20150408Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF NEW TARIFF SCHEDULE 82,
A COMMERCIAL AND INDUSTRIAL
DEMAND.RESPONSE PROGRAM (FLEX
PEAK PROGRAM).
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO.IPC.E-T5.03
COMMENTS OF THE
COMMISSION STAFF
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The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application for approval of new tariff Schedule 82, a Commercial and Industrial
Demand-Response Program (Flex Peak Program).
BACKGROUND
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. A third party
(EnerNOC) managed the earlier program. The Company's contract with the third party has
expired, however, and the Company believes it can save costs for all customers and increase
program transparency by managing the new Flex Peak Program itself. The Company asks the
Commission to process the case under Modified Procedure, and to issue an Order by May 1,
2015, so the Company can solicit participants and implement the program by June 15,2015.
STAFF COMMENTS APRIL 8,20I5
The Flex Peak Program 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.
The Company says most of its Energy Efficiency Advisory Group's members cautiously
support the Company managing the program.
In Order No. 32923 the Commission approved a settlement agreement that set the
following design parameters for the Company's 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 l5 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-13-14, Demand Response Programs Settlement Agreement, pp. 7-8. The
Company says it has incorporated these parameters into its current proposal for an internally-
managed Flex Peak Program.
The Company says the new Flex Peak Program will be available to commercial and
industrial customers taking service 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 Schedule 82, customers who intend to participate must apply to
participate in the program before each program season begins.
STAFF COMMENTS APRIL 8,2015
The Company proposes a June 15 through August l5 season for the Flex Peak Program.
During the season, 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 per day but not more than 15 hours per week or 60 hours per season. The
Company will notiff participants of an impending event at least two hours before the event
occurs.
The proposed Flex Peak Program's incentive structure includes fixed and variable
payments. For the first three events, the capacity payment would be $3.25 per weekly effective
kilowatt (kW) reduction, multiplied by: (l) the actual kW reduction received during a dispatch
event, or (2) nominated if there is no event. The variable payment would be $0.16 per kilowatt-
hour (kWh) reduced, effective after the first three events have been called for the program
season. The Company would send checks to participants within 30 days after the program
season ends.
The Company expects its total cosls for the Flex Peak Program will range from about
$ 1 . 1 million per year without variable payments, to $ 1 .4 million per year if the program has 3 5
MW of nominated reductions and is dispatched for 60 hours. It 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 does not propose changing customer rates that fund the program. Rather, it
believes the current level and method of recovery will adequately fund the program for the
foreseeable future. The Company's Demand-Side Management (DSM) Annual Report would
report on all program activities, including how the program impacts the Energy Efficiency Rider
and what incentives are to be included in the Company's annual Power Cost Adjustment (PCA).
The Company currently recovers about $2 million ayear in commercial and industrial
demand response costs through base rates. The Company recovers or credits deviations above or
below the base amount through the PCA. This allows 100% of any annual program cost savings
to flow to customers by June of the following year. The Company notes that demand response
costs tracked through the PCA would include only the incentives paid to participants, or the
amounts paid to third-party demand aggregator contractors. The Company would continue to
recover its labor costs for administering the program through the Energy Efficiency Rider.
STAFF COMMENTS APRIL 8,2015
STAFF ANALYSIS
The Company proposes to self-administer the Flex Peak Program, and claims that it will
reduce program costs. Staff estimates program costs will decrease by about $600,000 per year.'
The Company's plan includes changes to both program delivery and the incentive structure.
Staff cautiously supports the Company's proposal. But Staff is concerned that the proposed
changes may negatively impact program performance, reliability, and participation. Stafls
concems are explained below.
Program Delivery Concerns
The Company proposes to decrease the number of kWs a customer must be able to shed
to participate in the progrzrm. The Company says this lower kW eligibility cap will enable
smaller customers to participate in the program for the first time. Staff does not oppose lowering
the cap, but Staff believes adding more small customers to the program could add administrative
costs that reduce the value of self-administration.
The Company also plans to discontinue some of the prior administrator's practices. For
example, the Company will no longer provide real-time load monitoring equipment to program
participants. This equipment lets participants see their actual demand reduction during an event
and whether they are meeting their nominated amounts. According to the Company, most
participants have sophisticated equipment to help manage their load. Anticipating that
discontinuing this service could be problematic, the Company informally asked 25 current
program participants whether the Company would impede their participation in the program if it
stopped providing the monitoring equipment. While most participants said they would still
participate without the equipment, nine out of twenty-five said the equipment and real-time load
data was important to them. In light of this response, the Company says it will help customers
who want the software find a solution. But the Company also says those particular customers,
and not the program, will bear the related expenses. Staff is concerned that some potential
participants may decline to participate in the program if the Company requires them to bear this
expense. Even more importantly, Staff believes that the lack of real-time monitoring equipment
may limit new, smaller participants' ability to consistently and reliably reduce their demand.
rStaff calculated this amount based on $2 million associated with Commercial and Industrial demand response
program costs allocated to base rates and the $1.4 million total program expense for maximum dispatch.
(Application, pages 6-7).
STAFF COMMENTS APRIL 8,2015
The Company did not, however, survey these prospective new participants, and it thus lacks
information about whether they need the equipment to successfully participate in the program.
Staff believes smaller customers are less likely to have their own monitoring equipment, and that
the expense of obtaining it may significantly detract from their total incentive for participating,
particularly since their load reduction is likely to be smaller than that of past participants.
The Company also plans to stop providing mid-event coaching for participants who
needed reminders about how much or which aspects of their facilities to curtail. This mid-event
coaching enabled participants to make their facility more dispatchable and, consequently,
improved the program's reliability. Most participants may be larger customers that previously
participated in the program, and who might also have sophisticated equipment to help manage
load. But Staff remains concerned that combining untrained new participants with the absence
of event coaching and real-time load monitoring software could lead to a less reliable demand-
response resource.
Incentive Structure Concerns
Staff thoroughly reviewed the Company's proposed methodology for measuring event
demand reduction. Before the Company decided to self-administrate the program, it issued a
Request for Proposals to third parties. Assuming that the response from the prior administrator,
EnerNOC, reflects how the FlexPeak program was previously administered, Staff believes the
Company's proposed methodology may decrease incentive payments when compared to the
prior approach.
[This section of Staff s comments contains confidential information]2
' lThis section of Staff s comments contains confidential informationl
STAFF COMMENTS APRIL 8,20I5
[This section of Staff s comments contains confidential informationl
The Company maintains that the revised program pays participants only for the demand
reduction the Company actually receives during an event. However, reducing customer
incentives for lower usage on the Company's peak days may decrease the reliability of
participants' demand reduction.
[This section of Staff s comments contains confidential information]3
[This section of Staff s comments contains confidential information] Participants
must be notified about events at least two hours before an event. So, if the Company calls an
event from 2pm - 6p*, the notification would happen no later than l2pm, and the adjustment
period would be from l0am - 12pm. But since the tariff does not limit how early the Company
may issue event notifications, the adjustment period could conceivably start more than four hours
before an event dispatch.a
' lttris section of Staff s comments contains confidential informationl
a According to the Settlement Stipulation in Order No. 33036, participants will be notified at least two hours before
an event, but it does not place a limit on how far in advance the Company may notifu participants.
STAFF COMMENTS 6 APRIL 8, 2015
Shifting the adjustment period earlier in the day is problematic for two reasons. First,
energy usage fuither from the event (at least four hours rather than [This section of Staff s
comments contains conlidential informationl) is less representative of the likely difference in
usage during an event. Second, to the extent a facility's demand is weather-related, determining
the magnitude and direction (up or down) of the adjustment based on the difference between
forecasted and actual demand from [This section of Staff s comments contains confidential
information] may be smaller than the difference between forecasted and actual demand from
l2pm -2pm. This difference may create regular downward baseline adjustments. As previously
explained, downward baseline adjustments decrease customers' incentive payment for each
event and may, therefore, negatively impact program participation.
Staff acknowledges that the Company may want to shift the adjustment-calculation
period to stop participants who would otherwise attempt to game the system by increasing
consumption after event notification (in the two hours before an event) and then shutting
everything down during the event. However, FlexPeak participants in the demand-response
workshops indicated that demand reduction in most sites is manual, meaning an employee walks
around the facility and physically tums consumption down or off on several or many devices.
The demand response settlement preserved the two-hour event notification for FlexPeak-but
not A/C Cool Credit or Irrigation Peak Rewards-which recognizes that the manual process is
labor intensive and time consuming. This means that it may be difficult, if not impossible, for
participants to quickly ramp demand up and down to maximize their incentive.
To prevent unreasonable day-of-event adjustments, Staff recommends that the Company
file a revised tariff specifuing that the event notifications occur two hours before an event, rather
than "at least" two hours before an event. This will align the tariff with language in both the
Company' s Application and supporting testimony.
Since the Company maintains that internal administration costs for the program will
increase, Staff concludes that the cost savings under the revised program will come from
removing load-monitoring equipment, discontinuing event coaching, and most importantly, using
an alternate methodology for calculating per-event customer incentives.
Recommendation
Despite some concerns, Staff cautiously supports the Company's proposal. The lack of
near-term capacity deficits makes this a reasonable time to experiment with program
STAFF COMMENTS APRIL 8,2015
administration in order to achieve cost-savings for customers. If the Company can deliver the
same reliable resource for less money, customers will be better off.
Furthermore, the Company has pointed out that self-administration gives it the
opportunity to cross market its energy-efficiency programs. Staff is encouraged that the
Company is looking for these opportunities. Additionally, the Company has received support
from some of its industrial customers who would like more transparency in the contracts and a
more timely incentive payment than EnerNOC provided.
Staff thus recommends that the Company begin a one-year pilot of the proposed program.
To track the success of this effort and ensure an off-ramp from self-administration if necessary,
Staff recommends that the Company provide an end-of-season report, on or before 80 days of the
Program ending. Staff believes the filing date of the Company's annual DSM report is too close
to the Program's start date for relevant stakeholders to submit thoughtful suggestions and
critiques. The end-of-season report should detail 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 cost analysis of the Program. The Company should file this end-of-
season report as a compliance filing to this case, upon which parties to the case and other
stakeholders may recommend to the Commission that the Company either continue to directly
administer the program or otherwise issue a Request for Proposals (RFP) to resume third-parfy
administration. As is current practice, Staff expects that the Company will continue to provide
program updates in its annual DSM report.
STAFF RECOMMENDATION
Based on the information reviewed by Staff and presented in these comments, Staff
recommends that the Company:
1. Provide an end-of-season report, on or before 80 days ofthe Program ending. The
report should detail 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; and
STAFF COMMENTS APRIL 8,2015
2. File a revised tariff speci&ing that event notification shall occur two hours before an
event, rather than "at least" two hours before an event. This will aligr the taritrwith
language in the Company's Application and supporting testimony.
Respecttully submitted this 3lA day of April2015.
ilt lL
Karl T. Klein
Deputy Attomey General
Technical Staff: Stacey Donohue
i:umisclcomment&/ipcc I 5.3kkd commcnts
STAFF COMMENTS APRIL 8,2015
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF APzuL 2015,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC.E.15-03, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWNG:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-mail: [e-mail]
[e-mail]
(Lisa - Confidential Comments)
(Dockets - Non-Confi dential Comments)
PETER J zuCHARDSON
GREGORY M ADAMS
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE ID 83702
E-mail : oeter(Drichardsonadams.com
sre q fa ri c hard so nadam s. c o m
(Confidential Comments)
TAMI WHITE
QUENTIN NESBITT
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail: [e-mail]
qnesbitt@ idahopower. com
(Non-Confi dential Comments)
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: [e-mail]
(Confidential Comments)
SECRETARY
CERTIFICATE OF SERVICE