20160926_5076.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER PAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MARK ROGERS
DATE:SEPTEMBER 22,2016
RE:IDAHO POWER COMPANY’S TARIFF ADVICE NO.16-04;
MODIFICATIONS TO SCHEDULE 72-INTERCONNECTIONS TO
NON-UTILITY GENERATION
On September 2,2016,Idaho Power Company (“Idaho Power”)filed a Tariff Advice
with the Idaho Public Utilities Commission (“Commission”)to revise its Tariff Schedule 72
Interconnection to Non-Utility Generation.In this Tariff Advice,Idaho Power proposes that
when a Seller’s interconnection will utilize Interconnection Facilities provided under a prior
agreement(s),and the combined term(s)of the prior agreement(s)is greater than 35 years,the
operation and maintenance (O&M)charge related to those existing Interconnection Facilities for
the Seller’s interconnection will be computed at the levelized monthly rate of 0.40%for 138 and
161 kV facilities,and 0.70%for facilities below 138 kV.
BACKGROUND
The current Tariff does not specify how O&M facility charges will be computed beyond
35 years.This tariff advice outlines the methodology for calculating O&M charges for
interconnection facilities that have been in place beyond 35 years.
STAFF ANALYSIS
On December 17,1990 Idaho Power filed an Application,Case No.IPC-E-90-20 with the
Idaho Public Utilities Commission for approval of an Interconnection Tariff for non-utility
generation (Tariff Schedule 72).On April 12,1991,the Commission issued Order No.23631
approving Idaho Power’s proposed Tariff Schedule 72—Interconnection to Non-Utility
DECISION MEMORANDUM 1 SEPTEMBER 22,2016
Generation with an effective date of April 15,1991.The approved tariff specified operation and
maintenance obligations and expenses for non-utility generation:
The Company will operate and maintain Company furnished Interconnection
Facilities as well as any Seller Furnished Facilities transferred to the Company.In
consideration of such operation and maintenance services,Seller will pay the
Company a monthly operation and maintenance charge equal to a percentage of the
Construction Cost and Transfer Cost paid by the Seller.The percentage is 0.4%for
138 kV and 161 kV facilities (transmission facilities)and 0.7%on facilities below
138 kV (distribution facilities).’
On April 19,1991 Petition for Reconsideration was filed.In Order No.23718 the
Commission granted Reconsideration on two of the issues raised:
1.The inclusion of interconnect costs in the administratively determined avoided cost
rate;and
2.The calculation and reasonableness of the Schedule 72 operation and maintenance
service charges.
During Reconsideration,Staff,although agreeing with the Company’s underlying
methodology for calculating the 0.4%and 0.7%O&M facility charge,contended that Idaho
Power should charge non-level rates rather than the levelized O&M rates previously approved.
The Commission found that Staffs proposal to have O&M charges escalate over the life of each
contract more reasonably represents reality than a levelized O&M charge.The Commission in
Order No.24025,directed the Company to file a revised tariff with non-levelized rate schedules
equal to the levelized O&M charges.2 Attached as Exhibit No.1 is a table showing the
relationship between the non-levelized and levelized rate for distribution facilities over a 35 year
period.
The rationale behind the non-levelized rate was that it would help encourage the QF
industry by reducing QF expenses during the early debt years,while maintaining an equalized
net present value for the Company.3 That is,over a 35 year contract the Company would realize
equal value whether or not a non-levelized or leveLized rate is in place.In light of the
See Schedule 72 page 5 attached to Order No,23631.
2 Order No.24025 page 9.
Order No.24025 page 5.
DECISION MEMORANDUM 2 SEPTEMBER 22,2016
relationship behind the non-levelized and levelized rate,Staff believes it is reasonable that
facilities beyond 35 years should be charged the levelized 0.4%or 0.7%facility charge.
If the levelized rate is not adopted,a new incremental schedule would need to be filed for
equipment older than 35 years under each expiring contract.Based upon the new contract length,
the monthly O&M charges would change for each contract so that they reflect the same value as
the levelized rate.Given the administrative burden of such a process,and the fact that both
methods for computing O&M rates have equal value,Staff believes it is reasonable to charge the
levelized O&M rate for equipment beyond 35 years.
STAFF RECOMMENDATION
Staff has reviewed the Company’s revised tariff and believes the calculation for the
levelized rate beyond 35 years is consistent with the intent of Commission Order No 24025.
Staff recommends approval of the revised tariff as filed by the Company.
COMMISSION DECISION
Does the Commission wish to approve Idaho Power’s proposed change to its Tariff
Schedule 72—Interconnections to Non-Utility Generation?
UdmcmosilPC lnerconnection Charge
DECISION MEMORANDUM 3 SEPTEMBER 22,2016
Exhibit No.I
Non-Lcvclized vs.Levelized O&M Facility Charge (Distribution Facility)
Operation and Maintenance Obligations and Expenses -Distribution Facilities
Contract Year Non-Levelized Distribution Rate Levelized Distribution Rate
0 -
1 0.47%0.70%
2 0.49%0.70%
3 0.52%0.70%
4 0.54%0.70%
5 0.56%0.70%
6 0.59%0.70%
7 0.61%0.70%
8 0.64%0.70%
9 0.67%0.70%
10 0.70%0.70%
11 0.73%0,70%
12 0,77%0.70%
13 0.80%0.70%
14 0,84%0.70%
15 0.87%0.70%
16 0.91%0.70%
17 0.95%0.70%
18 1.00%0.70%
19 1.04%0.70%
20 1.09%0.70%
21 1.14%0.70%
22 1.19%0.70%
23 1.24%0.70%
24 1.30%0.70%
25 1.36%0.70%
26 1.42%0.70%
27 1.48%0.70%
28 1.55%0.70%
29 1.62%0.70%
30 1.69%.0.70%
31 1.77%0.70%
32 1.85%0.70%
33 1.93%0.70%
34 2.02%0.70%
35 2.11%0.70%
Net Present Value (Non-Levelized)Net Present Value (Levelized)
5.92%5.92%