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HomeMy WebLinkAboutON29065.pdfOffice of the Secretary Service Date June 28, 2002 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AN ENERGY COST FINANCING ORDER AND AUTHORITY TO INSTITUTE AN ENERGY COST BOND CHARGE. IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY) TO IMPLEMENT A POWER COST ADJUSTMENT (PCA) RATE FOR ELECTRIC SERVICE FROM MAY 16, 2002 THROUGH MAY 15, 2003. CASE NOS. IPC-02- IPC-02- ORDER NO. 29065 On May 13 , 2002, the Commission authorized recovery of $244.4 million over a one- year period and deferred $11.5 million to be recovered solely from the Irrigation and Small General Service classes during the 2003-2004 Power Cost Adjustment (PCA) period. Order No. 29026. On May 30, 2002, the Commission clarified this Order to specify that Order No. 28992 issued in Case No. IPC-01-34 was the controlling decision that resulted in the disallowance of irrigation load reduction lost revenues in Case Nos. IPC-02-2 and -3. Order No. 29041. Following the issuance of Order No. 29041 , the Commission received two additional petitions seeking clarification or reconsideration of Order No. 29026. These two petitions prompted several responses and/or cross-petitions by other parties. Having fully reviewed the petitions and the record in this matter, the Commission partially grants the ICIP's Petition for Reconsideration for deferred recovery of the industrial class' PCA costs by authorizing a two-year recovery of Schedule 19 power supply costs. response to Idaho Power s Petition seeking clarification regarding a Demand-Side Management (DSM) carrying charge filed on June 7, 2002, the Commission further clarifies Order No. 29026 as set forth below. I. ICIP'S PETITION FOR RECONSIDERATION The Industrial Customers of Idaho Power (ICIP) requested the Commission reconsider its decision not to allow the industrial class a deferred recovery of its share of incurred power costs. The ICIP stated that it is unreasonable to order Idaho Power to recover all of its excess power supply costs in a single PCA year. ICIP Reconsideration Petition at 2. Moreover ORDER NO. 29065 it stated that the ICIP "stands ready to sponsor additional witnesses to help the Commission to fully understand the real and pressing need the industrial customers of this state have for immediate rate relief" Id. at 3. The ICIP argued that the two Commission-ordered deferrals discriminated among customer classes and had no legal or factual basis. Id. at 4. Moreover, the Commission favorable treatment of the Irrigation Class without also bestowing the benefits of no rate increase this year to other classes "hold those similarly situated customer classes to a higher and arbitrarily imposed standard.Id. at 5. Alleging that such "discrimination is illegal " the ICIP argued that "all classes should have the opportunity to avail themselves of the two-year deferral in order to avoid any rate increases this year.Id. at 6. The Industrial Customers also argued that exemption of the Small General Service (Schedule 7) class from this rate increase "is arbitrary, discriminatory and in violation of Idaho law. Id. at 6. Citing the Commission s decision to minimize hardship to the Small General Service class by deferring the portion that would raise their rate above 021~/kWh the ICIP noted that this class is not unique in experiencing hardship as a result of Idaho Power s rate increases. Id. In short , " there are no valid differences among the classes with respect to the timing of recovery ofIdaho Power s extraordinary power costs.Id. at 7. The Industrial Customers requested the Commission grant its Petition for Reconsideration, reversing its decision in Order No. 29026 and implementing a five-year deferral of Idaho Power s 2002-2003 PCA expenses. Id. In the alternative, the ICIP requested the Commission schedule a hearing to present additional evidence in support of deferred recovery. Id. at 7- A. Idaho Power s Cross-Petition On June 6, 2002, Idaho Power Company filed a Cross-Petition for Reconsideration of Order No. 29026. Although Idaho Power had no objection to the Order as issued, the Company believes Order No. 29026 could become "unfair, unjust and unlawful" if the Order is changed and a five-year deferred recovery of its 2002-2003 PCA expenses is ordered. Idaho Power Reconsideration Cross-Petition at 2. Idaho Power argued that if the Commission grants a five- year deferral of its 2002-2003 PCA expenses, the Commission must also grant the Company Cross-Petition for Reconsideration. Id. at 3. If the Commission were to recover costs over five years, the Commission must find the issuance of energy cost recovery bonds is in the public ORDER NO. 29065 interest because financing the deferred amounts over five years without a bond issuance would work an unjust financial hardship upon the Company. Id. Idaho Power stated that it is prepared to introduce evidence to this effect. Id. B. Commission Discussion and Findings Reconsideration provides an opportunity for an aggrieved person to bring to the Commission s attention any issue previously determined and provides the Commission with an opportunity to rectify any mistake or omission. Idaho Code 9 61-626; Washington Water Power v. Kootenai Environmental Alliance 99 Idaho 875, 591 P.2d 122 (1979). The Commission Procedural Rule 331.01 requires that petitions for reconsideration must include "a statement of the nature and quantity of evidence or argument that the petitioner will offer if reconsideration is granted." IDAP A 31.01.01.331.01. Rule 331.03 provides that petitions for reconsideration must state whether the petitioner requests reconsideration by evidentiary hearing, written briefs comments, or interrogatories. IDAP A 31.01.01.331.03. In instances where an aggrieved party asks the Commission to reconsider its decision it may do so by taking additional evidence or based upon the current record. Accordingly, the Commission will review its Order No. 29026 based upon the current record and the arguments contained in the Petitions for Reconsideration. The Commission disagrees with several assertions put forth by the Industrial Customers.Although its Petition decries the Commission s Order as being based on inconsistent logic " it is not incongruous to hope for the best (a significant rate decrease next year) and fear the worst (increased wholesale power prices once the FERC price mitigation orders expire). ICIP Reconsideration Petition at 3. The Commission s failure to evaluate the potential risks and rewards of the choices we make would constitute malfeasance on our part. Although we agree with the ICIP that "no one knows what wholesale rates are going to do next year " we do not adopt the ICIP's absolute belief that "deferring recovery of excess power supply costs does not harm customers" and "simply moves costs into future periods for recovery.Id. While beneficial in the short-term, it is naIve to think deferred power cost recovery will truly benefit customers if rates do not decrease. On the contrary, a multi-year deferral will only exacerbate high rates by layering one rate over another. As we previously stated , " we are reluctant to create a situation where customers are required to continue paying costs from this year on top of whatever increase may be required in future years.Order No 29026 at 17. ORDER NO. 29065 Although the ICIP may contend otherwise, the Commission does not underestimate "the critical importance of immediate rate relief" ICIP Petition at 3. However, we cannot authorize rate relief without considering the risks that would accompany such a decision. Thus, we continue to believe that a five-year deferral facilitated by the issuance of energy bonds is inappropriate at this time for the reasons set forth in Order No. 29026. Despite the ICIP'assertions to the contrary, the two-year deferred recovery authorized by Order No. 29026 for the Irrigation and Small General Service classes does not unlawfully discriminate between customer classes. Idaho Code 9 61-315 bars unreasonable differences as to rates and gives the Commission the power to determine what constitutes unreasonable rate discrimination.The Idaho Supreme Court explained in Idaho State Homebuilders v. Washington Water Power 107 Idaho 415 , 690 P.2d 530 (1984), that not all differences in rates between different classes of customers constitute unlawful discrimination under Idaho Code 9 61-315. The Court explained: A reasonable classification of utility customers may justify the setting of different rates and charges for the different classes of customers. Utah-Idaho Sugar Company v. Intermountain Gas 100 Idaho 368, 597 P.2d 1058 (1979). Any such difference (discrimination) in a utility s rates and charges must be justified by a corresponding classification of customers that is based upon factors such as cost of service, quantity of electricity used, differences in conditions of service, or the time, nature and pattern of the use. Utah-Idaho Sugar Company v. Intermountain Gas supra. We have found justification for rate discrimination as between customers within a schedule and as between customers in different schedules. Grindstone Butte Mutual Canal Co. v. Idaho Public Utilities Commission 102 Idaho 175 627 P.2d 804 (1981); Utah-Idaho Sugar Company v. Intermountain Gas supra. Homebuilders 107 Idaho at 420. These factors - cost of service, quantity of electricity used, differences in conditions of service, or the time, nature and pattern of use - are guidelines the Supreme Court has set for the Commission to use to evaluate whether there is a reasonable justification for setting different rates for different classes of customers. The Supreme Court further explained that anyone criterion is not necessarily more essential than another and that the criteria listed are not exclusive. Grindstone Butte 102 Idaho at 175. Although the Commission cannot discriminate between similarly situated customers within a customer class, the Commission may treat separate customer classes differently. In ORDER NO. 29065 Order No. 29026, the Commission chose not to increase the rates of the Small General Service class above the 8.021~IkWh average rate) now in place because to do so under present circumstances would produce unjust and unreasonable rates. In essence, the Commission found it appropriate to cap the rates of non-lighting customers at 021~/kWh during the 2002-2003 PCA period. Although the ICIP argued that the hardship of the Small General Service class was not "unique " no other non-lighting customer class was required to pay a rate of such magnitude. ICIP Reconsideration Petition at 6. In recognition ofthe special circumstances facing irrigators, the Commission likewise allowed the Irrigation class to defer recovery of its power supply costs over two years. As we previously explained, the Commission was concerned based on public testimony that irrigators did not appreciate the cumulative effect of the multiple rate increases authorized last year because their consumption ended just as the October increase went into effect. Order No. 29026 at 17. It was not so much the seasonal nature of the irrigators' usage that concerned us, but rather the fact that it coincided with the second rate increase. This effectively eliminated any meaningful perception of the price signal by the Irrigation class. The Commission determined that a single-year recovery of irrigator power costs would be unreasonable because it would increase irrigators' rates by 11.4%. Average rates would go from 5.1O1~/kWh ordered May 1 2001 in Order No. 28722 to 5.685~/kWh without allowing irrigators to experience the incremental increase afforded to other classes. The ICIP also argued that "all classes should have the opportunity to avail themselves of the two-year deferral in order to avoid any rate increases this year." ICIP Reconsideration Petition at 6. The Commission notes that a considerable number of residential customers who testified at public hearings supported recovery of power supply costs in a single PCA year. The Commission is fully aware that high electric rates place Idaho industrial customers at a competitive disadvantage. Although it is not prudent to securitize excess power costs over five years at this time, the Commission finds it appropriate to limit the blended rate of the Schedule 19 customers to the 4.496~IkWh ($87 554 281 annual revenue requirement) authorized in Order No. 28852 rather than the 719~/kWh rate ($91 691 204 annual revenue requirement) implemented in Order No. 29026. This will remove the 4.7% increase in Schedule 19 rates and 1 Class average rates are class revenues from rates, with customer, demand, energy, etc. components, divided by class energy used. ORDER NO. 29065 defer the difference for recovery during the 2003-2004 PCA period. Appendix 1 shows the first year impact of this rate change. Although this decrease may not be as large as the ICIP desires it will mitigate the impact on industrial customers yet allow Idaho Power to timely recover its reasonably incurred purchased power costs. Moreover, Idaho Power shall be entitled to collect a 6% per year simple interest carrying charge for amounts deferred beyond the traditional PCA recovery period. This new rate shall be effective July 1 , 2002. The Commission realizes that a higher Schedule 19 rate became effective on May 16 2002 and will have been in effect for approximately six weeks by the July 1 , 2002 effective date of this Order. The amounts deferred for recovery in this Order and Order No. 29026 shall be explicitly assigned to the classes that generated the accrual for recovery during the 2003-2004 PCA period. With regard to Schedule 19 customers, the Commission orders the Company to calculate the amount that has been collected in this six-week period, reduce the carryover to the next year s PCA by that amount, and file that amount with its monthly PCA report. II. IDAHO POWER'S PETITION FOR CLARIFICATION On June 7, 2002 , Idaho Power filed a second Petition for Clarification of Order No. 29026 relating to the carrying costs of DSM programs. Because it will take longer to accumulate DSM funds through rates than to make expenditures on DSM programs, the Company believes the application of a carrying charge or credit to fund DSM programs is appropriate. Idaho Power Clarification Petition at 2 and 4. Thus, the Company would be entitled to recover interest to the extent DSM programs are pre-funded by Idaho Power in advance of funds being generated through the tariff rider. Id. at 4. Idaho Power further explained that it would pay interest for funds that are not expended for any DSM program. The Company recommended that a 6% interest rate be approved. Id. The Company also requested clarification from the Commission as to how the initial institution of essential DSM programs should be accomplished. Specifically, Idaho Power wanted to know if it should focus on the residential class in the first year or if it should create a cost-effective program for each class based upon the amount of funds derived from each customer class. Id. at 3 and 5. To the extent possible, the Company requested the Commission issue an Order as soon as possible in anticipation of the Energy Efficiency Advisory Group meeting in July. Id. at 4. ORDER NO. 29065 A. ICIP's Cross-Petition On June 12 2002, the ICIP cross-petitioned the Commission for clarification of Order No. 29026.The ICIP noted that when the Commission denied industrial customers the opportunity to self-direct conservation dollars collected from its class members, the Commission encouraged representatives of the industrial class to participate in the Energy Efficiency Advisory Group to ensure the DSM dollars collected by this tariff rider will also benefit their class." ICIP Clarification Cross-Petition at 2, quoting Order No. 29026 at 22. The ICIP believes that if the Commission now clarifies its Order by instructing the Energy Efficiency Advisory Group to devote essentially all the funds to residential DSM programs, this admonition to the industrial class would have little practical meaning. Id. at 2-3. Thus, the ICIP asked the Commission for clarification that the Energy Efficiency Advisory Group develop cost-effective DSM programs that are specifically targeted toward industrial facilities in Idaho Power s service territory, rather than devote all the funds generated by the DSM rider to the residential class in the first year. Id. at 3. The ICIP also supported "expensing" DSM charges as they are incurred to avoid accumulating DSM deferrals. Id. To the extent funds accumulate that have not been expended the ICIP stated that it is reasonable for Idaho Power to pay a carrying cost on the unused positive balance in the DSM fund. Id. B. Conservation Groups' Response On June 14, 2002, Intervenors Land & Water Fund of the Rockies, Idaho Rivers United, Idaho Rural Council and Mary McGown (the "Conservation Groups ) responded to Idaho Power s Petition for Clarification of Order No. 29026 regarding carrying costs for DSM programs. The Conservation Groups do not object to the application of a carrying charge or credit to fund DSM balances. Conservation Groups' Response at 1. The Conservation Groups also noted that the initial implementation of DSM programs should be guided by (1) the relative contribution of each class to total DSM funding, (2) the ease of program implementation, and (3) the estimated total resource costs. Id. at 2. Under this criteria, the Conservation Groups believe the residential class should receive primary attention initially for implementation of DSM programs like CFL bulbs, central air conditioner upgrades, and efficient appliance incentives. Id. However, cost-effective programs for other classes should also be pursued. Id. The Conservation Groups suggested the "BacGen ORDER NO. 29065 Vending Miser " the P&P Lighting and Retrofit programs for commercial and industrial customers, as well as irrigation efficiency programs for the Irrigation class. Id. C. Commission Discussion and Findings The Commission anticipates that Idaho Power and the Energy Efficiency Advisory Group will create and implement a balanced portfolio of DSM programs for all customer classes over the long-term. In the short term, however, Idaho Power and the Advisory Group shall have the flexibility to focus on different classes during different years if necessary to achieve the most cost-effective energy conservation in the shortest amount oftime. We expect this result-oriented approach to be the primary guide for initial program selection, regardless of which customer class( es) will directly benefit. The energy savings generated by such an approach will indirectly benefit all ratepayers as more class-specific DSM programs are implemented over time. more DSM funds become available, the Commission expects that Idaho Power and the Advisory Group will ensure that specific programs are targeted toward each specific customer class - including industrial facilities. The Commission anticipates that DSM expenditures will balance out among the customer classes over time and will review DSM expenditures annually to see that a fair result is achieved. Although the Commission hopes that some initial programs will benefit the residential class, we prefer that the programs projected to generate the greatest return on customers' DSM dollars to be implemented first. The Advisory Group shall assist Idaho Power to evaluate and plan programs that achieve this result. To guarantee quick implementation of meaningful DSM programs and avoid DSM deferrals, the Commission authorizes Idaho Power to pre-fund DSM programs with a carrying charge. Although Idaho Power recommends this carrying charge be set at 6%, the Commission finds the customer deposit rate (i., the interest rate paid on customer deposits effective at the beginning of each year) to be the appropriate interest rate under these circumstances. The correct carrying charge for calendar year 2002 is 4%. Order No. 28896. The customer deposit rate shall be applied as a carrying charge benefiting Idaho Power if the Company must borrow money to fund DSM programs before the funds are collected. Conversely, Idaho Power shall credit customers at the customer deposit rate if it collects DSM money in excess of its expenditures. ORDER NO. 29065 ORDER IT IS HEREBY ORDERED that the Petition for Reconsideration filed by the Industrial Customers of Idaho Power in Case Nos. IPC-02-2 and IPC-02-3 is partially granted as set forth above. Effective July 1 , 2002, the 2002-2003 PCA revenue requirement responsibility of Schedule 19 shall decrease to $87 554 281. The difference between this amount and $91 691 204, less the six-week adjustment discussed above, shall be deferred for recovery from Schedule 19 customers until the 2003-2004 PCA period. IT IS FURTHER ORDERED that Idaho Power file Schedule 19 tariffs in conformance with the Commission s findings set forth above. IT IS FURTHER ORDERED that the amounts deferred for recovery in this Order and Order No. 29026 shall be explicitly assigned to the classes that generated the accrual for recovery during the 2003-2004 PCA period. With regard to Schedule 19 customers, the Commission orders the Company to calculate the amount that has been collected in this six-week period, reduce the carryover to the next year s PCA by that amount, and file that amount with its monthly PCA report. IT IS FURTHER ORDERED that the Petition for Clarification regarding carrying charges on DSM funds filed by Idaho Power Company is granted as set forth above. THIS IS A FINAL ORDER ON RECONSIDERATION. Any party aggrieved by this Order or other final or interlocutory Orders previously issued in Case Nos. IPC-02-2 or IPC- 02-3 may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules. See Idaho Code 961-627. ORDER NO. 29065 DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this cZgfl. day of June 2002. AUL KJELLANDER, PRESIDENT MARSHA H. SMITH, COMMISSIONER ATTEST: 1t~ C mmission Secretary O:IPCEO202 03 In4 recon - - - ORDER NO. 29065