20150507final_order_no_33292.pdf

Office ofthe Secretary
Service Date
May 7,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION FOR )CASE NO.IPC-E-15-03
APPROVAL OF NEW TARIFF SCHEDULE )
82,A COMMERCIAL AND INDUSTRIAL )
DEMAND-RESPONSE PROGRAM (FLEX )ORDER NO.33292
PEAK PROGRAM).)
On February 4,2015,Idaho Power Company applied to the Commission for an Order
authorizing the Company to implement a new schedule—Schedule 82,Flex Peak Program—and
continue recovering its demand response program expenses in the current manner.The
Company proposes to implement the program by June 15,2015.
On March 4,2015,the Commission issued a Notice of Application and Notice of
Modified Procedure that set an April 8,2015 deadline for interested persons to comment on the
Application,and an April 15,2015 deadline for the Company to reply.The Industrial Customers
of Idaho Power (ICIP)intervened as a party in the case.’Commission Staff,ICIP,and the Idaho
Conservation League (ICL)filed timely comments,and the Company filed a timely reply.
The Commission has reviewed the record.Based on our review,we enter this Order
authorizing the Company to implement a new Schedule 82,Flex Peak Program,to be effective
on the service date of this Order as more fully explained below.
THE APPLICATION
With this Application,the Company proposes to offer a new demand response
program—the Flex Peak Program—that would enable commercial and industrial customers to
voluntarily reduce their loads on summer peak days.The Company implemented an earlier
version of the program—the FlexPeak Management Program—in 2009.Since then,the earlier
program has achieved between 8.5 and 39.3 megawatts (MW)of generation level reductions per
year.
A third party—EnerNoc,Inc.—managed the Company’s earlier program.The
Company’s contract with EnerNoc has expired,however,and the Company believes it can save
costs for all customers and increase program transparency by self-managing the new Flex Peak
On April 24,2015,another entity,EnerNoc,Inc.,filed a Petition to Intervene.EnerNoc withdrew its Petition on
April 27,2015.
ORDER NO.33292
Program.The Company reports that most of its Energy Efficiency Advisory Group (EEAG)
members cautiously support the Company managing the new program.
The Company notes that,in Order No.32923,the Commission approved a settlement
agreement that set the following design parameters for the Company’s prior FlexPeak
Management Program:
a.Participants.Idaho Power will not actively seek to expand the capacity of
the FlexPeak [Management]Program.Participants are industrial and large
commercial customers.
b.Program Details.The FlexPeak Management Program will be available
from June 15 through August 15,Monday through Friday,from 2:00 p.m.-
8:00 p.m.,excluding holidays.Each dispatch event will last up to four
hours per participant within the available program hours.Dispatch events
will not occur more than 60 hours per season.In the event of a system
emergency,demand response capacity from the FlexPeak Management
program will be available.Idaho Power will conduct a minimum of three
dispatch events per season.There will be two hours advanced notice to
participants.
c.Incentive.A fixed and variable payment structure may be appropriate,as
long as the variable portion is low enough that it does not prevent the
program from being dispatched.If a variable and fixed incentive structure
is used,a minimum of three dispatch events will be included in the fixed
incentive.The variable incentive will be paid to participants if Idaho
Power conducts dispatch events in the FlexPeak Management program for
more than the three minimum dispatch events.
See Case No.IPC-E-13-l4,Demand Response Programs Settlement Agreement,pp.7-8.The
Company claims its new program incorporates these parameters.
The Company would offer the new program to commercial and industrial customers
that the Company serves under Schedules 9,19,or a special contract.The Company will
promote the program to past commercial and industrial demand response program participants.
As explained in proposed Schedule 82,customers who intend to participate must apply to
participate in the program before each program season.
The Company proposes a program season of June 15 through August 15,during
which the Company will call at least three dispatch events.The events will occur between 2:00
p.m.and 8:00 p.m.,Monday through Friday,excluding holidays,and last from two to four hours
ORDER NO.33292 2
per day but not more than 15 hours per week or 60 hours per season.The Company will give
participants at least two hours notice before an event occurs.
The Company’s proposed incentive structure includes fixed and variable payments.
The fixed payment would be $3.25 per kilowatt (kW)per week multiplied by either:(1)the
actual kW reduction received during a dispatch event;or (2)nominated kW if there is no event.2
The variable payment would be $0.16 per kilowatt-hour (kWh)reduced,effective after the first
three events have been called for the season.The Company would send checks to participants
within 30 days after the season ends.
The Company expects its total program costs will range from $1.1 million per year
without variable payments,to $1.4 million per year if the program has 35 MW of nominated
reductions and is dispatched for 60 hours.The Company does not propose to change customer
rates that fund the program,and believes the current level and method of recovery will
adequately fund the program for the foreseeable future.
The Company explains that,in furtherance of Commission Order No.32426,the
Company moved about $2 million of commercial and industrial demand response incentive
payments into base rates effective January 1,2012.The Company has since recovered or
credited deviations from this base through the annual Power Cost Adjustment (PCA).3 The
Company clarifies that demand response costs tracked through the PCA include only the
incentives paid to participants,or the amounts paid to third-party demand aggregator contractors.
The Company expects that the Flex Peak Program’s incentive payments would range from about
$0.9 million per year with no variable payments,to about $1.27 million if the program is
dispatched for the maximum hours allowed.The Company currently recovers its labor costs
associated with administering demand-response programs through the Energy Efficiency Rider.
The Company proposes to recover its Flex Peak Program expenses in the same way it
recovers its current commercial and industrial demand-response program expenses.In other
words,it would recover its Flex Peak Program incentive payments through base rates,and track
2 “Nominated kW”is the amount of kW that a program participant commits not to use during a program event.The
Company expects participants to reduce their load by the nominated kW during each hour of each event for the
event’s duration.
The PCA is a cost recovery mechanism that lets the Company adjust its rates up or down to reflect the Company’s
changing power supply costs.While the change in costs is reflected in rates,neither the Company nor its
shareholders receive any financial return from the PCA.Instead,the PCA allows the Company to pass the benefits
or costs of the change to its customers.
ORDER NO.33292 3
deviations from the base through the PCA.The Company explains that this recovery method
would enable it to pass the program’s annual cost savings to customers by June of the following
year.The Company would continue to recover program labor expenses and administrative
expenses through the Energy Efficiency Rider.The Company’s DSM Annual Report would
discuss all program activities,how the program impacts the Energy Efficiency Rider,and what
program incentives will be included in the PCA.
THE COMMENTS
Commission Staff,ICIP,and ICL filed comments in the case,and the Company filed
reply comments.The comments are summarized below.
A.Commission Staff
Staff “cautiously supports”the Company’s Application to self-manage the new
program.Staff estimates the new program will decrease costs by $600,000 per year.Staff notes
that customers will be better off if the Company can deliver the same reliable resource for less
money.Staff is concerned,however,that some of the Company’s proposed changes—such as a
new way of measuring event-demand reduction,and not providing participants with real-time
load monitoring services and mid-event coaching on curtailment—could decrease the program’s
performance,reliability,and customer participation.Staff thus suggests the Commission
approve the program as a one-year pilot.Staff also suggests that the Company file an end-of-
season report within 80 days after the season ends.The report would discuss the number of
participants and participating sites,MW of demand response under contract,MW of demand
response realized and incented per dispatch,percent of nominated MW achieved in each dispatch
event by participant,and a detailed cost analysis of the program.Staff also suggests that the
Company revise its proposed tariff to specify that the Company will notify participants of a
program event two hours before an event,rather than “at least”two hours before an event.
B.ICIP
Like Staff,ICIP supports the Company managing the new program.ICIP favors the
transparency that arises from the Company self-managing the program through a filed tariff,
instead of through a third-party that might have different contracts with different participants.
ICIP also offers suggestions on how the Company might improve the program.In summary,
ICIP suggests that the Company:(1)calculate incentive payments,in part,by using EnerNoc’s
method of determining whether a customer achieved its nominated kW reduction (ICIP believes
ORDER NO.33292 4
the Company’s proposed method to calculate the baseline may discourage participation);(2)
offer real-time data to participants;(3)monitor the mix of program participants to ensure smaller
customers are participating (program participants will no longer be actively coached about
curtailment during an event,which ICIP says could be problematic for smaller,less sophisticated
customers);and (4)pay participants for the first hour of an event that the Company calls but then
cancels within two hours of the scheduled start time (CIP notes it can take a customer four hours
to prepare for the start of an event and then return to normal after the event ends).
C.ICL
ICL asks the Commission to deny the Application because the Company has not
shown its proposed program will be equivalent to,and cost the same or less money than,the
program run by EnerNoc.ICL observes that the EnerNoc program consistently delivered
verified cost-effective demand reductions.EnerNoc also provided coaching and real-time energy
usage data,which the Company will not provide.Moreover,EnerNoc was contractually
obligated to nominate some amount of demand reduction potential each week,and if it could not
find the potential it paid a penalty to cover the Company’s cost of procuring alternate supplies.
ICL notes that the Company does not propose equivalent protections for ratepayers.ICL also
claims that the alleged benefits of a Company-run program—including program transparency,
the ability to cross-market efficiency programs,and cost savings—”are speculative and hard to
quantify.”Meanwhile,the Company “makes no effort to explain why these speculative benefits
outweigh the risk to customers of less reliable performance and less robust metering and data
collection.”ICL thus asks the Commission to deny the Application,and direct the Company to
re-engage the potential third-party administrators who responded to the Company’s request for
proposals (RFP).
D.Company Reply
In its reply,the Company agrees with Staff’s recommendation that it prepare an end-
of-season report,and to file a report in Case No.IPC-E-15-03 by November 2,2015.The
Company also agrees to modify the proposed tariff’s event notification language to clarify that
notification will occur “on or about two hours”before an event instead of “at least”two hours
before an event.The Company otherwise re-affirms that the Commission should authorize the
Company to manage the Flex Peak Program as filed.The Company acknowledges the other
parties’suggested changes.But it believes there is no need to change the program before
ORDER NO.33292 5
determining whether the Company can successfully run it.Id.at 2-3.The Company’s replies to
the other parties’concerns are summarized below.
In reply to Staff’s and ICIP’s concerns about the Company not offering real-time load
monitoring,the Company notes that it surveyed some of the prior program’s participants and was
advised that many of those participants do not need the Company to provide real-time load
monitoring.The Company notes that to provide real-time load monitoring to all participants,it
would have to invest considerable resources to develop software that would potentially benefit
just a few participants.The Company also doubts it could provide real-time load monitoring in
time for the 2015 season.See Reply at 3-5.
In reply to concerns about how the Company’s program will calculate incentives and
the baseline from which to determine whether a customer has achieved its nominated kW
reduction,the Company clarifies that it will calculate original baseline kW using the three days
out of the immediate past ten non-event business days.See Reply at 5.The Company also
explains that its proposed symmetrical day-of-load adjustment4 is consistent with industry
practices,will accurately measure and compensate participants for their load reduction,and will
protect all customers from paying for load reduction that was not achieved.Id.at 6-7.The
Company proposes to symmetrically cap this adjustment,and asserts that doing so is standard
industry practice and will protect participants and the Company from the volatility associated
with large adjustments to the original baseline kW.Id.at 7-8.
In reply to ICIP’s recommendation that the Company pay incentives for the first hour
of an event that the Company has cancelled within two hours of the scheduled start time,the
Company notes that event cancellations are rare.Further,participants receive weekly capacity
payments based on their weekly nominations regardless of whether events are called or
cancelled,and the Company maintains that these capacity payments will fairly compensate
participants even if an event is cancelled.Id.at 8.
The Company also replies to ICIP’s recommendation that the Company calculate a
participant’s reduction based on the average reduction over an event period,and that the
Company not use the proposed hour-by-hour adjustment for underperformance.The Company
The Company explains that the day-of-load adjustment is the difference between the average original baseline kW
and the average actual metered kW during the two hours before the participant receives notice of an event.The
adjustment accounts for customers using more or less load than their original baseline kW predicts on the day of an
event.Reply at 5-6.
ORDER NO.33292 6
stresses that its proposal to use the average load production to meet the overall nomination,with
a per-hour adjustment for every hour the nomination is not achieved,will ensure that load
reduction is achieved for the whole event rather than just part of the event.The Company thus
maintains that the hour-by-hour adjustment will more accurately measure and incentivize true
load reduction that system operators can depend upon.Id.at 8-9.
In reply to Staff’s recommendation that the program be approved as a one-year pilot,
the Company asserts that designating the program as a one-year pilot would be inconsistent with
the Demand Response Settlement Agreement approved in Order No.32923,which directs the
Company to take a long-term view when implementing demand response.The Company also
believes that designating the program as a pilot could negatively impact program enrollment.
The Company notes that it has agreed to submit an end-of-season report and impact evaluation
that will thoroughly review the program’s performance and enable stakeholders to provide
feedback to the Company.Id.at 9-10.
Lastly,in reply to ICL’s claim that the benefits of the Company’s proposed program
are “speculative and hard to quantify,”the Company notes that the benefits of its proposed
program are no more speculative than those in programs offered by third-party vendors.The
Company explains that the benefits it offers (e.g.,lower cost,more timely payments,and greater
transparency)differ from benefits that a third-party provider might provide (e.g.,real-time load
monitoring and coaching during events),but that the Company’s program will nevertheless
provide a good overall value to customers.And,since the Company will operate its program
without mark-up or profit,it would be unreasonable to require its shareholders to “cover any cost
impact that results from [the Company]actually realizing fewer demand reductions than [it]
intends to acquire,”as suggested by ICL.Id.at 10.
For these reasons,the Company asks that it be allowed to implement Schedule 82 and
manage the Flex Peak Program as stated in the Application,and that it be allowed to continue
recovering program expenses in the same manner that it currently recovers commercial and
industrial demand response program expenses.Id.at 11.
FINDINGS AND DISCUSSION
The Commission has thoroughly reviewed the record in this case.Based on our
review,we find it just,fair,and reasonable to approve the Company’s request to:(1)manage the
ORDER NO.33292 7
Flex Peak Program as described in the Application;and (2)continue recovering program
expenses in the same manner that it currently recovers commercial and industrial demand
response program expenses.The Commission strongly supports the use of commercial and
industrial demand response-programs.And,while EnerNoc’s program was robust and cost-
effective,customers will benefit if the Company can deliver similarly reliable demand response
at the same or less cost.We appreciate the suggestions offered by Staff,ICIP,and ICL.But
given the lack of near-term capacity deficits,it is a reasonable time to allow the Company an
opportunity to administer its own program more efficiently.We find that it would be premature
to modify the proposed Flex Peak Program before allowing the Company a chance to show that
it can successfully run a reliable and cost-effective program with robust customer participation.
Consistent with the Company’s Reply,we find it reasonable to direct the Company to file a
revised Schedule 82 that requires the Company to notify participants “on or about two hours”
before an event.
We are mindful of the intervenors’concerns about the Company running a
commercial and industrial demand response program.Consequently,we find it reasonable to
direct the Company to file,one-year from the service date of this Order,a one-time report that
discusses its experience in running the program,how the program’s costs and benefits compare
to those achieved under the prior program,how participants have performed under the structure,
and whether changes might improve the program (e.g.,offering real-time load monitoring,
coaching,etc.).We further find it reasonable and in the public interest to direct the Company to
file an annual end-of-season report within 80 days after the season ends each year.The annual
end-of-season report should include the number of participants,number of participating sites,
MW of demand response under contract,MW of demand response realized and incented per
dispatch,percent of nominated MW achieved in each dispatch event by participant,and a
detailed program cost analysis.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application is approved as
discussed above.The Company shall promptly file a revised Schedule 82,Flex Peak Program,
that modifies the event notification language as specified above.The tariff shall be effective on
the service date of this Order.
ORDER NO.33292 8
IT IS FURTHER ORDERED that the Company shall file an end-of-season report
each year within 80 days after the Flex Peak Program season ends for that year,as discussed
above.
IT IS FURTHER ORDERED that the Company shall file,one year from the service
date of this Order,a separate one time report as discussed above.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2015.
ATTEST:
Je D.Jewell UCommissionSecretary
O:IPC-E-I 5-03kk2
I
4 %__j
MACK A.REDFORD,COMMISSIONER
1c2
KRI INE RAPER,CO!MISSIONER
PAUL
ORDER NO.33292 9