20090302Application.pdf

~IDA~POR~
1\\(j~
An IDACORP Company
BARTON L. KLINE
Lead Counsel
March 2, 2009
VIA HAND DELIVERY
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-09-02
IN THE MA TTER OF IDAHO POWER COMPANY'S APPLICATION FOR
APPROVAL OF AN AGREEMENT TO IMPLEMENT A COMMERCIAL
DEMAND RESPONSE PROGRAM.
Dear Ms. Jewell:
Enclosed please find for filing an original and seven (7) copies of Idaho Power's
Application in the above 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.
Ve;/
. \¡ ,, '
\ivBarton L. Kline
BLK:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise, ID 83702
..
BARTON L. KLINE, ISB #1526
LISA D. NORDSTROM, ISB #5733
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: 208-338-6936
bkline(âidahopower.com
Inordstrom(âidahopower.com
or.c'r.i 1""..'t-,.I.j_l i,,,
Z009 MAR -2 P~f 2: 25
¡ () ;1; !~,-~ '-1
UTlllT; ËS '-
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 MAnER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF AN AGREEMENT TO
IMPLEMENT A COMMERCIAL DEMAND
RESPONSE PROGRAM.
)
) CASE NO. IPC-E-09-02
)
) APPLICATION
)
)
COMES NOW, Idaho Power Company ("Idaho Power" or "Company") and, in
accordance with RP 052, hereby requests that the Idaho Public Utilities Commission
("Commission") issue. its Order approving an agreement between Idaho Power and
EnerNOC ("EnerNOC") to implement a commercial demand response program
("Program").
This Application is based on the following:
1. Description of Commercial Demand Response Program. The Program is
a voluntary demand response program targeting Idaho Power's commercial and
industrial customers that are willng and able to reduce their electrical energy loads for
APPLICATION - 1
...
short periods (two to four hours) during summer peak days. Participating customers wil
receive compensation for reducing their loads. Any customer with at least 200 kWof
average summer biling demand taking service on Schedules 9 or 19 or under a Special
Contract is eligible to participate.
EnerNOC has been selected by Idaho Power through a competitive RFP process
to implement the Program on a turn-key basis. EnerNOC has successfully implemented
similar programs for other utilities throughout the country. EnerNOC wil enter into
contracts with Idaho Power's customers, in which the customers wil agree to reduce
their respective electrical energy loads when called upon by EnerNOC to do so. Idaho
Power will pay EnerNOC capacity payments to make load reductions available on a firm
basis during summer peak months, and wil pay energy payments for delivery of those
load reductions when Idaho Power calls for them. EnerNOC is responsible for
developing and implementing all marketing plans, securing all participants, installng
and maintaining all equipment downstream of the meter used to reduce demand,
tracking participation, and reporting results to Idaho Power. Idaho Power wil initiate
demand response "events" by notifying EnerNOC, who wil, in turn, supply the
requested load reduction to the Idaho Power system.
Participating customers wil sign a contract with EnerNOC. This contract
specifies the incentives EnerNOC wil pay to the customers, based on the amount of
load reduction they commit to provide. Reductions wil be achieved, either automatically
or manually, through control of energy management systems, raising cooling set-points,
and turning off or dimming lights, signage, and other controllable energy loads.
EnerNOC wil conduct demand response audits with customers to identify areas where
APPLICATION - 2
, ,..
reduction can be achieved. A load reduction plan wil be created for each participant
with the goal of achieving the desired load reduction without negatively impacting
business operations. Participants wil receive monthly capacity payments for having
predetermined kWs of load available for reduction and wil receive event-based
payments based on actual kWh energy reductions. There is no charge to the customer
to participate in the Program. Depending on existing customer metering, pulse initiated
metering may need to be installed by Idaho Power at the customer facility. EnerNOC
wil reimburse Idaho Power for all costs associated with installng the pulse initiated
metering devices, including the cost of the metering devices themselves. Participants
wil have access to a web portal displaying real-time and historical information on their
energy use and demand reductions.
2. EnerNOC - Idaho Power Agreement. Idaho Power has contracted with
EnerNOC to provide specific load reductions during specified times of the year. The
term of the EnerNOC agreement (the "Agreement") is five years. The amounts to be
paid to EnerNOC under the Agreement are based on the value to Idaho Power of
delivered capacity and energy reductions. EnerNOC guarantees performance to Idaho
Power, and will pay liquidated damages under the terms of the Agreement if committed
levels of performance are not achieved. A copy of the Agreement is enclosed herewith
as Attachment No.1.
3. Terms and Conditions of the Agreement.
(a) Term. The term of the Agreement commences on February 23,
2009, and will conclude five years from the commencement date. The Agreement
provides Idaho Power the right to extend the term of the Agreement.
APPLICATION - 3
..
(b) Demand Reduction Commitment. The Agreement specifies a
demand reduction lower bound and a demand reduction upper bound that EnerNOC
must meet for each year of the Agreement. This ranges from a lower bound of 2 MW
and upper bound of 35 MW in 2009, to a lower bound of 35 MW and upper bound of 65
MW in 2013. In addition, Idaho Power and EnerNOC have agreed upon targets for
each year; 2009 through 2013. The targets for demand reduction for these years are 2
MW, 30 MW, 40 MW, 50 MW, and 50 MW, respectively. The 2 MW lower bound and
the 2 MW target of demand reduction for 2009 assumes a Program implementation by
April 2009.
(c) Mandatory Program Availability Hours. Under the Agreement,
Idaho Power wil have the ability, between the hours of 2:00 p.m. and 8:00 p.m.
Mountain Prevailing Time of any non-holiday weekday day between June 1 and August
31 of each program year, to initiate a "program event," for which EnerNOC wil reduce
customer energy use by the agreed upon amount. The Agreement allows Idaho Power
to require demand reduction up to sixt hours per season with up to twenty events per
season. Events can be called once per day with a duration between two and four
hours. Idaho Power wil provide notification of an event to EnerNOC at least two hours
prior to the event. Events are initiated by Idaho Power sending an electronic dispatch
signal to EnerNOC. EnerNOC then notifies customers of the upcoming event bye-mail
or phone. At the customer site, load wil be reduced either automatically or manually.
For some sites, EnerNOC equipment may be activated remotely to initiate and end the
load curtailment. During an event, EnerNOC will use meter data to monitor and confirm
APPLICATION - 4
..
that customers achieve the required reduction. When an event ends, EnerNOC wil
send a restoration notification to customers.
4. Cost of the Program. The total cost of the program over five years wil be
approximately $12.2 millon, based on the number and duration of Program events
expected to occur over the course of the Agreement. The estimated yearly cost of the
Program ranges from just under $315,000 in the first year to nearly $3.5 millon in the
fifth year. Over the course of the term of the Agreement, the parties expect that total
Program costs wil be allocated as follows:
(a) Capacity Payments to EnerNOC 85 percent
(b) Energy Payments to EnerNOC 6 percent
(c) Idaho Power Administration 9 percent
The Program was reviewed with Idaho Power's Energy Effciency Advisory
Group ("EEAG") at its October 2008 meeting. In addition, on February 25,2008, Idaho
Power presented an overview of the Program to a meeting of the Industrial Customers
of Idaho Power.
5. Cost-Effectiveness Analysis. The Company has evaluated the cost-
effectiveness of the Program and concluded that it is cost-effective based on the criteria
previously established by the Commission. A copy of the cost-effectiveness analysis is
enclosed as Attachment No.2.
6. Regulatory Approval. The Agreement wil only become effective when the
Commission issues its Order approving the Agreement without material change or
condition.
APPLICATION - 5
.ti
7. Rate Recovery. Idaho Power proposes that the costs of the Program be
recovered from Energy Efficiency Rider funds. If the Commission decides in the
remaining portion of the Irrigation Peak Rewards proceeding (Case No. IPC-E-08-23)
that the costs of the Irrigation Peak Rewards Program should be recovered through the
Power Cost Adjustment, the same Power Cost Adjustment cost-recovery mechanism
should be used for Program cost recovery.
8. Modified Procedure. Idaho Power believes a hearing is not necessary to
consider the issues presented herein and therefore respectfully requests that this
Petition be processed under modified procedure; i.e., by written submissions rather than
by hearing. RP 201, et seq. If, however, the Commission determines that a technical
hearing is required, the Company stands ready to present its testimony and support this
Application at hearing. To increase the likelihood that the Company could use the
Program to manage demand during the upcoming summer period, the Company
respectfully requests that the Commission process this Application as expeditiously as
is reasonably possible.
9. Communications. Communication and service of pleadings with reference
to this Application should be sent to the following:
Barton L. Kline
Lisa D. Nordstrom
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
bkline(âidahopower.com
Inordstrom(âidahopower.com
John R. Gale
Vice President, Regulatory Affairs
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
rgale(âidahopower.com
APPLICATION - 6
.ti
NOW, THEREFORE, Idaho Power respectfully requests that the Commission
issue a final Order:
(a) Approving Attachment No.1, the Agreement, in its entirety, without
material change or condition;
(b) Authorizing the Company to implement the Program consistent with
the terms of the Agreement; and
(c) Authorizing the Company to recover Program expenses from either
Energy Effciency Rider funds or through the Company's Power Cost Adjustment
mechanism.
Respectfully submitted this 2nd day of March 2009.
~~BART NL
Attorney for Idaho Power Company
APPLICATION - 7
..
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-09-02
IDAHO POWER COMPANY
ATTACHMENT NO. 1
e e
ATTACHMENT NO.1
IS A
CONFIDENTIAL
DOCUMENT
AND
SUBJECT TO THE PROTECTIVE
AGREEMENT
.-
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-09-02
IDAHO POWER COMPANY
ATTACHMENT NO.2
-
An IDACORP Company February 26, 2009
Commercial Demand Response Program Cost-Effectiveness
Cost-Effectiveness Summary
Idaho Power plans to begin a five-year contract with EnerNOC to deliver a specified amount of
annual megawatt (MW) demand reduction during the summer. The program summer season will run from
June 1st through August 31st. EnerNOC's targeted amount of demand reduction will increase each season,
reaching fifty MW in 2012 as shown in chart below. Idaho Power has determined that this commercial
demand response program is cost effective, both from the Utility Cost (UC) and Total Resource Cost (TRC)
perspective, beginning in year two (2010). Due to the extremely short time constraint from contract signing
to the beginning of the 2009 summer event season, Idaho Power believes that year one of the program
should be viewed as a ramp up year. Analysis shows that the program must reach 15 MW for the value in
demand savings to be greater than program costs and be cost effective. Although the TRC in year one is
projected to fall below 1.0, the critical pieces of program infrastructure will be established in the summer of
2009, allowing for a cost effective program in ensuing years. In the remaining years of the contract, the
program will continue to be cost effective. The program is expected to reach full participation in 2012, with
a TRC ratio of 1.12 annually thereafter. Below is a table of annual megawatt goal reduction along with the
corresponding TRC Ratio for the expected case scenario which is explained below. Also included is the total
program present value 5 year TRC ratio.
Year MWGoal TRC Ratio
2009 2 .51
2010 30 1.10
2011 40 1.12
2012 50 1.13
2013 50 1.12
2009 PV 5 Year 1.10
.ti
Program Assumptions
A number of assumptions have been made in determining the cost-effectiveness of this program. These
assumptions are based on Idaho Powers research and EnerNOC's experience with other commercial
demand response programs around the region. Brief descriptions of these assumptions are below. These
assumptions will be modified as actual data is gathered throughout the term of this program.
. Number of Participants
To achieve the full program megawatt reduction of fifty MW, EnerNOC believes that
approximately 250 participants will be included in the program. This could vary depending on
the average load of customers that participate in the program.
. Total Megawatt Potential
Based on the mix of Idaho Powers commercial and industrial customer mix and their
corresponding summer demand, EnerNOC believes that at least fifty MWs are available for
demand reduction for any event called during the summer at full program participation. This is
expected to be achieved in the summer of 2011. For the summer of 2009, the MW goal wil be
dependent on the date of Commission approval and the time available for program marketing
and participant recruitment.
. Number of monthly events
Idaho Powers proposed contract with EnerNOC states that up to twenty events may be called
from June 1st to August 31st of each year. Based on historical summer peak days for Idaho
Power, it is expected that Idaho Power wil call a total of 15 events during these summer
months. With a maximum of 60 hours per event season that is available to Idaho Power, this
would result in event durations of 4 hours for each event called.
. Expected Case Scenario
The majority of the value of this program is derived from the avoided capacity benefits to Idaho
Powers system, while the majority of the cost to Idaho Power results from the contracted
capacity costs paid EnerNOC. The total capacity payment to EnerNOC for the annual number of
specified megawatts is a predetermined cost that is not dependent on the number of events or
the number of total event hours called. The program's cost-effectiveness is impacted by the
.e
variable energy payments made to EnerNOC, which vary based on the number of events called
throughout the summer and the length of the event periods.
In order to evaluate the cost-effectiveness of the program in a range of operating assumptions,
Idaho Power completed three cost-effectiveness scenarios for this program varying the number
of event days, the event days called per month, and the total number of event hours per month.
Based on historical summer demand data, Idaho Power developed an expected case scenario
which represents the likely number of event days called per month and its corresponding energy
cost paid to EnerNOC. For the expected case scenario, Idaho Power calculated the cost-
effectiveness based on fifteen total summer events, with each event lasting four hours. The
total resource cost ratio results of this analysis is shown in the table above. The monthly
breakdown of events is as follows:
June: 1 event
July: 13 events
August: 1 event
Idaho Power also created a cost-effectiveness scenario where all twenty events would be called
in July, resulting in the highest possible energy payment to EnerNOC. In this scenario, the
program is stil cost-effective from a UC and TRC perspective.
Finally, Idaho Power developed a third scenario where the program was called fewer than eight
events per month. In this case, Idaho Power would not pay any energy payment to EnerNOC,
resulting in the highest UC and TRC ratios for the program.
. Baseline Energy Usage
Baseline energy usage is defined as the energy usage that would have occurred for a customer if
an event would not have been called. Upon review of different methods and with the
recommendation of EnerNOC, Idaho Power has decided to follow the '3in 10' model for
determining baseline energy usage. This means the baseline energy usage is calculated using
the average of the 3 highest measured demand readings in the last 10 days. This method is
described in further detail in the contract. Idaho Power believes that this method of calculating
energy usage wil result in the best representation of what would have occurred if no event had
been called and will provide the Company with the baseline needed for reporting and paying
demand reduction due directly to the called event.
... Shifted Energy
Demand response events can lead to shifted energy usage after an event is called, due to the
catch up effect of cooling loads or industrial processes. This is also known as the Isnapback'
effect. While Idaho Power does not know the exact amount of shifted energy that wil occur,
these cost-effectiveness analyses include a shifted energy load of 5% of reduced event energy.
This percentage is low because a significant portion of the load reduction is expected to come
from lighting, as well as the assumption that many commercial buildings wil not be occupied
after event hours. Based on reports from actual events from EnerNOC with other utilities, it is
believed that this percentage is an accurate approximation of actual shifted energy that may
occur. The value of this shifted energy is based on the difference between the costs of on-peak
energy and mid-peak energy.
Cost-Effectiveness Calculation Inputs
In addition to the assumptions made in the analysis, there are also standard inputs that have been
included in the cost-effectiveness analyses.
· On-Peak Demand and Annual Energy Coefficients
This is the percentage adjustment for avoided transmission and distribution losses during
summer peak hours and is added to the kW and kWh total savings. From the latest Idaho
Power system loss-coefficients study, the loss coefficients are 10.9% for kWh and 13% for peak
kW.
. Discount Rate
This is the standard discount rate used for Idaho Powers energy efficiency and demand
response analysis, which represents the Company's after tax weighted average cost of capitaL.
As stated in the 2006 Integrated Resouse Plan (IRP), Idaho Power discount rate is 6.93%.
. DSM Alternative Costs
These are the avoided capacity and energy costs used in by Idaho Power for cost-effectiveness
analysis of energy efficiency and demand response programs. These time and seasonally
..variant alternative costs can be found in the technical appendix of the 2006 Idaho Power
Integrated Resource Plan on page 68.
Total Resource Cost and Utilty Cost Ratios
Unlike many other energy efficiency programs where the customer must incur an incremental cost
to receive an incentive, for this commercial demand response program, the customer wil not incur any
direct incremental cost. The customer is able to receive an incentive from EnerNOC for participating in a
demand reduction event without purchasing any equipment or paying any direct cost to participate. The
participant test is not applicable for this program since there is no participant cost and the utilty and
contractor absorbs all of the costs to run the program. For the same reasons, the utility cost and total
resource cost for this program are equal. In EnerNOC's experience with other utilities, the same standards
for the utility cost, total resource cost, and participant test apply.
e .
SPREADSHEET TO
ATTACHMENT NO.2
ISA
CONFIDENTIAL
DOCUMENT
AND
. SUBJECT TO THE PROTECTIVE
AGREEMENT