20121119_3889.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL

DATE: NOVEMBER 7, 2012

SUBJECT: IDAHO POWER’S APPLICATION FOR AUTHORITY TO IMPLEMENT
RATES TO INCLUDE CAPITALIZED CUSTOM EFFICIENCY
INCENTIVE PAYMENTS, CASE NO. IPC-E-12-24

On October 31, 2012, Idaho Power Company filed an Application requesting
Commission authorization to place in rates a portion of a regulatory asset account created for
capitalized custom efficiency incentive payments. The Company requested an effective date of
December 1, 2012, but anticipates the Commission will suspend the date to provide time to
review the Application.
Idaho Power’s custom efficiency program provides financial incentives to
commercial and industrial customers to implement energy efficiency measures, including motor
rewinds, variable frequency drives, energy efficient refrigeration, and others. In an earlier case,
Idaho Power proposed to capitalize direct incentive payments associated with its custom
efficiency program. Case No. IPC-E-10-27. The Commission did not approve the Company’s
request to allow capitalization of incentive payments, but did authorize the Company to account
for custom efficiency incentive payments as a regulatory asset beginning January 1, 2011. Order
No. 32245, p. 6.
Idaho Power now proposes that the Commission allow recovery of custom efficiency
incentive payments outside of a general rate case proceeding. In Order No. 32667 recently
issued in Case No. IPC-E-12-15, the Commission stated that the interest rate to be applied to the
incentive payment balance, which ultimately would be included in rates, should be thoroughly
reviewed and determined in a rate case. Order No. 32667, p. 11. The Company in that case
DECISION MEMORANDUM 2
argued that its current rate of return should apply. Id. The Commission deferred a decision on
the interest rate to be applied to the regulatory asset account until the Company seeks to recover
the deferral balance in a general rate proceeding. Id.
The Company proposes in this case to place in its base rates the custom efficiency
regulatory asset associated with incentive payments made in 2011 plus accumulated carrying
charges. Incentive payments made in 2011 totaled $7,018,385, and the Company calculated a
carrying charge using its authorized rate of return. Accordingly, Idaho Power proposes to
recover a balance as of May 31, 2013 of $8,126,504. As it did in Case No. IPC-E-12-15, the
Company proposes to apply its current authorized rate of return to the unamortized balance of
the regulatory asset and to recover the investment through a four-year amortization schedule.
This results in an annual revenue requirement of $2,949,340. The Company proposes to collect
this additional revenue requirement through a uniform cents-per-kilowatt-hour charge, identified
in a new tariff Schedule No. 56. Idaho Power also proposes to update Schedule 56 on an annual
basis with an effective date of June 1 each year.
In this case, Idaho Power requests that the Commission:
(1) Recognize that custom efficiency incentive payments made in 2011 are
used and useful and were found to be prudently incurred expenses,

(2) Consider allowing recovery of custom efficiency payments outside of a
general rate case proceeding,

(3) Specify a carrying charge for the custom efficiency regulatory asset prior
to including it in rates,

(4) Specify a four-year amortization period for the custom efficiency
regulatory asset,

(5) Once the custom efficiency incentive payments are included in rates,
allow the unamortized portion of regulatory assets to earn the Company’s
full rate of return in the same manner as other supply-side resources,

(6) Approve the Company’s proposed approach to recovering custom
efficiency payments through annual filings each spring,

(7) Authorize the Company to implement Schedule 56 with an effective date
of December 1, 2012.

DECISION MEMORANDUM 3
Staff recommends the Commission suspend the proposed effective date of December
1, 2012, for 30 days plus 5 months as authorized by Idaho Code § 61-622. Staff further
recommends the Commission issue a Notice of Modified Procedure with a 60-day comment
period and 21-day reply comment period to process the Application.
COMMISSION DECISION
Should the Commission suspend the proposed effective date of December 1, 2012, for
Idaho Power’s new proposed tariff Schedule 56 and issue a Notice of Modified Procedure to
process the Company’s Application?

Weldon B. Stutzman
Deputy Attorney General

bls/M:IPC-E-12-24_ws