DATE:	August 2, 2007
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Wilson, Kummer, Sickel) Office of the General Counsel (Fleming)
RE:	Docket No. 070350-EG – Petition for approval of residential load control program by Florida Power & Light Company.
AGENDA:	08/14/07 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:		All Commissioners
PREHEARING OFFICER:		Administrative
CRITICAL DATES:		8-Month Effective Date January 31, 2008
SPECIAL INSTRUCTIONS:		None
FILE NAME AND LOCATION:		S:\PSC\ECR\WP\070350.RCM.DOC

 

 Case Background

As part of its Commission-approved Demand-Side Management (DSM) Plan, Florida Power & Light Company (FPL) offers a load management program known as the On-Call Program.  Customers who choose to participate in the On-Call Program receive incentive payments in exchange for allowing FPL to interrupt electric service to specified appliances.  The On-Call Program has been offered since 1986. 

 

            On March 6, 2003, Commission approved modifications to the On-Call Program.[1]  The modifications included closing the On-Call Program to new participants and offering a new load management program known as the Residential Load Control Pilot Project (Pilot Program).

 

            The Pilot Program was approved for a three year period beginning April 1, 2003.  After that date, any new customers who signed up for residential load management will receive incentives based on Rate Schedule RLP.  As part of the Pilot Program, customers received a reduction in incentives compared to the existing On-Call Program.  In addition, any existing participants of the On-Call Program who move to a different location or make any change to the interruption schedule of their appliances would be paid incentives according to Rate Schedule RLP.

 

            The three year approval for the Pilot Program originally expired April 1, 2006.  FPL filed a petition on March 1, 2006, requesting continuation of the Pilot Program.  On March 14, 2006, the Company filed a supplemental petition requesting the program be allowed to continue, without interruption, until a full analysis of the Pilot Program could be made.  That request for continuation, without interruption, was granted on April 24, 2006.[2]

 

            On May 31, 2007, FPL filed a petition to approve the new DSM Program on a permanent basis. This recommendation addresses FPL's request to (a) approve FPL’s Residential Load Control Pilot Project as a DSM Program; (b) approve the revised tariff sheets for a permanent Residential Load Control Program contained in Appendix A; and (c) allow FPL the opportunity to recover expenditures for FPL’s Residential Load Control Program through FPL’s Energy Conservation Cost Recovery (“ECCR”) Clause. The Commission has jurisdiction pursuant to Sections 366.81 and 366.82, Florida Statutes.

 

Discussion of Issues

Issue 1: 

  Should the Commission approve Florida Power & Light’s (FPL) petition to offer the currently approved Pilot Program as a permanent demand side management (DSM) program? 

Recommendation: 

 Yes.  The currently approved Pilot Program continues to meet the policy objectives of the Florida Energy Efficiency and Conservation Act and should, therefore, be approved as a permanent demand side management (DSM) program.  The revised tariff sheets for a permanent Residential Load Control Program contained in Appendix A should be approved. FPL should be allowed to petition for recovery of expenditures for its Residential Load Control Program through FPL’s Energy Conservation Cost Recovery (ECCR) Clause. (Wilson)

 

Staff Analysis: 

 Under the established On-Call Program, a credit of $3.50 per month was given if a customer allows the utility to interrupt electric energy to the customer’s water heater.  Under the Pilot Program, the credit amount for the same interruption is $1.50.  Similarly, the On-Call program provided a monthly credit amount of $6.00 for cyclic interruption of air conditioning; the same cyclic interruption gets a credit of $3.00 under the Pilot Program. 

When the Commission approved the Pilot Program to begin April 1, 2003, the Company expected to offer this program for a maximum period of three years.  The Company planned new promotions and marketing positions to be tested as part of the Pilot Program, and expected to gain information by monitoring customer response.  Based on customer response, permanent approval of the Pilot Program or reverting all customers to the previous On-Call Program were thought to be possibilities.

The primary purpose of the Pilot Program was to measure customer response to the reduced incentives.  It was expected that a reduced amount of credit would have some chilling effect on the willingness of customers to sign up for the program, and would result in some drop off among original customers when they moved or made other changes.  Notwithstanding those reductions, FPL has continued to add load management customers under the Pilot Program and thereby increase peak demand savings in a cost effective manner.

            The approved Pilot Program was successful at determining if FPL could lower its On-Call Program incentives and still achieve its targeted levels of program participation without suffering significant customer attrition and a concurrent drop in system reliability.  By year end 2007, Pilot Program participants will represent approximately 45% (338,000 of the 750,000 total participants) of the total population receiving load management credits, which is at the upper end of FPL’s previous projections.  The expectation had been that between 36% and 47% of the total load control participants would have been on the Pilot Program, so the Pilot Program can be characterized as having achieved its objective and is expected to continue increasing the total number of load management customers.

 

FPL is not proposing to shift all participants to lower incentives.  Rather, FPL would allow the normal customer attrition process to reduce the number of customers participating under the closed incentive rate schedule.

In its filing, FPL portrayed the Pilot Program as successful in general terms because it is cost effective and continuously growing.  However, the rate of growth in the number of customers participating has been impacted by the storms that did major damage throughout the Company's service area during 2004 and 2005. 

            The Pilot Program reflects an effort by FPL to reduce program costs.  The cost of load management programs primarily consists of the monthly credits paid to participating customers.  The program costs are passed on to all of FPL's ratepayers through the Energy Conservation Cost Recovery (ECCR) clause.  A reduction in monthly credits paid will result in a corresponding reduction in overall expenses recovered through the ECCR clause.

Staff believes that FPL’s new and revised DSM program is cost-effective.  In response to a staff data request, the total program has a benefit/cost ratio greater than 1.0 under the Participants and RIM tests.  A cost-effective DSM program under the RIM test means that program participants, as well as those customers who do not participate, will benefit from the program.

Staff recommends that the Commission approve FPL’s Petition.  The new Residential Load Control Program is expected to increase FPL’s system demand and energy savings, continue to meet the policy objectives of the Florida Energy Efficiency and Conservation Act (FEECA), and is expected to continue to be monitorable and cost-effective. In addition, FPL should be allowed to petition for recovery of expenditures through the ECCR clause.

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes, if Issue 1 is approved, this tariff should become effective on August 14, 2007.  If a protest is filed within 21 days of the issuance of the order, this tariff should remain in effect with any increase held subject to refund pending resolution of the protest.  If no timely protest is filed, this docket should be closed upon the issuance of a consummating order.

Staff Analysis: 

 If Issue 1 is approved, this tariff should become effective on August 14, 2007.  If a protest is filed within 21 days of the issuance of the order, this tariff should remain in effect with any increase held subject to refund pending resolution of the protest.  If no timely protest is filed, this docket should be closed upon the issuance of a consummating order.

 

Appendix A