20070529_1946.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DONOVAN E. WALKER
DATE:MA Y 25, 2007
SUBJECT:ROCKY MOUNTAIN POWER'S APPLICATION FOR APPROVAL OF
REDUCTIONS IN BP A'S RESIDENTIAL EXCHANGE CREDITS, CASE
NO. PAC-07-
On May 25 , 2007, Rocky Mountain Power (Company), a division of PacifiCorp,
filed an Application for approval of reductions in the Bonneville Power Administration
Residential Exchange Credits. The Company requests expedited treatment of its Application
with the proposed revised tariff Schedule 34 to become effective on June 1 , 2007. Staff
recommends that the Commission act on the Company s Application in an expedited manner
and approve it.
THE RESIDENTIAL EXCHANGE PROGRAM
All citizens of the Pacific Northwest are entitled to share in the benefits from the
region s federal hydroelectric power system. See 16 US.C. 99 832, 837-839. As a regional
utility, PacifiCorp dba Rocky Mountain Power is entitled to participate in the Residential
Exchange Program (REP), which is the mechanism designed to extend the benefits of low cost
federal power to residential and small farm/irrigation customers served by investor-owned
utilities in the region. 16 U.C. 9 839c.l The REP is administered by the Bonneville Power
Administration (BP A), the federal agency tasked with marketing the power generated by the
federally owned dams on the Columbia River.
BP A's public power utility customers, such as municipalities, cooperatives, and
public utility districts, typically benefit from the federal hydroelectric system through their
I 16 D.c. 99 839-839h (2000) is titled the Pacific Northwest Electric Power Planning and Conservation Act of
1980, and is commonly referred to as the "Northwest Power Act" (NWPA).
DECISION MEMORANDUM
preferential access to low cost federal power provided by BP A. The residential and irrigation
customers of the regional investor-owned utilities, such as PacifiCorp, Idaho Power, and A vista
share in the benefits of the federal hydroelectric system through the REP, by receiving credits on
their electric bills. The investor-owned utilities provide electricity to approximately 60% of the
Northwest's population. BP A uses formulas based on various factors, including a utility
average system cost for producing power, to distribute benefits through the REP. In application
the REP acts as a cash rebate to the investor-owned utilities, which is passed through directly to
the utility s customers as required by the Northwest Power Act (NWPA).
In 2000, BP A offered the region s investor-owned utilities the option of entering into
a settlement of the REP (2000 REP Settlement) in lieu of the traditional REP calculation. The
entire region s investor-owned utilities, including PacifiCorp, entered into the REP Settlement
with BP A. Payments to Idaho regional utilities under the REP Settlement totaled
approximately $259 million for the 2002-2006 term, and $35 million for the first four months of
2007. As previously stated, these payments are passed through directly to customers as credits
on their electric bills.
THE 9TH CIRCUIT DECICIONS
On May 3 , 2007 , the 9th Circuit Court of Appeals issued two OpIniOnS in 18
consolidated appeals concluding that certain BP A actions in entering the 2000 REP Settlement
with the region s six investor-owned utilities, including PacifiCorp, Idaho Power, and Avista
were "not in accordance with law.Portland General Electric Co. v. Bonneville Power Admin.
, 2007 WL 1288786 (9thCir); Golden Northwest Aluminum, Inc. v. Bonneville Power
Admin., 2007 WL 1289539 (9thCir) (Court Decisions). Consequently, on May 21
2007, BPA issued letters to PacifiCorp, Idaho Power, and Avista indicating that because of the
Court decisions it was suspending the monthly payments or credits that it was making pursuant
to the REP settlements.
THE COMPANY'S APPLICA TION
On May 25 , 2007, Rocky Mountain Power filed an Application for approval of
reductions in the Bonneville Power Administration Residential Exchange Credits. The Company
seeks approval of a revised Electric Service Schedule No. 34, submitted with the Application.
Also with its Application the Company filed a copy of a letter from BP regarding the
elimination of REP payment, a balancing account study, and an affidavit of Jeffrey K. Larsen
DECISION MEMORANDUM
regarding the request for expedited treatment. The Company states that as a result of the
proposed revisions eliminating the REP credit pass-through, the net monthly bill for the average
Idaho residential customer using 1000 kWh will increase 28 percent. Irrigation customers ' net
monthly bill, on average, will increase 51 percent for service rendered on and after July 13 2007.
The Company states that the effect of the proposed revisions to Schedule 34 is to
eliminate the REP credit for residential customers and continue the credit to eligible irrigation
customers into the first part of the current irrigation season, until the surplus in the balancing
account is reduced to zero. Because the irrigation season is just beginning, eligible irrigation
customers have not yet received a material level of the REP credits for the year, and continuing
their credit until the balancing account is exhausted will provide some level of benefits during at
least part of the current irrigation season. The Company anticipates that with the proposed
changes, the REP credit would continue for irrigation customers for service through July 12
2007.
The Company requests expedited treatment stating that it is warranted given the
urgent need to match the Schedule 34 credits with the level of benefits that BP A will be
providing under the REP - zero - in order to ensure that customers are not paid credits that
exceed the benefits received from BP A, and to send an accurate price signal to irrigation
customers prior to the irrigation season.
IDAHO IRRIGA TION PUMPERS ASSOCIA TION COMMENTS
On May 25 , 2007, the Commission received a letter from the executive director of
the Idaho Irrigation Pumpers Association (IIP A). IIP A stated that it supports distributing the
remaining credits in the balancing account to the irrigation class at the "pre-termination levels
until such time as they are exhausted, as proposed by the Company. IIP A stated that this is a
necessary step in trying to mitigate the loss of the credits to the irrigation class under the
circumstances. IIP A stated that it polled its members, and they support this approach. This was
communicated to Rocky Mountain Power prior to the filing of its Application. IIP A expressed
its support for the Company s Application, and asked the Commission to act quickly on it.
STAFF RECOMMENDA TION
Staff recommends that the Commission find that good cause exists under these facts
to consider and rule upon the Company s Application on an expedited basis. Additionally, Staff
has reviewed the proposed revisions to Schedule 34, and recommends that the Commission
DECISION MEMORANDUM
approve the Company s Application.Staff discussed the possibility of several different
scenarios for the distribution of the remaining credit balance in the Company s REP balancing
account. However, given the expressed preference of the irrigation customers, as stated by the
IIP , Staff supports the requested disbursement.
COMMISSION DECISION
Does the Commission find good cause to consider this Application on an expedited
basis and issue its decision?
Does the Commission wish to grant the Company s Application, approving the
revisions to Schedule 34 that will eliminate the BP A rate credit effective June 1 , 2007?
Does the Commission wish to authorize the disbursement of the credit balance at the
current rate to irrigation customers until that balance is exhausted, as proposed by the Company
and the Pumpers Association?
Does the Commission wish to address any other matter with regard to this
Application?
DECISION MEMORANDUM