20070215_1836.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:CECELIA A. GASSNER
DATE:FEBRUARY 12,2007
SUBJECT:PACIFICORP DBA ROCKY MOUNTAIN POWER'S APPLICATION
FOR APPROVAL OF REDUCTIONS IN BP A REGIONAL EXCHANGE
CREDITS, CASE NO. P AC-07-
On January 4, 2007, PacifiCorp dba Rocky Mountain Power (RMP or "Company
filed an Application with the Commission for approval of a revised Electric Service Schedule
No. 34, which would reflect a reduction in Bonneville Power Administration (BP A) regional
exchange credits. This Commission has the jurisdiction over such request pursuant to Idaho
Code ~~ 61-301 , 61-307, 61-622 and 61-623.
On January 18 , 2007, the Commission issued a Notice of Application and Modified
Procedure, and solicited comments from interested parties. Order No. 30222. Staff was the only
party to file comments. On February 13 , 2007, the Company filed a request to amend the
proposed effective date of the revised Schedule 34 to be February 16, 2007 instead of February
2007.
THE APPLICATION
According to the Application, RMP participates in the Residential Exchange Program
(REP) administered by the BP A. RMP established and maintained accounts to monitor the
differences in the program credits provided to the Company s customers and the payments
received from BP A. The Company states that as of October 2006, its Idaho balancing account
showed a surplus of $7.2 million; that is, RMP paid out $7.2 million less in benefits to its Idaho
residential and small farm customers than it had received from the BP
RMP has recently engaged in negotiations with BP A for the calculation of REP
credits effective October 1 , 2006 through September 30, 2011. Through these negotiations, the
DECISION MEMORANDUM
REP benefits passed on to RMP customers are less than benefits received under the parties' prior
five-year agreement. The Company is proposing a reduction to the Schedule 34 credit amount to
reflect the change in the net credit received from BP A to pass on to RMP customers. Further
RMP proposes to apply $1 million from the existing Idaho balancing account toward the change
in the 2007 BP A credit to help moderate it.
The Company also proposes that certain long-term care facilities served by it be
eligible to receive REP benefits. These facilities would include those where the average patient
stay is longer than 30 days, but not include those care facilities that provide full medical care
similar to hospitals or medical clinics.
ST AFF COMMENTS
Staff noted that the Company is proposing an overall reduction in REP credits to
reflect the decrease in RMP benefits received from BP A and reduction of the surplus in the Idaho
balancing account. According to Staff calculations , the proposed credits will decrease from
$0.019216 to $0.016757 per kilowatt-hour for non-irrigation customers under Schedule Nos. 1
, 7A, 23A, 35A, 36 , 19 with 6A, 19 with 23A, and 19 with 35A. As proposed, credits to
irrigation customers under Schedule 10 would be reduced from $0.031546 to $0.026415 per
kilowatt -hour.
Staff notes however, that the determination of the exact annual payout of credits to
customers is not a precise science because the credits passed through to customers are a function
of actual energy consumed. Staff also notes that RMP assumed no customer growth or load
growth in its analysis. Staff believes it is reasonable to assume some growth in RMP's Idaho
service territory; therefore, Staff applied historical and forecasted growth rates to the Company
expected payout of BP A benefits for non-irrigation customers. Staff did not escalate loads or
number of customers for the irrigation class because significant changes are not anticipated.
Staff used rates for customer growth and load growth based on the Company s 2004 Integrated
Resource Plan. Using a growth rate of 1 %, Staffs analysis shows the surplus in the Idaho
balancing account will likely be reduced to just over $1 million at the expiration of the
Agreement in 2011 at normalized consumption levels.
Staff believes that the REP rates proposed by the Company for qualified non-
irrigation and irrigation customers are reasonable. Staff anticipates that the surplus existing in
the Idaho balancing account will be appropriately reduced, approaching zero, over the term of
DECISION MEMORANDUM
the Agreement. Staff further believes that an attempt to accelerate reduction in the surplus
balance could actually cause balancing account deficits requiring offsetting credit reductions.
Should the balance grow larger during the five-year period or fail to decline as quickly as
anticipated, the Company should recommend modification of the REP to better assure that all
appropriate benefits are received by customers in a timely manner.
The second matter Staff reviewed is the inclusion of certain long-term care facilities
for REP credits. According to BP A's Customer Load Eligibility Guidelines, the loads associated
with nursing homes are eligible to receive the REP credit. Long-term care facilities such as
nursing homes are eligible for REP credits when the average length of stay is 30 days or longer
and the facility does not provide full medical care similar to the medical facilities, equipment and
staff normally provided by hospitals, clinics, or similar institutions. The loads associated with
hospitals are ineligible to receive REP credits.
Staff noted that the Company has identified 17 long-term facilities that qualify for
REP credits. The overall impact of including these facilities in the allocation of REP benefits to
all other customers is minimal. Staff recommends the Company include pass through of REP
benefits to qualifying long-term facilities in accordance with BP A's Customer Load Eligibility
Guidelines.
Overall, RMP's proposal will reduce benefits to the Company s customers in Idaho.
Non-irrigation customers will experience a credit decrease of approximately 13% per kWh, and
irrigation customers will see a credit decrease of about 16% per kWh. However, Staff believes
the Company s proposed rates for allocating REP benefits are reasonable and will reduce the
surplus in the Idaho balancing account to a reasonable level by the end of the Agreement while
lessening the potential for balancing account deficits. Additionally, Staff believes it is
appropriate to include certain long-term facilities that qualify under BP A's Customer Load
Eligibility Guidelines to receive REP credit.
STAFF RECOMMENDATION
1. Staff recommends the Commission approve the reduction in BP A credits provided
to qualifying customers of Rocky Mountain Power through the 2007-2011 Residential Exchange
Program Agreement as proposed.
2. Staff recommends the Commission direct the Company to provide the
Commission with monthly payments and Idaho account balances on an annual basis.
DECISION MEMORANDUM
3. Staff recommends the Commission approve the Company s request to include
qualifying long-term care facilities in the allocation ofREP benefits.
Staff has no objection to the revised effective date of February 16 2007.
COMMISSION DECISION
Does the Commission desire to approve the reduction in BP A credits as proposed by
RMP? Does the Commission desire to direct the Company to provide the payments and balances
as proposed by the Staff? Does the Commission desire to approve the Company s request to
include qualifying long-term care facilities in the allocation of REP benefits?
CuLl
Cecelia A. crassner
M:P AC-O7-0 l cg2
DECISION MEMORANDUM