20200121Comments.pdf

Attorneys Jbr ldaho Clean Energt Association
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
RECEIVED
il:i*lllt 2l Pti 3t 21
CtstoN
IN THE MATTER OF THE PETITION
OF IDAHO POWER COMPANY TO
STUDY FIXED COSTS OF PROVIDINC
ELECTRIC SERVICE TO CUSTOMERS
Case No. IPC-E-18-16
Io.qHo Cr-enN ENERGY AssocrATroN
CoMMENTS oN Ionuo PowEn
CoMPANY'S FrxED-CosT REpoRT
The ldaho Clean Energy Association, Inc. ("ICEA") submits these comments on Idaho
Power's Fixed-Cost Report Response to Idaho Power Company's Fixed Cost Report, which was
filed on September 30,2019.t
INTRoDUcrroN
Order 34046 (May 19,2018) put forth that critical questions related to fixed costs should
be addressed. ICEA appreciates that the Commission established in that Order a process for
giving consideration to the input of interested parties. IPC-E-18-16 opened a venue in which
those questions could be raised and contemplated by multiple stakeholders. ICEA appreciates
Staffls leadership to guide stakeholders tlrough a process in which the parties defined key
attributes to be considered in assessing each rate design and a sampling of rate designs to be
I In Order No. 34466 (filed Oct. 24, 2019), the Commission invited comments on the Fixed-Cost Report or
responses to the Company's motion to accept Fixed-Cost Report by January 21, 2020. ICEA has elected to comment
upon the Fixed-Cost Report rather than respond to the Motion to Accept Fixed-Cost Report. ICEA understands that
the Commission's "acceptance" ofthe Fixed-Cost Report would not reflect acceptance of, or agreement with, any
contents ofthe Report, but would merely recognize that the Report was filed.
OR IGINAL
Preston N. Carter (lSB No. 8462)
Givens Pursley LLP
601 W. Bannock St.
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
14976324_l.docx [l 1523.4]
tCEA's CoMMENTS oN lDAr ro PowER CoMpANy's FrxED Cosr RcpoRr - I
studied. An outcome of those efforts, reflecting much thought and debate. were filed with the
Commission on 413012019 (Staff Report).
On 9130120l9,Idaho Power Company (the Company) filed a Fixed Cost Report (the
Report) that departed from the approach and interests reflected in the Staff Report. The
Company's Report focuses on assessing rate designs based on the alignment of rate components
with the cost classification components used to assign costs across customer classes. ICEA is
disappointed that the Company's report did not reflect the collective effort of the parties to
systematically consider a broader set ofattribute categories. For example, a resounding theme
from participants in this docket was that the impact of the rate design on future cost growths
should be a key consideration in assessing options for rate designs.
ICEA is not asking for a hearing. First, quite frankly. the solar industry in Idaho is facing
economic challenges resulting from IPC-E-I8-15, thus we lack the financial resources to
effectively represent our perspective in a hearing for IPC-E-18-16, a hearing in which we would
anticipate the Company would invest significant resources to advocate for its perspective. We
believe IPC-E-18-16 provided a venue during which stakeholders presented perspectives which
would build a helpful toolkit if those perspectives had been reflected in the Report. Lastly, the
Company has not demonstrated that it is unable to recover its fixed costs.
With these comments, ICEA endeavors to put forth a more objective assessment of rate
designs. We aim to build on the collective effort ofthe parties in IPC-E-18-16, and to provide the
Commission a toolkit on which future efforts might build.
We ask that the Commission find the Report as insufficient in providing the
comprehensive fixed costs analysis requested by the Commission, and that the Commission give
significant weight to these comments to inform future decisions.
ICEA,S CoMMENTS oN IDAIIo PowER CoMPANY,S FIxED Cosl.REPoRI - 2
I
Contents
Comments on the Fixed Cost Report Study Design: Too Narrow a Lens
Attributes for Assessing Rate Designs: A More Objective Approach
Insights from End-Points: Directional lmpacts of Rate Design Components
Assessment of Two Rate Designs: Time of Use, & a Thrce-Tier Rate Structure
Customer Cost of Service: No Single Correct Methodology
Volatility and Materiality: A Call for Caution and Prioritization
Recap of Recommendations
I. Commentson Elxcdleoslt EaDort Study Desiqn: Too Narrow a Lens
il.
III
tv.
VI
VII.
Among the goals of rate design is the ability ofthe utility to recover its fixed costs. That
goal is not the same as! nor is it measured by, the alignment ofthe percent ofcosts collected
from fixed fees with the percent ofcosts which the Company considers fixed. Alignment of rate
components with cost classifications is not specified among the seventeen attributes identified by
the collective parties in this docket for assessing a rate design, as reflected in the Staff Report.
Nevertheless, over halfthe figures in the Company's Report present this comparison.
Aligning rate components with the Company's cost classification components is one
approach to rate design, it is not a methodology for assessing a rate design. A misalignment
between rate components and the Company's cost classification components, lor example, is not
evidence of ineffectiveness. The focus on improving alignment distracts fiom opportunities to
address public interests. In addition, as discussed later, faimess in pricing considers both sides of
the buyer/seller transaction. By narrowly framing the lens through which it views rate
designs, the Report attempts to build a case to better serve the Company's interest without
adequately conveying the detrimental impicts on the public interests.
ICEA's CoMMENTS oN IDA[o PowER CoMpANy's FrxEr) Cosr REpoRT - 3
In ldaho, there's a strong public interest in maintaining low energy rates. Our state,
however, is experiencing the fastest population growth in the nation2, and that growth drives up
system loads and the associated expenditures to serve them. Given the Company's 20l9IRP
projects a 23% increase in billed sales to residents over the planning horizon3, a report on fixed
costs in Idaho should pay attention to the public's interest in managing the growth of future fixed
costs as well as other factors important to customers. A helpful toolkit should assess rate designs
across a set of attributes representative of both Company and public interests.
Recommendations
. To assess rate designs, ICEA asks that the Commission consider a more comprehensive,
objective, and multi-auribute approach than that presented in the Company's Report. The
public interest in preventing future cost glowth should in particular be given greater
consideration.
Il. Attributes for Assessins Rate Desisns: A More Obiective Aooroach
The Staff Report presents five categories of attributes defined through the collective effort of
the parties to systematically assess the tradeoffs involved in rate design decisions:
1) Impact on Fixed Cost Recovery
2) Billing impacts to customers
3) Price signaling & behavior
4) Fair, just, and reasonable
5) Otherconsiderations
These attribute categories were established in an attempt to represent both the Company and
the public interests. In this section, ICEA would like to comment on the first four ofthese
categories. In the next section, ICEA will present an assessment of rate designs across these
attributes.
2 U.S. News & World Report, December 30, 2019, https://www.usnews.com/news/best-states/slideshows/these-are-
the- I 0-fastest-srowinE-states-in-america?slide= I I
r Appendix A, Projected Residential Sales and Load,2019-2038, page 44
ICEA's CoMMENTS oN IDAHO POWER COMPANY'S FIxED COST RTrcRT - 4
Attribute Catesory l. I mpqct A4 Elxrd eas ecover-a
The Report does not demonstrate that current rate designs have impeded the
Company's recovery of fixed costs. The Report presents theoretical arguments related more to
ftow the Company would prefer to recover fixed cost. The Company introduces the study raising
its concems with rate designs which collect fixed costs via volumetric charges, page I :
For this type of rate design, revenue recovery is at risk ofany reduction in usage
(e.g., due to variation in weather or demand energy response [DER]) unless there
is a mechanism that decouples revenue from customers' usage.
Over the next 20 years, the 2019 IRP does not project a reduction in usage but rather a
continual load growth into the future. Meanwhile, Idaho Power has a decoupling since 2007,
which has proven to be an effective mechanism to ensure recovery of fixed costs. In applying
the FCA, the parties may disagree on the details ofwhat costs are applicable, but the FCA
effectively enables the Company to recover fixed costs as they are defined in that process.
Changing conditions are not impeding the ability to recover fixed costs. The Report
notes, on page 3,
It is also important to recognize that conditions have changed since the current
rate designs were established.
The Report then selectively points to factors enabling customers to reduce their load on
the system while omitting the factors increasing the load on the system.
Consider the net impact of changing conditions: The historical residential load rose by
less than l% from 2008 to 2018, yet the IRP projects residential load to rise by I l% from 2018
to 20284 . The risk of declining usage is not the top concem, it is the need to manage growth. The
Report also highlights a growth in on-site generation, but the Report should provide greater
context. For every one new Net Metering customer, the Company expects over three new
42019 lRP, Appendix A. p43, Resjdential Load Historical Residential Sales and Load, 1978 2018 (wcathcr
adjusted) and Projccted Residential Sales and Load,2019-2038. p44
ICEA's CoMMr-.N'rs oN lt)A o PowrR CoMpANy's FrxED Cosr REpoRT - 5
a
residential customers to join its service area and contribute to fixed costss. Fixed costs are being
spread over a rapidly growing base ofresidential customers, and the growth ofresidential
customers outpaces the growth ofon-site generation in gross terms.
The Commission and customer have no obligation to provide the Company any
specific allocation of cost recovery, only the opportunity to earn its overall revenue
requirement. Because the current rate design does so, the Commission should give particular
attention to other attributes when considering ifchanges to rate design are warranted.
Recommendations:
The Repo( does not demonstrate that current rate designs have impeded the Company's
ability to recover fixed costs. Analysis that the Company is recovering fixed costs through
means other than fixed charges is not an indicator that current rate designs are ineffectively
recovering fixed costs.
Attribute Catesorv 2: Ililline ImDacts to Customers
ICEA agrees that the billing impact on customers is an important attribute category. As
proposed in the Staff Report, this category currently includes impact on low income customers.
ICEA proposes that the Commission broaden this "low income" attribute in assessing future
changes to rate designs 10 consider other vulnerable populations and the overall affordability ol
energy for those customers.
Recommendatior!
ICEA proposes that the Commission broaden the "low income" attribute to consider
impact ofa residential rate design on "Affordability for vulnerable populations", a category
which would includc but not be limited to:
F For low income customers, how would their bills be impacted?
r 2019 lRP Advisory Council Ootobcr Mccting, slidc 32. and 2019 IRP Appendix A, pagc 44
ICEA's CoMt\4ItNTS oN Il)All( ) P( )wf R C( )vpA\ y's FIxlil) C( )st Rl.poRl - 6
ICEA's CoMMENTS oN IDAHo PowER CoMpANy's FrxED CosT RrpoRT - 7
L For customers unable to access natural gas heat, how would their options for managing high
winter electricity bills be impacted?
> For customers who are vulnerable to future cost increases, would they have greater or less
ability to reduce exposure to future rate increases?
Attribute Catesorv 3: Price sisnalins & behavior
Pricing structure drives customer behavior, which impacts the need for future fixed costs,
The Report focuses on the assignment of its current fixed costs and does not adequately convey
the relationship between rate structures and firture costs.
The parties collectively resolved to consider the following attributes in assessing the price
signaling & behavior impacts of rate designs:
a. Conservation (discourage wasteful use ofservice)
b. Controllability over billing determinant
c. Peak Reduction or Other Methods to Decrease Need to Invest
d. Predictabiliry
e. Simplicity (customers understand & can act on signal)
Recommendations:
o We ask that this attribute category, price signaling and behavior, be given significant weight
in assessing any change to a rate design.
o Given that Idaho Power is successfully recovering its fixed costs, we ask that no changes to
rate design should be made that go in the direction ofnegatively impacting conservation,
controllability, peak reduction, or other factors linked to causation of future costs.
Attribute Catesorv 4: Fair. Just. and Reasonable
The Commission challenged the parties to address critical questions with regard to fixed
costs. One such question is - What is fair? This is a question ofprinciple before it is a question
of math. The Report on page 3 suggests that faimess is achieved by aligning pricing components
with cost classifications. ICEA acknowledges that rate designs should enable the Company to
recover fixed costs, which is one ofmultiple attribute categories. Faimess is a different attribute
and cannot be narrowly framed from the Company's side ofthe transaction.
Equitable pricing considers what is fair to both relational partners in the
transaction given not only the costs from the seller's perspective but the benefits from the
buyer's penspective. Rates are not more equitable simply by aligning more with cost
classifications; rates can only be more equitable if the benefits received by the customer are
considered. Customers benefit fiom a service depending on when, where, and how much they
use the service. Volumetric pricing is not unfair when customers who use the system more
contribute more to fixed costs. It is fair and equitable to design rates such that individual
customers contribute differently to fixed costs based on when, where, or how much they use the
services provided by the Company.
With regard to equitable cost allocation, the Regulatory Assistance Project (RAP) has
taken a long-term view and published January 2, 2020 Electric Cost Allocationfor a New Era: A
Manual.6 The authors observe the changing dynamics of the industry and put forth
recommendations on how to navigate the challenges, summarizing -
As a starting point, there are two high-level principles for cost allocation that help
guide the way:
Cost causation: Why were the costs incurred?
Costs following benefits: Who is better offbecause the cost was incurred?
In some cases, these two conceptual frameworks point to the same answer, but in
other cases they don'I. When they conflict, we believe that "costs follow benefits"
should usually, but not always, take priority.
ICEA,S CoMMEN Is oN IDAIIO POWIR COMPANY,S F|XID COST RTPoRT. 8
6 By Jim Lazar, Paul Chemick, William Marcus, Mark LeBel, download at https://www.raoonline.ors/knowledse-
center/electric-cost-al location-new-era/
Fairness must consider both the Company's and customerts side ofthe buyer/seller
relationship. Consider a simplified case: Assume that 100% ofthe Company's costs were fixed.
Would the most fair rate design be a single fixed charge per customer? This rate design would
seem most fair to a utility that measures faimess by the alignment ofthe percentage ofrevenue
collected from fixed fees with the percentage ofcosts that the Company considers fixed for that
time period. But thal is one side of the transactional relationship -the utility's. A single fixed
charge would not be fair from customers' perspectives, For example,
r Customers are not the same in the benefits they receive from the Company's services. A
single person consuming little electricity would not consider it fair to pay the same rate as
large families who use multifold more electricity.
o Customers who make efforts to lower their usage, and thereby help reduce the need for new
fixed costs in the future, would not consider it fair to pay the same rate as customers who
waste energy and drive up future costs.
o Customers who prefer to source energy from cleaner resources would not find it fair to be
unable to reduce the fees they pay to a utility that sources from fossil fuels.
o Customers who want to invest in energy efficiency or on-site generation in order to reduce
their exposure to future rate increases would not find it fair.
r Revenue stability for the Company would come at the cost of controllability for the
customer-
The point is that, while the Company has the right to advocate for its interests, the metrics
proposed by the Company in the Repo( do not assess what is fair and equitable.
Recommendations:
In assessing *'hether a rate design is fair and equitable, the Commission should consider if
ICEA'S COMMENTS oN IDAIto PowER CoMpANy's FrxFir) C( )s'r Rt-.poR't - 9
the rate design enables customers to contribute to fixed costs in a manner proportionate to
how the customer benefits from the service provided by the Company. Customers benefit
from a service depending on when, where, and how much they use the service.
III. Insiehts from End Points: Directional Iupacts of Rate Design Components
To develop a toolkit illustrating the benefits and problems with different components of a
rate design, the study designed by the collective parties (Staff Report) included the assessment of
simptified, single-determinant rates which could serve as end-points isolating the directional
impact of such charges. While this was not ICEA's suggestion, we appreciate the value of
gaining insights from exemplary end-points. Given the Company omitted this portion of the
study from its report, ICEA is attempting to capture the lessons leamed by assessing these
simplified rate mechanisms across the attributes identified by the parties. The comments below
are followed by a color-coded summary table.
Fixed Charee:
Going in the direction ofhigher fixed charges is favorable to the Company's interest in
revenue stability, but it would reduce customer control, decrease fairness, and signal behavior
that increases the need for future fixed cost expenditures. When a restaurant charges a fixed fee
for an all-you-can eat buffet, we tend to over eat.
1n2016, Rocky Mountain Institute (RMI) published A Review of Alterndte Rate Designsl,
which the Company references in its Report. The study notes on page l5:
Proposals to add or increase fixed charges (mandatory lees regularly assessed on a
per customer basis) have proliferated in recent years, with proponents arguing
they are needed to provide revenue certainty and ensure customers "pay their fair
share" of system costs.
1 A Review ol /lternqtive Role Dcsigns, Aman Chitkara, Dan Cross-Call, Becky Xilu Li, James Sherwood (Rocky
Mountain [nstitute, 20l6), Download at www.RMI.ORC-U\LI.ORNATIVE, R{]'E DESIGNS
ICEA'S CoMMINTS oN IDAHO P0WI-R COMPANY'S FIXED CoST REPoRT - 1O
However, fixed chargcs are not a solution to the evolving rate design challenges
outlined here. Fixed charges decrease the level ofrate sophistication, when more
is needed. In addition, numerous studies have shown that fixed charges
disproportionately impact lowJfixcd-income customers and other low-use
customers, and remove incentives for customers to reduce energy consumption or
peak demand.
Volumetric Charge:
Of the three forms of charges, volumetric provide the most benefits as measured by
attributes defined in this docket. While volumetric rates do not improve revenue stability, they
increase customer control and encourage conservation. Time of Use (TOU) volumetric charges,
to be further discussed later in these comments, can be designed to allocate demand costs across
volumetric rates for peak periods. Well-designed TOU rates can enable the Company to recover
its costs and enable customers to align behavior with cost causation, thereby helping to prevent
increases in fixed costs allocated across all customers over time.
With regard to what is fair and equitable, volumetric rate designs enable customers to
contribute to fixed costs in a marurer proportionate to when and how much they use the services
provided by the Company. When combined with a mechanism such as the FCA, volumetric
pricing can balance the interests ofboth the utility and the customer in a fair and equitable
Demand Charqe:
While there are theoretical arguments for Demand charges as a means ofcost recovery,
the empirical evidence does not demonstrate that the benefits outweigh the problems. The
downsides include:
o Increasedcomplexity.
. Decreasedpredictability.
[CEA's CoMMFNI.S ON II)AHO POWER COMPANY,S FIX}jI) COSI RLPOR,I - I I
manner.
. Decreased customer control. In one hour, a bill-payer can get stuck with a high demand
charge. Perhaps the visiting inJaws went on a cleaning rampage, or the neighbors all came
over for dinner (causing one bill-payer's demand to peak, though the neighborhood demand
was less in total).
o Potentially discourage conservation. To add a retail demand charge would result in lower
rates per kwh, which decreases the controllable motive to conserve. E.g., a household
doesn't typically hit peak demand when the residents are gone, but lower volumetric charges
mean less motive to cut back the AC when the residents aren't home.
The RMI Review of Allernate Rate Designs referenced in the Company's Report provides
further insights on Demand Charges. The objective olthe report, from page 5, is:
To support informed decision making, this report provides a meta-analysis of
numerous existing studies, reports, and analyses to support an objective
assessment of the efficacy of time-based rates and demand charge rates lor mass-
market customers.
In its Key Takeaways for demand charge rates, RMI summarizes on page 76,
Minimal empirical evidence is currently available to provide insight on the
efficacy or impact ofdemand charge rates on any desired outcomes beyond cost
recovery.
To summarize, ICEA puts forth in Figure I a matrix consistenl in the attributes lor rate
assessment filed by Staff. The color coding reflects the directional impact ofthe rate design
relative to the current Schedule I rate design.
8 Implementation Costs & (;radualism were also attributcs in that rcport but arc not addrcsscd in this summary table
ICEA's CoMMI,NTS oN IDAHO Powt.R CoMIANy's Frxl,r) Cos r Rr:r{)R r - l2
Figure 1: lnsiehts from End Points
Directionol impocts of rote components
relotive to Schedule 7
= Positive impact on this attribute
= At risk of negatively affecting this attribute
= Negative impact on this attribute
= No measurable impact or not evaluated at this time
Volumetric
Charge Only
Demand Charge
Only
lmpact on
Fixed Cost
Recovery
Revenue Stability
credit Risk
Relationship with PCA/FCA Simplifies
recovery of fixed
costs
Ability to
recover fixed
costs remains
intact via FCA
Ability to
recover fixed
costs remains
intact via FCA
Ability to Recover Fixed
Costs
lmpact to future cost
causation
lmpact Across Class
Low lncome lmpact Minimalchange Not eva luated
Stability for Customers Minimal change
Price
Signaling &
Behavior
(to align
behavior with
cost
causation)
conservation (discourage
wasteful use of service)
Not shown to be
effective
Controllability over billing
determinant
Peak Reduction or other
measures to decrease need
to invest in fixed plant
lf time
differentiated
Not yet
demonstrated
to be effective
Predictability Minimal change
Simplicity (customers
understand & can act on
signa l)
Customers can
understand but
not act on signal
Fair, Just &
Reasonable
Fairness
Not unfair.
Customers
contribute more if
they use more,
Avoidance of undue
discrimination
Not evaluated
but poses risks
ICEA'S CoMMENTS oN IDAHo PowER CoMpANy's FIXED Cosr [(-EpoRr - l3
Single Fixed
Charge Only
Billing
lmpacts to
Customers
See RMI report
Does not consider
customer side of
transaction (the
more you benefit,
the more you pay)
a
Recommcndations:
a
Going in the direction ofhigher fixed I'ees goes in the direction ofsignaling behaviors which
increase future costs. Increased fixed fees should only be considered ifexisting or alterative
rate designs do not enable the Company to recover fixed costs and the Commission desires to
reduce the signal to customers, and their ability, to control energy consumption.
We oppose the implementation of demand charges for residential and small general service
customers (Schedules l, 6,7 , & 8) as these introduce significant problems with no
demonstrated benefits. TOU volumetric charges provide similar benefits with less downsides
and olfer a better alternative than Demand charges.
For the above reasons. we oppose the Three Tier Rate design proposed by the Company.
IV. Assessment of Two Rate Desisns: Time of Use, & a Three-Tier Rate Structure
a
a
e A Rel)iew ofAlterndtile Rate Designs, page 79
ICEA'S CoMMENTS oN IDAHo PowER CoMpANy's FrxED Cosr REpoRT - l4
Of the opportunities to improve existing rate designs. Time of Use (TOU) rates for
volumetric consumption combined with a low fixed monthly charge is most compelling. As the
RMI studye referenced in the Report summarized in its "Research Takeaways":
Empirical evidence is available for time-based rates, but is limited for demand
charge rates.
A significant amount ofresearch is available on the effects of time-based
rates, and there is clear insight on best-practice design choices. This research
consistently indicates that well-designed time-based rates are effective at
achieving their objective ofproviding a price signal to customers about when
to use energy (and when not to). This has compelled several regions-
including Califomia, Massachusetts, and the province ol Ontario to
transition toward default TOU rates for all residential customers.
In contrast, there is limited empirical evidence on the effrcacy or impacts of
mass-market demand charges on any desired outcome beyond cost recovery.
It remains unclear whether demand charge rates effectively communicate
price signals to customers about how to change their usage to reduce system
cost.
There are a range of options for TOU rates which merit further consideration levemging
lessons from best practices. Most importantly, TOU pricing can effectively reduce peak load
growth and the associated growth in fixed costs for new peaking resources. The Company also
noted that TOU is likely to be lavorable to low income customers (Report, page 35).
The Company presents its concems, on page 34 (POPP = Peak to OffPeak Price ratio):
While this type of a rate structure is expected to result in the shifted usage,
because the rate structure does not reflect the cost to serve (a POPP ratio of5:l is
artificially inflated as energy cost differentials are much lower), this design likely
will no1 adequately collect the class's fixed costs when customers shift usage from
on-peak to off-peak.2a Furthermore, ifthe TOU program is offered as an optional
TOU offering, it may not be effective in getting customers to shift usage; natural
winners are instead able to take advantage ofreduced energy bills with no
behavioral change and no cosl savings.
Fortunately, lessons from best practices can address the Company's concems.
r The POPP need not be "artificially" inflated. Both energy and demand-related costs can be
assigned to the peak period, which brings rates closer to marginal costs for each period.
Rather than collecting demand costs through a "demand" charge logged within one hour of
the month for each customer, demand costs are spread in a fair and equitable manner across
volumetric rates for the published peak time periods. The study referenced by the Company
recommends achieving a desired POPP by iteratively adjusting four inputs or structural
dimensions: peak period duration, peak period frequency, number of pricing periods. and
seasonal differentiation.
o While customers who can benefit from TOU rates more likely take advantage of opt-in
programs, an opt-out program puts all customers on TOU but allows customers to opt-out.
An opt-out is shown to substantially increase participation. This can also help accelerate
Footnote 24: According to the relerenced study, introducing the 5:l diflerential is
expected to result in customers shifting approximately 10 percent ofusage lrom
on-peak 1o off-peak
ICEA'S CoMMENTS oN IDAIIo PowER CoMPANY'S FIXED CosT RIPoRT . I5
technologies which enable customers to save money on their bills and the Company to avoid
cost increases over time.
o The FCA would remain an effective mechanism to ensure the recoverv of fixed costs.
Current trends lurther accelerate the need for TOU pricing:
o The Company projects growth of electric vehicles. In the absence of TOU pricing, expect
customers will plug in electric vehicles upon arriving home in the aftemoon, including during
summer system peak periods.
o Ifcustomers with on-site generation receive less than retail for energy exported to the grid,
those customers will be more motivated to shift consumption to time periods when the sun is
at its brightest, including summer afternoons.
o Customers with both on-site generation and electric vehicles would be particularly motivated
to avoid charging their electric vehicles at night when they are not exporting.
r Residential customers drive peak load for the Company, and ldaho projects strong growth
over the coming years. Behavior changes and technologies could help prevent future costs
associated with peak load growth, but these take time to develop and adopt.
We believe a well-designed TOU rate is a compelling opportunity to reduce peak load
groMh and the associated future fixed costs. A glide path could consider marketing, education,
or other approaches to grow participation in the current residential Opt-in rate program and plan
for an eventual transition to a well-designed Opt-out program.
We believe it fair and reasonable to allow customers on Schedule 6 to participate in the
TOU rates available to residential customers on Schedule l. This price signal can help mitigate
the potential for peak load growth and the associated growth in fixed cost expenditures, which is
in the public interest.
ICEA'S COMMENTS oN IDAHO Powr-rR CoMPANY'S FrxH) Cosr Rr.poR r - l 6
To summarize a comparison of TOU rates and the Three Part'fiered Rate, the following
is a matrix consistent in the altributes for rate assessment filed by Staff. As before, the color
coding reflects ICEA's effort to evaluate the directional impact ofthe rate design relative to thc
current Schedule I rate design.
ICEA'S CoMMENTS oN IDAHO PowLR CoMpANy's FIXH) Cost Rt:poR t - I 7
Figure 2: Directional lmpact of TOU
Rates and a 3-Tier Rate relative to
Schedule 1
= Positive impact on this attribute
= At risk ofnegatively affecting this attribute
= Negative impact on this attribute
= No measurable impact or not evaluated at this time
I0 % of LIHEAP & Weatherization assistance customers, Report, p35 & 31
1t Reiew ofAbernale Rqle Designs, p76
Time of [Jse Rates with
Low Fixed Charge/
month
3-tier Rate:
Fixed, Demand, &
Volumetric
lmpact on
Fixed Cost
Recovery
Revenue Sta bility Not evaluated.
A well-designed rate
combined with FCA
would enable fixed cost
recovery.
By decreasing customers' ability
to control bill determinants, this
rate design would improve IPC
revenue stability. FCA would
still be necessary to ensure fixed
cost recovery.
Credit Risk
Relationship with PCA/FCA
Ability to Recover Fixed
Costs
lmpact to Future Cost
Causation
Billing
lmpacts to
Customers
lmpact Across Class
Low lncome lmpactlo 6l% show reductions in
bills
55% & 59% show reductions
in bills
Stability for Customers Varies with rate design Varies with rate design
Price
Signaling
(to Align
Behavior
with cost
causation)
Conservation Empirical evidence
demonstrates efficacy
o lncreasing fixed fees
discourages conservation
. Demand charges not
shown to be effective
Controllability over billing
determinant
Customers can control
bill not only by how much
but also when they
consume enerBy
Peak Reduction or other
measures to decrease need to
invest in fixed plant
Em pirical evidence
demonstrates efficacy
Not demonstrated to be
effectivell
Predictability Similar to current Fixed cha rges predictable,
Demand charges less
Simplicity (customers
understand & can act on
signal)
Understandable and
actionable
Fair, Just &
Reasonable
Fairness Better aligns rates with
usage and cost causation
lnadequately considers
customer side of the
buyer/seller transaction
Undue Discrimination An opt-out program
would address
Not addressed but poses
risks.
ICEA's CoMMENTS oN IDAHo PowER CoMPANY,S FIxED CoST REPoRT - 18
o lncreased fixed fees
reduce control.. Demand charges difficult
to control
o Difficult to understand. Monthly demand charge
less actionable
Recommendations
With regard to TOU rates, the Report did not adequately present the benefits, and the
concems presented are addressable. A well-designed TOU rate program. when
considered across the multiple attribute categories defined by the collective pa(ies in the
Staff Report, provides a compelling opportunity to reduce peak load growth, increase
customer control over current and future costs, and more closely align price signals with
cost causatron.
o As soon as feasible, the Company should allow customers on Schedules 6 the option of
participating in TOU rates available to Schedule I customers.
o ICEA looks forward to working with Staff to explore the possibilities that TOU provides
to incent peak load reductions.
V. Customer Cost of Service: No single correct methodolow
Regarding the Customer Cost of Service (CCOS) methodology proposed by the
Company in the Report, ICEA does not concur with the CCOS methodologr proposed. There
are many methodologies for the proper spread offixed costs, and the Report does not explore the
full range of options. Given this docket has not provided a sufficient venue for determining the
most appropriate methodology for cost allocations, our cornments will not go into detail
regarding issues with the specific CCOS method presented in the Report. We expect a more
comprehensive consideration of methodologies would be made during a general rate case.
As cost allocations are contemplated in the future, we would note the over-arching
guidance presented by the Regulatory Assistance Project in its recent publication, Electric Cost
Allocutionfor u New Era: A Manualt2, which emphasizes the allocation ofcosts based on usage:
': By Jim Lazar, Paul Chcrnick, William Marcus, Mark LcBcl, publishcd January' 2, 2020, p l8-19.
ICEA'S CoMMENTS oN IDAHo PowHR CoMpANy's FIxHr) Cos r RF.poR l - l9
To begin, there are best practices that apply to both embedded and marginal cost of
service studies:
Treat as customer-related only those costs that actually vary r,'ith the number of
customers, generally known as the basic customer method.
Apportion all shared generation, transmission and distribution assets and the
associated operating expenses on measures ofusage, both energy- and demand-based.
Eliminate any distinction between "fixed" costs and "variable" costs, as capital
investments (including new technology and data acquisition) are increasingly
substitutes for fuel and other short-run variable operating costs.
Where Iuture costs are expected to vary significantly from current costs, make the
cost trajectory an important consideration in thc apportionment ofcosts.
a
a
ra
VI. Materiality and Volatili8: A Call for Caution and Prioritization
The Report does provide data that can inform the scoping ofissues related to materiality
and volatility.
Volatility. In IPC-E-I7-13, one of the concems raised by ICEA regarding separate rate
classes was the increased volatility ofrates that results when there are few customers in the rate
classl3:
ICEA'S CoMMt-N rs oN ll)AHo PowER Cor\4pANy's FIXED Cosr RrpoRT - 20
o Ensure broad sharing ofoverhead investments and administrative and general (A&G)
costs. based on usage metrics.
The number ofnet metering customers in the proposed classes would be
very low relative to standard customers. My perception is that such a small
rate class would be more vulnerable to future changes in rates and rate
structure. While Idaho Power has raised concerns about the range of
predictions of power inflation rates, I perceive inflation rates for standard
customers to be more predictable than future rates for net metering ifsuch
customers were put in a separate class. As described earlier, the higher the
risk involved in any investment, the higher the retum needed to motivate
an investor. Putting net metering customers into a separate class would
burden the market with higher risk regarding future rates, thereby driving
down the profitability of the rooftop solar installation industry.
r3 IPC-E-17-13, White Direct, page 9 Lines 3-l I
The Report provides evidence ofthis problem. For example, the Company presents
(Report, Figure 6) what percentage changes would be needed to address deficiencies in revenue
collection assuming the Company's proposed CCOS methodology. For Customers on Schedule
8, the change would be 100% (a doubling of revenue collected) in order to address the proposed
revenue deficiency of S 1 8,000. 14 Different assumptions for the CCOS methodology, such as
those described but partially presented in the Report, result in significant swings in the revenue
deficiency or surplus calculated for on-site generation customers (Schedules 6 & 8). A changing
composition of customers can create further swings. This exposure to volatility emphasizes the
need for caution and materiality in the contemplation of future changes.
Materiality. Though we do not concur with the methodology, if the purported revenue
deficiency from fie Residential On-Site Generation Class were spread across Residential
Customers, the deficiency proposed by the Company represents $l per residential customerls.
This figure would be significantly lower if the CCOS modifications described in the Report were
applied, or if changes to Net Metering contemplated in IPC-E-18-15 were in effect. Meanwhile,
the Report (pl4) presents that revenue from the Irrigator class falls $2'1.'l million short ofthe
revenue requirement suggested by the Company's proposed CCOS methodology. For the
purposes ofscoping materiality, consider that a $21.1 million revenue deficiency would equal
$49 per residential customer. While again the Company's figures are arguable, we would note
that the potential for a $l/customer cross-class subsidy is not more urgent than a $49lcustomer
cross-class subsidy.
I{ The Report, Appendix D, Page 67
t5 lbid
ICEA's CoMMEN t S oN Ir)AHo PowER CoMpANy's FtxED Cosr REpoRT - 2l
Recommendations
a ICEA continues to ask that the materiality ofdemonstrated issues wilh rate design be
considered in the prioritization and timing of changes.
ICEA understands that current rate designs provide leniency to the Irrigator class given the
industry and its economic viability are valued in Idaho. If rate decisions are to be assessed in
the context oftheir impact on an industry, ICEA asks that consideration be given to the
impact on the clean energy industry in ldaho.
VII. Recap of Recommendations
a
a We ask that the Commission find the Report as insufficient in providing the comprehensive
fixed costs analysis requested by the Commission, and that the Commission give significant
weight to these comments to inform future decisions.
To assess rate designs, ICEA asks that the Commission consider a more comprehensive.
objective, and multi-attribute approach than that presented in the Company's Report. The
public interest in preventing future cost growths should in particular be given greater
consideration.
The Report does not demonstrate that current rate designs have impeded the Company's
ability to recover fixed costs. Analysis that the Company is recovering fixed costs through
means other than fixed charges is not an indicator that current rate designs are ineffectively
recovering fixed costs.
ICEA proposes that the Commission broaden the "low income" attribute to consider impact
of a residential rate design on "Affordability for vulnerable populations".
We ask that the attribute category "Price Signaling and Behavior" be given significant weight
in assessing any change to a rate design.
a
a
a
a
ICEA,S CoMMENTS oN IDAIIo PowER CoMPANY,S FIXF,I) CoS.I RI,POI{.I . 22
a Given that Idaho Power is successfully recovering its fixed costs, we ask that no changes to
rate design should be made that go in the direction ofnegatively impacting conservation,
controllability, peak reduction, or other factors linked to causation of future costs.
In assessing whether a rate design is lair and equitable. the Commission should consider if
the rate design enables customers to contribute to fixed costs in a manner proportionate to
how the customer benefits from the service provided by the Company. Customers benefit
from a service depending on when, where. and how much they use the service.
Going in the direction ofhigher fixed fees goes in the direction of signaling behaviors which
increase future costs. Increased fixed fees should only be considered if existing or alterative
rate designs do not enable the Company to recover fixed costs and the Commission desires to
reduce the signal to customers, and their ability, to control energy consumption.
We oppose the implementation of demand charges for residential and small general service
customers (Schedules 1, 6,'1 , &. 8) as these introduce significant problems wilh no
demonstrated benefits. TOU volumetric charges provide similar benefits with less downsides
and offer a better altemative than Demand charges.
For the above reasons, we oppose the Three Tier Rate design proposed by the Company.
With regard to TOU rates, the Report did not adequately present the benefits, and the
concerns presented are addressable. A well-designed TOU rate progftlm, when considered
across the multiple attribute categories defined by the collective parties in the Staff Report,
provides a compelling opportunity to reduce peak load growth, increase customer control
over current and future costs, and more closely align price signals with cost causation.
As soon as feasible, the Company should allow customers on Schedules 6 the option of
participating in TOU rates available to Schedule I customers.
a
a
a
a
a
tCEA's CoMMENTS oN IDAIIo PowER CoMPANY,S FIxF]) CosT REPoRT - 23
. ICEA looks forward to working with Staff to explore the possibilities that TOU provides to
incent peak load reductions.
r ICEA continues to ask that the materiality of demonstrated issues with rate design be
considered in the prioritization and timing ofchanges.
r ICEA understands that current rate designs provide leniency to the Irrigator class given the
industry and its economic viability are valued in Idaho. Ifrale decisions are to be assessed in
the context oftheir impact on an industry, ICEA asks that consideration be given to the
impact on the clean energy industry in ldaho.
Dated: January 2l,2020.
GIVENS PURSLEY LLP
/ --='=
Preston N. Carter
Givens Pursley LLP
Attorneys for ldaho Clean Energt Association
ICEA's CoMN.lENr s oN lr)Arlo PowrR C0r\4pAN y's Frxf r) C( )s r RHPoR I - 24
I certify that on January 21, 2020, a true and correct copy ofthe foregoing was served
upon all parties ofrecord in this proceeding via the marner indicated below:
Commission Staff
Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Ste. 201-A
Boise, ID 83714
[e-mail]
Edward Jewell, Deputy Attomey General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Ste. 201-A
Boise, ID 83714
Edward. [e-mail]. gov
Hand Deliver"v & Electronic Mail
(Original and 7 Copies)
Electronic Mail
Via Electronic Mail
Lisa D. Nordstrom
Regulatory Dockets
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, ID 83707
lnordstrom@idahoDower. com
[e-mail]
Benjamin J. Otto
Idaho Conversation League
710 North 6s Street
Boise, Idaho 83702
botto@idahoconservation. ors
Idaho Irrigation Pumpers Association, Inc.
c/o Anthony Yankel
12700 Lake Avenue, Unit 2505
Lakewood, Ohio 44107
[e-mail]
Timothy E. Tatum
Connie Aschenbrenner
Idaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ID 83707
tlaIum@idahopower. com
caschenbrenner(a)idahopower.com
Idaho Irrigation Pumpers Association, Inc.
c/o Eric L. Olsen
Echo Hawk & Olsen, PLLC
505 Pershing Avenue, Suite 100
P.O. Box 6l l9
Pocatello, Idaho 8305
-t wk om
ldahydro
c/o C. Tom Arkoosh
Arkoosh Law Offrces
802 W. Bannock Street, Suite LP 103
P.O. Box 2900
Boise, ID 83701
[e-mail]
h
[e-mail]
ICEA's CoMMEN'r's oN IDA[o PowER CoMpANy's FIxt]r) Cosr REpoRT - 25
CERTIFICATE OF SERVICE
Ted Weston
Rocky Mountain Power
1407 West North Temple, Suite 330
Salt Lake city, UT 841l6
ted.weston@paci fi corp.com
Briana Kober
Vote Solar
358 S. 700 E., Suite 8206
salr Lake City, UT 84102
briana@v otesolar.org
Al Luna
Aluna@earthi ustice.org
Abigail R. Germaine
Boise City Attomey's Office
105 N. Capitol Blvd.
P.O. Box 500
Boise, ID 83701-0500
asermaine@ci tyofboise.otg
Zack Waterman
Mike Heckler
Idaho Sierra Club
503 W. Franklin Street
Boise, ID 83702
zack. watermanfdsierracl ub.org
[e-mail]
Patrick D. Ehrbar
Avista Corporation
P.O.Box3727
Spokane, WA99220-3727
[e-mail]
F. Diego Rivas
NW Energy Coalition
I 101 8th Avenue
Helen4 MT 59601
diego(Zlnwenergv.orp
Avista Corporation
Joe Miller
[e-mail]
ICEA,S CoMMENTS oN IDAHO POWER COMPANY'S FIXED COST REPORT . 26
Yvonne R. Hogle
Rocky Mountain Power
1407 West North Temple, Suite 330
Salt Lake City, UT 84116
wonne. hoele@pacifi corp.com
David Bender
Earthjustice
3916 Nakoma Road
Madison, WI 53711
[e-mail]
Nick Thorpe
nthome@eartlli ustice.orq
Idaho Siena Club
c/o Kelsey Jae Nunez
Kelsey Jae Nunez LLC
920 N. Clover Drive
Boise, ID 83703
[e-mail]
David J. Meyer, Esq.
Avista Corporation
P.O.Box3727
Spokane, WA99220-3727
David.mever@avi stacorp.com
NW Energy Coalition
c/o Benjamin J. Otto
Idaho Convservation League
710 N. 6fi Street
Boise, ID 83702
botto@i dahoconservation.org
Industrial Customers of Idaho Power
Dr. Don Reading
6070 Hill Road
Boise, Idaho 83703
dreadine@mindsprin g.com
c/o Peter J. Richardson
Richardson, Adams, PLLC
5 | 5 N. 27th Street
P.O. Box 721 I
Boise, Idaho 83702
[e-mail]
Russell Schiermeier
29393 Davis Road
Bruneau, Idaho 83604
[e-mail]
7--,.-J
Preston N. Carter
ICEA's COMMENTS oN IDAHo PowER CoMpANy's FrxED Cosr RI-:poR t - 27