20081209AARP Comments.pdf

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AARP Letterhead
VIA HAND DELIVRY
December 9, 2008
Ms. Jean Jewell
Commssion Secreta
Idaho Public Utilties Commssion
472 W. Washigton St.
Boise, ID 83702
Re: Case No. IPC-E-08-16-- In the Mattr of the Application of Idao Power Co. for a
Certficate of Public Convenience and Necessity to Intal Advanced Metenng Inftrctue
("AMI") Technology Thoughout Its Service Terntory.
Dear Ms. Jewell:
Enclosed, you will find an ongin and seven (7) copies of AA' s comments in
response to the Commission's call for comments on Idaho Power Co.'s Application for a
Cerficate of Public Convenience and Necessity to Intal Advanced Meterng Intrctu
("AM") Technology Thoughout Its Serve Terntory. Please file stap one copy for our
records.
Please contact me at 208-855-4001 if you have any questions.
Sincerely,~~
James Wordelman
State Director
HEALTH / FINANCES / CONNECTING / GIVING / ENJOYING
Jennie Chin Hansen, President
Wiliam D. Novelli, Chief Executive Officer
RECi:i\!CO,.,v... ~ t..,~
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
2008 DEC -9 AM 8: 04
IDAHO PUBLIC
UTILlT!ES COMMISS.!ON
In the Matter of the Application )
Of Idaho Power Co. for a )
Certificate of Public Convenience)
And Necessity to Install Advanced)
Metering Infrastructure ("AMI") )
Technology Throughout its )
Service Territory )
Case No. IPC-E-08-16
COMMENTS IN RESPONSE TO COMMISSION ORDER No. 30637
BY
Barbara R. Alexander
Consumer Affairs Consultant
ON BEHALF OF
AARP
December 9,2008
Introduction
Pursuant to Order No. 30637, AARP submits the following comments regarding
the application of Idaho Power Co. for a Certificate of Public Convenience and
Necessity to Install Advanced Metering Infrastructure. AARP is a non-profit
membership organization for people aged 50 and over. AARP has nearly 185,000
members in the State of Idaho.
These comments were prepared by Barbara R. Alexander. Ms. Alexander
opened her own consulting practice in March 1996. From 1986-96 she was the
Director, Consumer Assistance Division, at the Maine Public Utilties Commission. Ms.
Alexander is an attorney and received her J.D. from the University of Maine School of
Law in 1976. Her clients include national consumer organizations, state public utility
commissions, and state utility public advocates. Ms. Alexander has appeared as an
expert witness in regulatory proceedings, submitted comments in rulemaking
proceedings, assisted in the drafting of legislation, and worked as a consultant to state
regulatory commissions in the following areas: consumer protections to accompany the
move to retail electric, natural gas, and local telephone competition; service quality
performance standards and programs for electric, natural gas, and telecommunications
providers; low income program design and implementation; consumer education
programs and policies; and analysis of utility customer service programs. Ms.
Alexander's has published papers that analyze and make recommendations on "default"
service policies for residential customers for both natural gas and electric service in
restructured energy markets, the identification of "red flags" for utility consumer
protection policies, and, most recently, the implications of advanced or "smart" metering
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and "real time" pricing policies for low income customers. Barbara's current clients
include AARP, where she has worked with offices in Maine, Montana, California, Ohio,
Illinois, Connecticut, New Jersey, and Mississippi, Pennsylvania Office of Consumer
Advocate, Illinois Attorney General and Ilinois CUB, Delaware Public Service
Commission, and Maryland Office of Peoples CounseL.
In several states Advanced Metering Infrastructure (AMI) has been proposed as
a means of reducing electricity costs to consumers while meeting future increases in
demand for electricity. AMI is proposed as the means by which utility companies can
charge consumers different prices for electricity on the basis of the time of day the
electricity is used, including charging more at peak times. Proponents also contend that
AMI will result in savings across the operating system and increase reliabilty, including
through remote connections and disconnections, and by enabling utility companies to
pinpoint the exact location of interruptions and system problems more quickly, resulting
in faster restoration of service.
Despite the potential of the technology, AMI is currently untested in widespread
use. It is not at all clear how many consumers would reduce their electricity bil through
the use of time-based pricing options linked to the AMI investment. In fact, Time of Use
rate options have been offered for many years by many electric utilities without any
significant customer interest or widespread popularity. To save money, consumers
would need to be able to shift enough electricity usage from peak times to non-peak
times. AARP is concerned that high-income and high-usage customers might benefit
from the use of the expensive AMI investment, while low-income and lower usage
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customers, including many seniors, would not. As a result, the investment in AMI
systems might have some impact on reducing peak demand usage, but at a very
expensive price impact on non-participating customers. At the very least, all potential
least cost and cost effective options to achieve the desirable goal of reducing peak load
demand for residential customers should be considered prior to focusing solely on the
AMI investment.Further, installation of AMI could negate existing consumer
protections, such as those around disconnection and biling.
The cost of installing AMI systems is another area of concern. If a utility
company realizes operational savings by installing advanced meters, such savings may
not cover the overall costs of installing the AMI systems. Most AMI proposals by U.S.
electric utilities have not demonstrated that the costs of AMI can be recovered solely
through operational savings. As a result, electric bills could potentially be larger than
the amount a consumer who chooses to participate in new rate options might save by
participating in an AMI program and would certainly be larger for customers who do not
choose to participate in time-based pricing options. Finally, utilities have typically
wanted to be assured of rate recovery up-front without offering any guarantees of future
customer savings over the long term of these investments.
When considering the installation of AMI, the Commission should conduct a
thorough analysis through a contested proceeding to determine all of the following:
. the costs and benefits to 1) lower income customers, 2) customers at different
usage levels and 3) residential customers, in general;
. the bill impact resulting from payment for the new meters and communication
systems, as well as the costs of implementing new rate options through the
utility's current biling system;
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. the impact on customer service, privacy, and consumer protection policies and
programs that presently exist; and
. the implicit costs of alternate metering for consumers who wil have to spend time
and effort monitoring prices to participate in kilowatt-hour usage tracking programs.
Further, the Commission should ensure that vulnerable populations, such as low-
income consumers and consumers with health problems, do not suffer adverse
consequences in the event that AMI results in substantially higher electric bills for these
people. This could be done by extending and expanding the current pilots in order to
collect more and more meaningful data on the impact of time based pricing on various
demographic groups. Further, dynamic pricing programs should not be mandatory and
should not result in cost shifting on to other customers.
Background
It is clear that the installation of AMI has the historical support of the Commission
and AARP understands and agrees with the overall intent of the Commission's interest
in this technology. The Commission appears convinced that AMI will provide benefits to
customers and allow customers to save money on their electricity bils. In Case No.
IPC-E-06-1, the Commission issued Order 30102 (July 13, 2006) in which the previous
history of seeking full implementation of AMI was described and numerous operational
and technology-based issues raised by the Staff in its Report were described. The
Commission stated that IPC should have an additional year to correct the operational
difficulties associated with the implementation of the pilot programs and "additional data
to evaluate implementation on a larger scale." The Commission ordered IPC to provide
an assessment of how the Company will proceed with full deployment, including an
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implementation time line and a more extensive analysis of costs and benefits." (Order
at 6) Unfortunately, there does not appear to be any record evidence to support the
notion that AMI is the most cost effective way to achieve the goals and objectives as
stated by the Commission. The filings submitted to date fail to link any benefits of AMI
with the objective that customers can lower their bills or that the long term costs of
generation supply for IPC's customers will be lower than would be the case without
deployment of AMI.
Finally, the pilot programs conducted to date are very small in scope and the
reports submitted to date in Case No. IPC-E-07-05 do not suggest or provide any
information on the benefits or costs associated with offering customers time-based
pricing options and fail to include important information that would allow any reliance on
such pilot programs to document customer benefits as a result of AMI deployment.
While AARP is supportive of investments that are likely to reduce long run costs
for electricity and supports the notion that properly designed demand response
programs targeted to residential customers (whether relying on time-based pricing
options or direct load control programs) are an important part of any utility's portfolio of
resources and services, the lack of any documented costs and benefits associated with
this AMI filing suggests that relying on AMI alone to achieve these objectives may be
premature.
Therefore, AARP recommends that the Commission not approve the Application
of Idaho Power Co. (IPC) for a Certificate of Public Convenience and Necessity to install
Advanced Metering Infrastructure (AMI) throughout its service territory at this time.
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AARP also recommends that the Commission undertake the following actions to
further explore AMI and its relationship to lowering the current or future costs of
electricity for IPC's residential customers:
First, the current pilot programs should be expanded and more data should be
collected to allow for a proper review of the costs and benefits associated with offering
time-based pricing options to IPC's residential customers. The list of data that should
be collected and considered is set forth later in these Comments. Most importantly, the
pilot program should be designed to solicit participants from a wide variety of
demographic and usage profiles so that the Commission and IPC can properly evaluate
the meaning of the extremely small pilot program that has been conducted to date.
Second, any evaluation of AMI should be conducted with data on costs and
benefits that is publicly available and considered in the context of a full base rate case
so that all the utility's costs and expenses can be evaluated in an integrated manner.
Third, the Commission should solicit and consider all potentially cost effective
demand response and efficiency options be evaluated on an equal manner prior to
assuming that an expensive AMI system is required or even necessary to offer cost
effective demand response and efficiency programs to residential customers.
Summary of Recommendations
1. IPC is seeking the Commission's approval of a capital investment of $70.9
million for its AMI project and assured rate recovery in a future base rate case.
However, IPC has failed to submit information on the cost basis for this proposed
investment, claiming that its contractual process and the actual terms of the contracts to
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purchase this equipment and services should be confidentiaL. Furthermore, IPC has not
publicly made available its cost-benefit analysis and the Net Present Value calculations
concerning the long term cost effectiveness of this proposal. As a result, only the
Commission and the Commission's Staff currently have access to these important
materials. The determination of such a significant cost to ratepayers should not be
approved without allowing the public to review the costs that will ultimately be included
in rates.
2. IPC claims that certain Operations and Maintenance benefits will accrue to
ratepayers over the life of the project and has provided estimates of such benefits for a
three-year period. However, IPC did not provide the work papers or basis for its
estimated O&M benefits. As a result, there is little in the record of this Application that
would allow ratepayers to understand the basis for IPC's statements of benefits or the
implications of the proposed AMI system on costs presently built into IPC's revenue
requirement. In fact, the benefits that IPC claims will result from its AMI project are
unproved.
3. Unemployment is currently a concern in Idaho. The current
unemployment rate is nearly 6%, up from around 2% just a few years ago. The
practical import of IPC's proposed AMI project will be to eliminate jobs for IPC
employees engage in field visits for meter reading and other meter-related activities.
The nature of this impact on employment and the local economy at a time of significant
economic recession is not described or even acknowledged in this Application. Further,
the state's unemployment rate affects ratepayer households as well, The rate increase
due to AMI wil impact affordability for struggling Idaho households.
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4. The benefits that IPC alleges will occur as a result of future dynamic
pricing options that may be offered to customers is not identified or quantified in this
Application. The prior pilot program conducted by IPC with respect to time-based
pricing options does not provide any basis for assuming that such programs would
result in lower electricity bills for most customers. Nor has any study been undertaken
about the implications of relying on time-based pricing on customers whose usage
levels may not allow for bil savings or who are unable to shift usage to lower cost
periods, such as the elderly, disabled, or other vulnerable customers. Finally, IPC has
not considered the costs and benefits of advanced meters in its integrated resource
planning process to determine the most cost effective demand side management or
demand response programs for its customers. As a result, there is no basis for any
concltision that the AMI system is the most cost effective means to offer customers
demand response options or whether such pricing options will be selected by IPC's
residential customers, or with what impact, if any, on the prices for electricity generation
supply charged by IPC, either in the short term or long term.
6. Finally, IPC's proposal fails to address important consumer protection
policies associated with the installation of AMI, such as the potential to rely on its two-
way communication system to remotely disconnect customers, thus eliminating an
important consumer protection associated with a field visit to the customer's location
prior to disconnection of service for nonpayment.
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DETAILED DISCUSSION
The Commission should consider this proposal in the context of a base
rate filng. It is not fair or reasonable for the Commission to consider IPC's proposal to
guarantee a future rate increase to pay for the AMI investment and the accelerated
depreciation of current meters without a full opportunity for discovery of the Company's
testimony and exhibits, the ability to offer testimony in opposition to the Company's
statements and evidence, to conduct a hearing with the opportunity for cross
examination, and a decision "on the record." This proposal, if approved, wil not only
have an impact on customer rates,1 but has the potential for more significant impacts on
customer service and potential pricing options that may not result in any benefits for
IPC's residential customers in the form of lower generation supply prices or the reduced
-need for investment in new peak load generation. Therefore, the Commission should
consider this proposal, if at all, in the context of a base rate proceeding. This is
particularly important because of the lack of evidentiary support for IPC's assertions in
the public record of this Application, as more fully explained below.
IPC's Application fails to provide the evidentiary basis for its assertions
that the AMI investment wil benefit IPC's residential customers. IPC has
estimated the capital costs of its AMI system at $70.9 millon. IPC proposes that the
Commission approve this investment and that IPC would then file for cost recovery in
2009, stating, "The Company will propose a parallel cost recovery track to the general
rate case and attempt to time the 2009 AMI rate adjustments to coincide with the results
from the general rate case." (Testimony of Mr. Gale, page 9) IPC estimates that the
i IPC's Application did not contain any analysis of customer bil impacts due to its proposed rate increase or any
customer class rate proposals.
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revenue requirement necessary to support the capital costs alone would be an increase
of $3.82 million. IPC also has stated that its proposal is conditioned on the Commission
also approving the accelerated depreciation of its old meters over a three year period.
IPC has estimated that the impact of this proposal, as well as a reflection of some
reduction in O&M costs as a result of AMI, will be an additional revenue requirement
increase of $8.4 millon. As a result, IPC is proposing to increase customer rates by
approximately $12 million as a result of this filing.
However, IPC does not include the basis for either its costs or its estimated
savings or operational benefits in this filing. The exhibits accompanying the testimony
of the IPC witnesses do not provide the basis for their estimates of either costs or
benefits. Exhibit 4 attached to Mr. Waites' testimony reflects a list of estimated
operational benefits of the installation phase of this project, i.e., three years. Not only
does Mr. Waite not identify the basis for these estimated operational savings, but Mr.
Waite fails to offer an analysis of the costs and benefits of this proposed investment in
the form of a Net Present Value analysis. In discovery submitted by the Staff, IPC
stated that it had prepared a formal cost-benefit analysis and would provide such
information, along with supporting calculations, only to those individuals or parties who
had signed a Confidentiality Agreement.2 This information is not available to AARP or
any other party or interested party in this proceeding given the nature of the Modified
Proceeding being used to consider this proposal. This approach is not typical of other
utility proposals to install AMI. For example, Pepco proposed a full scale AMI system in
the District of Columbia and filed a publicly available "business case" that details the
2 IPC Response to Staff Data Request No.4.
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overall costs, the costs per meter, and the basis for all its estimates of operational
savings to justify its proposal.3 The same is true for Central Maine Power Company in
its AMI proposal filed with the Maine Public Utilties Commission.4 While utilities may
well need to protect bidding documents and actual contracts or bids submitted by
various suppliers, the overall analysis of the costs and benefits, and the Net Present
Value analysis that justifies its request for a rate increase are typically available to the
public.
Attached to Mr. Gale's testimony is Exhibit 1, IPC's Advanced Metering
Implementation Plan, previously submitted to the Commission in Case No. IPC-E-06-01.
Even this document fails to reflect any Net Present Value analysis of the proposed AMI
project or document its statement on page 2 of this Plan that, "... it is expected that the
long term benefits of reduced expenses plus additional benefits not yet identified or
quantified will result in net benefits in the long term." It would be harmful and unfair to
residential ratepayers for the Commission to approve this substantive investment and
rate increase sought by IPC for a project that does not reflect standard and important
factual support for the supposed benefits of this project.
The lack of specificity concerning either costs or benefits, but the sure result that
rates would increase if this Application is approved, suggests that the Commission
should not undertake any approval of this proposal based on the record available in this
proceeding. Furthermore, any proposal to increase rates should be considered in the
3 Formal Case No. 1056 before the D. C. Public Service Commission. The business case materials are available on
the Commission's website under this docket number. Pepco's proposal was fied in 2006 and is stil pending before
the Commission. See: ww.dcpsc.org
4 Docket No. 2007-215 before the Maine Public Utilities Commission. This case file is also available on the Maine
PUC's website. It is important to note that on September 29,2008, Central Maine Power Co. withdrew its AMI
proposal, citing a variety of factors, including technological uncertainty and lack of interest by third pary suppliers
in offering demand response pricing options to residential customers. See: ww.state.me.us/mpuc
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context of a full base rate investigation in which all the costs and benefits associated
with this proposal and other investments and expenses incurred by IPC can be
considered at the same time.
A careful review of costs, and the impact of those costs on customer bils, should
be a priority given the Commission's heightened concern over the growing lack of
affordability of energy (CASE NO. GNR-U-08-1). For example, according to
information provided in the Workshops on energy affordability, over 100,000 households
in IPC service territory are income eligible for the Low Income Home Energy Assistance
Program. Consideration should be given to how the costs of AMI impact affordabilty of
low and fixed income households.
IPC fails to provide any evidence to justify its allegation that the long term
benefits of its AMI proposal wil exceed the costs. This statement is made in IPC's
AMI Implementation Plan (August 2007) attached to Mr. Gale's Testimony, Exhibit 1.
Mr. Gale also states that the operational benefits exceed the costs. (Gale at 5, lines 8-
10) However, IPC has failed to provide any evidence to support this statement. The
only evidence submitted by IPC concerning the benefits of AMI consisted of a list of
"quantifiable O&M benefits" by Mr. Waites (page 9). Mr. Waites' Exhibit 4 is cited for the
basis for these benefits. However, this exhibit provides dollar amounts of O&M costs
(benefits) for 2009 through 2011. The dollar amount for each specific category of
potential benefits identified by Mr. Waites in his testimony is not provided. The basis for
dollar amount of operational benefits stated in Exhibit 4 in the amount of $8.9 milion is
not identified. Even the categories of potential benefits identified by Mr. Waites are not
identified in Exhibit 4. As a result, there is no basis for IPC's statement that the long run
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benefits will exceed the costs. Nor is there any evidence to support IPC's calculations
of benefits for the three-year installation period provided in its Exhibit 4. Finally, IPC
has not provided any long term cost and benefit analysis and the basis for such analysis
in its filing.
Finally, it is important to realize that lPG's estimates of benefits, however, they
are calculated, must of necessity rely on estimates provided by other utilities in other
state regulatory proceedings, although IPC did not even identify the basis for its
estimated benefits that appear in Mr. Waites' Exhibit 4. Any estimates of operational
benefits due to AMI installation do not reflect large scale or full implementation and
analysis of any AMI project to determine if the estimated benefits in fact occur because
no U.S. utility has completed such an installation and published the results of a "before"
and "after" evaluation of costs and benefits.
It is untimely for IPC to make a proposal in which the only sure result is the
loss of jobs in today's economic recession. It does not appear reasonable for the
Commission to approve an increase in rates for all customers in which the chief source
of operational savings are lost jobs in today's economy. In its response to Staff Data
Request 50, IPC confirmed that the bulk of the operational savings relate to the
reduction in expenses associated with meter reading and disconnects and connects. In
addition to those utility employees who lose jobs due to AMI, other Idaho ratepayers
who are suffering from the economic recession will experience higher electricity rates
even as they may also be impacted by the state's growing unemployment situation.
IPC's proposal for AMI fails to make any linkage between this technology
and its vague statements of future benefits so that "wide scale applications of
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pricing, programs, and information can become a reality." (Gale at 5) IPC's
proposal to increase rates for AMI does not contain any analysis of any demand
response or demand side management programs or impacts on electricity prices that
may occur due to this investment. Indeed, Mr. Gale states that additional investments
would be necessary to even begin to offer such "benefits."s
IPC's proposal makes reference to ongoing pilot programs to test customer
reaction and interest in time-based pricing in the Emmett and Letha areas served by
IPC. A review of the information contained in Case No. IPC-E-07-05 is instructive and
supports AARP's recommendation that a full-scale implementation of AMI at this time is
not appropriate. The results of the pilot programs and the reports filed to date by IPC
indicate only a very small number of customers are participating in the two programs
offered in 2007: 58 customers in the Energy Watch program (to test customer reaction
to day-ahead notification of critical peak pricing events) and 86 customers in the Time of
Use Program (testing customer reaction to three tiered time-based prices for the
summer period). These are extremely small participation levels. Furthermore, none of
the information associated with these pilot programs indicate the following key variables
that would vital to interpreting any results from the pilot programs:
. Demographic information about the pilot participants so that the time-based
prices can be evaluated on different income and usage profiles;
5 For example, this proposal does not appear to include the investments necessary to provide customers with new
biling options, web-based educational tools, or other marketing and educational expenses that would be necessary
to make use of or to develop additional pricing options for residential customers. Nor does this proposal reflect
costs that might be associated with providing "smart" thermostats or other devices to customers that would be
installed to provide direct load control programs for central air conditioning.
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. Whether or how the pilot program participants are statistically representative
of IPC's residential customers generally;
. Bil impact analysis on all participants so that the impact on lower usage
customers can be compared with higher usage customers;
. Projected impacts on load shape, load shifting, and usage characteristics on
alllPC residential customers;
. The elasticity of demand of IPC's residential customers compared to the pilot
participants; and
. Costs associated with ramping up the program to a full scale program in
terms of billing systems and other softare changes necessary to offer
programs without the operational and technical difficulties that were
documented in the pilot program reports.
Finally, the reports to date show that Time of Use customers have not shifted
load as a result of the pricing structure and, as a result, there is little basis for assuming
that Time of Use pricing, at least as reflected in the prices used in this pilot program,
would have any long term impact on IPC's resource needs and future costs of
generation supply service.
These pilot programs do not inform the public or the Commission about the
potential impact of any full scale implementation of time-based pricing that might result
from this expensive AMI investment. In fact, IPC's AMI filing specifically states that no
such analysis has yet been conducted to support this proposed rate increase to fund the
AMI project.6 This lack of analysis is particularly important because there is no basis for
6 See, also, IPC's Response to Staff Data Request NO.8 in which IPC stated that the costs to revise its biling system
to offer time-based pricing options to its customers are not included in this fiing for AMI approvaL. See IPC
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assuming that residential customers generally are interested in or would benefit from
time-based pricing options. If all customers must pay for the new metering system and
the only documented benefit is to reduce operational expenses associated with meter
reading, there are far less expensive Automated Meter Reading systems available.
IPC's filng fails to reflect any long term integrated resource plan to identify
the best mix of supply and demand resources and investments to provide the
long term lowest cost to consumers. Most importantly, IPC does not appear to even
acknowledge the importance of developing or submitting a long term integrated
resource plan prior to the determination of the most cost effective and least cost means
to offer customers options to reduce their overall bill or reduce their peak load usage
and contribute to lower electricity prices for all customers. It would not be appropriate to
put all our "eggs" into the AMI basket, particularly in light of the costs associated with
such an investment, until there is a more detailed and comprehensive analysis of all the
potential options that might be available to reduce usage and reduce peak load usage
for residential customers. It will not be possible to determine the appropriate pricing
mechanisms that should be offered to residential customers without the development of
the factual foundation for identifying and comparing the results of a wide range of
potential programs to reduce usage overall and peak load usage by each customer
class served by IPC. Such an analysis should start from the "bottom up" and identify
Response to Staff Data Request No. 19 in which IPC states that "some additional investment and software
development will be needed before either of these two additional functionalities can be fully implemented"
(referrng to tying the AMI system to outage management and ability to offer time-based rate options). Finally, see
IPC Response to Staff Data Request No. 46 which confirmed that no specific new pilot programs or other pricing
options have yet been identified or evaluated as part of this filing for AMI approval.
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the most cost effective means to achieve the long term lowest electric generation price
for residential customers.
Such an analysis should NOT first begin by trying to justify the AMI investment
and the reliance on unknown dynamic or real time pricing proposals, most of which
have not been demonstrated to be what residential customers want or which have not
been implemented on a large scale for any U.S. utility. For example, there is no
research that indicates that lower use residential customers would benefit from hourly or
time-based pricing for basic electricity service. The research that has been conducted
to date fully supports the notion that residential customers with lower than average use
have little or no price elasticity of demand.? Furthermore, the pilot programs that some
utilities have conducted to test residential response to dynamic pricing or critical peak
pricing confirms that lower use and low income customers in particular see little or no
benefit in terms of bill reduction.8 The California pilot programs conducted 2002-2004
did not evaluate the costs and benefits of AMI. Rather, they attempted to determine the
bill impacts on a group of volunteers to a variety of pricing options, the design of which
were constrained by the Commission and did not reflect "real" wholesale market prices.
Furthermore, those pilot programs clearly documented that larger use customers had
more flexibilty to shift peak electricity usage and the low income and lower use
7 See e.g., Faruqui, Ahad, "Inclining Toward Effciency: Is electricity price-elastic enough for rate designs to
matter?", Public Utility Fortnightly (August 2008, pages 22-27). Mr. Faruqui quotes an EPRI survey of price
elasticities by customer class which reported that 44% of customers have no price elasticity and is below 1 for
customers with no electric space heating or central air conditioning. Another RAD Corp. study for NRL in 2005
reported that it used 30 years of consumption and pricing date to estimate both short run and long run electricity
price elasticities for residential customers and found that residential price elasticity at -0.24 in the short run and at -
0.32 in the long run.
8 See, e.g., Alexander, Barbara, Smart Meters, Real-time Pricing, and Demand Response Programs: Implications for
Low Income Electric Customers (May 2008), available at:
http://ww.pulp.tc/Smart Meter Paper B Alexander May 30 2007.pdf).
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of IPC's response to Staff Data Request 50 which states that a significant portion of
IPC's projected operational savings are based on a reduction in O&M expenses
associated with field visits for disconnection and reconnection of service. As a result, it
is not clear how IPC can claim operational savings associated with reduction in field
visits or other expenses associated with disconnection and reconnection of service if it
does not rely on its two-way communication system to remotely disconnect or reconnect
the meter. At the very least, this issue may require further examination by the
Commission and clarification of these responses.
The reliance on remote disconnection of service for nonpayment of a utility bil
eliminates current consumer protections, including a premise visit during which
customers are able to avoid disconnection by making payment. A meter that IPC can
turn on for a customer remotely is also a meter that IPC can turn off remotely for
nonpayment or any other reason for which the customer may be in default of IPC's tariff
provisions. Relying on remote disconnection will greatly increase the number of
disconnections that IPC could implement compared to historical disconnection rates
because a large volume of disconnections can occur without the need for scheduling
field visits. Furthermore, this approach, if implemented, would eliminate the obligation
to conduct a premise visit to the customer's dwelling at the time of disconnection, thus
eliminating the potential for customer contact, detection of medical emergency, or other
conditions that may result in a forbearance by IPC from effectuating the disconnection
of service.
The potential for such a significant change in consumer protections is of great
concern to AARP, as evidenced by AARP's participation in the Avista remote
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disconnection pilot proceeding. In that case, AARP, CAPAI, Avista and Commission
staff worked together to limit the customers who could be subjected to remote
disconnection under the pilot. Further, the pilot wil evaluate the impact of remote
disconnection on customers, including those who receive energy assistance.
Conclusion. As a result of the analysis of IPC's Application and the
identification of the procedural and substantive defects in this Application, AARP
recommends that the Commission take no action to approve this proposal at this time
and further actions should be initiated to consider the costs and benefits of AMI and
other potentially less expensive and more cost effective means to achieve lower
electricity prices for IPC's residential customers.
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