20040105Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL STAFF
FROM:DAVE SCHUNKE
DATE:DECEMBER 19, 2003
RE:CASE NO. PAC-03-14 (PacifiCorp)
IDAHO 2003 IRRIGATION LOAD CONTROL CREDIT RIDER PROGRAM
COMPLIANCE FILING-EVALUATION REPORTS;
PROPOSED CHANGES TO SCHEDULE 72 PROGRAM
On December 5, 2003 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed proposed changes to its electric Schedule 72 Irrigation Load Control Credit
Rider Program. Also filed was a copy of the Company s Schedule 72 2003 Program Evaluation
Report.
The Company, in its filing, recommends the following changes to improve the
Schedule 72 Program. The intent of the Company s recommendations is two fold: (1)
streamline the enrollment process and (2) mitigate potential customer concerns that may have
limited customer participation in the 2003 Program. The Company proposes to:
1. Provide customers with a Load Control Service Agreement by January
15th of each year together with the Load Control Service Credit
notification (the credit the customer would receive should they elect to
participate). The Load Control Service Agreement will include the
amount of credit the customer would receive during the upcoming
irrigation season if participation is elected.
2. Require that customers SIgn and return the Load Control Service
Agreement by February 15th of each year to indicate their intention to
participate in the Program.
DECISION MEMORANDUM
3. Notify participating customers of the scheduled hours for load control
during the irrigation season by March 15th of each calendar year.
4. Permit participating customers to notify the Company of their intent to
opt out of the Program without penalty by April 15th.Under the
Company proposal customers notifying the Company of their intent to
opt out of the Program after April 15th shall be subject to the terms of
Special Condition No., Early Termination (Schedule No. 72).
5. Not enforce the ineligibility for the 2004 irrigation season for customers
who submitted an Intent to Participate Notification in the 2003 Program
but subsequently failed to execute a Load Control Service Agreement.
This proposal is based on the Company recommendation to eliminate the
Intent to Participate Notification as part of the 2004 Program.
6. To limit the potential cost for participating customers under terms of
Special Condition No., Cost of Load Control Devices, (Schedule No.
72) to such costs only to the extent that they exceed one thousand dollars.
The Company requests an effective date of January 7, 2004 for its proposed Schedule 72 tariff
changes. Should the Commission elect not to approve the proposed changes with the January 7
2004 effective date, the Company would consider it an acceptable outcome to administer the
Irrigation Load Control Credit Rider Program for the 2004 irrigation season based on the existing
conditions of Schedule No. 72
Accompanying PacifiCorp s tariff change request is a copy of the Company
November 28, 2003 Schedule 72 Program Impact Evaluation Report. The Evaluation Report
filing is a compliance filing pursuant to Commission directive in Order No. 29209, Case No.
PAC-03-, wherein the Company was directed to submit a Report at the end of the 2003
irrigation season summarizing the results of the Schedule No. 72 Irrigation Load Control Credit
Rider Program.
DECISION MEMORANDUM
YOU ARE FURTHER NOTIFIED that the Schedule No. 72 Irrigation Load Control
Credit Rider Program was initially approved by the Commission in Case No. P AC-03-, Order
No. 29209. In that Order the Commission addressed the methodology used by the Company to
calculate the proposed credits. The proposed credits are different for each month of the irrigation
season to reflect the varying costs of power, and hence, value of curtailment, in each of the
months. In valuing the shift of load from the super peak to light load hours, PacifiCorp included
a 30% uncertainty factor in recognition of uncertainties with respect to (a) the amount of load
that actually shifted; (b) the hours of the day that load is actually shifted to; (c) the level of load
control equipment failure; (d) unexpected differences between estimated load and actual load; (e)
failure of customers to shift load; and (f) customer termination from the Program for previously
failing to shift load. The proposed credits are thus 70% of the differences between expected
super-peak and off-peak market prices. The Commission characterized the Company s proposal
as essentially a time-of-use proposal and not a curtailment or buy-out proposal. The Program is
also voluntary.
On December 10, 2003, the Commission issued a Notice of Application and a Notice
of the Schedule 72, 2003 program report filing. The Commission further issued a Notice of
Modified Procedure and established a comment deadline of December 30, 2003. Timely
comments were filed by the Commission Staff and Stanly Searle of Idaho Falls.
Mr. Searle, expressed concern over last years program notification and suggested that
direct mailings should be required. He also commented on some difficulty that the Company had
in resolving problems in a timely manner. He felt that the cost of equipment should not be billed
to the user. He went on to say that
, "
the program did not meet the needs of the users , noting the
participation rate was far below that of the old load control program. Regarding load shifting,
Mr. Searle said his "pump used more KW in 2003 than in 2002" and that "the power is being
used during off peak". In conclusion he stated that
, "
the savings to the user are not enough to get
wide spread participation." He "found the 2003 program non-profitable and will not be
participating in 2004.
DECISION MEMORANDUM
Staff provided comments on the Program Evaluation Report and the Company
proposed changes. They said that with 10.3% of the customers participating in the program an
average load of about 21 MW was shifted or curtailed during the critical peak period. The
Company estimated that this resulted in about 8 million kWh being saved during the curtailment
period, and this energy was curtailed not shifted. Staff noted that the Company had not provided
data to support the finding with respect to load shifting. They then cited the Commission
statement on page 5 of Order No. 29209: "We find the proposal submitted by the Company...
recognizes that irrigator load in super-peak periods will be shifted to other times or off-peak
periods." Staff recommended that the Company should further study the load shifting effect of
the Schedule 72 program.
Staff summarized the program cost as reported by the Company for 2003 to be $550 900, or
about $70/Mwh super-peak. Due to lower expected field cost, the estimated project cost for 2004
is $386 370 or about $49/Mwh super-peak. The program was said to be cost effective in the first
year from the perspective of Total Resource Cost, but not cost effective from Pacificorp
perspective due to high first year field costs. Staff took exception with a portion of the statement
on page III-3 of the Report that "the Program is cost effective in the first year, providing benefits
of over $657 000 at no cost to the participants " Staff stated that they believe there are participant
costs, even though they may be indirect and sometimes difficult to quantify. If they had no costs
all irrigators would participate. Staff believes this next season will be important in determining
if the program remains successful. If the participants choose to participate again, it will confirm
that they believe the program is cost effective for them. Therefore, it is important for the
Company to vigilantly survey irrigation customers and continue to monitor the program
watching for program modifications that might add value for both the participants and the
Company.
Staff then discussed the load control service credit. The Company intends to calculate the
monthly credit for the 2004 irrigation season using the same methodology used last season. Staff
believes this valuation methodology offered a reasonable credit for use in the program during the
2003 irrigation season. However, questions related to the methodology, including whether 70%
is the proper discount, should be addressed in greater detail in the 2004 evaluation report that we
believe should be filed by December 1 , 2004. Staff recommends that the uncertainties, used to
support the 30% discount, be evaluated, quantified where possible and the amount of the
DECISION MEMORANDUM
discount adjusted accordingly. The analysis should be based on the experience of both years
2003 and 2004.
Staff believes this is an important program that will become even more important in the
future as BP A irrigation credits change and the cost of super-peak energy increases. It will be
critical to have program options like this for irrigation customers to be able to exercise some
control over their electric bills and for the Company to control power supply costs. Over the
next couple of seasons it will be important to familiarize more irrigators with this program and to
continue to refine it, including reevaluating the credit calculation.
In its filing, the Company recommended six changes, listed at the beginning of this
Memo, that Staff believes would improve the schedule 72 program. The proposed changes
would require that the Company not only provide customers with notice of the credit by January
, but also provide them with the Agreement by that date. Second, rather than submit to the
Company an "Intent to Participate " the customers would return signed agreements by February
15. Third, Notice to the customers of the Load Control Schedule would occur on
March 15 rather than March 1 and, fourth, the Company would add a provision that allows
customers to opt out of the program without penalty by April 15. The Company also proposes to
eliminate the requirement that customers failing to execute an agreement after submitting an
Intent to Participate" would not be eligible to participate in the program the following year.
The last change proposed by the Company would require customers to only pay the cost
installation and control devices in excess of one thousand dollars. Previously the customer was
required to pay all these costs.
Staff in its comments recommends the following:
The Company should improve program evaluation by studying the extent and effect
of load shifting that results from implementation of the 2003 and 2004 curtailment
programs. The results of the study should be presented to the Commission and
irrigators by December 1 , 2004.
The Company should provide an evaluation of the individual uncertainties used to
establish the 30% discount in calculation of the Load Control Credit. Where possible
these uncertainties should be quantified and the amount of the discount reevaluated.
DECISION MEMORANDUM
The Company should survey the irrigators and continue to monitor the program
watching for program modifications that might add value for both the participant and
the Company.
The Commission should approve the six program changes proposed by the Company.
Staff anticipates a Company filing on the Schedule 72 Irrigation Load Control Credit
the week of January 5 , 2004. The Company calculated monthly credit is proposed for the 2004
irrigation season.
Commission Decision
Does the Commission wish to accept the Staff proposed recommendations with
respect to the 2004 report and the Company-proposed changes to the Schedule 72 Irrigation Load
Control Credit Rider Program?
Dave Schunke
Vld/M:PACEO314
DECISION MEMORANDUM
Eric L. Olsen ISB# 4811
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: [phone]
RECEIVED IT)FILED
2003 DEC 30 PM 4: 29
il.;;\.lC il)dLiC
UTILITIES COt1MISS10N
Attorneys for the Idaho Irrigation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF PACIFICORP DBA UTAH POWER &
LIGHT COMPANY FOR APPROVAL OF
PROPOSED CHANGES TO ELECTRIC
SERVICE SCHEDULE 72-IRRIGATION
LOAD CONTROL CREDIT RIDER
PROGRAM.
Case No. PAC-O3-
IDAHO IRRIGATION PUMPERS
ASSOCIATION, INC.
COMMENTS TO PROPOSED
CHANGES AND EVALUATION
REPORT
COMES NOW the Idaho Irrigation Pumpers Association, Inc. ("Irrigators ), through
undersigned counsel, and hereby respectfully submits its comments on PacifiCorp s proposed
changes to the optional Irrigation Load Control Credit Rider Program ("Program ) and the
corresponding Evaluation Report ("Report"
The Irrigators want to reaffirm their support for the overall Program. The
monitoring and evaluation clearly shows that it is a viable demand side resource that can be
utilized to mutually benefit PacifiCorp, the Irrigators, and PacifiCorp s other customer classes.
Given the uncertainty of maintaining the current level of BP A Exchange Credit benefits, the
Program will become even more critical in the future to ensure affordable rates for the Irrigators
while at the same time benefitting PacifiCorp s other customer classes. The Irrigators believe
that PacifiCorp has worked hard to implement and refine the mechanics of the Program to the
benefit of all parties involved. The Irrigators are also appreciative of PacifiCorp s efforts to
IRRIGATORS' COMMENTS - 1
::0
G')
meet and discuss the Program directly with the Irrigators.
PacifiCorp s filing proposes six new changes to the existing Program. The
Irrigators believe that all the requested changes will be beneficial to timely implementation and
continued operation of the Program and recommends that the Commission approve and
implement the same as soon as practical without a formal hearing. One concern the Irrigators
had with the Program s initial filing in P AC- E-03-03 was that the Irrigators did not have the
opportunity to review and comment on the Load Control Service Agreement ("Service
Agreement"). The current filing requires that PacifiCorp would provide its irrigation customers
with the Service Agreement by January 15, 2004, and the Irrigators have not yet been provided
with a copy of the Service Agreement. The Irrigators respectfully request that the Commission
require that the Service Agreement be provided to the Irrigators and Commission Staff for
review and comment prior to dissemination. The Irrigators commit to promptly review the
Service Agreement and get its comments to PacifiCorp to avoid delay.
Generally, the Report indicates that the Program as a whole is a cost effective
means of reducing a portion of PacifiCorp s the peak electricity demand, thereby allowing
PacifiCorp to avoid meeting a portion of its peak demand through market power purchases.
However, the Report does not fully flush out the all the Program s benefits. Specifically, the
Report indicates that in addition to being a demand-side resource, it also results in energy
savings/conservation. Report at II-3. However, these benefits were not quantified and the
Irrigators respectfully request that the Commission require that PacifiCorp continue to monitor
and quantify this potential Program benefit and give it appropriate weight in the monthly credit
pricing methodology.As an apparent corollary, the Report summarily concluded that the
Program participants were not shifting their load from the peak periods they were curtailed to the
IRRIGATORS' COMMENTS - 2
off-peak periods. Report at IT-2. The Irrigators respectfully request that the Commission require
that PacifiCorp continue to provide data to support this conclusion or require it to monitor and
quantify this claim going forward inasmuch as is was one of the primary uncertainty elements
that went into the reducing the price for the Program credit.See Order No. 29209, at 5.
Notwithstanding the above conclusions, the Report also summarily concludes that the Program
does not affect a participant's monthly peak demand (or load factor) because it does not reduce
demand on non-control days. Report at IT-5. As a consequence, no benefit was attributed to a
participant's likely reduced demand factor.But the Irrigators believe that the opposite
conclusion should have been reached and that this benefit should be given proper weight in the
monthly credit pricing methodology.As such, the Irrigators respectfully request that the
Commission require that PacifiCorp continue to monitor and quantify the reduction in demand
due a farmer s participation in the Program. Finally, the Report indicates the load control
equipment was extremely reliable and that the Program participants curtailed their irrigation
activities during the required times. Report a t I I-I. This high degree 0 f reliability calls into
question the continued use of the 30% uncertainty factor to reduce the amount of monthly credit.
PacifiCorp intends to file in early January its calculation of the proposed monthly
credits to be paid to Program participants in 2004. By supporting PacifiCorp s proposed changes
to the Program, the Irrigators are in no way endorsing the current credit pricing methodology.
The Irrigators fundamentally disagree with PacifiCorp s methodology because it focuses solely
on projected market prices to the exclusion of the avoided cost of PacifiCorp' s other supply side
resource options, as well as the other potential Program benefits and certainties addressed in the
Report. The Irrigators respectfully request that the Commission require PacifiCorp to provide
the Irrigators with the credit calculation and allow comments to be filed on the calculation of the
IRRIGATORS' COMMENTS - 3
same. The comment process on the credit calculation for the 2004 irrigation season should not
hold up the implementation of the Program for this coming year.
The Irrigators believe that the Program should continue to b e monitored on an
annual basis to refine and improve it, to quantify the benefits derived thereby, to evaluate and
revise the pricing mechanism in light of all benefits, and to address the questions the Irrigators
have raised about the Report. Further, the continued review of the Program would also be
beneficial to the Commission in evaluating the various supply-side actions PacifiCorp will be
taking in the future in light of its current Integrated Resource Plan.
Respectfully submitted this 30th day of December, 2003.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
ERr L. SEN
Attorneys for e Idaho Irrigation Pumpers
Association, Inc.
IRRIGATORS' COMMENTS - 4