Central Vermont Public Service Corporation
Response to Request for Comments on DPS Request to Adopt New Avoided Costs
September 22, 2006
On September 7, 2006, the Public Service requested that interested parties provide
comments on certain issues attendant to the request of the Vermont Department of Public
Service for approval of avoided costs. This response provides Central Vermont Public
Service Corporation’s comments and is organized by discussion questions raised by the
Board.
Q1.
What specific avoided costs are we adopting?
A1.
For present purposes the Board should adopt only the ICF avoided capacity and
energy cost projections, without any DRIPE adjustment. Development of T&D
avoided cost projections will require further analysis and discussion and therefore
CVPS can not recommend the adoption of any particular T&D cost projections at
this time. The Company supports continued collaboration by interested parties
and the Department to advance work on the attendant T&D issues.
Q2.
To the extent that these avoided costs are being used for energy efficiency, should
we be concerned about the potential range of unpredictability inherent in the
forecast? I.e., would altering some of the assumptions, such as the timing of LNG
facilities, be likely to have an effect upon measure screening.
A2.
When forecasting economic outcomes, one must always be concerned with
variability and uncertainty of crucial inputs. In this case variability in crucial
inputs can lead to either higher or lower avoided cost projections, and hence cause
efficiency investments to appear more or less efficacious. In Central Vermont’s
view the best way to address this concern is with probabilistic based scenario
analysis. The application of such analysis yields a range of possible outcomes
and can be used to understand the implication of uncertainty and assess the
robustness of resource investment strategies.
Q3.
Which costing period methodology should we adopt, that contained in the ICF
report or the periods set out in the newer ISO market rules?
A3.
For two reasons, CVPS believes it would be best to adopt the cost periods
described in the ISO-NE market rules. First, the ISO market rules entail more
numerous cost periods thus allowing for homogenous grouping of hours. Second,
with implementation of the ISO-NE Forward Capacity Market (FCM) efficiency
resources will be valued by ISO, for purposes of determining capacity payment,
according to relative performance in ISO-NE cost periods. Thus, adopting the
ISO-NE cost periods will better align the EEU valuations with actual ISO-NE
capacity payments for efficiency resources.
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CVPS understands that the DPS recommends that the costing periods used in the
report be adopted at this time and is sympathetic to the Department’s concerns
about implementation. However, for the reasons stated above, the Company hope
that if not now, at least over time, the ISO-NE market rule costing periods will be
used for DSM screening and analysis purposes.
Q4.
How quickly do we need to adopt the avoided costs, particularly for EEU
purposes?
A4.
The avoided costs used for EEU purposes were generally put into service when
the EEU was established. They predate the formation of the current ISO-NE
market designs. The sooner the updated avoided costs and be adopted for use by
the EEU the better.
Q5.
To what degree, if any, should the avoided costs be used for other purposes? Are
there other uses that would be appropriate or that should be considered in the
Board's decision of whether to adopt them?
A5.
The use of the values recommended for adoption in item 1 above should be
restricted to the immediate purpose of valuations by the EEU. The DPS has
indicated that the avoided costs were not offered to serve as an approved
benchmark in other matters.
CVPS does not request that the Board convene a workshop be fore approving the
proposed avoided costs consistent with this recommendation.
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