20160819Application.pdf

JULIA A. HILTON
Senior Counsel
[e-mail]
August19,2016
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
RECEIV ED
2016 AUG 19 PM 4: 52
i.:•. ·.; i ~. :; J2L!C ;. · r :· ·' COMMiSSION
Re: Case No. IPC-E-16-19
An IDACORP Company
Deferral and Recovery of Costs Associated with Participation in Energy
Imbalance Market -Idaho Power Company's Application and Testimony
Dear Ms. Jewell:
Enclosed for filing in the above matter please find an original and seven (7)
copies of Idaho Power Company's Application.
Also enclosed for filing are an original and eight (8) copies each of the Direct
Testimony of Timothy E. Tatum and the Direct Testimony of Kathleen Anderson. One
copy of each of the aforementioned testimonies has been designated as the "Reporter's
Copy." In addition, a disk containing Word versions of Mr. Tatum's and Ms. Anderson's
testimonies is enclosed for the Reporter.
If you have any questions about the enclosed documents, please do not hesitate
to contact me.
JAH:csb
Enclosures
Very truly yours,
J,L~
Julia A. Hilton
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
JULIA A. HILTON (ISB No. 7740)
Idaho Power Company
1221 West Idaho Street (83702)
P.O . Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Attorney for Idaho Power Company
REC EIVED
20 1&1'.tUG 19 PM f.t:52
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR ) CASE NO. IPC-E-16-19
DEFERRAL AND RECOVERY OF COSTS )
ASSOCIATED WITH PARTICIPATION ) APPLICATION
IN THE ENERGY IMBALANCE MARKET. ) ________________ )
Idaho Power Company ("Idaho Power" or "Company"), in accordance with Rule
of Procedure 52, hereby requests that the Idaho Public Utilities Commission
("Commission") (1) acknowledge the potential for long-term operational and net cost
savings benefits related to Idaho Power's proposed participation in the western Energy
Imbalance Market ("EIM"), (2) authorize the establishment of a regulatory deferral
account to track necessary incremental costs associated with western EIM participation,
and (3) authorize the Company to recover, in a future rate proceeding, the estimated
incremental costs of joining the western EIM.
In support of this Application, Idaho Power represents as follows:
APPLICATION -1
I. EIM OVERVIEW
1. In November 2014, the California Independent System Operator
("CAISO") and PacifiCorp created an energy imbalance market to enhance real-time
coord ination. The western EIM is a five-minute market administered by a single market
operator, CAISO, which uses an automatic economic dispatch model to find and
determine the least-cost energy resources to serve real-time customer demand across
a wide geographic area. The western EIM is different from the regional market that is
currently being discussed between CAISO and other utilities because the western EIM
focuses solely on real-time imbalances and allows EIM entities to retain all balancing
responsibilities and transmission provider duties. In addition , it uses generating
resources from market participants to meet real-time load efficiently and cost-effectively
across the entire western EIM footprint.
2. Idaho Power plans to begin participating in the western EIM in April 2018,
and, at that time, the western EIM footprint will include PacifiCorp, CAISO, NV Energy,
Inc., Puget Sound Energy, Arizona Public Service Company, and Portland General
Electric Company (collectively "Market Participants"). Market Participants voluntarily bid
resources into the western EIM and the market operator provides least-cost dispatch
instructions and generates a location marginal price to be used for energy imbalances,
factoring in load, available generation , and existing transmission constraints. Benefits
to joining the western EIM include the economic efficiency of an automated dispatch
model for both generation and transmission line congestion, savings due to diversity of
loads and variability of resources within the expanded footprint, reduced operational risk
due to enhanced system reliability, and ability to better support the integration of
renewable resources.
APPLICATION -2
3. Since its inception, the western EIM has resulted in significant cost
savings to Market Participants. Idaho Power continually seeks opportunities to attain
long-term cost savings for its customers and therefore engaged Energy and
Environmental Economics, Inc. ("E3") to conduct a benefits study to determine whether
benefits could be attained through the Company's participation in the western EIM. The
focus of the analysis performed was to provide consistent, conservative estimates of
Net Power Supply Expense ("NPSE") savings to Idaho Power to be used for evaluation
of participation in the western EIM. Based upon the results of the E3 benefits study,
participation in the western EIM is expected to result in NPSE savings for Idaho Power
customers.
4. However, in order to participate in the western EIM and achieve these
expected benefits for its customers, Idaho Power must incur EIM-related costs,
including upfront and ongoing incremental costs as well as software and metering
investments necessary for participation. Idaho Power proposes to defer the Idaho
jurisdictional share of these incremental expenses into a regulatory asset until they can
be amortized into customer rates after participation in the western EIM commences.
Idaho Power also seeks authorization to recover the estimated costs of joining the
western EIM in a future rate proceeding. This proposed deferral and subsequent
amortization of costs will allow Idaho Power to more closely match EIM costs with the
period in which the benefits are achieved.
5. This Application is supported by the Direct Testimony of Timothy E.
Tatum, Vice President of Regulatory Affairs, who details the long-term cost savings
benefits of participation, the Company's proposed accounting treatment for incremental
costs associated with Idaho Power's participation in the western EIM, and the
APPLICATION -3
Company's request for authorization of future recovery of these costs. It is also
supported by the Direct Testimony of Kathleen Anderson, Transmission and Energy
Scheduling Leader in Idaho Power's Load Serving Operations Department, who
discusses the nature of the western EIM and the costs and benefits associated with
Idaho Power's participation.
II. REQUEST FOR DEFERRAL TO ALIGN
COSTS AND BENEFITS OF EIM PARTICIPATION
6. By participating in the western EIM, the Company anticipates achieving
NPSE benefits, which will automatically flow to customers through the Power Cost
Adjustment mechanism upon the date the Company begins participating, expected to
occur in April 2018. However, to achieve such benefits, Idaho Power expects to incur
incremental costs to prepare for and participate in the western EIM. Idaho Power seeks
to defer its incremental costs related to participation in the western EIM in order to allow
the Company to match the benefits that customers receive with the costs incurred by
the Company to provide those benefits.
7. As set forth in the benefits study conducted by E3, annual NPSE savings
from participation in the western EIM range from $4.1 to $5.1 million per year. The E3
benefits study ran several scenarios that simulated Idaho Power's real-time generation
costs as an EIM participant and as compared to a business as usual case in order to
quantify NPSE savings. The E3 benefits study does not assign an economic value to
non-financial benefits associated with increased reliability or potential financial benefits
due to anticipated reductions in reserves.
8. In order to participate in the EIM and achieve NPSE savings, Idaho Power
will incur incremental costs in a total estimated amount of $15.77 million, which include
start-up costs, software integration costs, metering costs, incremental annual ongoing
APPLICATION -4
labor, and market and hosted software fees. Idaho Power proposes to defer the Idaho
jurisdictional share of these start-up and associated incremental labor costs to a
regulatory asset until no earlier than April 2018, when such costs can be amortized into
customer rates, in order to align the costs more closely with the period the benefits are
achieved.
9. To better align costs borne by the Company with the benefits received by
customers, Idaho Power proposes an amortization period of 10 years that would begin
no earlier than April 2018 to ensure that annual revenue requirements in 2018 and
beyond will only reflect positive net benefits. Idaho Power also seeks assurance that
the upfront costs required to participate in the western EIM are eligible for recovery
when requested. The Company's participation in the western EIM is indefinite,
providing benefits to customers for years to come. Ultimately, Idaho Power envisions a
scenario where both costs and benefits associated with EIM participation are reflected
in base rates after evaluation in a general rate case. Because timing of a future general
rate case is unknown, the Company may propose an interim rate recovery method in
order to appropriately match the level of cost recovery with the provision of customer
benefits.
10. Recognizing the unique nature of the costs and benefits of EIM
participation, the Company asks that the Commission issue an order acknowledging the
expected customer benefits resulting from its participation in the Western EIM,
authorizing the Company to defer its Idaho jurisdictional share of incremental costs
related to participation in the western EIM, and authorizing the Company to recover, in a
future rate proceeding, the estimated incremental costs of joining the EIM.
APPLICATION - 5
Ill. PROPOSED SCHEDULE
11 . Idaho Power seeks to begin participating in the western EIM on April 4,
2018. In order to facilitate other regulatory requirements prior to that date, Idaho Power
respectfully requests an order on this Application on or before January 31, 2017.
IV. MODIFIED PROCEDURE
12. Idaho Power believes that a technical hearing is not necessary to consider
the issues presented herein and respectfully requests that this Application be processed
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201,
et. seq. Idaho Power has contemporaneously filed testimony in support of its
Application. If, however, the Commission determines that a technical hearing is
required, the Company is prepared to present testimony in support of this Application in
such a hearing.
V. COMMUNICATIONS AND SERVICE OF PLEADINGS
13. Communications and service of pleadings with reference to this
Application should be sent to the following :
Julia A. Hilton
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
[e-mail]
[e-mail]
Matt Larkin
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
[e-mail]
VI. REQUEST FOR RELIEF
14. As described in greater detail above, Idaho Power respectfully requests
that the Commission issue an order (1) acknowledging the potential for long-term
benefits related to Idaho Power's participation in the western EIM, (2) authorizing the
establishment of a regulatory deferral account to track necessary incremental costs
APPLICATION - 6
associated with EIM participation, and (3) authorizing the Company to recover, in a
future rate proceeding , the estimated incremental costs of joining the EIM.
DATED at Boise, Idaho, this 19th day of August 2016.
Attorney for Idaho Power Company
APPLICATION -7