The Idaho Public Utilities Commission earlier this month said that it has approved a portion of an Idaho Power application regarding treatment of costs associated with joining an Energy Imbalance Market (EIM).
As noted in the commission’s statement, Idaho Power – which hopes to join the EIM administered by the California ISO (Cal-ISO) in April 2018 – asked the commission to make a finding that its participation in the EIM could benefit customers in the long term; authorize a deferral account to track the costs; and allow the company to recover those costs from customers in a future rate case.
The commission said that while it approved the deferral account, it declined to make a finding that EIM participation could benefit customers in the long term. However, the commission noted that “there is a possibility of a net benefit to the company’s customers.”
The commission added that it asked Idaho Power to provide evidence of customer benefit beyond what the company originally proposed, which was a quarterly benefits report provided by the Cal-ISO.
For instance, the Cal-ISO, in a Jan. 31 statement, noted that the western EIM produced benefits of $28.26m in 4Q16, and that the benefits since the real-time market was launched in November 2014 now total $142.62m.
The commission said in its statement that in addition to the Cal-ISO report, it directed Idaho Power to work with commission staff “to determine what other information may be available to demonstrate benefits.”
The commission said that it further directed Idaho Power to provide a report one year after joining the EIM that delineates the costs and benefits of participation.
Utilities like Idaho Power typically begin each hour with generation to match its anticipated load, but during the hour, imbalances occur when the energy supply does not equal demand, and when that occurs, Idaho Power relies on dispatches from its own generation, as well as extra reserves to balance supply with demand, the commission said.
By joining the EIM, Idaho Power would have access to an automated five-minute energy dispatch service across a broader footprint in the West with more deployable resources, the commission said. The Cal-ISO and PacifiCorp created the western EIM in 2014, and since then, NV Energy, Puget Sound Energy, and Arizona Public Service have joined, with Portland General Electric scheduled to join in October, the commission said. The EIM is governed by a five-member body that is financially independent from market participants, the commission noted.
Idaho Power claims that moving from an hourly market to a five-minute imbalance market is expected to lead to increased surplus sales opportunities when the company is generating more electricity than it needs as well as cost savings from increased access to other suppliers’ lower-cost generation, the commission said. An independent consultant that the company contracted claims the potential cost savings, before expenses, could be between $4m and $5m per year, the commission said, adding that there are upfront costs, which are estimated to be about $11.1m, including the start-up expense of $1.7m, software integration costs of $7.9m, and metering investment of $1.5m.
The commission said that it adopted the company’s proposal to spread costs related to joining the EIM over a 10-year period, but denied Idaho Power’s request for an assurance from the commission now that the estimated upfront costs associated with EIM participation be eligible for recovery when requested.
In its order, the commission said, in part, that it declines to provide pre-approval for recovery of Idaho Power’s estimated incremental costs of joining the EIM, saying that its normal practice is to review actual costs to determine whether they were prudently incurred and thus recoverable in rates. Providing pre-approval for estimated costs would remove the incentive for the company to implement the project in a prudent and least-cost manner, the commission said, adding, “we will determine the recoverability of Idaho Power’s actual incremental costs of joining the EIM in a future proceeding, once the actual costs have been incurred.”
Idaho Power is IDACORP‘s (NYSE:IDA) principal operating subsidiary.