20171114Application.pdf

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An IDACORP Company
JULIA A. HILTON
Senior Counsel
ihi [e-mail]
November 14,2017
VIA HAND DELIVERY
Diane M. Hanian, Secretary
!daho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Case No. !PC-E-17-16
Method of Recovery for Costs Associated with Participation in Energy
lmbalance Market - ldaho Power Company's Application and Testimony
Dear Ms. Hanian:
Enclosed for filing in the above matter please find an original and seven (7) copies
of ldaho Power Company's Application.
ln addition, enclosed are an original and eight (8) copies of the Direct Testimony of
Tami White filed in support of the Application. One copy of Ms. White's testimony has
been designated as the "Reporter's Copy." A disk containing a Word version of Ms.
White's testimony is enclosed for the Reporter.
Very truly yours,
ulia A.ilton
JAH:csb
Enclosures
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
Re
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JULIA A. HILTON (lSB No. 7740)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
i h i lton@ idahopower. com
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Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COM PANY'S APPLICATION TO
ESTABLISH A METHOD OF RECOVERY
FOR COSTS ASSOCIATED WITH
PARTICIPATION IN THE WESTERN
ENERGY IMBALANCE MARKET.
CASE NO. |PC-E-17-16
APPLICATION
ldaho Power Company ("ldaho Power" or "Company"), in accordance with Rule of
Procedure 52, hereby respectfully makes application to the ldaho Public Utilities
Commission ("Commission") for an order authorizing the Company to establish an interim
method of recovery for costs associated with participation in the western Energy
lmbalance Market ('ElM"), through a temporary rate component in Tariff Schedule 55,
Power Cost Adjustment ("Schedule 55").
ln support of this Application, ldaho Power represents as follows.
I. EIM OVERVIEW
1. ln November 2014, the California lndependent System Operator (.CA|SO')
and PacifiCorp created an energy imbalance market to enhance real-time coordination.
APPLICATION - 1
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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 focuses solely on real-time imbalances and allows
EIM entities to retain all balancing responsibilities and transmission provider duties. !n
addition, it uses generating resources from market participants to meet real-time load
efficiently and cost-effectively across the entire western EIM footprint.
2. ldaho 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,
lnc.; Puget Sound Energy; Arizona Public Service Company; Portland General Electric
Company; and Powerex Corp. (collectively "Market Participants"). Market Participants
voluntarily bid resources into the western EIM and the market operator provides least-
cost dispatch instructions and generates a locational marginal price to be used for energy
imbalances, factoring in load, available generation, and existing transmission constraints.
Joining the western EIM is likely to result in real, sustainable cost savings in the form of
reduced net power supply expense ("NPSE').
3. In Order No. 33706, Case No. IPC-E-16-19, the Commission concluded that
the Company's participation in the western EIM would provide an opportunity for benefits
greater than costs, thus a possibility of a net benefit to the Company's customers.
Additionally, the Commission found that the Company's joining the western EIM is
reasonable and in the public interest. Order No. 33706 at 9.
4. ln order to participate in the western EIM and achieve the expected benefits
for its customers, ldaho Power has incurred, and will continue to incur, ElM-related costs,
including upfront and ongoing incrementa! costs as well as software and metering
APPLICATION - 2
investments necessary for participation. ln Case No. IPC-E-16-19, the Company
requested authority to defer to a regulatory asset account the incremental costs to
participate in the western EIM and requested approval to recover the costs in a future rate
proceeding. The Company did not, however, request recovery of the incremental costs
of participation at that time, but indicated that it may be necessary to implement an interim
rate mechanism for cost recovery to provide proper matching of costs and benefits in
customer rates upon commencement of the Company's participation in the western ElM.
5. Order No. 33706 authorized ldaho Power to defer the upfront incremental
operations and maintenance ('O&M") expenses associated with joining the western ElM,
but declined to provide pre-approval for recovery of these costs, noting that recoverability
in rates of Idaho Power's costs incurred to join the EIM will be determined in a future
proceeding.
6. ldaho Power seeks authorization to establish an interim method of recovery
for the incremental costs associated with joining the western ElM. The Company
proposes to include the revenue requirement associated with the incremental costs of
EIM participation as a temporary rate component in Schedule 55, until these costs and
benefits can be reflected in base rates. This proposed interim method of recovery will
allow ldaho Power to more closely match the timing of benefits and costs of participation
in the western ElM. Furthermore, recovery of costs through Schedule 55 allows for
administrative efficiencies and utilizes the same tariff schedule that EIM-related benefits
will ultimately be reflected in.
7. This Application is supported by the Direct Testimony of TamiWhite, Senior
Manager of Revenue Requirement, who discusses the benefits of participation in the
western ElM, the updated estimate of incremental costs associated with ldaho Power's
APPLICATION - 3
participation in the western ElM, and the Company's proposed interim method of recovery
for these costs.
II. REQUEST FOR INTERIM COST RECOVERY
THROUGH SCHEDULE 55
8. 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, ldaho Power has incurred, and
will continue to incur, incremental costs to prepare for and participate in the western EIM.
ln order to allow the Company to match the benefits that customers receive with the costs
incurred by the Company to provide those benefits, ldaho Power seeks to recover the
incremental costs related to participation in the western EIM through a temporary rate
component in Schedule 55, until the costs and benefits are reflected in base rates.
9. To participate in the EIM and achieve NPSE savings, ldaho Power will incur
incrementa! costs in a total estimated amount of $13.71 million, which include start-up
costs, software integration costs, metering costs, and incremental annual ongoing labor
costs, market fees, and hosted software fees. ln Case No. IPC-E-16-19, ldaho Power
provided an initialestimate of total incremental costs associated with EIM participation of
$15.77 million. ln total, estimated costs have decreased by $2.06 million primarily due to
increased metering costs, which were more than offset by reduced software integration
costs and lower than expected incremental ongoing O&M expense.
10. ldaho Power proposes to collect the Idaho jurisdictional revenue
requirement associated with these costs through a temporary rate component in
Schedule 55, similar to how revenue sharing and Energy Efficiency Rider transfers have
been included in Schedule 55 in the past. ldaho Power proposes to update the revenue
APPLICATION - 4
requirement associated with EIM-related costs as well as Schedule 55 rates annually,
with new rates going into effect June 1 of each year.
11. ldaho Power proposes to true-up the EIM-related annual revenue
requirement by recalculating the Idaho jurisdictional revenue requirement based on actual
costs and comparing it to the revenue requirement included in customer rates. Any under-
or over-recovery would be collected or refunded as part of the Schedule 55 EIM
Participation Cost rate component in the following year, in conjunction with the following
year's updated ldaho jurisdictional revenue requirement. To allow adequate time for
review of the prudence of the incurred costs and accuracy of the true-up calculation, the
Company intends to submit this information through a compliance filing made in this case
by the end of February each year.
12. To better align costs borne by the Company with the benefits received by
customers, Idaho Power seeks authorization to establish an interim method of recovery
for its incremental costs required to participate in the western ElM. The Company's
participation in the EIM is indefinite, providing benefits to customers for years to come.
Ultimately, ldaho Power envisions a scenario where both the costs and benefits
associated with EIM participation are reflected in base rates through a future rate
proceeding. Because timing of the Company's next regulatory proceeding that would
adjust base rates is not known, an interim rate mechanism for recovery is necessary in
order to appropriately match the level of cost recovery with the provision of customer
benefits.
13. Recognizing the unique nature of the costs and benefits of EIM
participation, the Company asks that the Commission issue an order authorizing the
APPLICATION - 5
Company to establish an interim method of recovery for costs associated with
participation in the western EIM through a temporary rate component in Schedule 55.
III. PROPOSED SCHEDULE
14. 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, ldaho Power
respectfully requests the Commission consider a case schedule that would allow for an
order on this Application to be issued on or before March 31 ,2018.
IV. MODIFIED PROCEDURE
15. ldaho Power believes that a technica! 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,
ef. seg. ldaho Power has contemporaneously fibd testimony in support of its Application.
lf, 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
16. Communications and service of pleadings with reference to this Application
should be sent to the following:
Julia A. Hilton TamiWhite
ldaho Power Company ldaho Power Company
1221West ldaho Street (83702) 1221\Nest ldaho Street (83702)
P.O. Box 70 P.O. Box 70
Boise, ldaho 83707 Boise, ldaho 83707
ihilton@ idahopower.com twh ite@ id ahopower. com
dockets@ id ahopower. com
VI. REQUEST FOR RELIEF
17. ldaho Power respectfully requests that the Commission issue an order
authorizing the Company to establish an interim method of recovery for costs associated
APPLICATION - 6
with participation in the western EIM through a temporary rate component in Schedule
55.
DATED at Boise, ldaho, this 14th day of November 2017.
IA N
for ldaho Power Company
APPLICATION - 7