20230131_TariffAdvice22-05_msmd1.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER LODGE
COMMISSIONER HAMMOND
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:MATTHEW E.SUESS
MICHAEL DUVAL
DATE:JANUARY 26,2023
RE:IDAHO POWER'S ANNUAL COMPLIANCE FILING TO UPDATE THE
SUBSTATION ALLOWANCE UNDER SCHEDULE 19,LARGE POWER
SERVICE,TARIFF ADVICE NO.22-05
BACKGROUND
On December 28,2022,Idaho Power ("Company")filed the Tariff Advice No.22-05
proposing an update to the Substation Allowance outlined in Schedule 19,Large Power Service,
required by Idaho Public Utilities Commission Order Nos.32893 and 32914.The Company
requested that the updates to the allowance be approved with an effective date of February 1,
2023.
STAFF ANALYSIS
Staff recommends approval of the Company's proposed allowance amount as filed.The
overall increase of 38 percent is a result of a 40 percent direct cost increase mitigated by a
general overhead decrease of 2.06 percent resulting in an overall allowance increase from
$57,640 per MW to $79,444 per MW.
The allowance is a credit given to a Schedule 19 customer against the total cost of a
substation upgrade,with the difference being directly charged to that customer for an upgrade
needed to provide them with service.As will be discussed,the increase in this year's allowance
is subject to abnormal inflationarypressure.However,because the allowance is credited against
the total cost of the project,which is also subject to the same inflationarypressure,the increases
are offsetting,thereby keeping the impact to customers consistent.
DECISION MEMORANDUM -1 -JANUARY 31,2023
Staffreviewed the Company's cost adjustment and methodology used to determinethe
proposed allowance and believes it conforms with Order Nos.32893,32914,32982,and 34576
from Case Nos.IPC-E-13-09 (Glanbia Foods Petition for Allowance to Rule H),IPC-E-14-01
(Schedule 19 Update),and IPC-E-19-40 (Update to Substation Allowance Under Schedule 19),
respectively.Under the current methodology,the Company determines the per Megawatt
("MW")substation allowance by dividing the estimated fully loaded costs for constructing a
transformer substation by 44.8 Megavoit Amperes ("MVA"),which is the rating of the
transformer commonly used by the Company for this type of service.I
Staff validated the Company's direct costs for labor,material,and vehicles and found
them to be reasonable given current inflation rates.Prior to the adjustment for overhead cost,
substation direct cost increased by 40%from the previous year.The increase in costs affecting
labor,material,and vehicles is attributed to pandemic-relatedsupply chain issues and shortages
in the labor market,which are beyond the control of the Company.The two biggest contributors
to the increase were the 44.8 MVA transformer (average cost increase of 12%)and the 4-unit
metal-clad switchgear (average cost increase of 88%).Project labor costs also went up 10
percent.
Staff believesthe proposed overhead rate is reasonable and recommends approval as
filed,Staff verified the Company's inputs and calculation of general overheads associated with
substations.The Schedule 19 general overhead rate represent capital costs that cannot be
directly assigned to a specific asset or individualproject,and are applied to all vehicle,labor,and
direct material costs.The proposed general overhead rate for the 12-months ending October 31,
2022,was 6.57 percent,which decreased from the current authorized rate of 8.63 percent.
STAFF RECOMMENDATION
Staffrecommends the Company's proposed update to Schedule 19 be approved as filed
with an effective date of February 1,2023.
'MVA and MW are equivalent for purposes of determining the cost per MW of the Substation Allowance.
DECISION MEMORANDUM -2 -JANUARY 31,2023
COMMISSION DECISION
Does the Commission wish to approve the Company's proposed update to Schedule 19 as
filed with an effective date of February 1,2023?
Matthew E.uess
DECISION MEMORANDUM -3 -JANUARY 31,2023