2001323_jh.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
GENE FADNESS
TONYA CLARK
DON HOWELL
RANDY LOBB
DAVE SCHUNKE
MICHAEL FUSS
TERRI CARLOCK
BEV BARKER
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: MARCH 23, 2001

RE: IN THE MATTER OF THE APPLICATION OF PACIFICORP DBA UTAH POWER & LIGHT FOR APPROVAL OF ITS PROPOSED ELECTRIC SCHEDULE NO. 72, CASE NO. PAC-E-01-4.

On February 23, 2001, PacifiCorp dba Utah Power and Light Company (hereinafter referred to as “PacifiCorp”) filed an Application seeking Commission authorization of its Electric Service Schedule No. 72, Irrigation Curtailment Program Rider (“Irrigation Buy-Back Program” or “Program”). PacifiCorp requested expedited processing of its Application and seeks a Commission Order making the Program effective from March 6, 2001.
On March 7, 2001, the Commission granted the Company’s request to process this case in an expedited manner using Modified Procedure. Order No. 28663 at 4. However, the Commission suspended the proposed effective date for this Program until March 30, 2001. Id. In this Order the Commission also found it appropriate to accept written comments from interested parties and persons filed on or before fourteen (14) days from March 7, 2001. On March 21, 2001, the Commission Staff filed its Comments. The Idaho Irrigation Pumpers Association and several individuals also filed comments.
PACIFICORP’S IRRIGATION BUY-BACK PROGRAM
PacifiCorp states that because of extreme prices in the wholesale power market, this Program has substantial value because it may reduce the Company’s excess purchase power costs that can be deferred based on the Commission’s Order No. 28630 in Case No. PAC-E-00-5. PacifiCorp states that this reduction in its costs will reduce deferred amounts of purchased power costs the Company will seek to recover in a future case.
PacifiCorp’s Program provides qualifying irrigation customers the option of reducing their consumption of energy in return for payment from the Company by executing an “Irrigation Curtailment Program Customer Agreement” (“Agreement”) with PacifiCorp prior to May 1, 2001. Exhibit A at 2. PacifiCorp states that irrigation customers who have total pumping operations of no less than 16 horsepower and receive service under Electric Service Schedule No. 10 are eligible to participate in the Program. PacifiCorp also asserts that eligible irrigation customers who are obligated for minimum energy usage related to line extension agreements or guarantees will be exempt from such contracts for the 2001 irrigation season so they may participate in the Program.
After considering several alternatives and performing economic analyzes the Company originally determined that a fixed price of 8.5¢ cents per kilowatt hour (“kWh”) was the appropriate level to offer its irrigation customers for their load reductions. However, on March 22, 2001, PacifiCorp filed an amendment to its Application that changed this fixed price to 12¢ per kWh. PacifiCorp states that it has chosen to raise its fixed price because the forward prices for power purchases in the wholesale market for the 2001 irrigation season have increased substantially from the time the Company filed its Application.
Based on this fixed price, PacifiCorp proposes to make monthly payments to irrigation customers who participate in the Program. PacifiCorp asserts that these payments will be adjusted to reflect any outstanding customer balances or arrearages owed to the Company for previous billing obligations. The Company also contends that it will not bill participating irrigation customers for the Schedule 10 Customer Service Charge during the 2001 irrigation season.
PacifiCorp asserts that it will periodically monitor participating irrigation customers’ farm operations to assure compliance with the requirements of its Program. PacifiCorp declares that failure to comply with these requirements will result in forfeiture of customer program payments and the imposition of a 24¢ per kWh penalty for any energy consumed in violation of Program conditions. Exhibit A at 2.
PacifiCorp proposes that its Program only be operational during the 2001 irrigation season and will expire on September 15, 2001. Id.
STAFF RECOMMENDATIONS
The Commission Staff has reviewed and analyzed PacifiCorp’s Application, Exhibit A and Amendment to Application. After this review Staff made the following comments.
1. Fixed Price Purchase Price
The proposed Irrigation Buy-Back Program is one of several options PacifiCorp has to obtain supply or reduce load. The actual cost, timing, and quantity of energy that can be obtained from all the options available to PacifiCorp is not fully known at this time. Absent more specific information regarding the characteristics and mix of resource options planned and implemented by the Company, Staff is unable to determine the most appropriate price to pay irrigators for energy purchased under this Program. Staff believes the Company’s analysis appears to reasonably address the relevant factors for determining an offering price. The price proposed by the Company is less than the forward market prices and appears to be within a reasonable range when compared to other resource options.
Schedule 10 (A-Firm)
The Company’s proposal does not include a different fixed price for the few irrigation customers taking service under this Schedule. Staff has reviewed the analysis of the proposed 12¢ per kWh payment and found that the equivalent payment to firm customers would be approximately 18¢ per kWh. Even though this higher price is justified to firm (Schedule 10 A) customers, for administrative ease the Staff is not opposed to the Company’s proposal to pay all Schedule 10 customers the same rate.
2. Controls to Guarantee Energy Savings and Calculation of Energy Saved
The Company will physically disconnect participating customer’s pumps and ancillary facilities such as pivot motors and chemigation systems to help to ensure energy consumption reductions. Staff has some concern about completely removing ancillary systems should the irrigator provide an alternative source for the pump (i.e., direct drive). Staff recommends that the Company work directly with the individual irrigator to assure that their needs are met in areas such as weed control or protection from wind damage. In order to further assure the load reductions necessary the Company will monitor participating irrigation customer’s farming operations to check for compliance with Program requirements. Furthermore, Schedule No. 72 provides penalties in the amount of 24¢ per kWh used if the irrigator is found in violation of Program conditions. Staff believes that these controls will help to promote the success of this Program.
PacifiCorp proposes to compute the amount of energy saved by comparing an irrigation customer’s average monthly energy usage during this season against their usage during the previous five years from June 1 through September 15. If a customer does not have five years of prior billing history, the Company will use the billing history that is available to compute savings. Staff believes that through this process the Company can verify accurately energy savings each irrigation customer participating in this Program provides.
3. Payments to Participating Irrigation Customers
PacifiCorp will make monthly payments to irrigation customers who participate in this Program. Staff believes this method of payment to participants is reasonable.
4. Accounting Treatment and Cost and Recovery
PacifiCorp proposes to allocate costs and benefits of the Program to the Company’s power supply expense in Account 555. Staff recommends that sub-accounts be established to specifically track Program costs that are subject to deferral and subsequent rate recovery. Staff further recommends that the Company provide a summary program performance report following the completion of the program in order to track actual program performance in a timely manner.

SUMMARY
Based on analysis of PacifiCorp’s filing Staff recommends approval of the Company’s Tariff Schedule 72 so that it may implement its Irrigation Buy-Back Program for 2001 only. Staff also makes the following additional recommendations:
Staff recommends that the Company should include sub-accounts to the purchase power Account 555 to specifically track the Program.

Staff recommends that the Company should provide a summary program performance report following completion of this Program.

COMMISSION DECISION
Does the Commission wish to approve PacifiCorp’s Irrigation Buy-Back Program for the 2001 irrigation season only?
If the Commission approves this Program does the Commission wish to order PacifiCorp to provide it with a summary program performance report following the completion of the Program?
If the Commission approves PacifiCorp’s Program does it also wish to allow the Company to track the costs and benefits of this Program in Account 555?
If the Commission allows PacifiCorp to record the costs and benefits of this Program in Account 555 does the Commission also wish to require the Company to include sub-accounts in the purchase power Account 555 to specifically track the Program?

John R. Hammond

Staff: Michael Fuss

M:pace0104_jh2
The Idaho Irrigation Pumpers Association is an intervenor in this case. See Order. No. 28674
See Staff Comments for the specific requirements of this Agreement.
Because of this exemption for 2001, PacifiCorp states that an additional year will be added to any existing contract for minimum usage a participating irrigation customer has previously entered into. Exhibit A at 1.
For example, unlike irrigation buy-back programs initiated by Idaho Power and Avista, PacifiCorp in its filing has not provided the Commission with data estimating the number of irrigation customers eligible for participation in this Program and the number that may ultimately participate.

DECISION MEMORANDUM 5