Proposed pilot programs would reward energy efficiency
Idaho Power Co. is seeking approval for two pilot programs to encourage energy efficiency.
One, IPC-E-04-15, would implement an annual adjustment to electric rates that would prevent the company from losing money when it invests in energy efficiency programs. The other, IPC-E-06-32, would provide the company financial incentives for meeting performance levels in a program to encourage energy efficient home construction. It would also penalize the company if it fails to meet the agreed-upon performance levels.
When the Idaho Public Utilities Commission sets rates, it determines the annual revenue needed by the company to recover its fixed and variable costs. The commission also estimates annual energy sales to establish the energy rate. While variable costs fluctuate with electricity consumed, fixed costs do not. If customers consume less electricity than anticipated, fixed costs are not fully recovered. Consequently, there is a financial disincentive when the company implements energy efficiency (often referred to in the industry as Demand Side Management, or DSM) programs that reduce electric consumption. A settlement signed by the company, commission staff and the Northwest Energy Coalition proposes a yearly adjustment to rates that removes that disincentive by reimbursing the company for identified losses as a result of DSM programs.
The three-year pilot program would reimburse Idaho Power if it were unable to recover its fixed costs due to reduced energy sales. The yearly Fixed Cost Adjustment (FCA), which would become part of the Energy Efficiency Rider that now appears on customer bills, would slightly increase rates to customers when the company is not able to recover fixed costs and credit customers when the company collects more than projected fixed costs. During the three-year pilot period, the FCA would apply only to residential and commercial customer classes. According to the company’s estimates, the impact on rates, if any, would be $1 or less a month.
In exchange for removal of the DSM disincentive, the program requires Idaho Power to significantly increase the size and availability of energy efficiency programs within its service territory.
The FCA would change rates at the same time as the annual Power Cost Adjustment (PCA) is made in spring. The company is proposing a cap of 3 percent on adjustment increases during one year, although the credit can be more than 3 percent during years when the company collects more than projected fixed costs.
If approved, the FCA would be implemented on a pilot basis for three years beginning Jan. 1 of this year and continuing through Dec. 31, 2009. Either commission staff or the company can request the commission to discontinue the program during the three-year period.
In a separate docket, Idaho Power is requesting approval of a pilot program that provides the company incentives for achieving agreed-upon performance levels in a demand-side management program relating to new home construction.
Under the program, Idaho Power would provide an incentive payment of $750 to builders for each home built to meet energy efficiency standards set forth by the ENERGY STAR® Homes Northwest program. The company would also provide marketing to encourage participation in the program.
On average, homes constructed to the ENERGY STAR® standard in Idaho will save 2,078 kilowatt hours annually, or 30 percent greater energy efficiency than existing Idaho residential building codes.
Under the proposed pilot program, Idaho Power would receive an incentive payment if the market share of homes constructed under the ENERGY STAR® program exceeds 7 percent of the total number of homes built in Idaho Power’s service territory in 2007, 9.8 percent of total service area homes in 2008 and 11.7 percent of total service area homes in 2009. The amount of the incentive would equal the percentage that exceeds the target. For example, if Idaho Power were able to achieve 105 percent of the 7 percent target for 2007, it would receive a payment equal to 5 percent of the total program net benefits. The incentive would be capped at 10 percent of program net benefits. Penalties would be levied for any year Idaho Power fails to reach the market share of 4.9 percent program participation it achieved in 2006. Impact on customers’ rates would be negligible.
The commission is accepting comments on both the RCA proposal and home construction efficiency program. Those wishing to submit comments on either proposal must do so by no later than Jan. 31. Comments are accepted via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on "Comments & Questions." Fill in the case number (IPC-E-04-15 for the RCA program and IPC-E-06-32 for the home construction program) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
A full text of the commission’s notices, along with other documents related to these cases, are available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to the above case numbers.