20110328_3288.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: MARCH 25, 2011

SUBJECT: IDAHO POWER’S APPLICATION FOR AUTHORITY TO IMPLEMENT
FIXED COST ADJUSTMENT RATES, CASE NO. IPC-E-11-03

On March 15, 2011, Idaho Power Company filed an Application requesting authority
to implement fixed cost adjustment (FCA) rates for electric service from June 1, 2011, through
May 31, 2012. In Case No. IPC-E-04-15, Order No. 30267 issued March 12, 2007, the
Commission approved a stipulation to implement a three-year FCA pilot program for residential
and small general service customers. On October 1, 2009, the Company filed an application
seeking authority to convert the pilot program to an ongoing, permanent program. Case No.
IPC-E-09-28. The Commission denied Idaho Power’s request to make the FCA mechanism
permanent and, instead, extended the pilot program for an additional two years. Order No.
31063. This is the Company’s first FCA adjustment filing since the Commission issued the
extension, and the Company’s fourth overall FCA adjustment filing.
BACKGROUND
The FCA is a mechanism to separate Idaho Power’s fixed costs from its energy sales,
and establish a rate to allow the Company to recover its fixed costs separate from energy sales.
The rationale for an FCA is that traditional rate design discourages energy conservation
programs; that is, utilities that recover fixed costs through energy sales have no incentive to
reduce their sales volume by encouraging energy efficiency and demand-side management
programs.
The FCA implemented in 2007 for the pilot program works the same for residential
and small general service customers. For each class, the number of customers is multiplied by a
DECISION MEMORANDUM 2
fixed-cost per customer rate that is determined through the Company’s revenue requirement in a
general rate case. This produces an authorized fixed-cost recovery amount, which is then
compared to the amount of fixed costs actually recovered by the Company. The difference
between the authorized fixed-cost recovery amount and the actual amount collected by the
Company is the fixed-cost adjustment for each customer class.
THE APPLICATION
Idaho Power reports that the rate of growth in the number of residential customers
was more than the rate of growth in the energy sales for the residential customer class in 2010,
i.e., the average use per customer decreased. As a result, the Company under-collected fixed
costs by approximately $7.9 million for its residential class.
The Company states that energy usage per customer also decreased in the small
general service class resulting in an under-collection of approximately $1.4 million in fixed
costs. Consistent with the first three years of the FCA pilot, the Company proposes a combined
rate increase for residential and small general service customers that will recover approximately
$3 million above what is currently recovered through FCA rates and represents an average
increase of 0.74%.
Idaho Power requests that its Application be processed by Modified Procedure.
STAFF RECOMMENDATION
Staff recommends that Idaho Power’s Application be processed by Modified
Procedure with comments to be filed no later than Thursday, May 12, 2011, and responsive
comments to be filed no later than Thursday, May 19, 2011.
COMMISSION DECISION
Does the Commission find that the public interest may not require a hearing to
consider the issues presented, and that this proceeding may be processed under Modified
Procedure with a comment deadline of May 12, 2011, and responsive comment deadline of May
19, 2011?

M:IPC-E-11-03_ks