20131202_4242.pdf

DECISION MEMORANDUM
TO:COMMISSLONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
FROM:RICK STERLING
DATE:NOVEMBER 27,2013
SUBJECT:TARIFF ADVICE NO.13-06;IDAHO POWER’S REVISIONS TO
SCHEDULE 98,RESIDENTIAL AND SMALL FARM ENERGY CREDIT.
On November 5,2013,Idaho Power Company (Idaho Power)filed a tariff advice with the
Idaho Public Utilities Commission (Commission)to revise its tariff Schedule 98 Residential and
Small Farm Energy Credit (the “REP credit”).On November 21,2013,Idaho Power filed an
updated tariff advice.In this updated tariff advice,Idaho Power proposes that the rate credit be
increased from the existing 0.0327 per kWh to 0.0491 0 per kWh to be effective January 1,2014.
Idaho Power also proposes to make administrative changes to the language in the tariff
BACKGROUND
This rate credit is designed to pass through to qualifying customers the REP benefits that
Idaho Power receives from the Bonneville Power Administration (BPA).The REP was designed
to allow the residential and small-farm customers of investor-owned utilities (bUs)in the
Northwest to share in the benefits of the Federal Columbia River Power System.Idaho Power
passes these benefits through to its qualifying customers via a rate credit on monthly electric bills.
The rate credit applies to residential and small farm customers served under Schedules 1,3,4,5,7,
9,15,and 24.
Historically,the total amount of REP benefits an IOU received was a function of the IOU’s
Average System Cost (ASC),the Priority Firm (PF)Exchange rate,and the IOU’s qua1i’ing
DECISION MEMORANDUM 1 NOVEMBER 27,2013
load.’Idaho Power typically did not qualify for REP benefits because its ASC was lower than the
PF Exchange Rate.
In FY09,BPA applied a “Lookback Adjustment”to REP benefits received by each IOU
(including Idaho Power)in response to two Ninth Circuit cases that overturned the 2000
settlement among BPA,lOUs,and consumer-owned utilities (COU5).BPA employed this
adjustment to withhold REP benefits from the lOUs in order to refund the COUs the REP benefits
improperly paid to the lOUs during the settlement.BPA’s Lookback Analysis was challenged in
multiple lawsuits.
On July 26,2011,BPA adopted a new Settlement Agreement that included the six lOUs,
the three state commissions,BPA staff,and nearly all of the COUs.The Settlement Agreement
fixed over a 17-year period the total amount of REP benefits to be paid to all IOUs.2 These fixed
REP benefits are allocated to the different utilities based on each utility’s relative qualifying load
as well as its relative ASC.Holding qualifying load constant,utilities with relatively high ASCs
will receive more REP benefits than utilities with relatively low ASCs.
Furthermore,under the new Settlement,the Lookback Adjustment was discontinued and
all “Deemer”balances were extinguished.However,the Settlement did recognize that differences
existed among the lOUs concerning how much of their original Lookback amount had been
repaid.Therefore,the Settlement established “reallocations”among the lOUs.REP benefits are
“reallocated”away from lOUs who paid back relatively less of their Lookback amounts and to
lOUs who paid back relatively more.The reallocations are designed so that most IOUs both pay
money into and receive money from the system.3 Idaho Power pays half of its REP benefits in
reallocations to the other lOUs.After adjusting for the reallocation,Idaho Power’s total benefits
are distributed to their Idaho and Oregon customers according to each state’s share of the
qualifying load.
THE TARIFF ADVICE
The proposed increase in the rate credit reflects both the FY14-FYI5 REP benefits and the
under-refunded balance relating to the existing rate credit.Idaho Power’s share of the FYI4-FYI5
BPA calculates both the ASC and the PF Exchange rate.
2 An IOU still has to have an ASC higher than the PF exchange rate in order to receive REP benefits.
The exceptions are Idaho Power and Puget Sound,Idaho Power only pays money into the system and Puget Sound
only receives money from the system.
DECISION MEMORANDUM 2 NOVEMBER 27,2013
REP benefits is $6.002 million ($3.00 1 million each fiscal year).Of this,$5.776 million is
allocated to Idaho customers.The under-refunded balance for Idaho customers from the existing
rate credit is $O.673 million.Idaho Power is holding $0.46 I million4 in reserves in the balancing
account which leaves a net benefit of$5.988 million to disburse ($5.776 +$0.673-$0.461)over
the two-year period.
Idaho Power proposes to disburse the REP benefits to Idaho customers from
January 1,2014 through December 31,2015.The projected usage during that time period is
12,193,804,000 kWh,which leads to a projected rate credit ofo.0491Ø per kWh.A customer
using 1,050 kWh per month would receive a credit of $0.52,a 50%increase from last year’s REP
credit.The actual credit will vary based on customer usage.
STAFF ANALYSIS
During StatEs review of the original proposal,it found a minor computational error in the
calculation of the REP credit.This led to Idaho Power filing a substitute proposal with a credit
0.00180 per kWh lower than their original proposal (0.04910 versus 0.05090).
Idaho Power holds a reserve amount in the balancing account in order to guard against the
possibility that Idaho Power overpays customers,is subsequently not eligible for REP credits,and,
therefore,is unable to recover the overpayment.While Staff recognizes that Idaho Power has a
valid concern,Staff believes it is important for benefits to be passed through to customers as
quickly as possible.Staff recommends that Idaho Power file quarterly updates to its balancing
account and,if the balance becomes too large,that Idaho Power file a revision to the REP credit
earlier than the current two-year cycle.
Staff believes the proposed credit amount of 0.04910 per kWh to be correctly computed by
Idaho Power and recommends approval with a January 1,2014 effective date.Staff found the
language changes to be minor and recommends approval of them.
‘The reserves include $13,798 carried over from the FYI2-FYI3 REP benefits.Idaho Power inadvertently excluded
this amount from its calculation of the rate credit.There is little practical effect on customers if this amount is
included in the rate credit calculations or is held in reserves to be included in future rate credit calculations.
DECISION MEMORANDUM 3 NOVEMBER 27,2013
COMMISSION DECISION
Does the Commission wish to approve Idaho Power’s proposed change in its BPA
residential and small farm energy credit from the existing 0.03270 per kWh to 0.04910 per kWh
effective January 1,2014?
Does the Commission wish to approve the minor language changes to Schedule 98?
Finally,does the Commission wish to instruct Idaho Power to file quarterly status reports
of its balancing account so that any necessary revisions to the rate credit be made sooner than
every two years?
Rick Sterling /
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DECISION MEMORANDUM 4 NOVEMBER 27,2013