20090515final_order_no_30805.pdf

Office ofthe Secretary
Service Date
May 15 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF ITS AGREEMENT WITH
ENERNOC TO IMPLEMENT AND
OPERATE A VOLUNTARY COMMERCIAL
DEMAND RESPONSE PROGRAM
ORDER NO. 30805
CASE NO. IPC-09-
On March 2, 2009, Idaho Power Company ("Idaho Power" or "Company ) filed an
Application with the Commission seeking approval of an agreement with EnerNOC
EnerNOC") to implement a voluntary demand response program for its commercial and
industrial customers.
On March 20, 2009 , the Commission issued a Notice of Application and Notice of
Modified Procedure and established an open comment period. Order No. 30755. Commission
Staff, the Industrial Customers of Idaho Power ("ICIP") and an Idaho Power customer filed
written comments within the established comment period. On April 23 , 2009 , Idaho Power filed
reply comments.
THE AGREEMENT
The Application describes the commercial demand response program ("Program ) as
a voluntary program "targeting Idaho Power s commercial and industrial customers that are
willing and able to reduce their electrical energy loads for short periods (two to four hours)
during summer peak days." Application at 1-2. Program participants will receive compensation
for voluntarily reducing their loads. Id. at 2. The Program will be extended to Schedule 9
Schedule 19 and Special Contract customers with an average summer billing demand of at least
200 kW. Id.
The Company selected EnerNOC through a "competitive RFP process to implement
the Program on a turn-key basis.Id. EnerNOC will be responsible for the Program
implementation and operation, including the following:
1. Entering into contracts with individual Idaho Power customers to reduce
their loads when requested by EnerNOC;
2. Marketing plans;
ORDER NO. 30805
3. Securing participants;
4. Installing and maintaining all equipment, aside from the meter, used to
reduce demand;
5. Tracking participation; and
6. Reporting results to Idaho Power.
Id. Idaho Power will "initiate demand response 'events ' by notifying EnerNOC , who will, in
turn, supply the requested load reduction to the Idaho Power system.Id.
EnerNOC will make incentive payments based on the reduction in demand each
customer agrees to provide to the Idaho Power system. Id. at 3. These payments will occur
monthly based upon predetermined reductions and "event-based payments based on actual kWh
energy reductions.Id. EnerNOC will conduct energy audits to identify potential areas for
demand reduction. Id. There is no monthly fee for program participation. Id. Some participants
may need to install "pulse initiated metering" and EnerNOC has agreed to reimburse Idaho
Power for the cost of installing this type of metering system and for the cost of the individual
meter. Id. All participants will be able to track their historical and real-time energy use and
demand reductions via a web portal. Id.
The Application states that the term of Idaho Power s Agreement with EnerNOC
begins February 23 , 2009 and extends five years from that date. Id. However, it also states that
the Agreement is contingent upon Commission approval without material change or condition.
Id. at 5. The amount Idaho Power has agreed to pay in consideration for EnerNOC's services is
based upon the "value to Idaho Power of delivered capacity and energy reductions.Id. at 3.
The Agreement includes a liquidated damages provision should EnerNOC fail to achieve a
predetermined level of performance. Id.
EnerNOC has committed to deliver a certain amount of demand reduction for the
Idaho Power system which varies "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.Id. at 4. The targets for
demand reduction for each year of the contract term (2009-2013) "are 2 MW, 30 MW, 40 MW
50 MW, and 50 MW, respectively.Id. The parties assume that the Program will be
implemented by April 2009. Id.
ORDER NO. 30805
The Agreement stipulates that Idaho Power shall be empowered to initiate a "program
event" "between 2 p.m. and 8 p.m. on any non-holiday weekday day between June 1 and August
31 of each program year " which will then obligate "EnerNOC to reduce customer demand by
the agreed upon amount." Id. Idaho Power is limited to one "event" per day, a total of 20 events
per season, totaling no more than 60 hours and with a duration between 2 and 4 hours per event.
Id. Idaho Power is required to give at least two hours' notice to EnerNOC prior to the initiation
of an event. Id. Notice to EnerNOC from Idaho Power will be via an electronic dispatch signal
and EnerNOC will then notify individual customers by telephone or e-mail. Id. EnerNOC will
notify customers once an event is terminated. Id.
The Application states that the total cost of the Program is approximately $12.
million over the life of the contract, varying from approximately $315 000 in the first year of the
Program to approximately $3.5 million in its final year. Id. at 5. Idaho Power estimates that 85
percent of Program costs will be associated with Capacity Payments to EnerNOC, 6 percent for
Energy Payments to EnerNOC and 9 percent for Idaho Power administrative costs. Id.
The Program was reviewed by Idaho Power s Energy Efficiency Advisory Group
EEAG") and presented at a meeting with the Industrial Customers of Idaho Power. Id. The
Application contains a cost-effectiveness analysis as an attachment. Id. The Company proposes
that Program costs be recovered from Energy Efficiency Rider funds, or
, "
if the Commission
decides in the remaining portion of the Irrigation Peak Rewards proceeding. . . that the costs of
the Irrigation Peak Rewards Program should be recovered through the Power Cost Adjustment
(("
PCA"
)),
" that Program costs should likewise be recovered through the PCA. Id. at 6.
ICIP COMMENTS
In its comments, ICIP offered general support of the concept of demand-side response
programs. However, ICIP also provided some general criticisms ofldaho Power s proposal and
suggested certain "modifications" of its proposed demand response program prior to
Commission approval.
Specifically, ICIP believes that the Irrigation Peak Rewards program, IPC-08-
should serve as a "benchmark against which to measure the EnerNOC aggregation Program" and
argued that "the Irrigation Peak Rewards tariff has many attractive features not likewise
available under the EnerNOC Program.ICIP Comments at 2-3. Such features include the
following: (1) a longer notice period in advance of "an event of curtailment;" (2) opt-out and
ORDER NO. 30805
drop-out rights through a one time cash payment; and (3) a shorter, six-week, potential
curtailment period. Id. at 4-
In addition, ICIP expressed concern regarding what it characterized as "the lack of
transparency" of the individual contractual relationships between EnerNOC and each
commercial and industrial customer. Id. at 3. According to ICIP, the relative level of expertise
and bargaining power between EnerNOC and the commercial and industrial customers supports
the need for "more transparency" as to the manner "each (program) participant will be treated.
. . .
Id.
STAFF COMMENTS
Staff believes that Idaho Power "reasonably evaluated the benefits and costs of this
Program" and recommended that the Commission approve the Agreement between Idaho Power
and EnerNOC to implement a commercial demand response program. Id. at 4-5. Specifically,
Staff expressed satisfaction with the following provisions and elements of the Company
proposal:
1) (The) program s projected cost effectiveness between .51 in the first year to
1.12 in the final year; 2) reasoning for the selection of EnerNOC in the RFP
process; 3) rationale for negotiating the number of events and event durations
specified in the contract; 4) plan for managing the contractual number of
events and event durations and how other demand response programs will be
integrated; 5) approximation of 'snapback,' (shifted energy following a
demand response event due to the catch up effect of cooling loads or industrial
processes); 6) anticipated maximum number of additional meters and costs of
meters for 2009; and 7) description of how it will conduct post
implementation evaluations and confirm demand savings.
Staff closed its comments with a reminder that, as with all demand-side management
programs, it will defer its determination of the prudency of the Program until "after the Company
has implemented and at least preliminarily evaluated this Program.Id. at 5.
CUSTOMER COMMENTS
An Idaho Power customer residing in Nampa, Idaho, submitted an e-mail to the
Commission s website expressing a concern that the Company s Application should have
demonstrated an awareness of or referenced "other options" such as "line conditioning that
utilizes new but reliable technologies that reduce the consumption levels of inductive loads
continuously.
ORDER NO. 30805
IDAHO POWER REPLY COMMENTS
Idaho Power offered specific comments in response to ICIP's comments.The
Company disagreed with ICIP's recommendation that its proposed Program can and/or should be
conducted in a manner similar to the Irrigation Peak Rewards Program." Idaho Power Reply
Comments at 2. Idaho Power believes that it is "not practical to implement the same type of
program for commercial and industrial customers at this time.Id. The Company cites the
following reasons in support of this assertion: (1) the variance in the type of equipment and load
profiles between irrigation and commercial/industrial customers; and (2) the availability of
historical data and experience developing a demand response program for irrigation customers
and lack thereof for commercial/industrial customers. Id. at 3-
Idaho Power countered the notion that EnerNOC will be able to "take advantage of
the inexperience of commercial and industrial customers when it negotiates contracts" by
referring to the fact that some of the Company s most sophisticated customers belong to its
commercial/industrial class of customers and/or are "members of large national chains of
companies" that have experience working with EnerNOC in other jurisdictions. Id. at 6. The
Company mentioned that "EnerNOC has publicly stated that participating customers who
contract with EnerNOC will likely receive between $25 to $35 per kW annually, depending on
the number of events called " an amount "very similar to the yearly average of $32 per kW that
irrigation customers will receive.Id. at 5-
Finally, Idaho Power addressed ICIP's remaining concerns by noting that the
proposed commercial DR Program provides an opt-out right that is "more generous" as well as a
period of advance notice prior to a curtailment event that potentially exceeds that which is
available under the Irrigation Peak Rewards Program. Id. at 7-8. Idaho Power believes that the
extended length of the curtailment season compared to the Peak Rewards Program is necessary
in order to "maintain flexibility to call events during the summer during all on-peak times
including all of June and August." Id. at 9.
COMMISSION DECISION AND FINDINGS
The Commission has reviewed and considered the filings in Case No. IPC-09-02.
We find the terms and conditions of the Agreement between Idaho Power and EnerNOC, as well
as Idaho Power s request that the costs of the Program be recovered from the Energy Efficiency
Rider Funds, to be reasonable. We further find that Idaho Power has, through a competitive RFP
ORDER NO. 30805
process, selected a capable entity with significant experience in negotiating and securing the
necessary load reduction agreements that will assist Idaho Power in reducing its overall
industrial and commercial load demands.
We also find that the parties' Agreement provides both the incentive for achieving the
target demand reductions promised by EnerNOC and adequate protections for the Company
should EnerNOC fail to deliver on its demand reduction commitments. We note that the
industrial and commercial customers' participation in the Program is strictly voluntary and that
the individual, arms-length bargaining process contemplated by this Program is not unlike the
contractual dealings undertaken by each of these industrial and commercial entities on any given
day.
The Commission understands ICIP's desire that the Program more closely resemble
the highly successful Peak Rewards Program offered to Idaho Power s irrigation customers.
However, we believe the Company is accurate in its assertion that implementing a similar
program for industrial and commercial customers is simply not practical at this time. As a
whole, irrigation customers tend to be a rather homogeneous group with respect to how much
energy they use and when they use it. In contrast, there is significantly more variance in the
typical energy load profile of most industrial and commercial customers. The Commission does
not foreclose the possibility that a Program similar to the Peak Rewards Program could be
developed and implemented in the future. In fact, Idaho Power has tacitly stated that it will be in
a much better position to make such a determination once the current Program has provided the
Company with sufficient data surrounding the energy consumption habits of the industrial and
commercial class of customers.
Finally, the Commission defers any definitive assessment regarding the prudency of
specific expenditures associated with the Program until after the Company has implemented and
submitted a preliminary evaluation of the Program to the Commission. Thereafter, Idaho Power
shall include an evaluation of the Program in its annual Demand-Side Management (DSM)
Report outlining the progress of its DSM Program Portfolio.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Idaho Power, an electric
utility, and the issues presented in this matter pursuant to its authority under Title 61 of the Idaho
Code, and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER NO. 30805
ORDER
IT IS HEREBY ORDERED that the Commission approves Idaho Power Company
Agreement with EnerNOC to implement a voluntary demand response program for its
commercial and industrial customers.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) may petition for reconsideration within twenty-one (21) days of the
service date of this Order with regard to any matter decided in this Order. Within seven (7) days
after any person has petitioned for reconsideration any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of May 2009.
/I.
. KE PTO , P IDENT
MARSHA H. SMITH, COMMISSIONER
J...
MACK A. REDFORD, COMMISS
ATTEST:
0: IPC-O9-np2
ORDER NO. 30805