970102.docx

DECISION MEMORANDUM
TO:COMMISSIONER NELSON
COMMISSIONER SMITH
COMMISSIONER HANSEN
MYRNA WALTERS
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KEITH HESSING
GARY RICHARDSON
WORKING FILE
FROM:SCOTT WOODBURY
DATE:JANUARY 2, 1996
RE:CASE NO.  IPC-E-96-23
AMENDMENT TO IDAHO POWER—MICRON ELECTRIC SERVICE AGREEMENT
On November 14, 1996 Idaho Power Company (Idaho Power; Company) and Micron Technology, Inc. (Micron) filed a joint Application with the Idaho Public Utilities Commission (Commission) requesting approval of an amendment to an underlying August 31, 1995 agreement for electric service between Micron and Idaho Power (Agreement).
The underlying Agreement between Idaho Power and Micron was approved by the Commission in Case No.  IPC-E-95-14, Order No.  26238.  Under the Agreement, Idaho Power agrees to furnish Micron’s total requirements for electric power and energy.  As reflected in the Commission’s Order No.  26238, the Schedule 26-Micron tariff included an immediate increase in scheduled monthly contract demand to 50 MW from the previous 40 MW.  It further provided for increases in 10 MW increments while Micron expanded its load to a monthly contract demand of 100 MW by January 1997.  (Agreement ¶¶ 6.1, 6.1.1)  Under the terms of the Agreement, Micron was permitted to increase its contract demand in increments of 10 MW up to a total contract demand of 140 MW or could similarly decrease its contract demand to zero.  (Agreement ¶ 6.2.1)
The underlying Agreement contained a scheduled ramp up of contract capacity up to the 100 MW level along with contract demand charges and minimum monthly bill provisions.  As set forth in the Application, it has now become apparent that due to a slow down in the semi-conductor market, Micron’s need for power will not grow at the rate originally anticipated.  Micron approached Idaho Power concerning the need for minimum monthly billing demand relief.  Under current conditions the contract demand and minimum monthly billing demand exceed Micron’s actual billing demand by over 35%, and this will soon increase to over 50%.  Micron desires to retain the ability to expand to 100 MW but views the ramp up of the minimum monthly billing demand as excessive.
After negotiations Idaho Power and Micron have agreed to lower the minimum monthly billing demand to 25 MW (Agreement ¶¶ 6.1.2, 6.2.2) and to increase the monthly billing demand charge by $0.43 per kW per month, i.e. to $6.25 per kW.  See revised tariff Schedule 26-Micron.  (Attached)  Other administrative changes have also been made to the Agreement (amendment to ¶ 6.2 Contract Demand Provision After Initial Expansion, ¶ 7.2 Operation and Maintenance and ¶ 7.3 Reactive Compensation), including a new Section 16 Right of First Refusal in the event of deregulation.  The applicants have further agreed that all of the changes and amendments to the Agreement and revised tariff Schedule 26 will be effective as of September 1, 1996.
The applicants request that the Application be processed under Modified Procedure, IDAPA 31.01.01.201-.204.  
A Notice of Application and Modified Procedure in Case No. IPC-E-96-23 was issued by the Commission on December 4, 1996.  The deadline for filing comments was December 27, 1996.  Commission Staff was the only party to file comments (attached).  Staff recommends approval of the proposed amendment as filed with the exception of the effective date.  Regarding the effective date, Staff states the following:
Idaho Power and Micron have proposed an effective date of September 1, 1996.  The application was filed with the Commission on November 14, 1996.  Barring substantial justification, Commission approved effective dates are normally 30 days or more after the filing date.  Under traditional rate making circumstances regulators may not care if Idaho Power agrees to amend a contract in such a way that Idaho Power receives less revenue.  The presumption would be that Idaho Power would not have entered into such a contract unless it received some offsetting benefit.  However, in the current regulatory climate, the Commission and other ratepayers have a very direct interest in Company decisions that reduce revenue.  When the Company’s Return on Equity falls below 11.5% the Company is authorized to amortize additional accumulated investment tax credits (ITC) and when the return exceeds 11.75%, excess earnings are shared 50/50 between shareholders and ratepayers.  A very rough estimate of the foregone revenue that results from the proposed amendment in calendar year 1996 is $400,000.  The effective date of the proposed contract amendment and tariff change directly impact Idaho Power’s 1996 earnings and, therefore, the potential amount of excess ITC amortization or sharing with ratepayers.  Staff does not oppose the contract amendment and tariff change but Staff does believe that to reach back in time two and one-half months before the proposed changes are even filed with the Commission to establish an effective date is inappropriate.  Staff believes a more appropriate, consistent and fair effective date is the date that the Commission approves the application, assuming it is approved.
Staff recommends that the effective date be the date of Commission approval.
Commission Decision
Should the proposed amendment to the Idaho Power-Micron Electric Service Agreement  be approved?
The effective date—September 1, 1996?  Date of Application?  Date of Order?
Scott Woodbury
vld/M:IPC-E-96-23.sw2