20170202press release.pdf

Case No. IPC-E-16-19, Order No. 33706
Contact: Gene Fadness [phone], 890-2712
www.puc.idaho.gov

Commission Oks part of Idaho Power request
related to benefits, expense of joining EIM

BOISE (February 2, 2017) – State regulators have approved a portion of an Idaho Power
Company application regarding treatment of costs associated with joining an Energy Imbalance
Market. Joining the EIM would allow the utility to pool its generation with neighboring entities
to more accurately match production to demand.

Idaho Power asked the Idaho Public Utilities Commission to 1) make a finding that its
participation in the EIM could benefit customers in the long-term, 2) authorize a deferral
account to track the costs and 3) allow the company to recover those costs from customers in a
future rate case. Idaho Power hopes to join the EIM in April 2018.

The commission approved the deferral account, but declined to make a finding at this point
that EIM participation could benefit customers in the long-term. However, the commission did
say “there is a possibility of a net benefit to the company’s customers.” The commission is
asking Idaho Power to provide evidence of customer benefit beyond what the company
originally proposed, which was a quarterly benefits report provided by the entity that
administers the EIM, the California Independent System Operator (CAISO). In addition to the
CAISO report, the commission directed Idaho Power to work with commission staff “to
determine what other information may be available to demonstrate benefits.” Further, the
commission directed Idaho Power to provide a report one year after joining the EIM that
delineates the costs and benefits of participation.
Utilities like Idaho Power typically begin each hour with generation to match its anticipated
load. But during the hour, imbalances occur when the supply of energy does not equal demand.
When that happens, Idaho Power relies on dispatches from its own generation and extra
reserves to balance supply with demand. By joining the EIM, Idaho Power would have access to
an automated five-minute energy dispatch service across a broader footprint in the West with
more deployable resources. Idaho Power would be joined with neighboring utilities, such as
PacifiCorp and NV Energy, to balance supply and demand more efficiently and cost-effectively.
Joining the EIM does not mean Idaho Power would give up control over its own generation and
transmission resources.
Idaho Power claims that moving from an hourly market to a five-minute imbalance market is
expected to lead to increased surplus sales opportunities when Idaho Power is generating more
electricity than it needs as well as cost savings from increased access to other suppliers’ lower-
cost generation. Further, Idaho Power claims, the EIM would allow for more efficient
integration of intermittent wind and solar resources, which currently make the management of
energy imbalance more complex.
An independent consultant contracted by Idaho Power claims the potential cost savings, before
expenses, could be between $4 million and $5 million per year. But there are upfront costs,
estimated to be about $11.1 million, which includes start-up expense of $1.7 million, software
integration costs of $7.9 million and metering investment of $1.5 million. In addition to the
upfront expense, there is an $836,000 annual operational expense for labor as well as ongoing
market and hosted software fees of about $786,000 per year beginning in April 2018.
The commission adopted Idaho Power’s proposal to spread costs related to joining the EIM
over a 10-year period. But the commission denied Idaho Power’s request for an assurance from
the commission now that the estimated upfront costs associated with EIM participation be
eligible for recovery when requested. Typically, expenses are not included in rates until after
they are known (rather than estimated) and examined for prudency when the company files a
rate case. The commission said pre-approval for estimated costs “would remove the incentive
for the company to implement the project in a prudent, least-cost manner.” The commission
also declined the company’s request to apply a one percent carrying charge on the deferred
balance.
The Western EIM was created by CAISO and PacifiCorp in 2014. Since then, NV Energy, Puget
Sound Energy and Arizona Public Service Company have joined. Portland General Electric is
scheduled to join in October 2017.
The EIM is governed by a five-member body that is financially independent from market
participants. Members are selected by a nominating committee that includes several
stakeholders, including EIM participants, transmission owners, suppliers and marketers of
generation, publicly owned utilities, state regulators and public interest and consumer advocate
groups.
A copy of the commission’s order and other documents related to this case are available on the
commission’s web site at www.puc.idaho.gov. Click on “Open Cases” under the “Electric”
heading and scroll down to Case No. IPC-E-16-19.
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