20110718Comments.pdf

Peter J. Richardson (ISB # 3195)
Gregory M. Adams (ISB # 7454)
Richardson & O'Lear, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(frichardsonandoleary .com
greg(frichardsonandoleary .com
RECEIVED
2011 JUl 18 PM 4= 40
Attorneys for the Industrial Customers of Idaho Power
BEFORE THE IDAHO
PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
PRUDENCY DETERMINATION OF
ENERGY EFFICIENCY RIDER FUNDS
SPENT IN 2010
)
) CASE NO. IPC-E-II-05
)
) COMMENTS OF THE
) INDUSTRIAL CUSTOMERS OF
) IDAHO POWER
COMES NOW, the Industrial Customers ofIdaho Power ("ICIP"), and respectfully
submits the following comments in response to Idaho Power Company's (the "Company's")
request for a prudency determination regarding Energy Effcient Rider ("EE Rider") fuds spent
in 2010. As set fort below, ICIP respectfully request that the Commission order the Company
to use values for demand response program achievements in EE Rider prudency dockets that are
consistent with the program limitations placed on demand response programs in the Integrated
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Resource Plan ("IRP"). ICIP also respectfully requests that the Commission require Idaho
Power to reru its cost-effectiveness analyses using its most curent avoided cost figues. ICIP
fuher respectfully requests that the Commission require the Company to use comparable
evaluation methodologies for its three demand response programs, so as not to undervalue the
cost-effectiveness of the FlexPeak Management Program compared to the AlC Cool Credits
Program and the Irrigation Peak Rewards Program. Finally, ICIP submits that several residential
programs are underperforming from a ratepayer perspective, and respectfully requests that the
Commission require the Company to obtain third par evaluations of these programs to
determine if they should be discontinued or significantly modified.
I. . BACKGROUND
Idaho Power requests the Commission issue an order determining that its expenditure of
$42,479,692 in EE Rider fuds in 2010 was prudently incured. According to Idaho Power, that
expenditue resulted in 187,626 megawatt hours ("MWh") in energy savings in 2010, and a peak
demand reduction of336 megawatts ("MW"). Direct Testimony of Darlene Nemnch, p. 8
(March 15,2011). Idaho Power states that it conducted its evaluation of the programs consistent
with the requirements of the Memorandum of Understading ("MOU") entered into by
Commission Staff and the Idaho Utilities regarding prudency reviews in Case No. IPC-E-09-09.
The Company states that its programs have generally passed the cost effectiveness tests called
for in the MOU. But the Company's programs have not all passed the ratepayer impact test
("RIM"), which according to Idaho Power "measures the impact on customers' bils or rates due
to changes in utility revenues and operating costs caused by an energy efficiency program." Id
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at pp. 12-13.
The Company states that third par firms conducted "process evaluations" on nine
programs in 2010. Id at pp. 16-17. But those process evaluations appear to be the only third
par evaluations conducted for this 2010 prudency review, and they evaluated only "program
delivery mechanisms in order to indentify constraints and potential improvements," not the
actul cost-effectiveness of the programs. Id at p. 20. The Company also re-evaluated the
"optimum amount of demand response resource that Idaho Power can and should plan for in the
long-term within the Integrated Resource Planing process." Id at p. 18. As explained below,
the Company appears to have now concluded that there is a cap on the overall amount of peak
demand reduction Idaho Power wil rely upon from demand response programs when it
determines whether it needs to procure a new capital expenditure on a peaking resource. But the
Company has not used those caps from the IRP process when evaluating the cost-effectiveness of
its programs in this prudency review.
II. COMMENTS
A. Idaho Power improperly uses peak demand reduction benefits for its Demand
Response programs in this case that are higher than the caps it imposed on the
programs in the IRP process where the Company determines its need to build new
peaking resources.
The success of Idaho Power's three demand response programs - the AlC Cool Credits
Program, the Irrigation Peak Rewards Program, and FlexPeak Management Program - is
important because the Company's 2011 IRP indicates that peakng needs are driving its
perceived future resource needs. These programs could enable the Company to reduce its
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peakng needs and prevent the need to incur future capital expenditues on futue peakng plants.
According to the recently fied IRP, "the value of reduced demand compared with building a
supply-side capacity resource is nearly, twice the value of the cost to ru the program." Idaho
Power's 2011 IRP, IPC-E-ll-11, p. 42 (June 30, 2011). Yet the Company has set a cap of351
MW through the end of2030 on these thee programs. Id In the 2011 IRP, where the
Company evaluates its peaking needs for puroses of planing to build a new peakng plant, the
Company placed a limit of "330 MW for sumer 2011, 310 MW in 2012 when the Langley
Gulch plant comes on line, and 315 MW in 2013 and 2014." Idaho Power's 2011 IRP, at p. 42.
But in this docket, where the Company seeks a prudency determination for cost-recovery
puroses, the Company asserts that it already achieved a peak demand reduction of336 MW in
2010. Direct Testimony of Darlene Nèmnich, p. 8.
The Company also indicated in this case that its cost-effectiveness analysis for its
demand response programs is not comparable to the costs and benefits of an actual peaking plant.
In response to ICIP Production Request No. 6(c), the Company stated:
Even though the Company uses the capacity cost of a SCCT for cost
effectiveness, the Company believes further analysis is needed to determine the
optimum level of demand response for its system and how to utilize this resource.
For example, the irrigation and commercial demand programs are only available
for 60 hours each sumer durng what the Company would expect to be peak
times, whereas a peaker would be available any month of the year. Even if 60
hours were not the limit to the time period that customers were willng to be
tured off, the appropriate interrption rate is very limited. Because of this limit,
there is a defined amount of demand response that is useful on Idaho Power's
system. The level of demand response will change as new load is added and as
other supply-side resources are added.
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For IRP puroses, "Demand response, because of its limitèd availability, cannot continually
satisfy all of the load and resource balance deficits throughout the IRP planing period." Idaho
Power's 2011 IRP, at p. 42. But that has not stopped the Company from using the programs' full
potential in its cost-effectiveness analysis in the prudency determination.
It is not clear why the Company canot better design its demand response programs such
that they can in fact defer the need for future peakng resources. Nor is it clear why the
Company canot at least design some mechanism to properly account for the actual costs and
benefits of its demand response programs that can be compared to the costs and benefits of a
future peakng plant. If the Company is correct that demand response programs canot be relied
upon to defer futue peaking needs, then the Commission should require the Company to use the
IRP caps in its cost-effectiveness analysis for those programs in prudency review dockets.
The last time the Company sought approval to build a peakng plant -the 170 MW
Evander Andrews gas plant - ICIP opposed issuance of a certificate of public convenience and
necessity on the ground that the Company could meet its peaking needs with demand response
programs and a virtal peaking plant using customers' stadby emergency generators. The
Commission granted the CPCN but also stated, "Idaho Power must diligently and vigorously
pursue all available, cost effective DSM, conservation, and pricing options that could potentially
displace or defer the need for additional futue peaking generation." Order No. 30201, p. 12.
The Commission also recently rejected the Company's request to place limits on the Irrigation
Peak Rewards program, and stated "the Commission finds' that adding language to limit
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paricipation in the Program is not nec~ssar, and could unduly discourage paricipation." Order
No. 32200, at p. 1 i.
Idaho Power has spent substatial sums on its demand response programs, but it remains
to be seen whether the Company will recognize the full benefits of those programs for puroses
of displacing the need for future, rate-based peakng generation. The Company stated in
response to ICIP Production Request No. 6(b) in this case, that considering the limits on demand
response discussed above, the Company projects a peak hour deficit in 2015. Presumably, the
Company's new IRP caps on its demand response programs will be used as justification to
procure a new peakng resource to be ònline in that time frame. The Commission should now
order that Idaho Power must recognize the full potential of the demand response programs in its
IRP process. In any event, the Company must use the same numbers for peak load reduction in
its cost-effectiveness analysis in prudency cases such as the curent case, as it uses in the IRP
process when evaluating its future peaking needs. Any other approach will require ratepayers to
redundantly fud a new costly peaking plant in addition to costly demand response programs.
B. Idaho Power used stale avoided costs in evaluating its programs, and thereby likely
overestimated the cost-effectiveness of its demand side management programs.
Idaho Power used the avoided costs from its 2009 IRP in calculation of the cost-
effectiveness of its programs in this case. However, since that time the Commission has
substantially reduced the published avoided cost rates available to qualifying facilities in March
2010 in Order No. 31025, and presumably the avoided costs applicable to the Company's
demand side management programs sliould also have decreased substantially at that time.
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Furer, on June 30, 2011, Idaho Power filed with the Commission their 2011 IRP with updated
DSM avoided cost values. Idaho Power's 2011 IRP, at Appendix C, p. 69. The avoided costs in
the 2011 IRP are significantly lower in the near term than those used in the cost-effectiveness
analysis in this case. Although the avoided costs used in this case are higher in the far term, the
cost-effectiveness tests employ a net present value discouiting process which gives near-term
values a signficantly greater effect.
It is very likely that some of the marginally cost-effective programs would no longer be
able to pass the cost-effectiveness tests ifIdaho Power were to use its most updated avoided
costs from the 2011 IRP. There has been no showing by Idaho Power that these figues
developed in lengthy IRP process were unavailable to Idaho Power at the time it filed this
prudency case. ICIP therefore respectfully requests that the Commission require Idaho Power
reru their costs-effectiveness tests with the avoided costs contained in the 2011 IRP, and order
the Company to use its most curent avoided costs in futue prudency determination cases.
C. The three demand response programs are not evaluated on the same basis.
The cost-effectiveness calculations for demand response programs represent 20-year
lifecycle calculations for the AlC Cool Credits Program and the Irrigation Peak Rewards
Program, and 10-year lifecycle calculations for FlexPeak Management Program. See Direct
Testimony of Darlene Nemnch, at p. 12. According to the Company's Demand-Side
Management 2010 Anual Report, the total resource costs for the AlC Cool Credits Program
and the FlexPeak Management Program in 2010 were $2.0 milion and $1.9 milion respectively,
with a savings of39.0 MW and 47.5 MW respectively. See Idaho Power's 2010 DSM Report, at
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p. 129. For approximately the same cost, the FlexPeak Management program achieved 22%
more peak demand reduction. Yet the'Company reports that somehow both the Utilty Cost test
and the Total Resource Cost test are virtlly the same for each program. Id, at p. 13 1. The
Commission should require Idaho Power to use comparable evaluation methodologies for its
three demand response programs, so as not to undervalue the cost-effectiveness of the FlexPeak
Management Program compared to the other two programs.
D. The Company's residential programs appear to be fallng short of expectations and
need serious third part evaluation to determine if some should be modified or
discontinued.
The Company's residential programs are not providing an equivalent ratepayer benefit to
programs for other customer groups. According to the Company's analysis, seven of the
residential programs failed the ratepayer impact test in 2010. See Idaho Power's 2010 DSM
Report, at Supplement 1, pp. 15, 17, 19,25,35,43, and 47 (stating that the Ductless Heat Pump
Pilot, Energy Efficient Lighting, Energy House Calls, Energy Star Homes Northwest, Home
Products, See ya later, refrigerator, and Weatherization Solutions for Eligible Customers
Programs all received below a score of 1.00 for the RIM test). Thus, over half of the thirteen
residential programs failed the test that measures the impact on customers' bils or rates due to
changes in utility revenues and operating costs caused by a demand side management program.
ICIP has raised concerns with the AlC Cool Credits program in the past, and it is obvious that
many of the other residential programs need serious evaluation and analysis to determine if they
can be improved, or if some should be discontinued.
The Commission has stated, "Idaho Power should seek to employ independent evaluators
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for all of its DSM programs and take affirmative steps toward achieving measurable
improvements in its documentation, verification and record-keeping processes for these
programs." Order No. 32113, at p. 9. ICIP agrees, and bel,ieves that doing so will help the
Company identify unsuccessful programs and keep overall expenditues within a reasonable
leveL. As noted above, however, Idaho Power has not submitted any thrd pary analysis of the
cost-effectiveness of its programs in this case. Commission Staff pointed out in its Production
Request No. 14 that the Company has delayed several third pary evaluations scheduled prior to
this case, including evaluations for seven of the residential programs. The Company's delay is
not a faithful implementation of the Commission's directive quoted above, and we now have
very little third pary information with which to evaluate the prudency of the Company's
expenditures in 2010.
The limited process evaluations do little to dispel ICIP's concern that the residential
program has a serious free rider problem. See Global Energy Parners, Process Evaluation of
Idaho Company's Residential Energy Effciency Programs, pp. 7-1, 7-4 (Feb. 3,2011) (noting
that Idaho Power did not collect the necessary information to evaluate free ridership for the four
programs evaluated, and noting that the limited information collected demonstrated free ridership
problem for the Heating and Cooling Effciency Program). The Commission should require
Idaho Power to engage a qualified third pary to fully evaluate the cost-effectiveness of each of
its residential programs, including any free-rider problems, and report back to the Commission
and interested paries on steps the Company wil tae to improve the programs or reduce fuding
for programs that canot be improved.
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~
III. CONCLUSION
ICIP respectfully requests the Commission require the completion of the additional
analyses and steps in this and future EE Rider prudency reviews, as discussed above.
DATED this 18th day of July 2011.
RICHARDSON AND O'LEARY, PPLC
By:~
e J. Richardson
egory M. Adams
Attorneys for the Industrial
Customers of Idaho Power
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 18th day of July, 2011, I caused a true and correct
copy ofthe foregoing COMMENTS OF THE INDUSTRIAL CUSTOMERS OF IDAHO
POWER to be served by the method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street (83702)
Post Offce Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(x) Hand Delivered
( ) Overnight Mail
( ) Facsimile
( ) Electronic Mail
Jason B. Willams
Lisa Nordstrom
Idaho Power Company
PO Box 70
Boise, Idaho 83707
(x) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( ) Overnght Mail
( ) Facsimile
(x) Electronic Mail
Gregory W. Said
Darlene Nemnich
Idaho Power Company
POBox 70
Boise, ID 83707
(x) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( ) Overnight Mail
( ) Facsimile
(x) Electronic Mail
SignedLkl( Gu ~f
Nina M. Curis
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