20080612Comments.pdf

UNITED STATES OF AMERICA
S. DEPARTMENT OF ENERGY
BEFORE THE
BONNEVILLE POWER ADMINISTRATION
PROPOSED METHODOLOGY FOR
DETERMINING THE AVERAGE SYSTEM
COST OF RESOURCES FOR ELECTRIC
UTILITIES PARTICIPATING IN THE
RESIDENTIAL EXCHANGE PROGRAM
ESTABLISHED BY SECTION S(e) OF THE
PACIFIC NORTHWEST ELECTRIC POWER
PLANNING AND CONSERV A TION ACT
) BP A DOCKET NO. ASCM-
COMMENTS OF THE
IDAHO PUBLIC UTILITIES COMMISSION
ON THE DRAFT RECORD OF DECISION
On May 29, 2008 , the Bonneville Power Administration (BP A) issued a draft Record
of Decision ("Draft ROD") regarding proposed changes to its Average System Cost
Methodology (ASCM) authorized by Section S(c) of the Pacific Northwest Electric Power
Planning and Conservation Act (Northwest Power Act). 73 Fed.Reg. 7270 (Feb. 7, 2008). The
Idaho Public Utilities Commission (Idaho PUC) again appreciates the opportunity to provide
comments to BP A on its proposed changes to the methodology for determining the ASC for
electric utilities participating in the residential exchange program (REP). This matter is of great
importance to all electric utility customers in Idaho , especially the customers of the investor-
owned utilities (lOUs) subject to the jurisdiction of the Idaho PUC.
The Idaho PUC commends BP A for the significant improvements to the ASCM reflected
in the Draft ROD. We believe the proposed methodology will provide a relatively accurate
estimate of a utility s average system cost. In particular, we specifically support the adoption of
IDAHO PUC COMMENTS
ON THE DRAFT ROD ASCM-
the Draft ROD issues pertaining to: the use of Federal Energy Regulatory Commission (FERC)
Form 1 information; the adjustment of ASCs to reflect major new resource additions; and the
inclusion of transmission costs, federal income taxes, return on equity, and regulatory assets and
liabilities. We believe the proposed methodology accurately reflects the requirements of the Act
and will result in an improved REP that is fair to all residential and farm customers throughout
the Northwest.
ELIMINA TION OF THE DEEMER MECHANISM
While generally supportive of the decisions reflected in the Draft ROD, the IPUC is
concerned about issues related to the ASC that were not addressed in the Draft ROD. The
proposed ASCM changes included in the Draft ROD are related and interconnected to decisions
and issues associated with the WP-07 Supplemental Rate Case, as well as the proposed bridge
and long-term REP contracts. We understand the rationale for parallel proceedings on these
issues, but are also concerned that addressing each matter in separate dockets may fail to
recognize the impact of decisions in one proceeding on issues in the other proceedings.
Specifically, the "deemer" issue remains a concern of the IPUC, and one that was raised
during the consultation process and in our comments on the ASCM, but our concern was not
addressed in the Draft ROD. One of the decisions reflected in the Draft ROD illustrates the
relationship between this overlapping issue and the decisions in the Draft ROD. In Section 4.
of the Draft ROD, BP A recited a comment filed in response to the appropriate consequences if a
utility fails to file an Appendix I. BP A proposed that a failure to file an Appendix 1 will result
in BP A setting "the utility s ASC equal to the PF 1 exchange rate until the end of the Exchange
Period." Draft Rod Section 4.1.8 (Evaluation of Positions) at p. 33. The commenter noted that
IDAHO PUC COMMENTS
ON THE DRAFT ROD ASCM-
suspending REP benefits "creates an alternative to incurring a deemer balance should the utility
anticipate that its ASC will drop below the PF exchange rate during that period.
To provide fairness and clarity to the REP on a going forward basis, the Idaho PUC
believes that BPA should eliminate the deemer mechanism. In other words, when an IOU's ASC
is lower than the BP A PF Exchange rate, the IOU will not be eligible for current REP benefits or
as the Notice states: "no payment flows from the utility to BP A." 73 Fed.Reg. at 7271. If or
when an IOU's ASC becomes higher than the PF rate, the IOU would then become eligible to
receive REP benefits. Requiring an IOU to lli!Y the difference (i., when the utility s ASC is
lower than the PF Exchange rate) before receiving future REP benefits goes beyond the concept
of "wholesale rate parity" between preference customers and IOU customers embodied in the
Northwest Power Act. H.R. Report No. 96-976 (I) at 60, 1980 U.C.. In fact, this payment
by an IOU may constitute a subsidy of either the other IOUs ' REP benefits or the public utilities
rates or both.
Unless this proposed ASCM addresses the deemer mechanism on a prospective basis
the legal and financial disputes that hang like a dark thundercloud over the REP in the past will
continue to do so into the future. Even taking into consideration the proposed changes to the
ASCM, the possibility exists that one or more IOUs' ASCs will be lower than the PF Exchange
rate in future years. Moreover, there is no certainty that the current relationship between the
IOUs ' ASCs and BPA's PF Exchange rate will remain the same over time. In 2008 , the electric
utility industry still faces a great deal of uncertainty regarding resources, for example: carbon-
based emissions, the integration of renewable resources, the construction of major transmission
lines, new technologies for generation and customer resources, and environmental mitigation.
IDAHO PUC COMMENTS
ON THE DRAFT ROD ASCM-
How the resolution of these uncertainties will affect the IOUs' costs/ASCs , BPA's Exchange
rate, and the relationship between the two is unknown at this time.
Adopting a policy of suspending an IOU's participation in the REP (without accruing
interest) when its ASC is lower than the PF Exchange rate, but resuming REP eligibility when its
ASC is higher than the PF Exchange rate, is a solution that is easy to understand and implement.
This policy harms no other party, and is consistent with the Northwest Power Act.
In summary, the Idaho PUC supports the Administrator s proposed changes to the
ASCM. The Idaho PUC also recommends that the Administrator adopt the solution we propose
for resolving the deemer issue.
Respectfully submitted this 12th day of June 2008.
FOR THE IDAHO PUBLIC UTILITIES COMMISSION
~J Donald L. Howell, II
Deputy Attorney General
PO Box 83720
472 W. Washington Street (83702-5918)
Boise, ID 83720-0074
Idaho State Bar No. 3366
Telephone No. [phone]
E-mail: don.howell~puc.idaho.gov
N :BP A ASCM-- wh dh _ROD Comments
IDAHO PUC COMMENTS
ON THE DRAFT ROD ASCM-