200311192nd Response Attachment 23.pdf

TT A CHMENT TO
RESPONSE TO
REQUEST NO. 23
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Idaho Power Company
Idaho 93-7 DSM Order 27660
Amortization of Accounts 1823360
.p~'.?l!J
(l.'i!
" .
oC. i/-c';-
-, ~~
Account
Amortization 182360
Amortization Adjustments 908000 Balance
Balance 12-31-27,562 1630
January-270,217.270,217.291 946.
February-270,217.270 217.021 7290
March-270,217.270,217.26,751,512.
April-270,217.270,2170 26,481 295.
May-270,217.270,217.211 078.
June-270,217.270,217.25,940,861.
July-270,217.270,217.25,670,644.
August-270,217.270,217.25,400,4270
September -270,217.270,217.25,130 210.
October-270 217.270,217.859,993.
November-270,217.270,217.589,776.
December-270,217.270 217.319,559.
Total 242 604.242 604.
Balance 12-31-319 559.
January-270,217.270,217.049,342.
February-270,217.270,217.23,779,125.
March-270,217.270,217.23,508,908.
April-270,217.270,217.23,238,691.
May-270,217.270 217.968,474.
June-270,217.270 217.22,698,257.
July-270,217.270,217.22,428,040.
August-270,217.270,217.157,823.
September-270,217.270,217.887,606.
October-270,217.270,217.21,617,389,
November-270,217.270,217.347 172.
December-270,217.270,217.076,955.
Total 242 604.242 604.
Balance 12-31-076,955.
January-270,217.270,217.806,738.
February-270,217.270,217.20,536,521.
March-270,217.270,217.20,266,304.
April-270,217.270,217.19,996,087.
May-270,217.270,2170 725,870.
June-270,217.270,217.19,455,6530
July-270,217.270,217.19,185,436.
August-270,217.270,217.18,915,219.
September-270,217.270,217.18,645,002.
October-270,217.270,217.18,374 785.
November-270,217.270,217.18,104 568.
December-270,217.270,217.834 351.
Total 242 604.242,604.
Balance 12-31-17,834 351.
January-270,217.270,217.17,564 134.
February-270,217.270,217.17,293,917 .
Prepared by D Jones9/18/2002
G\3 DRTMAN\RA TES\Budget\DSM Amort908.xls
Idaho Power Company
Idaho 93-7 DSM Order 27660
Amortization of Accounts 1823360
Account
Amortization 182360
Amortization Adjustments 908000 Balance
March-270,217,270,217.023,700.
April-270,217.270,217.16,753,4830
May-270,217,270,217.16,483,266.
June-270,217.270,217.213 049.
July-270,217.270,217.15,942 832.
August-270,217.270,217.15,672 6150
September-270,217.270,217.15,402 398.
October-270,217.270,217.15,132 181.
November-270,217.270,217.861 964.
December-270,217.270,217.591 7470
Total 242,604.242 604.
Balance 12-31-591 747.
January-270,217.270,217.14,321 530.
February-270,217.270,217.051 313.
March-270,217.270,217.781 096.
April-270,217.270,217.13,510 879.
May-270,217.270,2170 13,240,662.
June-270,217.270,217.970,445.
July-270,217.270,217.700,228.
August-270,217.270,217.12,430,0110
September-270,217.270,217.159,794.
October-270,217.270,217.889,577.
November-270,217.270,217.619,360.
Decembor-270,217,270,217.349,143.
Total 242 604.242,604.
Balance 12-31-349,143.
January-270,217.270,217.078 926.
February-270,217.270,217.808,709.
March-270,217.270,217.10,538,492.
April-270,217.270,217.268,275.
May-270,217.270,217.998,058.
June-270,217.270,217.727 841.
July-270,217.270,217.9,457 624.
August-270,217.270,217.187,407.
September-270,217.270,217.917 190.
October-270,217.270,217.646,973.
November-270,217.270,217.376.756.
December-270,217,270,217.106,539.
Total 242 604.242,604.
Balance 12-31-106,539.
January-270,217.270,217.836,322.
February-270,217.270,217.566,105.
March-270,217.270,217.295,888.
April-270,217.270,217.025,671.
May-270,217.270,217.755,454.
Prepared by D Jones9/1812002
G\3 _D RTMAN\RA TES\Budget\DSM Amort908.xls
Idaho power Company
Idaho 93-7 DSM Order 27660
Amortization of Accounts 1823360
Balance 12-31-
January-
February-
March-
April-
May-
June-
Total
Account
Amortization 182360
Amortization Adjustments 908000 Balance
270,217.270,217.6,485,237.
270,217.270,217.215,020.
270,217.270,217.944 803.
270,217.270,217.674 586.
270,217.270,217.5,404 369.
270,217.270,217.134 152.
270,217.270,217.863,935.
242,604.242,604.
863,935.
270,217.270,217.593,718.
270,217.270,217.323,501.
270,217.270,217.053,284.
270,217.270,217.783,067.
270,217.270,217.512,850.
270,217.270,217.242 633.
270,217.270,217.972,416.
270,217.270,217.702,199.
270,217.270,2170 2,431 982.
270,217.270,217.161,765.
270,217.270,217.891,5480
270,217.270,217.621,3310
242,604.242,604.
621 331.
270,217.270,217.351,114.
270,217.270,217.080,897.
270,217.270,217.810,680.
270,217.270,217.540,463.
270,217.270,217.270,246.
270,217,270,217.29.
621,302.621,302.
June-
July-
August-
September-
October-
November-
December-
Total
Balance 12-31-
January-
February-
March-
April-
May-
June-
July-
August-
September-
October-
November-
December-
Total
Prepared by 0 Jones9/1812002
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Office afthe Secretar.'
Service Date
May 1:!. 1999
BEFORE THE IDAHO PUBLIC UTILITIES COI\11\1ISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR RECOVERY
OF ITS REMAINING DEFERRED DEMAND
SIDE MANAGEMENT CONSERVATION EXPENDITURES.
CASE NO. IPC-98-
ORDER NO, 28041
SYNOPSIS
On December 14 , 1998, the Idaho Power Company (Idaho Power; Company) filed an
Application for an Order authorizing the Company to use 1998 revenue sharing amounts to fund
the Company's remaining deferred demand side management (DSM) conservation expenditures
which are not yet being amortized. By this Order, we authorize Idaho Power to offset the
Company s 1998 revenue sharing balance to re~over all of its requested olilstanding DSM, but
take into account the Company s current level of sales in calculating the recovery of that DSM.
BACKGROUND
In Order No. 27660, issued in Case No. IPC-97-, the Commission granted Ida.ho
, Power s Application to increase its rates to recover its outstanding DSM expenditures (i., DSM
expenditures that have been incurred but not yet authorized for recovery by the Commission)
made through August 1997. The Commission also authorized the Company to accelerate the
recovery of all its unamortized DSM (i., DSM authorized for recovery by the Commission but
not yet collected from ratepayers) from 24 to 12 years. The Commission disallowed from
recovery, however; the Company s expenditures in its Commercial Lighting Program (CLP)
incUlTed after the 1995 calendar year on the basis that the Company failed to demonstrate that the
expenditures it made in that program were prudent.
Petitions for reconsideration of the Commission decision to accelerate the
amortization of Idaho Power s DSM were filed and subsequently denied. The Commission
decision to accelerate the recovery of Idaho Power s DSM to 12 years is now pending on appeal
before the Idaho Supreme Court in Docket No. 25055. In Order No. 27722 issued on
reconsideration, the Commission acknowledged Idaho Power s right to make a future offering of
proof that its expenditures in the CLP were prudent.
ORDER NO. 28041
CURRENT CASE
Idaho Power proposes that the amount of the estimated payments for the Agricultural
Choices Program be set aside from the detennined 1998 revenue sharing amount. As payments
for the Agricultural Choices Program are made, those payments would be credited against the
revenue sharing balance. The payments would be reported to the Commission Staff and any
monies that were not required to reimburse the Company for Agricultural Choices expenditures
would then be available for disbursement as the Commission would require. If the amount set
aside is too low, the Company would file a proposal to recover the additional amount required.
The Commission conducted a technical hearing in this case on March 31 , 19990 The
only parties to present evid~nce during the course of that hemng were Idaho Power and the
Commission Staff. FMC Corporation appeared through counsel.
Idaho Power
During tbe hearing, tht" Company presented evidence regarding the development
implementation and administration of the CLF. In an effort to better explain it's goals in
implementing the CLP and the evaluations that it made of that program, Company witness Bruce
Cleveland testified that Idaho Power desired a program in which all commercial customers could
participate. The Company favored a straightforward program with easily understood eligibility
requirements and with a uniform wattage calculation process providing easy administration and
low administrative costs. Tr. p. 36.
Mr. Cleveland noted that the Company chose the CLP because the one common
energy use among all commercial customers is lighting.Moreover, a customer s hours of
operation are simple to quantify and it is easy to measure benefits with known energy lighting
nameplate ratings for lamps and fixtures , he testified. The Company patterned the CLP after the
successful Commercial Fluorescent Lighting Rebate Program Idaho Power offered to its
customers in the 1980s. In addition, Mr. Cleveland noted, more than 80% of the savings through
the CLP came from T8 lamps and electronic ballast combinations which had become the new
standard in the lighting industry. Finally, the Company was aware of similar lighting programs
implemented by utilities in other states that have proven to be cost-effective. Tro ppo 36-37.
Idaho Power states that it calculated the savings estimates used in the CLP
developing a standard energy calculation methodology that was systematic and uniform.
Lighting wattage information for both old and new equipment was obtained from various
ORDER NO. 28041
sources. Tr. pp. 37-38. Idaho Power argues that, from the outset, it knew the ClP would
cost-effective even if some of its customers would have installed energy efficient lighting
fixtures on their own without the availability of the program (known as "free riders
).
Id. Idaho
Power states that it conducted ~udits to verify that the ClP lighting measures installed under the
program have remained in use at their intended locations. Tro pp. 39-400 Idaho Power also
presented the testimony of Gregory Said relating to the actual calculations supponing the
Company s Application.
Commission Staff
Staff challenges two aspects of Idaho Power s filing. First, Staff contends that the
Company once again failed to demonstrate that it properly administered and evaluated the ClP
making it impossible to determine whether the costs incurred under that program which the
Company now seeks recovery are prudent. Second, Staff contends that the overall amount of
revenue requirement increase sought by Idaho Power in this case should be offset by additional
revenues the Company will begin receiving May 16, 1999 due to sales growth that has occtlITed
since this rate increase was approved in Case No. IPC-97-12.
Staff testified against ratepayer recovery of Idaho Power s ClP expenditures in Case
No. IPC-97-12. During the hearing in this proceeding, Staff witness Lynn Anderson nated
that the Commission disallowed recovery of post-1995 CLP costs incurred by the Compa..'1Y in
Case No. IPC-97-, amounting to approximately $274 000, on the basis that the Company
did not offer proof that the ClP expenditures are reasonable and because Idaho Power failed to
conduct the impact evaluation that it indicated it was going to do, Tr. pp. 85-86.
Staff argues, in this case, that Idaho Power has again failed to provide evidence of
prudence with respect to the CLP. Staff contends that, as a general rule, DSM programs should
be pre-evaluated for probable cost-effectiveness and should have implementation and evaluation
plans completed before full-scale implementation of the program begins. Tr. p. 86. Moreover
programs should be continually monitored while they are operational. Id. Both preliminary and
final program evaluations should reasonably estimate base line customer activity that would have
occurred absent the program. Tr. pp. 86-87.
Staff contends that Idaho Power failed to follow these guidelines in implementing the
CLP. Staff notes that the Company failed to conduct the process evaluations it promised in its
application when it first sought authority to implement the CLP in 1993. Tro p. 87. Moreover
ORDER NO, 28041
the Company s 1995-conservation plan specifically stated that an evaluation of the CLP was
scheduled for completion in 1996. Tr. p. 88. Staff concludes that the evidence provided by
Idaho Power in this case provides no indication that the Company completed the process and
impact evaluations that are nonnally expected for DSM programs and that the Company
promised it would perfonn for the CLP. Id. Consequently, Staff recommends disallowance of
the $274 000 invested in the CLP after 1995 through August 1997 as we.\i as disallowance of the
$396 000 incurred by Idaho Power since August 1997. Staff agrees, however, with. Company
witness Said's correction of the later CLP amount to $422 600. Tro
pp.
16, 81. Staff
recommends ratepayer recovery of Idaho Power s other DSM costs subject to the offset of
additional revenues received through incn:tLJed sales as discussed below. Tro pp. 91-92.
Regarding the remaining $1 455, I 00 of DSM costs for which Idaho Power seeks
recovery, Staff contends that $424 000 of the Agricultural Choices amount should not be
recovered until after it has been incurred later this year. Thus, Staff contends that $1 031,100 0f
additional DSM cost is recoverable from customers no\\!. Staff recommends. however, that the
Commission correct its estimate of revenue that v.till be recovered from the various customer
class rate increases scheduled to begin on May 16, 1999, resulting from the Company s prior
DSM request in Case No. IPC-97 -12. This correction Staff contends, results from updating
Idaho Power s base year sales that were used to calculate the percentage rate increases necessary
to collect $38,2 million in prior DSM costs and carrying charges. Staff testified that because of
increased sales, Idaho Power will recover at least $709,100 of the $1 031 100 revenue
requirement increase sought by the Company in this case. Staff recommends that the remaining
$322 000, plus future Agricultural Choices Program costs (estimated to be $424 000) totaling a
maximum of $746 000 be recovered by offsetting it against Idaho Power s 1998 revenue sharing
balance.
In support of its position that the Commission should correct its pnor revenue
estimate by updating the base year revenue , Staff notes that in 1997 when the Company filed its
Application in Case No. IPC-97-12 to accelerate the amortization of DSM costs from 12 years
to 24 years, the most recent weather nonnalized annual revenue data was for 1996. Staff argues
that because the Company s Application contained a provision for truing up revenues actually
collected compared to authorized revenue collections, there was no reason to suggest, even as the
ORDER NO. 28041
case was concluding in 1998 , that the base year revenues used to calculate the percentage rate
increases should be updated to reflect the growth that had occurred. Tr. p. 93.
Given that the Commission s ultimate decision was a 12-year amortization period
without a revenue true-up provision., however, Staff believes that it became very important to
recognize the most up-to-date, weather normalized base year revenues at least at the onset of the
rate increase that is scheduleci for May 16, 1999. Based on an estimated 3.4% revenue gro\\'th
from 1996 to 1998, Staff asserts that the May 16 scheduled rate increase will begin collecting at
least $8 676 more per month than anticipated in Order No. 27660. Tro p. 94. The net effect of
this base year coITection is that the Company s DSM acGOunts would recognize that $709 100 of
its CUITent $2 125 800 request is being collected through the May 16 , 1999 rate increase and
would not need to be funded through revenue sharing or an additional rate increase. Id. Staff
notes that the Company s 1998 weather normalized revenues are now available. Preliminary
indications are that revenues have grown by at least 3., rather than 3.4%, since 1996. Tro ppo
146 193-194.
Staff notes that in authorizing the recovery ofIdaho Power s DSM in Case No. IPC-
97 -, the Commission did not need to select a "test year" as it typically does in general rate
cases. Instead, the Commission authorized the recovery of a finite amount of expenditures
actually incurred by Idaho Power. The amount of those expenditures will not change, regardless
of growth. Because the recovery of that fmite amount was based on a percentage increase, Idaho
Power s actual recovery of that finite amount may under or over compensate the Company. This
is why the Company originally proposed, and the Commission often uses, a true-up mechanism
to ensure that actual revenues collected match the revenues authorized to be collected. Tr. p. 94.
Staff concludes that while its proposal to utilize updated revenue data to calculate
revenues collected from the May 16, 1999 rate increase does not constitute a full true-up (i., the
Company will almost certainly still over collect its DSM revenue requirement because of future
sales growth), it at least makes the start of a 12-year recovery more closely resemble the
revenues that will actually be collected. Tr. pp. 94-95.
Idaho Power Rebuttal
Idaho Power witness Rick Gale testified on rebuttal that it is easier to estimate
savIngs from the CLP than for any other of Idaho Power s DSM programs. The wattage
decrease caused by replacing the original lighting with the new lighting is simply multiplied by
ORDER NO. 28041
the hours of lighting to detennine the kWh savings. Thus, the saving estimates involve fewer
assumptions and are simpler to make than the estimates for any other program. Mr. Gale further
testified that the CLP has the lowest real levelized cost (7 mills per kWh) of any program in
Idaho Power s 1998 conservation plan. By this measure , the CLP has consistently been the
Company s most cost-effective program. Tr. pp. 166-167. Mr. Gale furthertestified that even if
a substantial number of CLP participants would have installed the energy efficient lighting
fixtures without the availability of the CLP, the CLP was still cost-effective. Tr. p. 168.
Idaho Power objects to Staff s proposal to update the revenues used by the
CoI1lrnission in granting DSM recovery in Case No. IPC-97-12. Mr, Gale argues that there
were many issues in that case related to the amount of Lie rate increase. The Company dis=:lgreed
with the Commission s fmal Orders issued in that case on a number of points including the
Commission s application of a hypothetical debt rate to a 12-year amortization, the disallowance
of the CLP, the $800 000 armual reduction to the ongoing operating and maintenance expenses
and the write-off of six-months of the 1998 amortization period. The Company "accepted" the
Commission s Order, however, based upon the overall result recognizing the give and take of a
contested proceeding and the ability of the Commission to weigh all factors. Tr. p. 1780
Mr. Gale concludes that to focus on only one issue from Case No. IPC-97-12 and
in effect make a single adjustment from a prior c~e and apply that single adjustment to the
instant case is not fair or reasonable. Id.
FINDINGS
In Order No. 27660 issued in Case No. IPC-97-, we denied Idaho Power the
recovery of its post-1995 CLP expenditures stating:
Regarding the CLP, we find that Idaho Power failed to offer proof that
the expenditures made by the Company were reasonable and, in fact
failed to conduct the impact evaluation that it said it was going to do in
its 1995 Conservation Plan filed with this Commission. Moreover, we
find that actions taken by Idaho Power rendered it difficult if not
impossible for Staff to conduct an independent review of the prudence of
the Company s CLP expenditures. We cannot impose upon the
Company a burden of proof that is unnecessarily onerous. Neither can
we countenance, however, Idaho Power s apparent lack of concern for
and cooperation in, the efforts of Staff to fully analyze the prudence of
this particular expenditure.
Order No. 27660 p_
ORDER NO. 28041
We went on to state that W1til Idaho Power demonstrates that its deferred
expenditures in the CLP program after 1995 were prudently incurred, those expenditures would
be disallowed. During the course of the hearing conducted in this case, it became increasingly
apparent to this Commission that the Company utterly failed to conduct any of the program
evaluations that it promised with respect to the CLP. See, Tr. pp. 54-, 182-1940 Idaho
Power s failure to perform program evaluations of the CLP notwithstanding, we find that the
Company has presented sufficient evidence in this case from which to conclude .that the ClP was
a cost-effective program and that the Company s expenditures in that program were prudently
made. We ncte that the Company s 1998 Conservation Pian indicates that the energy savings
attributable to the CLP were obtained at a levelizt:d cost of 7.3 mills per kWh which is well
below Idaho Power s avoided cost as listed in FMC's Exhibit No. 201 to this proceeding.
Although we af:,'Tee with Staff that the Company s cost effectiveness calculations are
overstated due to variO:.lS factors as cited in Mr. Anderson s testimony, we are persuaded by
Company witnesses that the program was, nevertheless. cost effective. Consequently, we hereby
authorize for recovery all of Idaho Power s expenditures made in the CLP. We admonish the
Company, however, for its failure to conduct the evaluations and studies it promised in its initial
Application in Case No. IPC-93-S and in the 1995 conservation plan. Regardless of the cost
effectiveness of the CLP , we remind Idaho Power of its obligation to honor the representations it
makes to this Commission or to seek authority to deviate from those representations,
We also fmd that, based upon the undisputed record, the Company s residual
expenditures actually made in the Agricultural Choices Program, Manufactured Home
Acquisition Program and Partners in Industrial Efficiency Program were prudently incurred and
are hereby authorized for rate recovery. We note that the prudence of these expenditures was
never called into question in this case.
Regarding the recovery of Idaho Power s authorized DSM expenditures, we find that
it is just and reasonable to consider increases in the Company s revenues that have occurred
since the base year that was used in Order No. 27660 in Case No, IPC-97-12. We are not
persuaded by Idaho Power s arguments that it would be inappropriate to update the Company's
revenues because the Company "accepted the Commission s Order" issued in Case No. IPC-
97-, taken as a whole. Tr. p. 178.
ORDER NO, 28041
Neither do we find it persuasive that such updated data should not be used simply due
to the many issues taken under consideration by the Commission in that proceeding. As Staff
noted in this case, the Company is seeking the recovery of a finite amount of expenditures. The
arguments made by Idaho Power in this case would be more persuasive had Case
No. IPC-97-12 been a general rate proceeding. In that event, it might be inappropriate to
retroactively adjust a single revenue or expense item without considering changes in all other
aspects of the Company s operations.
In this proceeding, however, it is our decision to allow Idaho Power to recover a finite
amount of money and io set the Company s rates as accurately as possible so that the Company
neither over nor under collects that amount. Idaho Power admits in this case that its revenues
have increased approximately 3.3% since 1996. Tr. pp. 193-194. In Case No. IPC-97-, we
relied upon the data available to us at that time (1996 revenues) to set the Company s rates to
recover, as closely as possible , the total amount of DSM expenditures authorized for recovery.
Our statutory mandate is to set rates that are "just and reasonable.Idaho Code 9 61-502. We
fmd that it would be \mreasonable to use anything other than the most updated data in calculating
the recovery of a fmite, non-recurring expenditure that will not change regardless of customer or
sales growth or any other outside factors.
We now have available to us updated data which demonstrates that the prior approved
rates will over collect the DSM revenue requirement detennined in Case No. IPC-97-12, We
hereby authorize Idaho Power to recover known and measurable DSM expenditures related to
the Commercial Lighting Program, Manufactured Home Acquisition Program, Agricultural
Choices Program and Partners in Industrial Efficiency Program, in the amount of $1 727 700.
The Company is required to offset this amount, however, by $688 200, to reflect that the rates
approved by Order Nos. 27660 and 27722 will collect 3,3% more revenue than previously
estimated. Idaho Power is authorized to recover the net amount of $1 , 039,500 by offsetting it
against the Company s 1998 revenue sharing balance.
Finally, Idaho Power may recover from the 1998 revenue sharing balance an
additional $424 000 for the portion of the Agricultural Choices Program that is not included
above after these costs are actually incurred and audited by Staff.
ORDER NO. 28041
ORDER
IT IS HEREBY ORDERED that Idaho Power s Application to recover various DSM
expenditures is hereby granted pursuant to the terms and conditions set forth above,
TIllS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No, IPC-98-
may petition for reconsideration within tWenty-one (21) days of the service date of this Order
with regard to any matter decided iL this order or in interlocutory Orders previously issued in this
Case No. IPC-98-16. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~ 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
/ /
day of May 1999.
~~ () ~~
Myrna J, Walters
Commission Secretary
vldlO:IPC-98-
ORDER NO. 28041
Office of the Secretary
Service Date
July 31. 1998
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AUTHORITY)
TO INCREASE ITS RATES AND CHARGES TO )
RECOVER DEMAND SIDE MANAGEMENT/
CONSERVATION EXPENDITURES.
CASE NO. IPC-97-
ORDER NO. 27660
SYNOPSIS
On November 26, 1997, the Idaho Power Company (Idaho Power; Company) filed an
Application for authority to increase its rates to allow for the accelerated recovery of its outstanding
Demand Side Management (DSM) expenditures. By this Order, we authorize Idaho Power to
increase its rates to reflect an ~ortization of 12 years with a carrying charge of 7.25%. The
resulting revenue requirement increase shall be allocated to all of the Company s customer classes
under the existing methodo~ogy and shall be recovered through a unifonn percent increase to
customers ' bills except for special contract customers who will pay a fixed fee. We deny from
recovery, the Company s investment in its Commercial Lighting Program incurred after the 1995
calendar year. Idaho Power s rates shall be reduced to reflect a decrease in the amount of its
authorized annual DSM administration expense. The first 6 months of amortization related to the
Company s 1994 DSM investment snaIl be reflected as if amortized through June, 1998. Finally,
we award intervenor funding to the Rate Fairness Group in the amount of $4911.37, the Idaho
Irrigation Pumpers Association in the amount of$14 727.94 and the Idaho Citizens Coalition in the
amount of $5360.68.
BACKGROUND
In its Application, Idaho Power states that as a result of Commission Order No. 25880
issued in Case No, IPC-94-, the Company began amortizing $19 863 300 of deferred DSM
program expenditures incun:edprior to 1994 at a rate of $68 91-0 -per month for 24 years. The
Company contends that a 24 year amortization period for that deferred investment is too long; it
proposes to amortize the outstanding DSM investment ($17,449 400 for the Idaho jurisdiction as of
December 31 , 1997) over five years. In addition, the Company wishes to begin amortizing all DSM
expenditures made after 1993 over five years. The Idaho jurisdictional amount of these expenditures
ORDER NO. 27660
(as of August 31 1997) was $16 239 800. The Company wishes to also recover can-ying charges on
deferred DSM amounts and to recover for the income tax impacts on those carrying charges.
Idaho Power states that, based upon changing the amortization period for deferred DSM
expenditures made prior to 1994 from 24 to 5 years, the Idaho jurisdictional revenue requirement to
be recovered in this five year period is $13 311 200. The Company states that the carrying charges
for the Idaho jurisdictional revenue requirement associated with the deferral of DSM made after
1993 are $7 794 000. The Company states that carrying charges during the years 1996 and 1997
have not been shown because of their treatment in the revenue sharing cases. Idaho Power
anticipates that revenue sharing for 1997 will exceed the carrying charges that will accrue on
deferred DSM program expenditures in 1997. If that is correct, Idaho Power states, the Company
will request that the Commission offset DSM carrying charges in the 1997 revenue sharing
proceeding in the same manner as it offset those costs against shared revenues in 1996. To the extent
that there is carrying charge recovery, there will be an income tax impact on the recovery of those
can-ying charges. The income tax impact of the Idaho jurisdictional revenue requirement associated
with the carrying charges on deferral of DSM, Idaho Power contended in its Application, was
003 700.
In summary, the Idaho jurisdictional balances purportedly associated with pre-1994
deferred DSM expenditures is $13 311 ,200 and deferred DSM program expenditures made after
1993 is $16 239 800. The Idaho jurisdictional revenue requirement associated with can-ying charges
on deferred DSM amounts is $7 794 000 and the Idaho requirement associated with income taxes
on can-ying charges is $5 003 700. Idaho Power sought to recover the total amount of $42 348 700.
The Company proposes that the Commission treat the 5 year Idaho jurisdictional revenue
requirement amount as two separate amounts to be allocated to customer classes by separate
methods. The Company recommends that the first amount, $13 311 200 , which is the incremental
revenue requirement associated with accelerating amortization of deferred DSM expenditures made
prior to 1994, be allocated to customer classes using the same allocations used in Case No. IPC-
94-5; the Company s last general rate case.
Idaho Power recommends that the remainder of the revenue requirement, which includes
deferred program expenditures made after 1993 , including carrying charges and income taxes, be
allocated to customer classes based upon the "ability of the customer class to participate" in DSM
programs.
ORDER NO. 27660
allocated to customer classes based upon the "ability of the customer class to participate" in DSM
programs.
Following the filing ofIdaho Power s Application, the Industrial Customers ofIdaho
Power (ICIP), Micron Technology, Inc, (Micron) and the Rate Fairness Group (RFG) filed motions
to dismiss the Company s Application on the basis that it constituted a general rate increase in
violation of the rate moratorium agreed to by Idaho Power and adopted by this Commission in Order
No. 26216 issued in Case No. IPC-95-11; it is inappropriate to grant the Application without
considering other issues that would affect the Company s earnings, and that the Idaho Legislature
rather than this Commission, should detemrine whether Idaho Power should be allowed accelerated
recovery of its DSM investment. On April 30, 1998, this Commission issued Order No. 27493 in
this case denying all three motions to dismiss and the matter proceeded to hearing on May 26-
1998. The following appearances were made at the hearing.
Industrial Customers of Idaho Power
Micron Technology, Inc.
Rate Fairness Group
Idaho Irrigation Pumpers Association, Inc,
Idaho Citizens Coalition
U. S. Department of Energy
FMC Corporation
Larry D. Ripley, Esq.
Brad M. Purdy, Deputy
Attorney General
Peter J. Richardson, Esq,
Allan R. Richey, Esq.
Paul L. Jauregui, Esq.
Randall C, Budge, Esq,
Al Fothergill
Lawrence A. Gollomp, Esq,
Conley Ward, Esq.
Idaho Power Company
Commission Staff
FINDINGS
Amortization of DSM
The only party supporting Idaho Power s proposed acceleration of its DSM recovery is
the Commission Staff. All others advocate that recovery remain at the current 24 years. The
arguments advanced by the various parties in opposition to Idaho Power s proposal largely overlap.
Primarily, the parties contend that Idaho Power provides no justification for its selection of 5 years
as an appropriate amortization period. . Certain parties contend that Idaho Power is attempting to
avoid stranded investments on a piecemeal basis without netting all of the Company s resources,
Micron argues that this is an issue that lies within the exclusive province of the Idaho Legislature.
Others, such as the ICIP, argue that the concept of "matching" revenues with expenses requires that
amortization match the expected useful lives of the resources. The ICC points out that most utility
ORDER NO. 27660
analysts predict that the transmission and distribution functions of electric utilities will remain
regulated thus minimizing or negating the possibility that Idaho Power will not recover its DSM
investments. FMC contends that, in some respects, DSM is simply another form of a generating
resource and there is no greater justification for accelerating the recovery of conservation resources
than there is for accelerating the recovery of investment in a hydro or thermal facility. FM C also
notes that although DSM is expensive by today s market standards (because of low gas prices and
sophisticated gas generation technologies), it allowed Idaho Power to avoid the acquisition of
relatively high cost hydro and thermal resources during the 1970's and 1980'
In rebuttal, Idaho Power argues that other regulatory jurisdictions are trending toward a
shorter amortization ofDSM. The Company also posits that shortening the recovery of DSM better
ensures that customers who received the benefits of the DSM measures will pay for them. Idaho
Power also notes that resource planning horizons have changed. Utilities are no longer planning for
the acquisition of base load generating plants so DSM is not simply another form of generation. The
Company further asserts that DSM is unlike generating assets owned by the utility. In the event of
market or regulatory changes, the Company can sell the latter in the market. The benefits of the
actual DSM measures, however, remain with those customers in whose facilities they were installed.
We find:
This Commission has expressed concern for some time regarding the amount of DSM
deferral that Idaho Power has been accumulating. This is evidenced-by the three year limit we
imposed on Idaho Power as of August, 1994 in Order No. 25880 to begin amortizing its DSM
balances. It is also evidenced by the fact that we specifically approved the provision in the rate
moratorium allowing the Company to seek a modification to the manner in which it recovered its
DSM expenditures. We also find significant the changes that are sweeping through the electric
industry and the unpredictability that has resulted.
We also agree with Idaho Power that conservation measures are different, in at least one
important aspect, from other generating resources. They are not owned by the Company as are base
load generating plants. Clearly, the Company is at somewhat greater risk with respect to DSM cost
recovery in the event of market and regulatory changes. We also find persuasive that by shortening
the recovery period of DSM, it is more likely that those customers who reaped the benefit of cost
effective resources, will pay for them. In short, we find that a 24 year recovery period for Idaho
ORDER NO. 27660
Power s DSM expenditures is too long. Consequently, we find that it is reasonable to allow the
Company to shorten the period in which it may recover its DSM,
Idaho Power was widely criticized in this case for purportedly failing to provide a
tangible basis for its selection of a five year amortization period. The fact is, the matter requires
some degree of discretion. This Commission, by virtue of the authority vested in it pursuant to
Chapter 5, Title 61, of the Idaho Code, has the power and, indeed, the charge, to exercise that
discretion. In defense of its proposal, Idaho Power notes that it currently relies on a five year
planning horizon for the acquisition of resources. The Company also leans on
the unpredictability
of the regulatory world in which it operates as fllrther justification for a dramatically shortened
recovery. Perhaps, we view the future regulatory paradigm from a different perspective , or with
greater assuredness. In any event, as the ICC posits, it is very likely that in five years ' time, there
will still be regulation of at least some aspect ofldaho Power s operations in this state. We find
therefore, that a five year amortization is too short,
We find that reducing the established DSM recovery period by one half (to12 years) will
considerably lessen the risk that the Company will not recover some portion of its expenditures
while, at the same time, shift more cost responsibility on those customers who benefitted from the
acquisition of DSM without unduly burdening ratepayers. Thus, we believe that a 12 year
amortization period is a just and reasonable compromise of all interests concerned.
Recovery of expenditures in Commercial Lighting Program
Staff proposes that all of the Company s investment made after the 1995 calendar year
in the Commercial Lighting Program (CLP) be disallowed, Staff notes that unlike most of the
Company s other DSM programs, there was never a formal impact evaluation conducted for the CLP
at any time during the course of the program to determine how many program participants would
have made lighting improvements without the program or whether the improvements they did make
were likely to persist for the asswned 12 year life. Thus, there is no reasonable assurance that the
expenditures being made by Idaho Power were resulting in energy savings and, if so, to what extent.
Staff argues, it was not possible to determine if the CLP was cost effective and, therefore, prudent
for the Company to continue beyond the first two plus years.
Idaho Power argues, in rebuttal, that the Company conducted "site verifications" in which
an unspecified nwnber of CLP installations were examined to determine what the energy savings
were and whether the measures and the program were proving to be economically cost-effective.
ORDER NO, 27660
We find:
Idaho Code 961-502 requires that before this Commission may change a utility s rates
it must fmd the existing rate "unjust, unreasonable, discriminatory or preferential." Rates previously
approved by the Commission must, therefore, be presumed to be fair unless and until the
Commission, whether by its own action or the action of another party, has before it evidence to the
contrary. Consistent with Idaho Code 9 61-502's mandate of reasonableness, the Idaho Supreme
Court ruled long ago that before changing a public utility s rates, the Commission must first.find that
existing rates are "unreasonable." See Murray Vo Public Uti/so Comm '27 Idaho 603 , 150 P. 47
(1915), Also, in Case No. U-1500-165 , Order No. 22299, the Commission stated that "care must
be taken to pay only for measurable conservation benefits and for those conservation benefits not
otherwise available.Order No. 22299 at p. 17.
In this case, Idaho Power filed an Application seeking to increase its rates on the basis
that they are insufficient. Because the Company is usually the only party in possession of the
information necessary to determine whether a cost was prudently incurred, it carries an obligation
to support its rate filings with information sufficient to establish that prudence. We find that Idaho
Power has not shown that its CLP met these criteria. In its Production Request No., Staff
requested "copies of any management, monitoring, or evaluation plans prepared or utilized for. . .the
Commercial Lighting Efficiency Programs. , . ." In response, Idaho Power stated:
The management and status reports for the programs are included in the
Conservation Plans of Idaho Power that are published annually. A copy of
Conservation Plans for the years 1989 through 1997 has been provided. TheCompany will soon release its 1998 Conservation Plan, and a copy will be
provided. References to the particular program years are set forth below.
(c) Commercial Lighting Program, 1993 through 1997 (Staff Exhibit
No. 105)
In its production request No. 10, Staff requested "copies of any progress reports, program
evaluations, impact assessments, performance summaries or similar documents prepared for. . .the
Commercial Lighting Efficiency programs. . . ." In response, Idaho Power stated:
In response to Requests lO(a), lO(b) and 10(c), all progress reports, programevaluations and impact assessments conducted by or for Idaho Power are
included in the Plan or the Technical Appendices by program. . . .
ORDER NO. 27660
, 0
Idaho Power s responses to Staffs Production Request Nos, 9 and 10 were dated April
In the rebuttal testimony of Idaho Power witness Gregory Said, the Company stated:
In addition to the fact that it was relatively easy to determine that the
Commercial Lighting Program was cost effective without conducting an in-
depth evaluation, the Company did perfonn field evaluations to determine if
the electricity savings in the Commercial Lighting Program had persisted
over time.
1998,
Tr. Vol. V, p. 597.
Witness Said's rebuttal testimony, filed May 20, 1998 , 3 working days prior to the
hearing, is apparently the fIrst time during the course of this proceeding that Idaho Power identified
any type of evaluation it performed on the CLP notwithstanding that Staffhad clearly requested such
information more than two months earlier, We find that Idaho Power s failure to accurately and fully
respond to Staff s production request rendered it impossible for Staff to conduct a prudence review
of the Company s CLP expenditures. Moreover, the Company failed to produce as a witness to this
proceeding any hlaho Power employee with fIrst hand knowledge of the CLP. The following is an
excerpt of testimony given by Company witness Said live during the hearing:
Where did you get your information that you utilized in preparing your
testimony on the CLP, Mr, Said? Did you get that from Ms, Nemnich?
Yes, I did,
And Idaho Power did not c!lll her as a, present her as a, witness to this
proceeding in support of its application, did it? .
No.
Tr. Vol. VI at p. 649.
Perhaps our concern with the CLP is best reflected in the following testimony of Mr. Said also given
at the hearing:
Okay. Would you agree with my characterization of Ms. Nemnich'
testimony that she testified, her deposition testimony that she testified
that the Company had not performed an impact evaluation of the CLP?
I think that's true and that s consistent with her response in the data
JequesL
Tr. Vol. VI
, pp.
647-648.
In conclusion, Mr, Said testified:
-.,
And that s the extent of the evaluation that you did, that the Company
did, of the CLP (referring to the "field" evaluations)?
ORDER NO. 27660
Yes. We were in the process of looking into discontinuance of the
program and were of the opinion that if you were going to discontinue a
program that it wasn t reasonable to put a lot of time and effort into a
written report whose sole purpose would be to propose modifications
discontinuance of the program.
Id. at p. 650.
Regarding the CLP, we find that Idaho Power failed to offer proof that the expenditures
made by the Company were reasonable and, in fact, failed to conduct the impact evaluation that it
said it was going to do in its 1995 Conservation Plan filed with this Commission. Moreover, we find
that actions taken by Idaho Power rendered it difficult if not impossible for Staff to conduct an
independent review of the prudence of the Company s CLP expenditures. We cannot impose upon
the Company a burden of proof that is unnecessarily onerous. Neither can we countenance, however
Idaho Power s apparent lack of concern for, and cooperation in, the efforts of Staff to fully analyze
the prudence of this particular expenditure. Consequently, we find that until Idaho Power
demonstrates, that its deferred expenditures in the CLP program after 1995 were prudently incurred
given that it failed to perfonn the impact evaluation that it had told the Commission it was planning,
then those expenditures will be disallowed as proposed by Staff.
Carrying charge on outstanding DSM balances
Idaho Power proposes collecting a carrying charge on outstanding DSM balances at the
rate of9.199% which reflects the Company s overall rate of return established in Order No. 25880.
Staff contends that this rate was appropriate to reflect the 24 year amortization period and the
possible risks of not recovering the full amount. Staff argues, however,.that a shorter recovery
period results in significantly less risk for Idaho Power. Since the payment of the accwnulated DSM
costs would be reasonably assured due to the shorter repayment time frame, the DSM deferred asset
should be considered more like a receivable from the ratepayers with a correspondingly lower risk.
Staff proposes using the Company s medium tenn cost of debt as a carrying charge. Rounded off
this equates to 7%. Staffs proposal is based upon the presumption that the Company s request to
recover DSM over 5 years is granted. A different carrying charge might be appropriate if some other
time period is ultimately adopted by the Commission.
The ICIP proposes that the Commission assume, for rate setting purposes, that current
unamortized DSM balances be financed with 5 year bonds and that rate adjustments be calculated
ORDER NO. 27660
. .. .
In rebuttal, Idaho Power contends that absent the front-end recovery securitized by an
actual bond issue, the hypothetical elimination of the common equity and the preferred components
of the overall cost of capital is inappropriate as proposed by Staff and the I CIP. The Company states
that it does not apportion its rate base and assign different capital costs to the portions. Idaho Power
states that the DSM deferred balance was fInanced or funded by the existing capital structure of the
Company and would be financed with short term debt only if the DSM balance was securitized.
We find:
Idaho Power witness Gale conceded that "(v)iewed in isolation there is a minimal risk
reduction related to the shortening ofthe amortization pe);od.
. . .
" This understates the reduction
in risk that Idaho Power apparently perceives it will enjoy as a result of a faster recovery period,
Mr. Gale further testified that "Idaho Power s overall rate of return has been traditionally
set in the context of a general rate case where all the factors impacting risk can be examined." The
Company advocates against singling out the interest on deferred DSM balances withGut a full
assessment of all factors impacting the Company s risk. This precise logic was in fact used by other
parties in this case who suggest that it is inappropriate to accelerate th~ recovery ofDSM without
netting it against all ofldaho Power s resources. We have already found that circumstances unique
to DSM and to Idaho Power warrant a different treatment of the' Company s investment in DSM,
By the same token, we find that it would be consistent and reasonable for us to consider the
reduction in risk attributable to a shorter DSM recovery period in selecting a caIT)'ing charge.
Because we have decided to allow the Company to shorten DSM recovery to 12 years, we find that
a caIT)'ing charge of 7.25% based on utility bond rates would be appropriate.
Level of future DSM expense
Staff and other parties recommend that the amount of annual DSM expense embedded
in rates should be reduced to reflect the fact that Idaho Power has terminated all but one of its DSM
programs (Agriculture Choices-Currently being considered for termination) and, therefore, the
Company should experience significantly reduced costs iri administering DSM as a whole. Staff
proposes reducing the amount ofDSM expense embedded in Idaho Power s rates in Idaho for future
recovery from $1 060 909 to $212 534 , which constitutes the average level of 1996 and 1997 actual
recorded expenses.
ORDER NO, 27660
Idaho Power contends that actual DSM expenditures will remain higher than Staff and
other parties suggest due to commitments made to the Low Income Weatherization Assistance
program (LIW A) but concedes that there will be a "slight" reduction in administrative DSM related
costs. The Company counters that administrative costs it actually booked do not reflect on going or
actual costs experienced by Idaho Power, including costs relating to the Company s involvement in
the Northwest Energy Efficiency Alliance (NEEA) and the Agricultural Choices program. Adopting
Staffs recommendation, Idaho Power asserts, will lock in unreasonably low expense levels into
future years.
The Company concedes that its organizational structure makes it difficult to measure the
on going DSM administrative costs because both corporate and field personnel were and are
involved in these activities. Consequently, Idaho Power proposes that its future DSM administrative
expense be decreased by the annual salaries of the four individuals who left the Company and who
spent the majority of their time working on DSM programs. This would result in a $337 362
reduction to the annual DSM expense level.
We find:"
The amount of annual DSM expense embedded in rates must be reduced to reflect
reductions that all parties, including the Company, acknowledge. The appropriate amount of the
reduction is disputed. We find that the appropriate treatment must use the Company s actual booked
costs in lieu of speculative amounts that cannot be quantified. Merely eliminating the expense
related to four employees is not sufficient to recognize the complete termination of nearly all DSM
programs. We find that Staffs proposed expense level of$212 534 reasonably represents the cost
of on-going programs and is the only amount for which there is solid evidence. If, in the future, the
Company actually experiences significantly higher DSM expenditures, we would certainly entertain
a filing to revisit the matter.
Gross-up for interest on taxes
Idaho Power grossed up the full carrying charge amount in its DSM revenue requirement.
Staff proposes that only the equity portion from the Company s capital structure should be grossed
up, The Company agrees in concept but argues that the actual ratio would be 60% for total equity
(a weighted ratio). Idaho Power grossed up the full carrying charge in the DSM balance deferred
the prospective carrying charges and all adjustments for revenue sharing, Staff grossed up the
ORDER NO. 27660 10-
carrying charge in the DSM balance deferred and the accrued interest in the revenue sharing
adjustments. Staff argues that the prospective interest should not be grossed up.
We find:
Staff's rationale and methodology is reasonable, Idaho Power agreed in concept that the
equity portion is the an10unt that would be grossed up but that the appropriate ratio is the weighted
ratio of 60%. No party objected to the use of the 60% ratio. Therefore, we adopt this ratio to
determine the gross up for taxes. The deferred amounts should be grossed up for taxes, however
we can not accept grossing up the prospective interest amount,
Proposed adjmtment to reflect 1998 amortization of 1994 DSM deferrals
Staff proposes that the first six months of amortization of Idaho Power s 1994 DSM
expenditures be reflected for January through June 1998 , reducing the DSM balance because the
Company should have begun amortizing those expenditures, at the latest, by January ,"1998 as per
Order No. 25880.
We find:
In Case No. IPC-94-, Order No. 25880 , Idaho Power was directed to begin amortizing
its DSM balances no later than 3 years from the date of deferral. In that Order, we stated:
We are also concerned with the length of time that DSM program expenses
were allowed to accumulate prior to the filing of this rate case, resulting in
accrued expenses in excess of $20 million. We decline to adopt Staffs
proposal to 'order immediate amortization of DSM costs. We find it
reasonable to require that commencement of amortization begin after no more
than three years, In the future, IPCo must begin amortization of accumulated
DSM costs after a three year period.
Order No. 25880 at p. 18.
\.,
Based on the foregoing, Staff argues that the 1994 deferred DSM balances would begin
to be amortized January 1998, Because it is now mid-year, Staff proposes reflecting 6 months of that
amortization by reducing the balance remaining. Idaho Power argues because it filed its case in late
November of 1997, prior to the end of the third year following deferral of 1994 expenditures, it
complied with the intent of the Commission s Order.
We agree with Staff, When we issued Order No, 25880, we were clearly concerned with
the level of deferred DSM that Idaho Power had accrued and desired that the Company make some
type of filing to begin recovery of those balances over time. We find the fact that Idaho Power filed
ORDER NO. 27660 11-
its Application in this case in late 1997, slightly before the end of the three year limit, does not
satisfy the spirit and intent of Order No. 25880. The Company has sufficient experience with
proceedings before this Commission to know that a filing of this complexity and magnitude could
not be processed and fmally resolved prior to the end of the three year limit. During the hearing in
this case, Idaho Power could offer no reason why it could not or did not file this case sooner. Given
the concern we have repeatedly expressed, at least as long ago as 1995 , regarding the need to begin
amortizing Idaho Power s DSM, we find that our previous Order requiring amortization to begin
should remain in effect. We find, therefore, that it is reasonable to reflect the first six months of
amortization of the Company s 1994 deferred balances as a reduction to the balance remaining for
recovery .
Allocation of revenue requirement
Idaho Power proposes that its pre-1994 DSM balances be allocated on the basis of system
load factor. All post-1993 balances are proposed to be allocated on the basis of a class s "ability to
participate" in DSM. Idaho Power s stated rationale for changing the allocation methodology for
post-1993 expenditures is that "DSM is currently viewed from the perspective of the direct benefits
received.
The parties to this proceeding were split on the issue of revenue allocation. The Irrigators
object to allocation on the basis of ability to participate noting that there has never been an equal
ability to participate on the part of all customers in a given class and it is impossible to detennine
those who could or could not participate. The Irrigators point out that cost effective DSM has
benefitted all of Idaho Power s customers and should continue to be allocated as it always has,
Moreover, the Irrigators argue that the DSM programs they were qualified to participate in were
limited because of their late implementation. Under Idaho Power s allocation methodology, the
Irrigators will pay for DSM programs when they could not participate in the programs and now will
pay more for post-1993 DSM because they can participate in those programs.
The ICC argues that there is absolutely no support for changing the allocation
methodology. According to the ICC, Idaho Power s proposal places the bulk of cost responsibility
on residential and irrigation customers and relatively little on larger, industrial customers. The ICC
characterizes this as "retroactively changing the rules of the game.
Staff argues that DSM was a cost effective surrogate for generating resources when
implemented and there is simply no reason to allocate it in a different manner. Staff also notes that
ORDER NO. 27660 12-
..
t..
while participating customers may have benefitted more from the actual DSM measures, they often
had to pay up front costs and assume the risk that the conservation measures would produce the
expected savings. In lieu of Idaho Power s proposal, Staff suggests that customers' total electricity
bills be increased by a unifonn percentage. Staff notes that this methodology offers the benefit of
simplicity and will not unreasonably distort class revenue responsibility.
The RFG opposes the "ability to participate" allocation noting that not all customers
within a class could even qualify for a DSM program supposedly designed for that class. For
instance, the Company s Manufactured Home Acquisition Program would be allocated to all
residential customers. Only those customers who purchased a manufactL1red home, however, could
have participated in that program,
Micron argues in favor of the ability to participate methodology but argues that it was not
able to participate in any post-1993 DSM, including the Partners in Industrial Efficiency program
and should not be allocated any costs for that time period.
FMC argues that none ofldaho Power s post 1993 DSM programs were cost effective
and, thus , the ability .to participate is the only meaningful method of allocation.
We find:
In Case No. IPC-94-, we chose to allocate the recovery of DSM to all of Idaho
Power s customer classes using the DSM allocation methodology adopted in the last rate case. Our
rationale for doing so was that the acquisition of cost effective DSM benefitted all of the Company
customers because it allowed the Company to avoid the construction or acquisition of more
expensive resources, We find that the original logic upon which we selected an allocation
methodology for DSM remains sound. No party to this proceeding offered persuasive arguments in
favor of abandoning our chosen method of allocation. To the extent that Idaho Power s DSM
constituted a cost effective acquisition of resources when implemented, then the rationale for
allocation of the cost of those resources remains unchanged,
Idaho Power s premise that those who benefit from DSM should pay for ithas conceptual
merit. Indeed, that is the very logic that led us to allocate DSM along with other system resource
costs, The flaw in Idaho Power s "ability to participate" allocation, however, is one of a practical
nature, In fact, weo find that the tenn "ability to participate" is somewhat misleading, As the
Company s witness readily agreed, the fact that a given DSM program might have been targeted for
a given customer class does not mean that every member of that class truly had the ability to
ORDER NO. 27660 13-
participate in theprdgrarn. For instance, although the Manufactured Home Acquisition program was
designed for customers who were served under the residential class schedule, that program was
available, as a practical matter, to only a small percentage of the residential class customers.
Furthennore, there was also considerable debate over whether and to what extent Micron could or
did participate in ~e ;PIE program. Adoption of the Company s proposed allocation would require
this Commissi()~:to ~~e findings regarding the nature of Micron s business operations and the
' . . .
interplay and business relationship between Micron Technology and Micron Electronics. Similar
difficulties exist in &:tennining the extent ofFMC's ability to participate in DSM programs.
We firid that such speculative analysis is needless considering that DSM represents a
syst~m resource and should be allocated as such. We view Staffs "unifonn percent" class allocation
proposal as a much simpler alternative to the Company s proposal, but note that the Staff offered no
compelling re~on to deviate from the previously approved allocation method. We also find that
spreading DSM costs unifonnly across all customer classes as proposed by Staff would improperly
allocate DSM cos~s and unreasonably alter the class revenue responsibility established in the last rate
case.
We commend the Company for its effort to craft an allocation that it believed falls
somewhere in the middle of the various parties' interests. Nonetheless , for the foregoing reasons
Idaho Power is directed to allocate the revenue requirement increase resulting from this Order to all
customer classes
' ()
~ the basis of system load factor, as previously required by Order No. -25880.
Rate design
Idaho Power proposes that the revenue requirement increase allocated to each customer
class be recovered using a unifonn percentage increase. For its special contract customers, however
the Company proposes a flat monthly fee designed to recover that allocation.
Staff di~agrees with Idaho Power s proposal of a flat monthly fee for all special contract
customers except for FMC. For those three other special contract customers, Staff proposes a
unifonn percentage increase based on monthly bills as proposed by Idaho Power for its other
customer classes. For FMC , Staff proposes a different rate design. Staff notes that under FMC'
recently approved contract with Idaho Power, the second block ofFMC's consumption is tied to
market conditions and is lower. To ensure that FMC pays its allocable share of the DSM revenue
requirement increase, Staff proposes that the revenue requirement allocation be recovered through
ORDER NO. 27660 14-
. 0
a fixed fee based upon a uniform percentage increase of normalized revenues received from FMC
in 1996.
We find:
As noted above, we have chosen to allocate the increased revenue requirement based on
the existing allocation method adopted in Case No, IPC-94-5 (Idaho Power s last general rate
caSe). The Company is directed to collect the revenue requirement of each non-special contract class
by applying the uniform percentage increase to all rate components within that class. For special
. contract customers, the Company s proposal of a fixed fee is accepted, The resulting rate increases
applicable for each customer class, including the special contract customers, are shown in
Attachment "A" to this Order.
Intervenor funding
. Intervenor funding requests were submitted by the RFG ($12 084.92), the ICC
($5,360.68) and the Irrigators ($15,174,89). We find that each of the three intervenors seeking
funding contributed materially to the Commission s final decision in this case and that the positions
taken by them differed sufficiently from those taken by the Commission Staff to warrant the award
of intervenor funding to all three applicants. We further find that the requests of all three applicants
otherwise satisfy all of the procedural and substantive requirements set forth in the Idaho Code ~ 61-
617Aand Rules 161 through 165 of the Commission Rules of Procedure, IDAPA 31.01.01. oWe do
note, however, that the Application of the Irrigators fails to itemize the hourly fees and number of
hours worked of its attorney and consultant. Such information is necessary for us to determine
whether the costs incurred and amount of funding sought is "reasonable in amount" as required by
Idaho Code ~ 61-617 A and Commission Rule 165. Without such itemization, future requests by the
Irrigators will not be approved,
Initially, we believe it is justifiable to award the entire $25 000 available, in total, to the
participants to this proceeding pursuant to Idaho Code ~ 61-617A. First, we award the ICC's entire
request of$5 360.68, For the Irrigators, we award costs in the amount of $1,276.49, consultant fees
in the amount of $8 850 and attorney s fees in the amount of $4 601.45 for a total award of
$14,727,94. Regarding the request of the RFG, we award costs in the amount of $320.92, We limit
our award of attorney s fees, however, to $4 601.45 for a total award of$4 911.37. The $4 601.45
-.,
awarded to each of the attorneys for the RFG and the Irrigators was calculated by splitting in half the
ORDER NO. 27660 15-
remaining amount of intervenor funds available after satisfying the I CC' s entire request and costs
and consulting fees for the RFG and the Irrigators,
Prepayment of DSM allocation
Staff proposes that because special contract customers each are a class of one for whom
we have allocated a fixed amount, they should be given the option of prepaying their allocation to
avoid carrying charges. No party opposed Staffs proposal.
We find:
0 It is reasonable to allow special contract customers the option of prepayment. We note
that this will in no way affect the amount of recovery assessed or otherwise prejudice the Company
other customer classes,
Timing of recovery
Our decision in this case results in an annual revenue requirement increase to Idaho
Power in the amount of $3 054 672. Staff witness Carlock proposes that any revenue requirement
increase approved by this Commission be deferred from recovery by offsetting it against the
Company s 1997 revenue sharing adjustment. Staff proposes, therefore, to use the sharing amount
to cover the additional monthly revenue requirement until it is exhausted. Staff further proposes that
the actual increase for DSM reflected on customer bills coincide with the 1999 PCA change and
1998 revenue sharing review on May 15, 1999 or when those rates are to be effective. Idaho Power
on rebuttal, recalculated the 1997 earnings sharing to reflect the adjustment proposed by Staff in the
gross up for taxes. The recalculated amount is $5 353 405.
We find:
No party objected to Staff's proposal which we hereby adopt. The Company is directed
to utilize the 1997 earnings sharing amount to offset the DSM revenue requirement until the 1999
PCA rate change is effective. Since the annual DSM revenue requirement is less than the 1997
revenue sharing adjustment, the unused balance shall accrue interest at the 6% interest rate
established for payments on customer deposits. Any offsets to the remaining balance will be
evaluated and the true up detennined coincident with the 1998 revenue sharing review. The
disposition of any remaining balance associated with the 1997 earnings sharing will be detennined
in the 1998 earnings sharing review.
ORDER NO. 27660 16-
. ,
ft,
-.,. . .
ORDER
IT IS HEREBY ORDERED that the application of Idaho Power Company for
accelerated amortization of its outstanding DSM investment is approved subject to the terms and
conditions set forth in the body of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7) days
after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this 3/~
day of July 1998,
ATIEST:
d;.'42
(j ~
aLLU-
Myrna J. lters
Commission Secretary
O:IPC-97-12.bp7
ORDER NO. 27660
Commissioner Nelson Dissented
RALPH NELSON, COMMISSIONER
MARSHA H, SMITH, COMMISSIONER
17-
. . - .. '. '.. \
DISSENT OF
COMMISSIONER RALPH NELSON
CASE NO. IPC-97-
While I agree with my colleagues on the major thrust of this order, there are two points
on which I cannot agree,
The flfst is the carrying charge for the DSM balance. While a shorter amortization period
will reduce risk to the Company slightly, it is not risk free. I would allow the return that was
approved in Idaho Power s last rate case,
The second point which I do not agree is the decision to disallow some amortization
because the Company s case was not filed timely. The case was filed in time to comply with my
understanding of the Commission s intent in Order No. 25880, when we said that Idaho Power
Company couldn t accumulate DSM costs for more than three years without applying for recovery
of those costs, or they would' have to begin amortization without recovery in rates. In this instance
. they applied for recoVery within the three years.
I2Jd U~~~,
Ralph Nelson, Commissioner
ORDER NO. 27660
I PC-97 -
Customer Class Cost Allocation and Rate Increases
IPC-94-Share of Intervenor Total New 1996 Norm.% RateCustomer Class Allocation $254 556/mo Funding Mo Rev ReQ Monthly Rev Increase
Residential 33.58%$85,489 $417 $85 906 $16 146 000 . 00 532%
Small General 24%691 691 311 900 0.434%
Large General 18.63%47,432 47,432 097 800 668%
Lighting, Dusk/Dawn 03%120,400 071 %
Large Power 13.04%198 198 026,700 824%
Irrigation 14.22%197 625 822 151,400 715%
Micron Tech.21%628 628 907 200 620%
FMC Corp.12.56%963 963 800 700 141 %
R. Simplot Coo 96%995 995 552 100 905%
S. Dept. of Energy 36%3,475 3,475 407 900 852%
Unmetered General 04%800 305%
Munic. Street Light.07%189 189 137 100 138%
Munic. Traffic Signal 05%119 119 800 669%
Total, All Classes 100.00%$254 556 042 $255 598 $38 707 800 6600/t
ORDER NO. 27660 ATTACHMENT A
If!' PI /:;~
.5 -, ods Office: of the: Se:cn:tar,
Se:r\lce Date:
Se:pte:mbe:r 10. 1 ~~~
BEFORE THE IDAHO PUBLIC UTILITIES COl'viMISSION
IN THE MA ITER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AUTHORITY )
TO INCREASE ITS RATES AND CHARGES TO )
RECOVER DEMAND SIDE MANAGEMENT/
CONSERVATION EXPENDITURES.
CASE NO. IPC-9i-
ORDER NO. 27i22
On August 20, 1998, the Idaho Power Company (Idaho Power; Company) filed a Petition
for Reconsideration and/or Clarification of Order No. 27660 issued by the Commission in this case
on July 31 , 1998. On August 21, 1998, the Industrial Customers of Idaho Power (ICIP) and Micron
Technology, Inco (Micron) filed a Joint Petition for Reconsideration of Order No. 176600 On
August 26 , 1998, the Commission Staff filed an answer to the foregoing petitionso Fi:1ally, on
August 28 , 1998 , Idaho Power filed an answer to the ICIP/Micron petitiono
Idaho Power s Petition
Idaho Power contends that Order Noo 27660 establishes the dollar amount increase in
annual revenue requirement resulting from the accelerated amortization of the Company s DSM
authorized by the Commission in that Order but fails to confirm the total deferred DSM balance or
the required monthly amortization of that balance. The Company has calculated the deferred DSM
0 balance to be $37 842 230 as of July 1 , 1998. The Company states that if it has incorrectly
quantified the new DSM deferred balance established by the Commission, then it petitions for
reconsideration on the grounds that (1) the deferred balance is not stated by the Commission, and
(2) since the deferred balance is not stated by the Commission, the Company is unable to state and
quantify the errors made in arriving at its calculated amount. If, however, the Company is correct
in its calculation of the deferred balance, then it requests that the Commission issue an Order on
Clarification confirming the amount.
Idaho Power also asks that the Commission confirm that a 12-year amortization of the
deferred balance stated above would result in a monthly amortization expense of $262 793. Again
if the Company is incorrect in its calculation, then it seeks reconsideration on the grounds stated
above.
ORDER NO. 27722
\ (..\ "\ "
Staff Response
Staff has confirmed the calculations made by Idaho Power and agrees that they are
correct. The deferred balance of approved DSM deferrals as ofJuly 1 , 1998 , is $37 842.230 and the
monthly amortization expense is $262 793. Staff recommends that the Commission issue an Order
of Clarification confirming these amounts.
""""'*""""""""""'*
We find:
\Vhile all of the information necessary to calculate Idaho Power s total deferred OS1\.-1
balances approved for recovery and the monthly expense of the approved amortization of that
balance is contained in Order No. 27660, Idaho Power is correct that those amounts are not
specifically stated in the Ordero We hereby grant Idaho Power s Petition for Clarification and affirm
that the Company s approved DSM deferrals as of July 1 , 1998 totals $37 842.230 and that the
monthly amortization expen"e, based upon a 12-year amortization, is $262 793,
************
The next issue raised by Idaho Power in its Petition pertains to the Commission s (l)
utilization of a carrying charge of 7.25%, (2) the lack of a tax gross-up on the canying charge
amount, and (3) the disallowance of future DSM expenses except for $212 534 attributable to the
low income weatherization program.
Idaho Power states that if, in its next general rate case, the carrying charge rate, taxes and
ongoing DSM expenses and their impacts on revenue requirement will be redetermined just as all
, other revenues, expenses and rate base issues are determined, then the Company does not petition
for reconsideration as to any of these issueso If, on the other hand, it was the Commissj.Qn s intent
in Order No. 27660 to set a carrying charge that would be independent from any determination of
an over~ rate of return in any future rate proceeding, then the Company petitions for reconsideration
on the grounds that it should not be required to accept a carrying charge, resulting tax considerations
and expense levels which would.remain separate and independent of the determinations that would
be made as to the Company s required overall rate of return and revenue requirement in the next
general rate case 0 The Company can accept the Commission s ruling in Order Noo 27660, however
if the Order is intended to be an interim determination as to revenue requirement and that these
issues will be revisited in the Company s next general rate case
ORDER NO. 27722
Staff Response
The Commission Staff does not oppose revisiting these issues in Idaho Power' s next
general rate case and recommends that the Commission s Order of Clarification recognize that
opportunity for Idaho Power. Staff is opposed, however, to an automatic change in rate making
treatment by Idaho Power in the next rate caseo The issue should be raised with Idaho Pow'er's
recoIT1Jnended changes presented at that timeo
************
We find:
It was not our intent in Order No. 27660 that the carrying charge rate, resulting ta.':
considerations or on-going DSM expense could never be re-examined. We approve Idaho Power
Petition for Clarification and acknowledge that the Company is free to make proposed changes to
those it~ms in its next general rate proceeding.
************
Idaho Power petitions for reconsideration of that portion of Order Noo 27660 wherein the
Commission ruled that the Company should have commenced amortization of the 1994 deferred
DSM balance on January I , 1998 Idaho Power argues that the. Company did satisfy the spirit and
intent of Order No. 25880 requiring the Company to commence amortization on January I , 1998
of the 1994 deferred DSM balance. Idaho Power notes that it made its filing at the end of November
proposing rates to be effective January 1 , 1998. It was the Commission, Idaho Power argues, that
suspended those rates and, thus, prevented the commencement of amortization. Idaho Power argues
that. the Commission "by its action prevented the commencement of the amortization as well as the
rate increase which Idaho Power proposed to amortize and fund the 1994 deferred balane-e." Idaho
Power argues that because it was required to begin amortizing the DSM balance on January 1 , 1998
the Commission would have suspended the proposed rate for 30 days plus five months by virtue of
Idaho Code ~ 61-622 from that date regardless of when the Company filed its application. It is the
proposed effective date of the rate, .Idaho Power contends, that triggers Idaho Code ~ 61-622, not
the filing date of the proposed rate, the Company contends.
Idaho Power further argues that, in preparing a financial filing, it must select a cut-off
date through which the accounting data is gathered so that the financial data can be scrutinized by
Staff and intervening parties and presented to the Commission. In this case, the Company selected
ORDER NO. 27722
August 31 , 1997, in order to physically file its Application by November 28, 1997. Assuming for
the purposes of argument, that Idaho Power should have filed soon enough to permit a suspension
ono days plus six months and still have rates in effect on January 1 , 1998 , a filing date of May 31.
1997 , would have been required. In order to file May 3 1 , 1997, Idaho Power notes. it would have
had to cease compiling financial data in February 1997. Idaho Power contends that this is not
reasonable nor should the Commission "impose such an onerous and capricious requiremento
In summary, Idaho Power states that it filed its Application in a timely manner and that
the disallowance of $516 730 should be corrected resulting in a deferred DSM balance of
$38 358 960. This would change the rate increase from a 0.660% increase to a 0.674% increase.
In the alternative, even though the Company believes that no part 'of the 1994 deferred
DSM balance should be disallowed, the quantification of the disallowed $516 730 amount is
erroneous the Company contendso Using the Commission s rationale, the disallowance would be
$192.797 , not $516 730.This amount is computed by taking .the 1994 DSM balance of
988 847 55 minus 1997 carrying charges for a total of$9 254 259.61. Dividing this amount by
288 months (24 years) would yield an amount of $32 132.85 per month or $192 797.08 for six
months
************
Staff Response
Staff believes that a filing deadline of May 31 , 1997 , is not "onerous and capricious" as
suggested by Idaho Power considering that the Company was put on notice by the Commission
when Order No. 25880 was issued on January 31 , 1995 wherein the Commission ruled:
We find it reasonable to require that commencement of amortization begin.
after no more than three years. In the future, IPCO must begin amortization
of accumulated DSM costs after a three year periodo
Order No. 25880 at po 18.
Consequently, Staff contends that the Company had ample time and opportunity to
collect the data needed to make its filing in time to ensure that the Commission and all interested
parties would have the opportunity to fully review the Company s Application.
Regarding Idaho Power s contention that the disallowance should be $192 797. rather than
$516 732, Staff does not dispute this amount. Staff notes, however, that the Company failed to
challenge Staff's calculations in the underlying case either through rebuttal testimony or cross-
ORDER NO. 27722 -4-
examination. The Company s Petition for Reconsideration is the first time that Idaho Power has
raised an issue concerning the proper amount of the disallowance.
************
We find:
Idaho Power does not provide any evidence or arguments which convince us that our
initial decision is "unreasonable, unlav.-ful, erroneous or not in conformity with the law" as required
by Rule 331 of the Commission s Rules of Procedure, IDAPA 31.01.01.331. Given that the
Company was well aware of this Commission s desire to begin amortizing the Company
accumulating DS\1 balances at least as far back as 1995, a desire that has, in fact, been frequently
expressed to the Company by this C~mmissio!l, we find Idaho Power s assertion that it complied
with the spirit of this Commission s prior Order to be without merit 0 The Company s Petition for
Reconsideration on this issue is denied. We do , how~ver, aQJ'ee that the disallowance when correctly
calr.ulated is $192 797
*****"'******
Idaho Power also petitions for clarification/reconsideration to ensure that it is entitled
revisit the Commission s di3Hllowance of the Company s expenditures made in the Commercial'
Lighting Program (CLP) after 1995. In that regard, the deferred DSM balances that the Commission
determined in Order No. 27660 were through August 19970 The Company anticipates filing in
September or October 1998 an Application that will present the additional DSM expenditures that
have been made since August 1997, together with a proposal as to how this deferred balance should
b~ funded.
Staff Response
Staff'states that it never alleged that the Company s expenditures made in the CLP were
not prudent. Staff simply contended, and the Commission agreed, that the Company had failed to
cooperate with Staff in its analysis of the program and had failed to provide the evidence necessary
to determine whether the CLP was prudent. Consequently, Staff does not object to Idaho Power
request to provide the information initially sought by Staff at a later time.
We find:
We grant Idaho Power s Petition for Clarification. In Order No.27660, we ruled:
Consequently, we find that until Idaho Power demonstrates that its deferred
expenditUres in the CLP program after 1995 were prudently incurred, given
ORDER NO. 2772'2
that it failed to perform the impact evaluation that it had told the Commission
it was planning, then those expenditures will be disallowed as proposed by
Stair
Order No. 27660 at p. 8.
Consistent with our finding in Order Noo 27660, we hereby acknowledge Idaho Power
right to make a future offering of proof that its expenditures in the CLP were prudent
************
Finally, Idaho Power states that it does not question the amount of the intervenor funding
awards issued in this case but does request reconsideration of the rate vfrecovery of those awards.
Idaho Power contends that the Commission has increased the Company s rates ~o particular classes
for a 24-month period to fund the intervenor funding award. No carrying charge is provided for in
the rates 0 Idaho Power suggests that the $25 000 award be funded out of the 1997 revenue sharing
amounto Then, no carrying charge or tax effect computation would be required nor would the
Company have to adjest rates in tWo years. If, however, the Commission chooses not to utilize the
1997 revenue sharing amount, the rates to fund intervenor funding must include a r,arrying charge
of9.199% and the tax effects of this carrying charge
Staff Response
The Commission Staff does not object to the Company s proposal to fund the intervenor
funding award out ofthe 1997 revenue sharing amount. The 1997 revenue sharing amount allocated
to the classes would be reduced by the amount of intervenor funding allowed for each class.
We find:
Given that there is no objection to Idaho Power s proposal and that it appears r7asonable
we hereby allow the Company to fund the intervenor funding award set forth in Order No. 27660
with the Company s 1997 revenue sharing amount. The intervenor funding amount is to be allocated
among specific classes as previously ordered, after the 1997 revenue sharing amount is allocated
among the Company s customer classeso
ICIFlMicron s Petition
The ICIP and Micron contend that Order No. 27660 is "unreasonable, unlawful
erroneous and not in conformity with the law " First, the ICIP and Micron assert that the record does
not support the Commission s selection of a 12 year amortization period because no party to this
proceeding specifically proposed a 12 year period.The Intervenors proposed leaving the
ORDER NO. 27722
amortization at the existing 24 years 0 Idaho Power proposed, and the Staff did not object to , a 5 year
amortization. The Commission ultimately chose 12 years.
Staff Response
Staff argues that the ICIP and Micron have attempted to create a new legal standard by
which Commission decisions are to be judged noting that the Commission is not bound by the
testimony of experts offered during the course of a case and has the discretion, based upon its own
expertise, to take a position not specifically proposed by a party to a caseo
Vie find:
We deny the ICIP/Micron Petition for Reconsideration on this point. ICIP and Micron
are attempting to impose a legal standard on Commission decisions unrecognized by either the
Commission itself or the Idaho Supreme CoUIt. In fact, the Supreme Court has ruled directly on this
point numerom times and reached the opposite conclusion ITom that advocated by the ICIP and
Micron. For instance, in Intermountain Gas Co. ',I. Idaho Public Utilities Commission 97 Idaho 113
540 P02d 775 (1975), the Court ruled:
The determination of reasonable rates of return by application of the "capital
attraction" or "comparable earnings" tests, or by application of any other tests
or considerations, is a legislative function (citations omitted) 0 In performing
such a function within its area of expertise, the Commission may d!'aw its
own conclusions ITom the facts without the aid of expert testimony.
97 Idaho at 126.
In Boise Water Corp. v. Idaho Public Utilities Commission., 97 Idaho 832, 555 P.2d 163
(1976), the Court held:
We need not and do not hold that the Commission was bound by the:
testimony of expert witnesses. Nor do we hold that the Commission must
accept for rate-making purposes the actual capital structure of the utility if it
fmds, on the basis of substantial evidence, that structure is unreasonably
constructed (citations omitted). If it in its own expertise has the background
ITom which to disagree with the conclusions of other experts, it may do so
97 Idaho at 842.
The legality of this Commission s decision to adopt a 12 year amortization period does
not necessitate that one of the parties to this proceeding made that precise proposal. In any event
the ICIPlMicron statement or inference that no party to this proceeding proposed or suggested a 12
ORDER NO. 27722
year amortization is not entirely accurate. Specifically, Mr. Fothergill, representing the Idaho
Citizens' Coalition., questioned Company witness Said during the hearing as follows:
Among the people that I associate with, it s a pretty common sense
thing is that the Company asks for twice as much as it wants and the
Commission awards half as much as the Company asks, given that perception
of people, wouldn t it be reasonable to have an amortization period of 10 to
12 years as opposed to five?
Tr., Vol. VI at p.
Witness Said responded to the foregoing question by stating that he did not agree that 12
years was more reasonable than 5. The fact remains, however, that one of the parties to this
proceeding recognized, at least indirectly, that an amortization period other than 5 or 24 could be
reasonable.
In any event, Order 'No. 27660 specifically enumerates several valid reasons supporting
the Commission s decislOn to reduce Idaho Power s DSM recovery periodo This Commission
relying on its expertise and after listening to extensive testimony from seven parties whose pmposals
ranged ITom leaving the amortization at 24 years to shortening it to 5 , chose a reasonable
amortization period of 12 years.
************
The lCIP and Micron further contend that the record does not support any reduction in
the amortization period ofIdaho Power s DSM investment regardless of how long. They note that
Idaho Code 9 61-502 requires that before the Commission may change rates, it must make a finding
0 that the current rales are unjust, unreasonable, discriminatory or preferential. The lCIP and Micron
argue that the record in this case does not support the Commission s conclusion that cb.anges are
sweeping through the electric industry.
Staff Re~ponse
Staff believes that the lCIP's contention that the Commission s decision to shorten the
recovery ofIdaho Pawer s DSM investment because of changes affecting the electric industry is not
supported by the record contradicts the very position that the ICIP has taken not only in this
proceeding but in others currently pending before the Commission. Staff suggests that the ICIP itself
argues that the deregulation of the electric industry is a foregone conclusion. Finally, Staff points
ORDER NO. 27722
out that the Commission cited a number of reasons for its decision to reduce the recovery period for
Idaho Power s DSM that were not related to "changes" affecting the electric industry.
Idaho Power Response
Idaho Power contends that the ICIP and Micron offer nothing new in support of their
Petition on this point, noting that the same arguments were raised and rejected by the Commission
. earlier in this proceeding when it denied the ICIP and Micron motions to dismiss Idaho Power
Application. Idaho Power asserts that the Commission "does not need additional briefs to assess the
strength of the record in support of its decisiono Answer at p.
We find:
We deny the ICIPlMicron Petition for Reconsideration. During oral argument conducted
in this proceeding on April 7, 1998, the ICIP's attorney, Mr. Richardson, stated in response to a
question tram one of the Commissioners:
Well, Mr. Commissioner, I think that probably the motive (referring to . .
Idaho Power s motive for seeking an accelerated DSM recovery J was in part
motivated by competition three years ago , but as you know, the concept of
competition in the electric industry really has gained currency over the last
three or four years, and although was probably being discussed, I don t think
it was seen with the certainty that it is today.
Frankly, Commissioner, if I were in Idaho Power s shoes, I would be
making the same attempt here today that they are making; that is, to clear the
books so that when competition comes, that they are poised to reap great
rewards.
Oral. Argument, Tr. Vol. II, atp. 17.
. .
Similarly, Micron s attorney, Mr. Alan Richey, predicted changes in the electric industry
within 12 to 24 months. During the oral argument conducted on April 7, 1998, Mr. Richey stated:
But in relatively short period of time as these things go-12 to 24
months-there ought to be some resolution in the Legislature (referring to
deregulation and the recovery of stranded costs), if not earlier if there is
federal legislation. And we don t see where there s really any problem of
putting this thing (referring to Idaho Power s Application for accelerated
DSM recovery J on hold until the Legislature could decide if they are going
to.
Tr. Vol. II at p. 29.
ORDER NO. 27722
Given the foregoing statements made by the Petitioners' attorneys. we find that the
ICIPlMicron argument that there are no changes affecting the electric industry, and thus, no support
in the record for this Commission s findings, is untenable and self-contradictory.
Moreover, in Order No. 27660, we identified several reasons for om decision to
accelerate the amortization ofIdaho Power s DSM. First, we noted our concern about Idaho Power's
accumuiating DSM balances and the need to begin amortizing them. We also found "significant the
changes that are sweeping through the electric industry and the unpredictability that has resulted.
Order Noo 27660 at p. 4.
We also agreed with Idaho Power that conservation measures are different, in at least one
aspect, from other generating resources 0 That is, they are not owned by the Company as are base-
load generating plants. Consequerltly, the Company is "at somewhat greater risk with resp~ct to
DSM cost rtcovery ir the event of market and regulatory changes.Id.
We found "persuasive that by shortening the recovery period of DSM, it is more likely
that those customers who reaped the benefit of cost-effective resources, will pay for them.Id.
p. 4.Conseque~ltly, we conduded that a 24-year recovery period for Idaho Power s DSM
expenditures was '(00 long and that reducing the recovery period to 12 years will "considerably
lessen risk that the Company will not recover some portion of its expenditures while, at the same
time, shill more cost responsibility on those customers who benefitted from the acquisition ofDSM
without unduly burdening ratepayerso" We ruled that "a 12-year amortization period is ajust and
reasonable compromise of all interests concerned." Order No. 27660 at p. 5.
************
The ICIP and Micron argue that Order No. 27660 is unreasonable due to its failure to
consider the impact of a shorter recovery period on other aspects of Idaho Power s cost of doing
business. "
Staff Response
Staff asserts that such a contention and coITesponding Petition for Reconsideration should
have been directed to Commission Order No. 27493 issued in this case on April 30, 1998, in which
the Commission denied the ICIP and Micron s Motion to Dismiss Idaho Power s Application for
among other reasons, its failure to consider other issues affecting the Company s earnings. Staff also
argues that Idaho law allows the Commission to make single-item changes to a utility s rates.
ORDER NO. 27722 10-
Idaho Power Response
Again, Idaho Power notes that the ICIP and Micron have simply repeated the arguments
made in support of their motions to dismiss and which were rejected by the Commission earlier in
this case. Moreover, the Company notes that it is undisputed that Idaho law allows tracker cases.
We find:
We deny the ICIPlMicron Petition on this pointo In Order No. 27493 , this Commission
held:
We find that none of these assertions have merit. The recovery periods of
Idaho Power s DSM investments were established prior to the issuance of
Order No. 26216. la Order No. 25880, issued in Case No. IPC-94-, this
Commission adopted a 24-year amortization period for Idaho Power-s DSM
investments. Tbe Company strenuously objected to that time period
arguIng that it was excessive. When we adopted the settlement stipulation
in Order No. 26216, this Commission was well aware of Idaho Power
concerns regarding the length ofDSM amortization. Regardless of what the
int~ntions of any of the signatory parties to the settlement stipulation might
have been, it was the intention of this Commission to allow Idaho Power the
opportunity to raise the issue of the proper DSM amortization period prior
to the expiration of the rate moratorium in the year 20000
Order No. 27493 at pp. 7-
We concluded:
We further find the contention that it is inappropriate to segregate DSM for
special consideration or to allow Idaho Power what is, in essence, a single
issue rate increase to be equally without merit. Those are' arguments that
should have beeIf raised in Case No. IPC-95-11. To dismiss the
Company s Application on that , basis would be to entirely negate the
intended result of the settlement stipulation adopted by this Commission in
Order No. 26216. In any event, in JR Simp/ot Co. v. Intermountain Gas
630 P.2d 133, 102 Idaho 351 (1981), the Idaho Supreme Court specifically
acknowledged the authority of the Commission to conduct "tracker" or
single item" cases affecting rates.
Id. at p. 8.
The ICIP and Micron should have raised their "single item" argument in Case No. IPC-
95-11 concluded in 1995, They could also have petitioned for reconsideration of final Order
No. 27493 issued in this case on April 30, 1998 pursuant to Rule 331 of the Commission s Rules of
ORDER NO. 27722 11-
Procedure, IDAPA 31.01.01.331. Regardless, as we noted in Order No. 27493 , Idaho law clearly
allows the Commission to conduct tracker or single item cases affecting rates.
************
Finally, the ICIP and Micron argue that, with respect to Idaho Power s Good Cents
Program, the Manufactured HOIrLe Acquisition Program and the Low-Income Weatherization
Program, the Company did not offer any evidence of prudence and that recovery of investments
made in this program should not be allowed. The ICIP and Micron contend that Staff failed to
conduct an "audit" of Idaho Power s DEAP and PIE programs.
************
Staff Response
Staff asserts that the ICIP and Micron s characterization of Staff's analysis in this case
is misleading. Staff argues that it did, in fact, conduct an analysis of certain aspects of Idaho
Power s DSM programs 0 Staff also notes that it does not bear.the burden of proving or disproving
the prudence of those programs.
Idaho Power Response
Idaho Power argues that the ICIP and Micron had the opportunity to present their own
evidence on the prudence of the Company s DSM programs but failed to do so. Instead, the
Company contends, they simply criticize the analysis performed by Staff while ignoring the
substantial" evidence presented by Idaho Power regarding the Company s DSM programs and
ignore the fact that the Company publishes and files with the Commission an annual Conservation
. Report in which" it addresses the cost effectiveness of its various DSM programs. Idaho Power
concludes that "it is not the Commission Staff's obligation to make the case that IC;lPfMicron
wanted to make.Answer at p.
We find:
The ICIP/Micron Petition for Reconsideration gives the impression that the Staff
conducted no analysis of any ofldaho Power s DSM programs to determine whether they were cost-
effective. In fact, this is simply not true. For example, the Staff recommended, and this Commission
agreed, to a disallowance of a portion of Idaho Power s investment in its Commercial Lighting
Program because of a failure of the Company to cooperate with Staff and provide the documentation
necessary to determine whether the program was cost-effective. In any event, it is not incumbent
ORDER NO. 27722 12-
upon the Commission Staff to prove the prudence of a utility s investments. In any gIven
proceeding, whether it be a general rate proceeding or a single item rate case, the Commission Staff
devotes all of its available resources to determine whether the expenditures for which recovery is
sought were prudently incurred. Because of the shear size and complexity of a utility s operations.
Staff simply cannot conduct a prudence review of every single expenditure incurred by a given
utility Consequently, Staff typically devotes its time and resources to the Company s more
significant expenditures and investments.
Regardless, it is a matter oflaw that the Staff does not have the burden to prove that the
costs incurred by Idaho Power for which it sought recovery in this case wel'~ prudently incurred.
Staff was convinced, after conducting its analysis of certain aspects of Idaho Power s DSM
programs, that, with the exception of the CLP program, Idaho Power s DSM costs on the whole were
prudently incurred and this Commission, based on the undisputed evidence presented during the
hearing, agreed. If the ICIP and wlicron believed that Idaho Power s DSM expenditures were not
prudent, then they shoutd have presented evidence to that effect. They failed to do so and are now
without a legitimate factual or legal basis to challenge the Commission s findings on this pointo
Conclusion:
We fmd that Order No. 27660 is not unreasonable, unlawful, erroneous or not in
confonnity with th~ law as asserted by the ICIP and Micron. Their Petition for Reconsideration is
hereby denied in its entirety.
ORDER
IT IS HEREBY ORDERED that, consistent with the terms stated above; the Petition for
Clarification of Idaho Power is granted, and the Petitions for Reconsideration of Idaho Bower and
the ICIP/Micron are denied.
TIllS IS A FINAL ORDER ON RECONSIDERATION. Any party aggrieved by this
Order or other final or interlocutory Orders previously issued in this Case No. lPC-97 -12 may
appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate
Rules. See Idaho Code 9 61-627.
ORDER NO. 27722 13-
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this/C'.
day of September 1998.
ENNIS S. RAN EN, RESIDENT
J2. ~d
~'---
RALPH NE SON, COMlvUSSIONER
...
~1v- J
MARSHA H. SMITH, COMWJSSIONER
ATTEST:
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/ ,//' ~-~..:. . .
J"-c;"'u.~
Myrna J. Walters
Commission Secretary
O:IPC-97.12.bp8
ORDER NO. 27722 14-