20150330_4622.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER RAPER
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MICHAEL W.MORRISON
KATHY STOCKTON
DATE:MARCH 24,2015
RE:IDAHO POWER’S ANNUAL COMPLIANCE FILING TO UPDATE
CHARGES,CREDITS,AND GENERAL OVERHEADS UNDER RULE H,
NEW SERVICE ATTACHMENTS AND DISTRIBUTION LINE
INSTALLATIONS OR ALTERATIONS,TARIFF ADVICE NO.15-02
BACKGROUND
On March 11,2015,Idaho Power (“Company”)filed a tariff advice with the Commission
proposing updates to the charges,credits,and general overhead rate outlined in Rule H,New
Service Attachments and Distribution Installations or Alterations.This is the sixth annual
compliance filing to update Rule I-I charges and credits as required by Idaho Public Utilities
Commission Order Nos.30853 and 30955.The Company also requests to update its general
overhead rate as required by Order No.32472.The Company also proposes to update the
method used to compute the overhead rate applied to engineering charges.The Company
proposes that the updates be approved by April 13,2015 with an effective date of April 27,2015.
Commission Order No.30853 requires the Company to submit its updated Rule H
charges and credits no later than January 1 of each year.The Company had submitted updates to
Rule Fl in Tariff Advice No.14-04 on December 23,2014,but after identifying errors in several
proposed charges/allowances,withdrew that filing on February 24,2015.
STAFF ANALYSIS
Staff reviewed the Company’s cost estimation methodology,and found it to conform with
that adopted in IPC-E-08-22 (Rule H Modification and Reconsideration),Idaho Power’s most
recent major line extension case.
DECISION MEMORANDUM -I -MARCH 24,2015
Staff notes 10 and 11 percent increases,respectively,in charges for 3-inch and 2-inch
pole risers.These increases were driven,primarily,by inclusion of material and labor charges
for compatible units that had been erroneously omitted in previous years’filings.Staff agrees
that these charges are appropriate.
The Company determined that in previous years’filings,some material and labor costs
had been incorrectly applied both to base and distance charges.Excluding these costs from this
year’s distance charge helped offset increased labor costs and a 13 percent increase in average
conductor price.Distance charges applied to Company-installed Underground Service
Attachments increased between three and four percent,while distance charges applied to
Customer-installed Underground Service Attachments decreased between two and six percent.
A five percent increase in the overhead Temporary Service Attachment charge is
attributable to the increased costs of #2 Aluminum Triplex conductor.
Staff also notes a 10 percent decrease in the line installation and service attachment
allowances for residential (Schedules 1,3,4,and 5)and non-residential single phase (Schedules
7,9,and 24)service.This decrease is due,almost entirely,to a $249.54 decrease in the cost of
the 25 kVA transformer used to compute these allowances.An eight percent increase in the non
residential three phase allowance is due,primarily,to a $348.15 increase in the cost of the 15
kVA transformer used to compute the allowance.
There was a small increase,from 17.49 percent to 17.60 percent,in the general overhead
rate used to calculate charges and allowances.Staff determined that the method used to compute
the new rate conforms to the methodology used in IPC-E-11-24 and approved in Order No.
32472.
Staff learned that the Company’s method for computing the general overhead rate applied
to engineering charges differs from that used to compute all other Rule H general overhead rates.
Namely,the overhead rate applied to engineering charges is computed monthly,while that
applied to other Rule H charges and allowances is computed annually.This has resulted in
considerable variation in the engineering overhead rate:Since 2012,the engineering overhead
rate has ranged from 10.75 percent to 22.00 percent,while the overhead rate applied to other
Rule H charges has ranged from 17.49 percent to 19.75 percent.Under the existing
methodology,this years engineering overhead rate would be 15.75 percent,versus a 17.60
percent rate applied to all other Rule FT charges and allowances.
DECISION MEMORANDUM -2-MARCH 24,2015
Idaho Power proposes that the current monthly method for computing the engineering
overhead rate be discontinued,and that the general rate applied to other Rule H charges and
allowances be used.Thus,the 17.60 percent general overhead rate would be used to compute the
overhead for engineering services.The increased general overhead rate,along with increased
labor and benefits rates,contributed to a six percent increase in charges for engineering services,
from $63 to $67 per hour.Staff believes the proposed method for computing engineering
overhead rates to be reasonable.Staff concurs with the Company’s proposal.
The Company has indicated that it will take two weeks to modify its computer systems,
prepared documentation,and train personnel,and requests an effective date of April 27,2015.
STAFF RECOMMENDATIONS
The Company’s methodology for computing charges and allowances for new service
attachments and distribution line installations is consistent with that approved by the
Commission in Order Nos.30853,30955,and 32472.Staff also believes the Company’s
proposal to compute the general overhead rates applied to engineering charges is reasonable.
Staff therefore recommends that the Company’s proposed Rule H updates be approved with an
effective date of April 27,2015.
COMMISSION DECISION
Does the Commission wish to approve the Company’s proposed Rule Ii updates to with
an effective date of April 27,2015?
Ka y ockton
udmernos/TA_I 502
DECISION MEMORANDUM -3-MARCH 24,2015