20130425Reply Comments.pdf

99
IHO
PIVER®
LISA D. NORDSTROM
Lead Counsel
Inordstromcidahopower.com
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An IDACORP Company
April 25, 2013
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-13-04
Second Amendment to Demand Response Agreement with EnerNOC, Inc. -
Idaho Power Company's Reply Comments
Dear Ms. Jewell:
Enclosed for filing in the above matter are an original and seven (7) copies of Idaho
Power Company's Reply Comments.
Sincerely,
74c.
Lisa D. Nordstrom
LDN :csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
LISA D. NORDSTROM (ISB No. 5733)
JULIA A. HILTON (ISB No. 7740)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
Inordstromidahopower.com
ihiltonidahopower.com
7fl3 APR 25 PM h: 44
iTtLiT COMM3i
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-13-04
APPROVAL OF ITS AGREEMENT WITH )
ENERNOC TO IMPLEMENT AND ) IDAHO POWER COMPANY'S
OPERATE A VOLUNTARY COMMERICAL ) REPLY COMMENTS
DEMAND RESPONSE PROGRAM )
Idaho Power Company ("Idaho Power" or "Company") respectfully submits the
following Reply Comments in response to the Comments filed on April 17, 2013, by the
Industrial Customers of Idaho Power ("ICIP").
I. PROCEDURAL BACKGROUND
On March 7, 2013, Idaho Power filed a Petition requesting Idaho Public Utilities
Commission ("Commission") approval of Amendment No. 2 ("Second Amendment") to
the February 23, 2009, Demand Response Agreement between Idaho Power and
EnerNOC, Inc. ("EnerNOC") under which Idaho Power provides its FlexPeak
Management demand response program ("FlexPeak Program" or "Program") for its
commercial and industrial customers ("Agreement"). The proposed modifications
IDAHO POWER COMPANY'S REPLY COMMENTS -1
reduce some of the FlexPeak Program's operating and pricing parameters, thus
reducing the cost to customers, without suspending the program or impacting current
participation levels for 2013. In response to Order Nos. 32762 and 32777, the
Commission Staff and ICIP filed comments on April 17, 2013.
Idaho Power agrees with the ICIP that the FlexPeak Program is a valuable
demand response program that should continue to operate during the 2013 program
season and indeed it will continue to operate during the 2013 season. However, Idaho
Power wishes to respond to several of ICIP's arguments so as to clarify the Company's
position in this matter.
II. DISCUSSION
A. The Cost-Effectiveness of the FlexPeak Program Is Demonstrated Annually
in a Transparent Manner.
The ICIP asserts that it is not possible to evaluate the cost-effectiveness of the
FlexPeak Program based upon the information that is publicly available. More
specifically, page 6 of its Comments states, "The ICIP appreciates that the Commission
said it will continue to evaluate the program, based on cost-effectiveness. However, it is
difficult to imagine how a thorough cost effective evaluation can take place in a
vacuum." The ICIP continues by stating that "Those ratepayers, as well as the program
participants, have the right to be assured that these program costs are cost effective."
Idaho Power agrees that its customers and regulators have the right to be
assured that its demand-side management ("DSM") programs are evaluated for cost-
effectiveness and are a good use of customer funds. However, the Company asserts
that the necessary information to evaluate cost-effectiveness is publicly available and
that these evaluations occur regularly.
IDAHO POWER COMPANY'S REPLY COMMENTS -2
1. FlexPeak Program Evaluation and Documentation Is Publicly
Available.
As stated on page 19 of the Demand-Side Management 2012 Annual Report
("DSM 2012 Annual Report), "Idaho Power's goal is for all programs to have benefit/cost
(B/C) ratios greater than I for the total resource cost ("TRC") test, utility cost ("UC") test,
and participant cost test ("PCT") at the program level and the measure level where
appropriate." ICIP has previously stated that it "believes that the most meaningful test
for evaluating the programs is the TRC test. That test includes both the costs incurred
by the Company and the costs incurred by program participants." ICIP Comments,
Case No. IPC-E-10-09, p. 6.
To verify the FlexPeak Program's cost-effectiveness, the Company uses
participants' meter data to determine the total demand reduction achieved and
reconciles this with each invoice received from EnerNOC to ensure that Idaho Power
pays the appropriate amount due pursuant to the Agreement between Idaho Power and
EnerNOC. Idaho Power also tracks the total Program costs used to calculate the
FlexPeak Program's cost-effectiveness.
Idaho Power then provides both the assumptions and calculations for the cost-
effectiveness of all of its DSM programs, including the FlexPeak Program, in several
publicly available documents filed with the Commission. The methodology,
assumptions, and expected cost-effectiveness of Idaho Power's three demand
response programs are described in pages 66-79 of Appendix C of the Company's 2011
Integrated Resource Plan ("IRP"). In Idaho Power's DSM Annual Reports, the
Company describes the actual cost-effectiveness of all of its DSM programs, including
its demand response programs. Idaho Power reviews the cost-effectiveness of each of
its programs annually and publishes them in Supplement I of the DSM Annual Report
IDAHO POWER COMPANY'S REPLY COMMENTS -3
titled "Cost-Effectiveness" and publishes the cost-effectiveness of the FlexPeak
Program again in the FlexPeak Management Annual Report included in Supplement 2
of the DSM Annual Report titled "Evaluation." In the DSM Annual Report supplements,
the Company describes how program cost-effectiveness is calculated:
Demand response programs are analyzed over the program
life where historical program demand reduction and
expenses are combined with forecasted program activity to
better compare the program to a supply-side resource.
While cost-effectiveness is determined over the program life,
it is also calculated for each individual year."
DSM 2012 Annual Report Supplement 1: Cost-Effectiveness, p. 2. Idaho Power
publishes both the annual and the program life TRCs for the demand response
programs, including FlexPeak Program, in its annual FlexPeak Management and DSM
reports. The customers who participate must believe this program is cost-effective from
their perspective or they would likely not participate. The FlexPeak Program
participants are knowledgeable business customers and their support of the FlexPeak
Program has been documented in the EnerNOC customer surveys described on page
96 of the DSM 2012 Annual Report and referenced on page 7 of ICIP's Comments.
Idaho Power understands that ICIP is concerned that the participant incentive
payment information is not publicly available to it and its participating members.
However, the Company disagrees with ICIP's assertion on page 6 that "The ratepayers
are buying a product, demand reduction, the cost of which neither the regulator nor the
utility have any true idea as what it actually costs." Idaho Power knows exactly what the
cost of the demand response provided by the FlexPeak Program is and publishes it
each year in the Company's DSM Annual Report, thus ensuring that the regulator,
customers, and other stakeholders know what that cost is as well. The costs are
IDAHO POWER COMPANY'S REPLY COMMENTS -4
reported by jurisdiction, funding source, and cost category in the most recent DSM 2012
Annual Report, Supplement 1: Cost-Effectiveness in Table 2. As reflected on the top of
page 9 of Supplement 1, the FlexPeak Program cost $3,009,822 million in 2012.
Comparing the cost to the value of demand reduction achieved, the FlexPeak Program
had a TRC ratio of 1.21 for 2012 and a program life TRC of 1.22, as shown on page 96
of the DSM 2012 Annual Report, page 6 of Supplement 1: Cost-Effectiveness, and
page 10 of the FlexPeak Management Program 2012 Report that is included in
Supplement 2: Evaluation filed in Case No. IPC-E-13-08. Absent information to the
contrary, this analysis should be sufficient to assure stakeholders of the Program's cost-
effectiveness without harming EnerNOC's competitive business model and the
underlying success of the program. Idaho Power believes this is what the Commission
intended when it stated:
Based on our review of the record, we find no need for the
Company's future DSM reports to disclose EnerNOC's
incentive payment information so long as the Company pays
a reasonable price and the FlexPeak Management Program
is cost-effective. We will continue to evaluate the FlexPeak
Management Program based on its cost-effective
performance.
Order No. 32667, p. 14.
2. The Success of an Areator Program Under a Bilateral Contract Is
Dependent on the Business Model that Makes It Attractive to Both
the Augreqator and the Participants.
ICIP has previously argued that it believes energy efficiency and demand
response programs should be administered by third parties—not utilities. ICIP
Comments, Case No. IPC-E-12-24, pp. 2-3. In its Comments filed in this case, ICIP
now argues that "EnerNOC is essentially setting the participants' retail rates for power
IDAHO POWER COMPANY'S REPLY COMMENTS -5
received from Idaho Power" and that "EnerNOC is acting as a monopoly provider of
demand response service in Idaho Power's service territory." ICIP Comments, pp. 6-7.
Idaho Power believes that ICIP misstates EnerNOC's service relationship. Idaho
Power contracts with EnerNOC to provide reduced demand for energy at peak times
from commercial and industrial customers. In practice, the remuneration participants
receive is negotiated between EnerNOC and the participant. The FlexPeak Program
and its pricing model have been approved by Commission Order Nos. 30805, pp. 5-6,
and 31098. Idaho Power's system, and all Idaho Power customers, are the primary
beneficiaries of the capacity it contracted to receive via the Agreement between Idaho
Power and EnerNOC; the customers that voluntarily participate for financial gain in the
FlexPeak Program administered by EnerNOC are not. It is not appropriate to directly
regulate a voluntary customer activity under this type of third-party negotiated pricing
model, the purpose of which is to minimize or delay the need to build new supply-side
resources. In any event, Idaho Power seriously doubts that demand response
aggregators like EnerNOC would be interested in continuing to provide such services if
subjected to rate regulation as a utility, as ICIP implies it should be.
B. Idaho Power Seeks to Engage Demand Response Stakeholders to
Thouuhtfullv Determine the Role of Demand Response Now and in the
Future.
Idaho Power is quite dismayed by repeated statements that somehow the
Company has a "dismissive attitude" toward its demand response programs, or that the
Company intends to permanently curtail them in their entirety. This cannot be further
from the truth. Idaho Power has nurtured these programs for more than nine years and
worked with thousands of customers to ensure the programs' success as capacity
resources that benefit all customers. Idaho Power's system has benefitted from up to
IDAHO POWER COMPANY'S REPLY COMMENTS -6
438 megawatts of demand response capacity that has served a vital role in efficient
resource planning and acquisition. However, Idaho Power is mindful that these
programs come at a financial cost and that it has an obligation to keep rates reasonable
for the benefit of all customers.
Idaho Power has never experienced a situation like it did last December when it
was faced with the prospect of knowingly operating demand response programs costing
customers more than $12 million a year when adequate system capacity would exist to
serve anticipated peak loads. The Company believed that it was not appropriate to
unilaterally decide which customers value more—lower rates or continued demand
response availability. Out of respect for its stakeholders, Idaho Power quickly filed a
case to temporarily suspend—not terminate—operation of two programs in the near-
term until it could meet with stakeholders to get input on how all demand response
programs should be valued and operated in future years. The Company believed this
cautious course of action would best serve its customers by staying true to its mission of
providing Idaho Power customers with reliable, responsible, and fair priced energy.
Given the negative response received to date, Idaho Power cannot help but ponder that
perhaps the Company overvalued the importance of lower rates in this instance.
To be clear, Idaho Power values its demand response programs and anxiously
awaits the opportunity to thoughtfully discuss the future operation and funding of its
three demand response programs in stakeholder workshops planned for this summer.
It has always been the Company's intent to foster an appropriate role for demand
response in its portfolio—it just would like assistance determining what that role is in
periods of sufficient capacity.
IDAHO POWER COMPANY'S REPLY COMMENTS -7
1.The FlexPeak Prouram Will Continue to Operate during the 2013
Program Season.
Idaho Power wishes to reiterate what is at stake in this case. Under the
proposed Second Amendment to the Agreement, the FlexPeak Program will remain
fully operational and available to provide peak capacity during the 2013 program
season. Although ICIP states that "Idaho Power is now essentially asking the
Commission to freeze the FlexPeak Program. . ." on page 3 of its Comments, the effect
of the proposed amendment is not to suspend program operation. Instead, Commission
approval of the Second Amendment to the Agreement will reduce the potential dispatch
hours and events to an amount that has only been exceeded in one of the four previous
years (2011), and to reduce the amount of demand reduction that EnerNOC is
responsible to secure. If approved, the Second Amendment to the Agreement will save
customers approximately $500,000. Participant incentive payments will remain equal to
what customers would receive absent the Second Amendment to the Agreement, and
the Program will be available for dispatch in 2013.
2.The Capacity Surplus that Idaho Power Identified in the 2013 IRP
Load and Resource Balance Has Multiple Contributing Factors.
Idaho Power agrees with ICIP that investment in generation is "lumpy" and
results in periods where demand response is less critical to minimize or delay the need
to build additional generation capacity. However, Idaho Power disagrees with the
implication that the sole "reason Idaho Power has a capacity surplus is that it just
energized the 300 MW Langley Gulch gas plant in June of 2012." ICIP Comments, p. 8.
Langley Gulch power plant was identified in prior IRPs that predicted a capacity
deficit, so it cannot be concluded that the commissioning of the plant alone is
IDAHO POWER COMPANY'S REPLY COMMENTS -8
responsible for the capacity surplus. As stated on page 10 of Water and Resource
Planning Director Mark Stokes' testimony in Case No. IPC-E-12-29:
During the 2011 IRP planning period, the load and resource
balance continued to show that Idaho Power's existing and
committed resources were insufficient to meet the projected
peak-hour load growth, and significant capacity deficits
continued to exist in the near-term summer months.
Mr. Stokes further testified that when the average load and peak-hour load forecasts
were prepared for the 2013 IRP, "the impact of the recession continued to reduce
forecasted load growth. As the Company began updating the generation forecast from
existing and committed resources for the 2013 IRP, it became apparent that there were
no near-term peak-hour deficits. . . ." Stokes Direct Testimony, pp. 10-11. To be clear,
the amount of capacity available on Idaho Power's system is a function of both
customer load and available resources to serve that load.
3. Unused Capacity Provided by FlexPeak Program Participants Cannot
be Readily Sold into the Market at a Profit.
Finally, Idaho Power wishes to note several FlexPeak Program and customer-
related issues that complicate the concept of selling unused demand response capacity
discussed on pages 11-12 of ICIP's Comments. First, the FlexPeak Program was
designed to provide capacity to Idaho Power and its customers during times of peak
loads and was priced accordingly. Second, there is no capacity market in the Northwest
and demand response should not be viewed as an energy product. Additionally, the
program has been marketed to participants based on capacity need. Program events
are intended to be called when Idaho Power is experiencing peak loads. The ability to
call program events for the purpose of selling the capacity into the market (if available)
could have detrimental effects on program participation.
IDAHO POWER COMPANY'S REPLY COMMENTS -9
III. CONCLUSION
Having clarified or responded to the issues identified above, Idaho Power
respectfully requests the Commission approve the Second Amendment to the
Agreement between Idaho Power and EnerNOC without change or condition. Although
the Company requested the Commission issue an order no later than May 31, 2013,
EnerNOC's solicitation of customer participation will progress with greater clarity if an
order is issued as soon as practicable in anticipation of the June 1 start of the program
season.
DATED at Boise, Idaho, this 25th day of April 2013.
(-~ . A .
1I4j7
LISA D. NORDSTROM
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS -10
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 25th day of April 2013 I served a true and
correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following
named parties by the method indicated below, and addressed to the following:
Commission Staff
Weldon Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
Industrial Customers of Idaho Power
Peter J. Richardson
RICHARDSON & O'LEARY, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, Idaho 83707
Dr. Don Reading
6070 Hill Road
Boise, Idaho 83703
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Christa Bearry, Legal Assistant
IDAHO POWER COMPANY'S REPLY COMMENTS -11