20040830_929.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL STAFF
FROM:SCOTT WOODBURY
DATE:AUGUST 16,2004
RE:CASE NO. IPC-04-17 (Idaho Power)
ELECTRIC SERVICE AGREEMENT
R. SIMPLOT COMP ANY (Pocatello)
On July 2, 2004, Idaho Power Company (Idaho Power; Company) filed
Application with the Idaho Public Utilities Commission (Commission) for approval of an
Agreement for Electric Service between Idaho Power and the J.R. Simplot Company (Simplot)
dated June 29, 2004 (the 2004 Agreement). .
Simplot operates a plant for the production of fertilizer near Pocatello, Idaho (the
Pocatello facility). Pursuant to an Agreement for Supply of Power and Energy between Idaho
Power and Simplot dated August 27, 1973 (the 1973 Agreement), Idaho Power supplies electric
service to Simplot's Pocatello facility in accordance with the rates and charges set out in tariff
Schedule 29 and its successor schedules. Since the 1973 Agreement was last renewed, Idaho
Power has revised and updated its contracts for special contract customers like Simplot. In
accordance with ~ 1.1 of the 1973 Agreement, Idaho Power timely notified Simplot in writing of
the Company s intent to terminate the 1973 Agreement effective June 30, 2004.
Pursuant to Commission Order No. 29535 dated June 28, 2004, the termination date
of the 1973 Agreement, as amended, was extended to the earlier of either August 29, 2004 or a
date on which the Commission approves a new service agreement between the parties.
2004 Agreement
Under the terms of the 2004 Agreement, Idaho Power agrees to furnish, and Simplot
agrees to purchase, 25 000 kilowatts of electric power and energy on a monthly basis. Section
DECISION MEMORANDUM
1 of the 2004 Agreement permits Simplot to increase the monthly Demand to a maximum of
000 kilowatts upon one year prior written notice to the Company. (Under the 1973
Agreement, Idaho Power agreed to supply and Simplot agreed to purchase up to 38 000
kilowatts.) The Minimum Billing Demand is the Contract Demand less 5 000 kilowatts. The
availability of power in excess of the Contract Demand is not guaranteed, and if Billing Demand
at the Simplot Facility exceeds the Contract Demand, Idaho Power may curtail service to the
Simplot facility.
Idaho Power states that the 2004 Agreement is similar to the Company s special
contract with Micron Technology. Reference Order No. 26238 November 20, 1995. The
unique provisions of the 2004 Agreement are described below.
Section 8.1 of the 2004 Agreement establishes that the rates and charges for electrical
power, energy and other services provided by the Company to the Pocatello facility will be
determined in accordance with the sum of the components of electric tariff Schedule 29 and its
successor schedules. The monthly charges under the 1973 Agreement include a Demand
Charge, an Energy Charge and a Facility Charge. The monthly charges under the 2004
Agreement include the same three charges plus a contract Demand Charge. The individual
component charges for the 2004 Agreement were derived by first establishing the charges
utilizing the 2003 normalized test year revenues and usage for Simplot from Case No. IPC-03-
13 and by adjusting the charges on a uniform percentage basis to derive the revenue requirement
authorized for Simplot by Commission Order No. 29505 in Case No. IPC-03-13. Reference
Worksheets, App. Att. 3.
All transmission and distribution facilities necessary for the delivery of power and
energy to the Pocatello facility are installed, owned and operated by Idaho Power. Section 7 of
the 2004 Agreement permits the parties to enter into separate agreements to provide any
additional transmission and/or substation facilities that may be required to provide electric
service to the Pocatello facility. Section 7.2 of the 2004 Agreement sets forth the monthly
Facilities Charge that Simplot agrees to pay for the use of the Company s distribution facilities.
Under the 2004 Agreement, the monthly Facilities Charge remains unchanged at 1.7% per
month.
If approved by the Commission, the 2004 Agreement would remain in effect for five
years, through June 30, 2009, and would automatically renew thereafter until either party to the
DECISION MEMORANDUM
2004 Agreement terminates that Agreement in accordance with the Agreement terms and
provisions. The effective date of any termination cannot be less than 12 months after the date of
delivery of the termination notice.
On July 22, 2004, the Commission issued Notices of Application and Modified
Procedure in Case No. IPC-04-17. The deadline for filing written comments was Friday,
August 13 , 2004. The Commission Staff was the only party to file comments. Staff reviewed
the proposed 2004 Agreement and associated Schedule 29 and recommends approval. Staff
believes approval of the 2004 Agreement is in the public interest. Staff notes that Schedule 29
rates have been revised to include a contract demand charge. Staff contends the proposed tariff
rates are revenue neutral; that is, they produce the same annual revenue as recently approved by
the Commission in Idaho Power general rate case IPC-03-13. Staff recommends that the
proposed Agreement and Schedule 29 become effective on the date of Commission approval.
COMMISSION DECISION
Idaho Power has requested approval of a June 29, 2004, Service Agreement for the
providing of electric service to J.R. Simplot's Pocatello facility. The rates and charges for such
service are set out in the Company s electric tariff Schedule 29. Staff recommends that the
Service Agreement be approved. Does the Commission find the Agreement acceptable and in
the public interest?
Scott Woodbury
VldIM:IPCEO417 sw2
DECISION MEMORANDUM