing usage patters there is an equal revenue impact to the Company.
Given that time-of-use rates are intended to reflect costs to serve, it can suggest that a customer
who is a strctual winner by moving to a time-of-use rate and does not change their
consumption patterns, then they were paying more than their true cost-of-servce, and in essence,
subsidizing other customers within the class. Alterately, if a customer would be a structural
loser by moving to a time-of-use rate, that would suggest they were paying below their tre cost-
of-service and may not choose to paricipate. These customers may prefer to remain on the
standard plan and continue to receive the intra-class subsidy.
Idaho Power conducted a preliminary study to estimate the potential revenue impact on the
Company due to the movement of customers from Schedule 1 to Schedule 5. The 2011 hourly
kWh data from the 250 customers in the Company's existing residential load research sample
was used as representative data of the total Idaho Power residential customer population. For
each of the customers in the load research sample, both Schedule 1 base rates and Schedule 5
base rates were applied to the hourly usage. A monthly and anual bil was calculated for each
customer for both rate plans. From this data, a delta was calculated showing how much the
anual bil for each customer would decrease or increase on an anual basis, both in total dollar
amount and in percent, by moving from Schedule 1 to Schedule 5. No change in energy usage
was assumed. Calculating these bil impacts as a percent of the Standard Schedule 1 bil
produces the following spread:
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2012 TVP Rollout Plan Idaho Power Company
Bilg Impact of Moving From Schedule 1 to 5
Number of Customers
Range: 9.3 percent increase to -14.2 percent decrease
Percent Bil Impact Customers
Greater than 9% Increase 1
Between 5% and 9% Increase 21
Between 0% and 5% Increase 116
Between 0% and 5% Decrease 79
Between 5% and 9% Decrease 26
Greater than 9% Decrease 7
Total dollar impact of each customer in the data set is plotted below.
Load Research Sample Annual Bil Impact moving
from Schedule 01 to OS, sorted by $ impact
$100.00
$0.00
-$100.00
-$200.00
-$300.00
-$400.00
-$500.00
-$600.00
-$700.00
Average -$24.43 $47.65
ai æ ~ ~ ~ ~ ro ~ ~ ~ ~ $ ~ ~ m B ~ ~ ~ m ~ ~~~~~~~~~~~~~NNNNNNN
Page 8
Idaho Power Company 2012 TVP Rollout Plan
As this graph shows, the largest anual bil reduction was $651.25 and the largest anual bil
increase was $47.65, while the average impact for the 250 customers in this sample was a bil
reduction of$24.43.
Expanding this "average" impact to 1,000 plan participants (for ease of using this analysis, 1,000
paricipants is used instead of 1,200 paricipants), the aggregate bil reduction for these 1,000
customers would correspond to a revenue reduction for the Company of $24,430.
However, it is counterntuitive to assume that customer wil elect to move to a new rate
strcture if they know they wil increase their bil. If all customers who are "strctual losers,"
are excluded, the range of anual bil impacts for the "structual winners" is from an anual bil
reduction of $1.03 to an anual bil reduction of $651.25. The potential range of revenue
reduction in this case for 1,000 new TVP customers is from approximately $1,000 to as high as
$650,000. The average annual impact of strctural winners is about $78.00 or a $78,000 revenue
reduction for 1,000 paricipants.
Price Elasticity Impact
Some customers may shift or shave usage in response to hourly price signals in order to lower
their bil. When this happens, there is reduction in revenue for the Company; however, there is
also reduction in expenses for the Company (because energy is not being provided during the
higher cost Peak hours). There is also the possibility that customers may increase Off-Peak
energy usage in response to lower prices, for example, by adding electric vehicle charging.
Understanding and quantifyng these changes is critical as more customers adopt TVP pricing
options. Over time, usage change in response to prices that are set closer to the cost-of-service
should increase system effciency.
The short term adjustment and price electrcity impacts briefly discussed above may also have an
impact on Idaho Power's existing mechansms such as the Power Cost Adjustment, Fixed Cost
Adjustment, and Load Change Adjustment Rate. Therefore, the Company plans to conduct a
comprehensive financial and usage impact analysis in order to propose a future tre-up
mechanism.
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2012 TVP Rollout Plan Idaho Power Company
6. Projected 2012 Timeline
J anuar/F ebruar
. File tarff and request approval
. Prepare web site for presentation
. Develop communication material
. Prepare sample for customer invitation
Marchi April
. Begin sending first invitation letters
. Prepare database for analyses
May/June/July/ August/September
. Expand rate plan to continue customer enrollment
October/November/December
. Evaluate customer adoption patterns
. Begin selecting customers for control group
. Evaluate any customer kWh usage impacts
. Study revenue impacts
. Prepare for 2013 implementation plan
7. Future Plans
After the 2012 rollout activities, Idaho Power expects to expand the time variant pricing offering
to more customers. In early spring 2013, Idaho Power wil file to add Schedule 4, Energy Watch
plan, as an optional rate available to residential customers. With the implementation of the new
biling system, the Company plans to be able to offer the TVP plans to more residential
customers in the Idaho service terrtory. Research conducted in 2012 wil assist in refining
customer messaging and in ensuring effective evaluation tools are provided to customers. With
the data gathered in 2012, Idaho Power wil be able to more clearly indicate the impacts on
revenue and costs due to the implementation of the optional TVP rate plans.
Page 10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 19th day of January, 2012, I served a true and
correct copy of the within and foregoing 2012 TIME VARIANT PRICING
IMPLEMENTATION PLAN upon the following named parties by the method indicated
below, and addressed to the following:
Commission Staff
Neil Price
Deputy Attomey General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
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U.S. Mail
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FAX
-- Email neil.pricecæpuc.idaho.gov
The Kroger Co.
Michael L. Kurtz
Kurt J. Boehm
BOEHM, KURTZ & LOWRY
36 East Seventh Street, Suite 1510
Cincinnati, Ohio 45202
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FAX
.. Email mkurtcæBKLlawfirm.com
kboehmcæBKLlawfirm.com
Kevin Higgins
Energy Strategies, LLC
215 South State Street, Suite 200
Salt Lake City, Utah 84111
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~¿.Q1(l~
Lisa D. Nordstro
CERTIFICATE OF SERVICE, Page 1