20110209Protests, Comments.pdf

W. MARCUS W. NYE
RANDALL C. BUDGE
JOHN A. BAILEY, JR.
JOHN R. GOODELL
JOHN B. INGELSTROM
DANIEL C. GREEN
BRENT O. ROCHE
KIRK B. HADLEY
FRED J. LEWIS
ERIC L. OLSEN
CONRAD J. AIKEN
RICHARD A. HEARN, M.D.
LANE V. ERICKSON
DAVID E. ALEXANDER
PATRICK N. GEORGE
SCOTT J. SMITH
JOSHUA D. JOHNSON
STEPHEN J. MUHONEN
BRENT L. WHITING
JONATHON S. BYINGTON
DAVE BAGLEY
CAROL TIPPI VOLYN
THOMAS J. BUDGE
CANDICE M. MCHUGH
JONATHAN M. VOLYN
MARK A. SHAFFER
LAW OFFICES OF
RACINE OLSON NYE BUDGE Be BAILEY
CHARTERED BOISE OFFICE
tat SOUTH CAPITOL
BOULEVARD, SUITE 208
BOISE, IDAHO 83702
TELEPHONE: [phone]
FACSIMILE: [phone]
201 EAST CENTER STREET
POST OFFICE BOX 1391
POCATELLO, IDAHO 83204-1391
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FACSIMILE [phone]
IDAHO FALLS OFFICE
477 SHOUP AVENUE
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FACSIMILE: [phone]ww.racinelaw.net
COEUR D'ALENE OFFICE
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ALL OFFICES TOLL FREE
[phone]
LOUIS F. RACINE (1917-2005)
WILLIAM D. OL.SON. OF COUNSEL
Febru 9, 2011
Case No. IPC-E-IO-46
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Jean D. Jewell, Secretar
Idaho Public Utilities Commission
PO Box 83720
Boise, Idaho 83720-0074
Re:
Dear Ms. Jewell:
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Enclosed for filing in the captioned matter, please find the original and seven copies of Idaho
Irrigation Pumpers Association, Inc. 's Protests/Comments.
ELO: rg
Enclosures
cc: Servce List
Sincerely,
fn
ERIC L. OLSEN
Eric L. Olsen ISB# 4811
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: '[phone]
2811 fEB -9 Ptl~: f 7
Attorneys for Idaho Irgation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
FOR APPROVAL OF REVISIONS TO THE )
IRRIGATION PEAK REWARDS PROGRAM, )SCHEDULE 23 )
)
CASE NO. IPC-E-10-46
IDAHO IRRGATION PUMPERS ASSOCIATION, INC.'S PROTEST/COMMENTS
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC. ("IIPA"), by and through its
attorneys, hereby respectfully submits, pursuant to Commission Rule 203, the following
protest/comments with regard to Idaho Power Company's ("IPC") proposed changes to the
Irrgation Peak Rewards Program, Schedule 23 (the "Program").
Introduction
In ths case, IPC has proposed to make signifcant changes to its Irrgation Peak Rewards
Program (the "Program"). The Program was first introduced on the heels of the 2000-2001
Wester energy crisis and began as a simple timer based program where all interrptions of
irrgation pumps were accomplished on a specified day (or days) of the week and at
predetermined times. This version of the Program sought to reduce IPC's sumer system peak
and IPC's corresponding need to build peaker plants and/or make expensive market power
purchases to meet its summer peak by shaving irrgator load at the times and days of the week
Idaho Irrigation Pumpers Association, InC.'s Protest/Comments - i
when IPC's summer system peak was most likely to occur. At its height, the timer based
program provided approximately 35 MWs of summer peak load reduction.
The Program was later improved and greatly expanded to include the interrption of
irrgation pumps through IPC dispatching the needed load reduction through the use of load
control devices or switches, e.g., cell or satellte phone based switches and recently switches
operated by IPC's Automated Meter Infrastrcture, at the times and days IPC actually needs to
shave peak summer load. Again, shaving load at the time of system peaks avoids IPC's need to
build additional peaker plants and/or avoid possibly more expensive market power purchases to
serve IPC's anual peak sumer load. During the 2009 system peak, the Program resulted in
approximately 160 MWs of reduction in sumer peak load and, during the 2010 system peak,
the Program resulted in approximately 221 MW s of reduction in summer peak load.l
By all objective measures, the curent Program has been a huge success from a cost
effectiveness standpoint, from an execution standpoint, and from an irrgator paricipation
standpoint. IPC's benefit/cost analysis of the Program was 1.50 over the 20-year planng
horizon and cost assumptions found in IPC's 2009 IR.2 Ths is the highest benefit/cost ratio of
all demand response programs curently available to ipC.3 This success can also be traced to
several other key factors that were brought out in the New York Times 2010 online article
entitled "Why is Idaho Power Paying Its Customers?," a copy of which is attached hereto as
Exhibit A. First, IPC has made a concerted effort to develop demand side resources as a result of
the experience it gained from the Wester Energy Crisis where the spot energy markets rose
i IPC Demand-Side Management 2009 Report, at 95; Pengily, DI, Exhibit 1.
2 Pengily, DI at 22, Ins. 2-24.
3 IPC Demand-Side Management 2009 Report, at19, 81 and 95.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 2
tenfold and from IPC following through with Commission orders to develop additional demand
side resources.4 Second, IPC along with the lIP A, Commission Staff, and individual irrgators
have continuously developed and refined the dispatchable Program in ways such that it curently
provides a level of monetar incentives to overcome the disincentives that irrgators face by
paricipating in the dispatchable Program. IPC's C.E.O. Lamont Keen said it best: "'With the
right incentives, people can and wil modify their behavior in ways that are beneficiaL. ,,,5 The
incentives under the Program need to be sufficient to overcome the increased labor costs, allow
recovery of capital expenditures, and offset potential crop losses an irrgator faces when
paricipating in the Program. In the words of Ter Ketterling, a large irrgator that paricipates
in the dispatchable program: '''I may save on power, but it may cost me some crop.",6 Irgators
have modified their behavior and have paricipated and relied on the Program.
PROTEST/COMMNTS
With the all the success of the Program has experienced, the saying, "If isn't broke, don't
fix it," should be the guiding principal to be applied by the Commission in reviewing IPC's
current filing. Specifically, IPC proposes to change the dispatchable program by (l) changig
the incentive payment strctue from a fixed payment to a 40% fixed and a 60% varable
payment based on the number of interrptions, with the varable payment being paid at the end
of the program year, (2) including one free load control event per program year, (3) modifying
the large customer, i.e., over 1,000 hp at a single pumping station, program requirements to
4 Kate Galbraith, Why Is a Utility Paying Customers?, New York Times online, Januar 23, 2010, at attched page
4.
5 Id. at attched page 3.
6 Id. at attched page 5.
Idaho Irrigation Pumpers Association, Ineo's Protest/Comments - 3
require the participant to nominate the amount of demand they wil reduce during an interption
and to change how the credit is calculated, (4) including a voluntar "Extended Interrption"
option from 8:00 to 9:00 p.m., along with a larger varable incentive to the paricipating irrgator
and (5) modifyng the penalty for-opt outs for a load control event from $.005 per monthy biled
kWh per opt-out occurrence to $1.00 per kW of participating demand per opt-out event.
IIPA's comments on IPC's proposed changes to the dispatchable Program are broken
down into two sections. The first section Protests the changes to the dispatchable Program which
the lIP A adamantly does not agree with and which the LIP A hereby requests a hearng on in
order to fully develop a record on those matters for the Commission's decision. The second
section deals with IPC's proposed changes to the dispatchable Program that the lIP A believes
can appropriately be dealt with through the Commission's consideration via modified procedure.
1. PROTEST:
A. IPC is Seeking to Inappropriately Limit the Size of DSM Programs.
Contrar to all that has gone on over the last 7 or more years, in this filing, IPC proposes
that there be a limit put upon the amount of demand response that it should pursue in the future.
Up until now, conseration and demand response programs have been considered desired
alternatives to the constrction of new, supply side resources. We have all heard repeatedly that
demand side resources are an economical and thus, presumably, a desirable alternative to
building new peaking resources. The testimony fied by IPC in this case goes so far as to make
the following statement regarding the Program:
The purpose of the Program is to reduce the Company's system summer peak
loads. If not for the Program, growing summer peak loads would likely require
the constrction of additional simple cycle gas peaker capacity to meet system
peak a few hours each year.?
7 Pengily D I, at 4 Ins. 9-14.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 4
Notwithstanding the stated purposes of the Program, IPC now proposes to begin putting
limits on how much demand side management resources it wishes to have. Those limits are
actually reductions in present levels of demand side management offered by irrgators under the
Program, although those same limits would impact, in theory, the Residential A1C Cool Credit
program and the Commercial Flex Peak programs. In companion Case No. IPC-E-IO-27
regarding the Appropriate Cost Recovery Mechanisms for Idaho Power's Energy Efficiency
Programs, IPC responded to Request 27 of the Industral customers that in 2011 it expected to
have 376 MW of demand response available, of which 285 MW (76%) comes from the Irrgators
and 91 MW comes from a combination of the Residential A1C Cool Credit program and the
Commercial Flex Peak program. In this case, the Company states that it believes that it only
needs 155 to 322 MW of demand response over the next five years.s In contrast, IPC's 2009
DSM Report dated March 15,2010 (less than 11 months ago) states at page 8:
Next to distrbuted generation, the company's demand response programs are the
least-cost resources for meeting summer peak loads over the 20-year IRP
planing perod.
The Company's 2009 Integrated Resource Plan ("IRP") at page 74 also confirms this fact.
One has to ask: If DSM programs are the least cost resource for meeting summer peaks,
then why is IPC suggesting cutting back on these resources and/or programs? IPC's 2009 IRP
projects that peak hour load wil grow at an average anual rate of 53 MW per year. With such a
projection, why would IPC want to be cutting back on its DSM programs?
Exhbit 1 to Mr. Pengily's testimony is a complete paradigm shift. The Company has
shifted 1800 and gone from developing all of the DSM that it can, to attempting "to determine the
8Id., at 9, In. 18.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 5
appropriate level of demand response to pursue though IPC's Program.,,9 It is not the position
of the lIP A that there is no limit to the need for DSM, or that there should not be a review of an
appropriate level ofDSM. However, this complete reversal of position, and even IPC's call to
reduce the amount ofDSM presently available, is not the type of simple change or uncontested
change that should be processed under modified procedure.
Even if there was no challenge in this case to the Company's proposal to be processed
under modified procedure, this is completely the wrong case in which this should be done. The
caption of this case deals with the "revisions to the Irgation Peak Rewards Program, Schedule
23". The fudamental changes being proposed here go far beyond the Program and impact the
way IPC and the Commission view all DSM programs-limits are being set for all DSM
programs, not just the dispatchable Program.
Assuming that it was appropriate to adopt out-of-the-blue limits to the amount ofDSM
that the IPC should acquire, IPC has presented no evidence that the reduction in the overall level
of system wide DSM should come from the Program as suggested in ths case. The DSM 2009
Anual Report lists the following Benefit/Cost Ratios for the thee DSM programs presently
being operated by the Company: 10
Residential A1C Cool Credit 1.09
Comm./Id. Flex Peak 1.11
Irrgation Peak Rewards 1.50
If there were a need to reduce the level of DSM on the system, why would the program with by
far the highest Benefit/Cost ratio be the program that is targeted for reductions?
9 ld., at 8, In. 17-19.
10 The Benefit/Cost Ratios listed are for both the Utility Cost Test and the Total Resource Cost Test. These ratios
can be found on the 2009 DSM Anual Report at pages 19, 81, and 95.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 6
Although IPC has offered ver little detail, the analysis that produced "the appropriate
level of demand response to be pursued by the Company though its demand response program",
came from Company Exhibit 1, page 4.11 What this exhibit demonstrates is that this reduction in
DSM requirements is based, in par, upon the "Existing and Committed Supply-Side Resources"
listed in Colum E. As can be seen from Column F, the "L&R (Load and Resource) Balance
Deficit Position w/o DR Programs" is 378 MW in 2011. However, when Langley Gulch comes
on in 2012, the resources in Colum E go up by 121 MW and the deficit drops from 378 MW to
155 MW. Clearly, IPC is substituting new resources (such as Langley Gulch) for existing DSM
programs. Instead of the IPC using DSM to reduce the need for additional plant, IPC is using the
addition of plant to reduce the need for DSM. Such an outcome is completely contrar to any
DSM or even energy efficiency programs that have been adopted to date.
The forecasted load data on Exhbit 1, page 4, of Pengilly's testimony also raises
concerns with this analysis. The peak load data in Colum B and the "60th Hour Peak Load" in
Colum C are taken from the load duration curve data that developed the graphs on page 3 of
that same exhibit. A simple look at these load duration curves, calls into question the data that is
used in the analysis. One can assume that there wil be some change in the load duration curve
from year to year as, generally speaking, more customers and more load is added. One would
expect that these cures would be generally parallel, as the percentage of customers shifts
slightly and the overall usage patter changes slightly.
This expectation generally holds tre for the actual data for 2008 and 2009 as well as that
for the forecasted 2013 and 2014 data. However, the load duration cures for 2011 and 2012
crisscross each other several times. Likewise the 2015,2016, and 2017 load duration cures
11 Pengily DI, at 8, Ins. 12-19.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 7
crisscross each other multiple times. In its response to lIP A Request 16 in this case, IPC did not
quibble with the fact that ths crisscrossing was odd, but stated that IPC uses a "complex
planng model to create hourly load shapes from the monthly peak and average load forecasts
developed with the Company's long-ter planing modeL." This "complex planing model"
results in such things as on Exhibit 1, page 1, where the peak load for 2011 being forecast to be
3,515 MW, while in 2012 it is forecast to drop 85 MW (down to 3,430 MW. It is unexplainable
how the 2011 peak could have been forecast to be approximately 400 MW greater than the actual
peaks in 2008 and 2009 and then for the peak to drop 85 MW in 2012. Under IPC's proposed
analysis of the requirement for DSM, such a decrease in the forecast is met by a decrease in the
DSM that the Company wishes to pursue in this case.
In short, with respect to IPC's proposal to limit the size ofDSM programs, the LIP A
recommends that the Commission not adopt the proposal to limit the size of DSM programs
under modified procedure. If the Commission wishes to investigate this issue further, it should
do so in a full, evidentiar hearng. The proposed addition to the tarff language in the
Availability section that indicates that paricipation in the Program can be limited because of "the
Company's need for peak load reductions" should not be adopted.
B. IPC's Change of the Incentive Strctue wil Reduce Paricipation in the Program.
The Company's proposal to change the dispatchable Program to a Fixedariable
payment scheme is no more than an obvious attempt to reduce the number of Program
paricipants by reducing the level of payment. Based upon a load factor of 50%, the customers
participating in the dispatchable Peak Rewards program are being paid $32 per kW of biling
demand per season. This is less than half of the capital cost of a simple-cycle combustion
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 8
turbine.12 In spite of what should be considered a good deal for the ratepayers13 in general (to be
charged $32/kW in order to avoid a cost of over $70/kW), IPC is proposing to greatly lower the
amount paid as a credit. On Exhibit 2 of witness Pengilly's testimony, there is a proposal to
make only 40% of the credit to Irgators fixed and the remaining 60% as varable. Under IPC's
proposal, the fixed payment/credit would drop from $32 per kW to $12.78 per kW.
It is recognzed that it is possible, under the Company's proposal, to get a larger credit-
if all 60 hours of interrptions occur, then there would be a ver slight bonus (6%) where the
overall amount paid would be $33.78 per kW. However, in discussions with IPC and according
to the filing, it has been made clear that IPC plans to do ver little interrption, at least into the
foreseeable futue with its additional capacity on hand due to Langley Gulch. As a matter of
fact, this lack of planed interrptions is the basis for IPC's proposal to have one dispatch test
event each year, where the irrgator does not receive a "varable" payment.
14 The Company feels
that it must have at least one dispatch event per year in order to keep irrgators honest so that
they wil not sign up for the program and expect to never get interrpted.
The IIPA's perspective of the Program is quite the opposite of that envisioned by IPC.
The dispatchable Program now calls for up to 60 hours of interption per season. When
irrgators sign up for the program, they sign up with the expectation that they wil be interrpted
60 hours per season-nothng else makes economic sense. If an irrgator signs up for the
dispatchable Program, but only has the abilty to be interpted 8 or 12 hours, then he would be
12 Assumig an avoided capacity cost of a simple-cycle tuine at $63/kW and a peak loss factor of 13%.
13 The LIP A has been wiling to settle for a low credit compared to the cost that is avoided because, under the present
treatment of this Program in rate cases the Irrgators are able to greatly reduce their peak demand responsibilty and
thus derive cost of service benefits as well because of the Program.
14 Pengily, DI, at 17, in. 8-21.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 9
looking for economic disaster. The Irrgators signed up for 60 hours of interrption per year and
made adjustments/improvements to their systems so that they can take 60 hours of interption
per year. The Irrgators do not know why IPC has never called interptions anywhere near this
leveL. Even if IPC does not "need" 60 hours per year of interrption, taking all 60 hours means
that they can either reduce high fuel and/or purchased power costs during peak hours, or it can be
sellng into the market when prices are highest. Taking full advantage of the interrptions would
not only save on the capital costs of peaking facilties, but it would lower the overall cost of
power, and thus, the PCA that all customers pay.
Is it appropriate to have the payment to irrgators based upon a fixed/varable scheme?
Although there is some general appeal to such a scheme (that gives some payment up front and
then increases the payment as the level of interrptions increases), the scheme is quite disruptive
and wil in all likelihood result in loss of paricipants and possibly a major loss of paricipants.
First of all, the Irrgators have always viewed what they offer (60 hours of system peak
interption) as an insurance policy to the Company. To the Irrgator, this is no different than a
crop insurance policy they all have that insures them from losses. Irrgators happily pay for the
insurance whether or not they use it and in fact hope they do not need to collect on the insurance.
IPC's proposal to change the payment scheme is being viewed as one where the Company wants
to pay a much smaller premium for insurance, and then pay more, only if it needs it. Such a
scheme is ilogical to most irrgators. The irrgator's thought process could have been different if
the program was introduced as being fixed/varable, but after several years of operation, such a
change is only viewed as draconian and a massive reduction in the credit that is offered. This is
the type of disruption that occurs when the Company goes from wanting all of the DSM that it
can get, to deciding to reduce the level ofDSM that it presently has.
Idaho Irngation Pumpers Association, InC.'s Protest/Comments -10
From a different perspective, if a fixed/varable credit scheme is so good, then why isn't
it being proposed for all DSM programs and not just the dispatchable Program? The LIP A asked
if the Company planed to offer a similar fixed/varable credit scheme for Residential and
Commercial customers and the following response was given: 15
The Company may assess the viabilty of a variable pricing model for the A1C Cool
Credit program in the futue. However, the incentives for the A1C Cool Credit program
are a smaller portion of the overall program cost and relatively small on a per customer
basis. Therefore implementing a varable incentive model may not be practicaL.
For the FlexPeak Management program, a portion of the energy payment made to the
third-pary provider is currently varable, based on the number of events called in a week
and the energy reduction realized durng an event. This program is administered under
contract with a third-pary provider with a five-year contract which wil expire after the
2013 season. Idaho power may assess the viabilty of increasing the varable portion of
this program in the future. (Emphasis added)
A few points are in order with respect to IPCs response. First, the credits to Residential A1C
Cool Credit customers are generally much lower than those to large irrgators, but so is the size
ofthe offered load, with the Residential customers effectively offering only 1 kW per customer.
Second, the FlexPeak program stared with a form of a fixed and small varable payment as
opposed to moving to that well after it was established. Additionally, the variable portion of the
FlexPeak payment is small and IPC gives no indication that it wants to raise the varable portion.
Why would the Company want to put such severe restrctions on the dispatchable Program?
Third, if the fixed/varable approach can improve the benefit/cost ratios, why not sta with those
programs that have the lowest benefit/cost ratios?
The major concern with respect to the proposal to change the scheme by which the credit
would be calculated is what the impact wil be upon the number of participants. The LIP A has
heard a great deal of antidotal comments that suggest there may be a strong backlash (reduction
is See LIP A request 12 in this case.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 11
in paricipation). The lIP A would not expect a major drop in paricipation this year as many
farers are well into the plannng process for this year and the Irrgation Peak Rewards program
would have been factored in. However, over time, it is anticipated that resentment for the
program payments wil grow and paricipation wil drop off substantially. With these Irgators
having been on the program and then dropping out, it is far less likely that they wil rejoin the
program once they have left it. If IPC trly believes that it does not need the program in the
short-run, but wil need it in the long-ru, the pricing scheme offered is guaranteed to
peranently reduce the number of paricipants in such a way that they wil not be
available/wiling to rejoin the dispatchable Program when the IPC decides that it wants/needs
more DSM. This is a ver myopic view of the dispatchable Program that discounts the fact that
the Western Energy Crisis wil not ever happen again or that relies on IPC being able to build its
way out of summer peak deficits.
How real is the possibilty of paricipation in the dispatchable Program being
substantially reduced because of this change to a fix/varable credit strctue? There is no
question that there wil be reduced participation-less payment means less participation.
Furermore, the suggestion that IPC wil only be interpting once per year (with no additional
payment), bringig the credit down from $32/kW to $12.78/kW wil clearly have an adverse
impact. Mr. Pengilly's testimony at page 16 line 18 makes an importt observation:
If the Company were to limit anual Program paricipation to match the annual
capacity need, it could potentially reduce its incentive costs by over 50 percent in
at least one of those years. However, because varng Program paricipation
could have unwanted impacts to customer satisfaction and ultimately long-term
paricipation levels, the Company opted to move to the proposed varable
payment strcture.
The LIP A fully agrees that to var the program paricipation level "to match the anual capacity
need" would cerainly "have unwanted impacts to customer satisfaction and ultimately long-ter
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 12
paricipation levels." However, it is inconceivable that IPC could assume that varng payments
from year to year would not equally have "unwanted impacts to customer satisfaction and
ultimately long-ter participation levels."
There is one last point with respect to the fixed/varable pricing scheme being proposed
that needs to be made. It is widely agreed that DSM programs such as the Program are designed
to avoid the cost of a peaking unt. At present, IPC has two gas fired units (Bennett Mountain
and Danskin) that generally fit this category. IPC receives the same rate of retu on these units,
if they are used or not. Yes, IPC gets to recover its gas costs if it uses these units, but the point is
that the DSM programs are designed to avoid the capacity/fixed costs of these units and savings
of the varable costs is a bonus.
Why would IPC propose that the irrgators get paid a fixed/varable rate for avoiding the
capacity cost of a peaker, when it expects to be fully paid the fixed costs of its gas peakng units?
Regarding the proposed modified incentive/credit strcture, Mr. Pengilly makes the following
comment begiing on line 21 of page 14 of his testimony:
The Company believes that having a portion of the incentive based on the actual
utilization of the resource more closely aligns the cost of demand response with the
varable capacity needed. (Emphasis added)
If DSM resources are a cheaper alternative to peaking units, why shouldn't the fixed payments
(rate of retu) for peaking units also fluctuate with the varable capacity needs of the Company?
An even more fudamental question is when did capacity needs (and thus fixed costs) become
varable?
For all of the above reasons, the Commission should reject IPC's proposal to change the
credit payments from the present fixed payment of $ 32/kW (based upon a 50% load factor) to a
fixed/varable payment, where only 40% of the present payment would be fixed. In other words,
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 13
if it isn't broke, there is no need to fix it. The dispatchable Program is not broken so there is no
need to fix it.
If the Commission rejects the IPC's proposal, but stil feels a need to make a change in
the pricing (which has not been justified by the Company), the lIP A offers an alternative. In the
event that for some reason the Commission believes that the amount of the credit should be
reduced, then it must be done in a way that wil have the least negative impact upon paricipation
levels. However, in order to maintain paricipation levels when the payment goes down, the
number of hours of interrption must go down as well. Although there are obvious problems
with the load duration cures shown in Company Exhibit 1 page, they generally reflect a pattern
that is flat until the highest 20-30 hours of load are reached. The highest 20-30 hours represent a
ver steep par of the cures with load signficantly increasing as the single peak hour is
encountered. The value of interptions nearer to the system peak value are more valuable and
more important than interrptions fuer away-the less hours of interption offered, the more
the benefit of the individual hours of interption.
Assuming that the Commission wishes to lower the credit paid to Peak Reward
customers, the lIP A offers that the credit could be reduced from $32/kW down to $25/kW (based
upon 50% load factor) if the hours of interption are reduced from 60 hours per season to 28
hours per season (7 days of interrption). Although the change in credit and the change in hours
of interption are not symetrcal, it must be remembered that the avoided cost of the peaker
does not change with the reduction in the hours of interrption. Additionally, the value of the
interrption increases as one moves close to the system peak load.
Moving to a lower fixed rate of $25/kW (as opposed to the Company proposal of
$12.78/kW) and cutting back on the possible hours of interrption would go a long way to
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 14
maintaining the present level of participation in the dispatchable Program. If the Company trly
believes that it is not going to need the interptions in the future (because of Langley Gulch and
other capacity additions), then it should be wiling to cut back on the program hours that it claims
that it wil not need.
C. The Commission Should Reject the One "Free" Interption Per Year.
One of the changes proposed by IPC is that it be allowed to have one "free" interption
per year. It should be recognzed that the concept of this "free" interption is only relevant
under the IPC's new/proposed scheme where the credit given to customers is based on both a
fixed and a variable component. On page 17 of his testimony, IPC witness Pengilly describes
why IPC is proposing such a change:
It is possible that the Company may not have a need for load control events in a
particular summer. By dispatching at least one event per Program Season, the
Company can test Program equipment and communication channels to ensure that
the load reduction is available when needed. Having at least one event per
Program Season wil also keep paricipants familar with the Program and help
them manage their Program expectations. A single test event that is incentivized
by a fixed payment also removes any disincentive for Idaho Power to use this
event.
There are a multitude of problems with this logic. First, as pointed out above, IPC is
strongly suggesting that there may be no dispatch events in the near term. The lack of events
may occur, if IPC so chooses, but the lIP A has stated above that its members welcome more, as
opposed to less interrption. Irrgators signed up and made investments so that we could be
interrpted. However, what ifIPC needs to call dispatch events? Does this proposal to get a
"free" event (when no interptions are needed) apply to years when one or more interrptions
are to be called on the basis of need as opposed to a "test" or keeping the Irgators honest?
Second, the need to test the Program equipment and communication chanels is simply a
red herrng. The Program has been around for several years and there has never been a
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 15
suggestion of the need to "test" the equipment. If IPC wants to "test" the equipment, it can do so
in a maner that wil reduce its peak loads and reduce its power supply cost (or increase sales for
resale). Whether there is only a "test" or a full fledged event, the impact on the Irrgator is the
same; he must make adjustments to his operation to compensate for the interrption. If a
fixedvarable credit scheme is adopted, then all interptions should count towards the variable
component of the credit.
Thrd, as stated above, one dispatch event should not need to be initiated each year to
keep the Irrgators honest. There should simply be multiple events for the economic benefit of
all. IfIPC wants to call an event for any reason, shouldn't this count as an interrption under the
Program?
Fourt, IPC claims that it needs a "free" dispatch event in order to "remove any
disincentive for Idaho Power to use the event". This statement is in direct conflct with most of
the logic that has been advanced by IPC in this case. The fixed/variable rate strctue was
advanced because it would "better align anual Program costs with the anual capacity need.,,16
However, here Mr. Pengily argues that because (under the IPC's proposal) there is a varable
cost to each event that is called, that there is now a "disincentive for Idaho Power to use this
event." That disincentive does not occur under the present credit scheme where the credit is
100% fixed and all dispatch events are free to the IPC.
The lIPA recommends that the Commission reject IPC's proposal to give it one "free"
interrption even under a fixed/varable credit scheme.
16 Pengily, DI, at 10, Ins. 17-18.
Idaho Irrigation Pumpers Association, Inco's Protest/Comments - 16
D. Changes to Dispatch Option 3 Parameters are Unnecessary.
Before discussing the specific changes being proposed by IPC to the maner in which
Option 3 customers would be interrpted, it is important to understand who these customers are.
An Option 3 customer is (and would continue to be): "Metered Serice Points with interal
metering having more than one pump and at least 1,000 cumulative HP". It is the understanding
of the IIPA that there are only 12 customers that represent approximately 28 MW that are in ths
grouping. This represents approximately 10% of the curtail able load.
The other thing that makes these customers special is that they do not want or canot be
directly controlled by the load control devices that are routinely used by the vast majority ofthe
Program paricipants. These customers have agreed to manually interpt themselves, based
upon their system requirements at the time. Effectively, this means that some pumps wil be
tued off durng a given event, while other pumps or combinations wil be turned off durng a
different event. It also means that some load wil need to be reduced before the time of the event
in the case of integrated systems where water is moved from one location to another before being
put on the field. Because of the integrated nature of these irrgation systems, the hours of
curailment or reduced load are expanded for these customers on either side of the event more
than most other Irrgators experence. In other words, IPC gets more curailment than specified
in the tarff. IPC's proposed changes to Option 3 requirements must be viewed, given ths
background of not only the size, but the complexities of these 12 customers.
According to IPC witness Pengilly's testimony on page 18, there are three changes being
proposed to Option 3: (1) to require paricipants to nominate their load reduction, (2) to change
the opt-out policy, and (3) to change the baseline from which the paricipants load reductions are
calculated. Each of these changes wil be addressed in turn.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 17
The first and most obvious problem with this proposal is that it requires an Option 3
participant to nominate ahead of time his load reduction and energy use. This nomination is
contrar to the express purose of Option 3 which was to allow these few (but very large
customers) to manually interpt what they could at the time of an event-something that they
do not know ahead of time. It appears that this requirement for a nomination is primar based
upon the expectation that IPC wil not be calling dispatch events ver often. With regard to the
need for Option 3 customers needing to nominate, IPC witness Pengilly stated on page 18 of his
testimony:
Curently under Dispatchable Option 3, paricipants have the option to provide a
portion of their load during a load control event. Under the current incentive
strcture, a paricipant could be paid a larger incentive if no event were called. This
has not been a signficant issue in the past because normally the Company has
called at least one event per Biling perod.
Under the Company's proposed changes to Dispatchable Option 3, paricipant's
fixed incentive payment wil be calculated based on the nominated load reduction
and energy use in no load control events are dispatched. Ths wil reduce the
chance of the Company overaying paricipants if no load control events are
dispatched. (Emphasis added)
IPC has indicated that it has not had a problem under the present scheme. As long as it calls for
interrptions it should not need a nomination (for which Option 3 was set up to avoid). The
simple solution to all of ths is for IPC to call more interptions and then the Program wil work
fine. With nominations, the viabilty of Option 3 is greatly reduced-it was designed for one
purpose-to provide this group of irrgators flexibilty in paricipating in the Program. The
Company's proposed changes are contrary to that purpose.
The second problem with this proposal as it relates to Option 3 paricipants is that it is
requiring an opt-out penalty for Option 3 customers. Again the purose of Option 3 was to
bring into the Program certain large customers that could not be subject to the automatic
interrptions that are to be given to the Option 1 and Option 2 paricipants. Simply put, Option 3
Idaho Irrigation Pnmpers Association, Inc.'s Protest/Comments - 18
was an optional program where the customer would manage his system as best as he could in
order to provide a substantial level of interrption, and now IPC is trng to turn it into a
mandatory program, where penalties wil be applied if obligations are not fulfilled.
The third problem with this proposal as it relates to Option 3 paricipants is attempting to
calculate a different baseline from which Option 3 customers have their credits determined. It
would seem that this proposal may have been made as an overreaction to a non-existent problem.
IPC witness Pengily states on page 21 of his testimony:
In the past, there were a few instances where a high demand was registered prior to
the event for a short duration and did not accurately represent the customer's load
prior to an event. By changing the calculation of Program kW for Dispatchable
Option 3 paricipants, it wil more accurately represent the load reduction provided
by the customer and minimize the risk of paying the customer for demand
reductions that the Company did not actually receive. (Emphasis added)
This statement strongly suggests that some Option 3 customers may have been trng to game
the system. However, there is no support for what is meant by "a few instances" and there is
little indication regarding what is meant by "a high demand". As pointed out above, these are
highy integrated irrgation systems, so it is unlikely that there would be a deliberate increase in
demand that was simply for the sake of increasing the Program credit. Additionally, under the
present tariff, it would be ver counterproductive to simply increase demand in order to increase
the Option 3 credit-the fixed credit is curently $4.65/kW, however the demand charge for
transmission customers is $5.24/kW or for secondar servce customers the demand charge is
$5.57/kW. Either way, an increase in the level of demand in order to get a higher Option 3 credit
(at $4.65/kW) would be more than offset by an increased demand charge of either $5.24 or $5.57
per kW (the impact upon the kWh component would be negligible for a brief increase in
demand).
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 19
Although the lIP A does not believe there is any gaming of the system, it does not
condone such practices and agrees that measures should be in place so that gaming does not take
place. Additionally, under the pricing scheme proposed by IPC, gaming could be more likely to
occur for Option 3 customers. However, the proposed development of a baseline put forth by
IPC is inappropriate and should not be adopted. Under the present terms of Schedule 23, IPC is
required to provide notice to the customers by 4:00 p.m. the day prior to the event. There is no
way that a customer could game the system prior to being notified of the coming event.
Therefore, the LIP A recommends that the same language apply that is in the existing tarff,
except that the 24-hour period where the maximum demand wil be measured should be the 24-
hours prior to the anouncement of the curtailment event as opposed to prior to the event itself.
In summar, LIP A recommends that the Commission reject IPC's proposal to require
Option 3 paricipants to nominate their load reductions and to reject IPC's proposal to place opt-
out penalties on Option 3 customers. With respect to the establishment of a baseline period for
paricipants, the fairest thing would be to use the highest demand reading in the 24-hours before
the announcement of the event in order to remove any assumption of gaming of the credits.
2. COMMNTS:
A. Optional Extension of Lengt ofInterptions from 8:00 p.m. to 9:00 p.m.
IPC's filing proposes an optional extension of the times of interrption from 8:00 p.m. to
9:00 p.m. Although the LIP A does not oppose an optional/voluntar extension of the times of
interrption from 8:00 p.m. to 9:00 p.m., it believes that the proposal is il conceived. The lIPA
believes that there are three fundament issues with the proposal.
First, the need for the extension is not well addressed or documented. Exhibit 1 page 1 of
IPC's filing contains a graph of the system load for July 16, 2010 when all thee load
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 20
management programs were called upon to reduce peak load. That graph shows an increase in
load durng the 8:00 p.m. to 9:00 p.m. timeframe, after all the load management programs have
been used. IPC's response to Staff Request 2 in this case suggests that it needs approximately 60
MW ofload reduction in the 8:00 p.m. to 9:00 p.m. timeframe. There is no indication as to what
causes this increase in load, simply the desire to extend some Irgation curtailment in order to
remove it. However, a look at this graph shows that the height ofthis graph/load at 8:00 p.m. to
9:00 p.m. is no different than the loads that occur durng the 3:00 p.m. to 4:00 p.m. (before and
after the interrption started). What is IPC's concern that it wishes to remove 60 MW from the
end of the event, when the load is at the same level during the first hour of the event?
Essentially, there would be no change in the magnitude of the peak on that day.
Second, Staff Request 2 sought information regarding how IPC came up with the amount
of the "Extended Interrption" Incentive. IPC only responded that it came up with the concept
of offering an incentive (for an Irgator wiling to be subjected to a period of extended
interptions) from a meeting it had with the lIP A. This is tre with respect to the concept, but
not the amount of the incentive. In its data response IPC provided no explanation as to how it
came up with the amount of the incentive offered. One can only conclude that there was little
sophistication in the development of this incentive.
Third, the incentive itself appears to be low and is based upon the fixed/varable scheme
such that its value wil not be readily apparent to the customers. Basically, the incentive is to
increase the standard varable energy credit from $0.35 per biling kWh to $0.40. This is a 14%
increase in this component, but because it is the varable component, this means that it would
have no effect at the "I-free" interrption, or at the most an 8.6% (14% times 0.60) increase in
the overall credit only if all 60 hours of interrption are taken.
Idaho Irrigation Pumpers Association, Inco's Protest/Comments - 21
Although the lIP A believes that this extended interrption perod is not well thought out
and is not economically designed to bring a strong response, there is no major har to the
dispatchable Program by the adoption of such a provision.
B. Change of Calculation of Opt-Out Penalty.
IPC has proposed that the opt-out fee be changed from its curent level of $0.005 per
kWh of the curent month's biling kWh to a simple $1.00 per kW of demand. First, it should be
recognzed that there is very little opting-out taking place, so this should be a minor issue for IPC
and the Program participants. Second, it should be recognzed that an opt-out provision is very
necessar in order to attract participants as they essentially need a relief mechanism in the event
that they ru into unexpected circumstances that are unelated to the Program, but are simply
caused by the everday challenges of faring.
The lIPA believes that the $1.00 per kW penalty is far easier to determine for an irrgator
as his kW is essentially fixed, while the $0.005 per kWh rate is largely indeterinate, because an
Irrgator does not know with any precision what his monthly kWh wil be. With this in mind, the
lIP A recommends adoption of ths change.
C. Credit Payment at the End of The Season.
Although it is not mentioned in IPC witness Pengily's testimony, the proposed tarff
changes include a change in the maner in which the Irrgators receive compensation for
paricipation in the Program. Curently, according to the Program Description in the tarff,
"paricipating Customers wil receive a financial incentive in the form of a Bil Credit for usage
that occurs during the calendar months of June, July, and Augut. . ."
With the introduction of ths Fixedl arable approach, IPC is proposing that the varable
energy porton of the credit be "paid in the form of a check no later than 60 days after the
Idaho Irrigation Pnmpers Association, Inc.'s Protest/Comments - 22
Program Season." This is the par of the credit that potentially makes up 60% of the existing
credits, but may amount from anyting between 0% and 60% of the existing credits-dependent
upon the number of interptions scheduled.
Given the overall proposal to make the credit based upon a Fixedl arable payment, it
may be necessar to wait until after the Program Season (30 days should be suffcient) in order
to calculate this portion of the credit. However, such a delayed payment may highight the
reductions in the credits under the new scenaro, and thus, cause more dissatisfaction with the
new payment levels. What if IPC calls no interrptions or calls its one free interption and
effectively causing this delayed payment to be zero? This would be like waving a flag to insure
that the irrgator knows that these payments have been severely cut back. What if there are only
two interptions (one "free" and one for credit)? Presumably, the customer would then receive
a credit of 1114th of the varable credit, which was itself only 60% of the original credit. Such a
payment would cause the customer to question why participate at all.
The lIP A recognzes that the scheme set up by this proposal of IPC would necessitate that
a portion of the credit be calculated after the season, so there is no paricular objection to the
proposal, other than it could be done quicker. However, this need to make an after the season
payment fuer highlights the reduction in credit being given to the irrgators and ultimately
may signficantly impact the level of participation.
CONCLUSION
The Peak Rewards Program has evolved into a cost effective tool for IPC to reduce its
summer system peak and avoid more costly supply side resources or market power purchases.
The LIP A believes that the changes that IPC proposes are too narrowly focus on the system's
apparent short term excess generation capacity to the exclusion of maintaining the Peak Rewards
Idaho Irrigation Pnmpers Association, Ine.'s Protest/Comments - 23
Program in the long run by maintaining an appropriate credit leveL. As such, the IIP A urges the
Commission to maintain the Peak Rewards Program as is. In other words, the Commission does
not need to fix the Peak Rewards Program, because it is not broken.
DATED this 9th day of Februar, 2011.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By ~~Ë~'
Idaho Irrgation Pumpers
Association, Inc.
Idaho Irrigation Pumpers Association, Inc.'s Protest/Comments - 24
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 9th day of Februar, 2011, I served a tre,
correct and complete copy of the foregoing document, to each of the following, via the
method so indicated:
Jean D. Jewell, Secretar
Idaho Public Utilties Commission
P.O. Box 83720
472 W/ Washington Street
Boise, Idaho 83720-0074
j j eweiicmpuc.state.id. us
U.S. Mail/Postage Prepaid
E-Mail
Facsimile
Overight Mail
Hand Delivered
Lisa D. Nordstrom
Donovan E. Walker
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707-0072
Inordstromcmidahopower.com
dwalkercmidahopower.com
U.S. MaillPostage Prepaid
E-Mail
Facsimile
Overnight Mail
Hand Delivered
GregW. Said
Scott Sparks
Director State Regulation
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707-0071
gsaidcmidahpower.com
ssparkscmidahopower .com
U.S. MaillPostage Prepaid
E-Mail
Facsimile
Overnight Mail
Hand Delivered
E~
Idaho Irrgation Pumpers Association, Inc.' s Protest/Comments - 25
Why Is Idaho Power Paying Its Customers? - NYTimes.com Page 1 of7
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Why Is a Utility Paying Customers?
By KATE GALBRAITH
Published: January 23, 2010
BOISE, Idaho
Enlarge This Image
Paul Hose/res for The New York Times
Farmers like Sid Eiwin lake a risl( by
watering less when power demand is
highest. Sui they like Ihe tipside: a
rebate from the Idaho Power
Company.
Add to Portfolio
Idaho Power Company
Go to your Portfolio ))
TWTTER
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FOUR decades ago, when Sid Erwn
began his career as an inspector at the
Idaho Power Company, a string of
new hydroelectric plants was
pumping out power faster than locals
could buy it. Soon enough, Mr. Erwin
recalls, the utility began sending
representatives to rural areas, urging farmers to use more
electricity when irrigating their crops.
PRINT
REPRINTS
SHARE
These days, Idaho's farmers are being paid to stop using
power.
Sitting at a cluttered kitchen table in his home, Mr. Erwin
- now a farmer himself - waved a bil showing that last
July he received a credit of more than $700 from Idaho
Power for turning off his power-guzzling pumps on some
summer afternoons.
"It's a total turnabout," says Mr. Erwin, who lives in
Bruneau, about 60 miles southeast of here. "I'm almost 70
years old and this has been a lifelong education to me."
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Exhibt A to IIPA Comments
çs.se No. IPC-E-1O-46. .. .. _ . .
,Why Is Idaho Power Paying Its Customers? - NYTimes.com
Enlarge This Image
Paul Hosefros for The New York Times
Ric Gale of Idaho Power said that
after an energy crisis, "everything
turned a full 180."
Enlarge This Image
",'./.:'.,'::
Paul Hosefros ror The New York Times
Water for Idaho's farmers, like Sid
Erwin, often has 10 be brought uphil
from the Snake River, or from wells,
with electric pumps.
Taming Peak Demand'
Idaho Power pays some
custoi~'iars to cuI ell;Clrtc use at
iirnBS oi peak eiemancl as & way
\0 ~;lòw ¡he need for nev. pov.er
pt~ni$. Here are the resuí¡s from
()ne dBY last sqmnier
IOAHO POWER DEMANO
~" OC'Û. ~nr.ga\'~B:~t~ . . . . .
2.BC(¡
2.600
2.,100
PO....VE'! de!n..r¡~d
i;lJ b~( 1"1'l11.; ,tì~'¡
iSO rr;aàti.;;u:i
2:45 P.M.' .7 P.M.
2.200 I ' i ' 1 ' l . I . i .
101'..M. '2 2 :1 6 R ".M
~;;..."l."'.J~. !tJ;: !TCd,ttf Hri: ~..:;:n.. 'IP''Xt: ¡¡\~J.~
As saving energy becomes a rallying cry for utilities and
the government, Idaho Power is in the vanguard. Since
2004, it has been paying farmers like Mr. Erwn to cut
power use at crucial times, resulting in drop-offs of as
much as 5.6 percent of peak power demand.
In a related program, it pays homeowners to turn off their
air-conditioners briefly at times of high demand.
Other effciency initiatives by the utility, including one
promoting attic insulation, have saved about 500,000
megawatt-hours of power since 2002, according to the
company - roughly equal to the amount used by 5,000
gadget-filled homes over eight years.
To pay for these and other energy-saving measures, Idaho
customers - individuals and companies - are charged a
4.75 percent "energy effciency" rider on their electric bils,
one of the highest percentage charges of this kind in the
country.
"It's clearly iconic in terms of a utilty that's turned the
corner," says Tom Eckman, the manager of conservation
resources with the NOlthwest Power and Conservation
CounciL. a planning group created by Congress. "They have
gone from prett much ground zero to a fairly aggressive
program leveL."
The company's effort are especially strildng given that the
push for energy effciency is generally associated with
coastal states like California and Masachusetts, not with a
state whose electric rates are among the lowest in the
country.
But the concept has rung true for Idaho's farmers, anglers
and snowbirds - outdoor tyes who have helped keep the
state nearly free of coal plants. They have been largely
receptive to the utility's arguments that it is cheaper to
save energy than to build new power plants.
Page 2 of7
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Exhibt A to IIPA Comments
Ç~se No. IPe-E-1o-4~ .. '. .. .
Why Is Idaho Power Paying Its Customers? - NYTimes.com
Green Inc."Every time they would build a plant, it would raise our
rates," says Terry Ketterling, a farmer in Mountain Home,
Idaho, who grows sugar beets, corn, wheat and alfalfa and
who, like Mr. Erwn, paiticipates in the irrigation payment
program.
Ablogabout
energ, the
environment and
the bottom line.
Go to 810g )) Energy experts say Idaho Power's efforts can be replicated
by other power companies across the country. Steve Nadel,
executive director of the American Council for an Energy- Effcient Economy, an advocacy
group, estimates that about half of utilties now run programs that pay customers to cut
use during peak periods. And companies like Enernoc, based in Boston, have sprung up
that help utilties by outftting stores and other businesses with devices to turn offlights
or reduce power in other ways during a power squeeze,
But most utilities spend a much lower proportion of their revenue on saving energy than
Idaho Power, says Ralph Cavanagh, a senior lawyer at the Natural Resources Defense
Council, an environmental group.
LaMont Keen, the C.E.O. of Idaho Power, acknowledges that the company, wìth its large
cohort of farmers, has a different customer base than most other power companies, Stil,
he argues that the success of his programs shows that even utilities with large industrial
loads can adapt.
"With the right incentives, people can and wìIl modify their behavior in ways that are
beneficial," he says.
The utilty also has its share of critics: Big businesses sometimes wìnce at paying the
effciency charge, And some say the utilty has dragged its feet when it comes to
renewable energy - other than that generated by huge dams. Some detractors refer to
Idaho as the "hole in the doughnut" on wind power - because most of its neighbors, like
Oregon, Washington and Wyoming, have built far more wind farms.
''Very little has been developed in Idaho in the past six or seven years, whereas all the
states around us have blossomed," says Ki Tidwell, a self-described "Republican soccer
mom" near Hailey, Idaho. Ms. Tidwell helped push through a shareholders' resolution to
urge Idaho Power to plan for a low-carbon future.
To the surprise of even Ms. Tidwell, it passed last May, wìth 52 percent of the votes.
Mr. Keen notes that hydro is a clean resource and says Idaho Power - a subsidiary of the
publicly listed Idacorp that serves parts of Oregon as well as most of Idaho - is working
to ramp up wind production and reduce the carbon intensity of its operations.
Exhibt A to IIPA Comments
Case No. IPC-E-1Q-46
Page 3 of?
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,Why Is Idaho Power Paying Its Customers? - NYTimes.com Page 4 of7
IDAHO POWER has been used to getting its way: it's an old joke around Boise that Idaho
is the only state named for a power company.
Until recently, getting its way meant adding power, which was cheap and plentiful,
thanks in part to several new dams completed in the late 1950S and '60S. (One of them,
caled Hell Cayon, was where Mr. Erwn spent his younger days checking on cables and
fittngs during constniction.)
A nasty shock arrived in 2000 and 2001, when peak-time energy prices on the open
market rose about tenfold - not counting steeper, temporary spikes. The Western energy
crisis was under way, with market manipulation woes in California compounded by a dry
stretch for Idaho's dams.
"Everyhing turned a full 18o, " Ric Gale, the utilty's vice president for regulatory affairs,
said in an intervew in Idaho Power's blocldike Boise headquarters, which is itself
undergoing a floor-by-floor green retrofit.
Idaho Power and regulators held emergency meetings, and customers were soon hit with
a temporar rate increase of about 44 percent. The utiity paid big irrigators to shut down
their electc pumps for the sumer of 2001, figuring it would be cheaper than buying
the power at high prices. An enormous phosphate plant in Pocatello was also in effect
paid to temporarily shut down one of its energy-guzzling furnaces. The move hurt sales,
and the company, FMC, decided later that year to close the plant permanently.
To avoid being caught short again, Idaho Power decided to give energy-saving measures a
tr. Another push came from the state's Public. Utilities Commìi;t=lm.l, which ordered
Idaho Power in 2001 to refocus on energy effciency - something the utility had dabbled
in during the 1990S.
PERHAPS more than any other group, Idaho's farmers have experienced at first hand the
effects of the utiltys transformation. Though Idaho's economy has diversified in recent
years, more than a fifth of its land is devoted to farming - not only to grow Idaho's world
-famous potatoes, but also crops like alfalfa, trticale and oat hay, all of which Mr. Erwin
grows.
Vast amounts of energy are required to pump water up to the state's plains from the
Snake River or from wells. The largest farms can use as much electricity as several
thousand homes. During the summer, big farms keep their pumps on nearly 24 hours a
day, seven days a week.
Until the 1970s, many farmers used gas-powered engines to force water uphil, according
to Mr. Erwn. But by offering steep discounts, Idaho Power convinced many ofthem to
Exhibt A to IIPA Comments
Case No. IPC-E.1Q-46
,Why Is Idaho Power Paying Its Customers? - NYTimes.com Page 5 of?
put in electric pumps and use them to move water up even taller slopes; the discounts are
stil in effect. Irrigation accounts for 12 percent of Idaho Power's electrcity load over all
- and 23 percent during peak periods.
That's why, in recent years, Idaho Power decided that farmers could help it reduce the
load on sunny summer days, when air-conditioners and other gadgets are on, by turning
off their pumps for up to 1S hours a week.
This concept, called demand response, has gained traction in utilty circles. In essence, it
involves paying users to make small sacrifices when there is an urgent need for extra
power (the "peak"). The utility can then rely on cutting some demand on its system at
crucial times - and, in theory, avoid the cost of building a new plant just to meet those
peak needs.
Over the course of the day, Mr. Gale says, "you can actually see the peak drop off when
the program lticks in."
For farmers, however, this process isn't easy. Workers must be dispatched to turn the
pumps on and off, and there is a risk of crop damage. "I may save on power, but it may
cost me some on crop," says Mr. Ketterling, who pumps water up more than 600 feet
from the Snake River. He spends about $1.8 milion a year on electricity and estimates he
shaved more than 30 percent off his bil over a six-week period last year by participating
in the program.
Ordinary consumers have also been called upon to help with effciency. These days, most
utilties enclose flers with monthly bils that offer energy-saving tips for appliances and
light bulbs, but Idaho Power seems to have taken the campaign to an extreme,
Just before Christmas, the utiity bought ads in newspapers flagging "naughty or nice"
holiday gifts: an electiic charger for a mobile device, for example, was "naughty," but a
solar charger was "nice." Last October, Idaho Power offered free classes to Boise
residents featuring energy-saving tips for cooking (ever tiied a solar oven?) and
demonstrations on sealing ducts.
Another program, begun last June after a yearlong pilot version, pays individuals 1S cents
for each square foot of insulation they put in their attcs. "That was a no-brainer," said
Courtney Washburn, a Boise resident who works for the Idaho Conservation League and
who received a letter from Idaho Power promoting the insulation rebate.
Ms. Washburn also partcipates in the utilitys "demand response" program for air-
conditioners, More than 32,000 Idaho Power households (out of nearly 407,000 total)
have allowed the utility to control their air-conditioners at crucial times.
Exhibt A to IIPA Comments
Case No. IPC-E-1D-46
,.Why Is Idaho Power Paying Its Customers? - NYTimes.com Page 60f7
On a hot summer day, Idaho Power can in essence push a switch that causes devices
installed on participating air-conditioning units, like Ms. Washburn's, to cycle on and off
for intervals as long as 15 minutes. Ms. Washburn says she has noticed no difference in
temperature, even though a sweltering day is exactly when people want their air-
conditioning most. Executives say the program lowers use during peak periods by about 1
percent. Participants are paid $7 a month during the summer.
Ms. Washburn says her electric bil has dropped by about 30 percent as a result ofthe
attic insulation and the $7 credit.
FACED with a fast-growing population, Idaho Power has been unable to avoid building
new power plants altogether; a new natural gas plant is in the works. But executives are
pressing ahead with effciency measures. The utilty is asking regulators to make
permanent a pilot program started in 2007 that allows Idaho Power to raise rates to
make up for sellng less power.
(This concept is known as decoupling and is celebrated by energy-effciency advocates;
Idaho was one of the first states to adopt it, after California, though Idaho Power's large
industrial customers are so far exempt from the rate adjustments.)
But the aggressive pursuit of effciency has prompted concerns in some quarters. Ray
Stark, senior vice president of the Boise Metro Chamber of Commerce, says that not long
ago a few companies, including a chemical producer, that had been considering
operations in the state were told by Idaho Power that there was insufcient capacity to
accommodate their power needs.
"That concerns us a great deal because we want to be competitive for economic
development projects," said Mr. Stark, adding that he supports the effciency push.
Mr. Gale said that capacity constraints were unrelated to the drive to save energy and
that utities can't always quickly accommodate a big new customer.
The rising effciency charges have also raised corporate eyebrows. Don Sturtevant, the
energy manager for the J. R. Simplot Company, the potato processor, said he cringed
when Idaho Power raised the charge last June to 4.75 percent from 2,5 percent, though
he said the company benefited from the program.
If the utilty raises the charge again, Mr. Sturtevant said, "it's going to be a challenge."
A version of this article appeared in prini on January 24. 2010, on
page BU1 of the New York edition.
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Exhibt A to IIPA Comments
Case No. IPC-E-1D-46
"Why Is Idaho Power Paying Its Customers? - NYTimes.com
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Exhibt A to IIPA Comments
Case No. IPC-E.1D-46