pace01.4jhmfuss.doc

JOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5470

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

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

COMMENTS OF THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission (“Commission”), by and through its Attorney of record, John R. Hammond, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Order No. 28663 issued on March 7, 2001, submits the following comments.
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 has requested expedited processing of its Application and seeks a Commission Order making the Program effective from March 6, 2001.
On March 14, 2001 the Commission granted the Company’s request to process this case in an expedited manner using Modified Procedure. Order No. 28663 at 4. See also, IDAPA 31.01.01.201-.204. However, the Commission suspended the proposed effective date for this Program until March 30, 2001. Id.

PACIFICORP’S IRRIGATION BUY-BACK PROGRAM
PacifiCorp states that the purpose of its Program is to cost effectively reduce the total cost incurred for power purchased in the wholesale market during the 2001 irrigation season. Application of PacifiCorp at p.3, ¶ 4. The Company states that because of extreme prices in the wholesale power market, this Program and the one approved by the Commission in Case No.
PAC-E-013, have substantial value. The Company believes that successful implementation of this Program will reduce its excess purchase power costs that can be deferred based on the Commission’s Order No. 28630 in Case No. PAC-E-00-5. Id. The Company 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. To be eligible to participate in the Program, PacifiCorp states that irrigation customers must have total pumping operations of no less than 16 horsepower and receive service under Electric Service Schedule No. 10. Application, Exhibit A at 1. 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.
PacifiCorp states that eligible irrigation customers who wish to participate in this Program must execute an “Irrigation Curtailment Program Customer Agreement” (“Agreement”) with PacifiCorp prior to May 1, 2001. Exhibit A at 2. PacifiCorp will also require participating irrigation customers to: 1) agree to disconnect their pumps from PacifiCorp’s electrical distribution system throughout the 2001 irrigation season; 2) certify that they will not offset electrical usage at other PacifiCorp connections or move curtailed pumps to another location or transfer water rights to another user such that the curtailed energy usage otherwise occurs; and 3) not apply any kWh saved through this Program in an Exchange Event under Electric Service Schedule No. 71. Exhibit A at 2.

PacifiCorp states that participation in this Program won’t preclude an irrigation customer from using other energy sources for pumping such as diesel generators, propane or diesel engines to directly drive their pumping systems. Id.
PacifiCorp contends that in the development of this Program it considered several alternatives to manage its power costs. In this process the Company conducted an economic analysis to determine the value that the irrigation load reduction represented to the Company’s system. Through this process the Company determined that a fixed price of 8.5¢ cents per kilowatt hour (“kW”) was the appropriate level to offer its irrigation customers for their load reductions.
The Company further believes that paying a fixed price to irrigation customers is advantageous over other alternatives because:
the price is supported by an analysis which demonstrates the value to Utah Power’s system;
the irrigators are able to use the price to determine whether it is economical for them to participate;
the approach avoids the uncertainty associated with either relying on the interruptibility of the system or selecting from a range of bids submitted by irrigators.

Application at p.3-4, ¶ 6.
Based on this fixed price, PacifiCorp proposes to make monthly payments to irrigation customers who provide reductions in their amount of energy consumption through 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. Exhibit A at 1. Finally, 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 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. The Company states that for those customers who

have less than five years of historical usage it will use the available billing history, and a comparison to the average usage for a similar pumping operation. Exhibit A at 1.
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 17¢ per kWh penalty for any energy consumed in violation of Program conditions. Exhibit A at 2.
PacifiCorp proposes that its Program only will be operational during the 2001 irrigation season and will expire on September 15, 2001. Id.
STAFF ANALYSIS
The Commission Staff has reviewed and analyzed PacifiCorp’s Application and Exhibit A. After this review Staff is prepared to make the following comments.
1. Fixed Price Purchase Price
As stated above PacifiCorp’s Program will pay participating irrigation customers 8.5¢ per kWh. PacifiCorp bases this price on its economic analysis. This analysis took into consideration the anticipated purchase cost of power as well as the amount of power that can be interrupted through the Company’s existing tariffs. Approximately 95-98% of PacifiCorp’s irrigation customers are on tariff Schedule 10 (C – interruptible). These customers have received reduced rates for power during the past 19 years in exchange for the possibility of being interrupted up to three times and not to exceed a total of 12 hour per week. If PacifiCorp maximized allowable interruptions, approximately 48,000 MWh would be curtailed during this irrigation season. The Company’s analysis indicates that the value of the interruption at anticipated market rates is approximately $17 million for the irrigation season. If the $0.085/kWh is adjusted for the $17 million in value of interuptibility, the real offering price is $0.133 / kWh. Furthermore, PacifiCorp believes that setting a fixed price provides advantages over other alternatives.
The proposed Irrigation Buy-Back Program is one of several options PacifiCorp has to obtain supply or reduced 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 $0.085/kWh payment and found that the equivalent payment to firm customers would be approximately $0.133/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 Program requires the individual irrigator to commit to removing a pump(s) from service for the entire 2001 irrigation season. 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 customers farming operations to check for compliance with Program requirements. Furthermore, Schedule No. 72 provides penalties in the amount of 17¢ per kWh used if the irrigator is found in violation of the agreement. Staff believes that these controls will help to promote the success of this Program.
As stated previously, 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 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 or payment to participants is reasonable.
4. Accounting Treatment and Cost and Recovery
The Irrigation Buy-Back program is just one of many resource options available to the Company. The Company is buying and selling power on a daily basis. The Company must continuously review its available resources and load requirements when making purchase decisions. Programs, which enable energy purchases at below the anticipated high market prices, are a benefit when meeting energy needs at below market prices or when the energy purchased is sold on the market. All Customers can potentially benefit from resources purchased at less than spot market by reducing the Company’s power supply cost deferrals that are subject to recovery.
The Company 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.
STAFF RECOMMENDATION
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.

Dated at Boise, Idaho, this day of March 2001.

_____________________________________
John Hammond Deputy Attorney General

Technical Staff: Michael Fuss

JH:MFuss:gdk:i:umisc/comments/pace01.4jhmfuss
PacifiCorp defines the 2001 irrigation season as June 1 through September 15, 2001.
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.
PacifiCorp will physically disconnect irrigation pump service for irrigation customers that participate in the Program. Furthermore, it will also disconnect ancillary electrical loads, such as pivot motors or chemigation systems for the 2001 irrigation season. Exhibit A at 2.
For example, PacifiCorp considered relying on the interruptible mechanism of Electric Service Schedule No. 10 to manage costs or instituting a “bid” program in which the irrigator would submit a bid to PacifiCorp for the price at which the irrigator would be willing to reduce or eliminate load. Application at p.3, ¶ 5.
PacifiCorp states that upon an irrigation customer’s request it will provide them with their applicable average historical usage and an estimate of their payment amount under the Program.
PacifiCorp has recognized that many of its irrigation customers taking service under interruptible schedules have grown accustomed to receiving the benefit of interruptible rates without being interrupted. Since these customers have received this benefit for a considerable length they might be unprepared to deal with interruptions in service, which are more likely to occur this year because of low water conditions. The Company has sent letters to all Schedule 10(C & B –interruptible) customers in an effort to remind them that they take service under an interruptible schedule and that in all that in all probability their service will be interrupted this irrigation season.

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.

STAFF COMMENTS 7 MARCH 21, 2001