20110114Idaho Power's Comments.pdf

LISA D. NORDSTROM
Lead Counsel
Inordstromcmidahopower.com
1SIDA~POR~
An IDACORP Company
January 14, 2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. GNR..E-10-03
IN THE MATTER OF THE COMMISSION'S INQUIRY INTO LOAD
GROWTH ADJUSTMENTS THAT ARE PART OF POWER COST
ADJUSTMENT MECHANISMS
Dear Ms. Jewell:
Enclosed for filng please find an original and seven (7) copies of Idaho Power
Company's Comments in the above matter.
Very truly yours,
Jz~iJ.~~
Lisa D. Nordstrom
LDN:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise. ID 83707
Ci\/l:
LISA D. NORDSTROM (ISB No. 5733)
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
Inordstromcæidahopower.com
dwalkercæidahopower.com
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Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S )
INQUIRY INTO LOAD GROWTH ) CASE NO. GNR-E-10-03
ADJUSTMENTS THAT ARE PART OF )
POWER COST ADJUSTMENT ) IDAHO POWER COMPANY'SMECHANISMS. ) COMMENTS
)
)
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company") in
response to the Notice of Filng and Modified Procedure issued by the Idaho Public
Utilties Commission ("Commission") on November 24, 2010, in Order No. 32124, and
submits the following Comments.
I. BACKGROUND
On May 28, 2010, the Commission issued Order No. 31093 in case No. IPC-E-
10-12 (p. 14) in which it noted "a potential inequity caused by an LGAR when retail load
declines during the year." The Commission also expressed a concern in Rocky
Mountain Powets Energy Cost Adjustment Mechanism ("ECAM"), Case No. PAC-E-10-
IDAHO POWER COMPANY'S COMMENTS - 1
01, stating that in periods of declining loads, the LGAR "looks less like a power cost
adjustment and more like a vehicle to restore lost revenue due to decreases in
customer usage." Order No. 31093. The Commission directed the Staff, Idaho Power,
Avista Corporation ("Avista"), Rocky Mountain Power ("the Utilties") and interested
parties "to meet as soon as practicable to address an appropriate change to load growth
adjustment mechanisms to eliminate a potential double recovery when loads decline."
Id.
On June 9, 2010, the Commission Staff hosted a workshop as required by Order
No. 31033 with the Utilties to discuss the Commission's concerns with regard to the
respective load growth adjustment mechanisms. On September 10, 2010, the
Commission initiated Case No. GNR-E-10-03, the Commission's inquiry into the Load
Growth Adjustment Rate ("LGAR") for Avista's and Idaho Power's Power Cost
Adjustment mechanisms ("PCA") as well as Rocky Mountain Power Company's ECAM.
The Staff hosted a second workshop on September 28, 2010, with the Utilties and
interested parties to further discuss the LGAR. At the workshop, Avista proposed a new
approach to calculating the LGAR that it believed would address the Commission's
concerns. The attendees agreed to evaluate the proposed methodology and prepare
written comments in response to the proposal in the GNR-E-10-03 docket. On
November 17, 2010, Commission Staff filed a motion to allow all interested parties to
consider and comment on the proposed modification to the LGAR. The Commission
issued a Notice of Filng and Modified Procedure in Order No. 32124 on November 24,
2010, in which it invited comments to be submitted by January 14, 2011.
IDAHO POWER COMPANY'S COMMENTS - 2
II. IDAHO POWER'S CURRENT LGAR
Idaho Powets current LGAR of $26.63 per megawatt-hour ("MWh") was derived
under the stipulated methodology approved by the Commission in its Order No. 30715
in Case No. IPC-E-08-19. The LGAR represents the amount of base level power supply
expense and specific generation-related cost recovery that is included in the Company's
base rates. In periods of load growth, the LGAR eliminates the double recovery of
power supply expenses and the potential for double recovery of other specific
generation-related costs that mayor may not be increasing. In periods of load decline,
the LGAR is consistently applied to ensure that the Commission-allowed base level
power supply costs are appropriately accounted for in the calculation of the PCA. That
is, the LGAR recognizes that the amount of power supply expenses and other specific
generation-related costs recovered through the Company's base rates changes as
loads increase or decline. Therefore, a "load growth adjustment" must be made in order
to properly estimate power supply expenses at normalized load levels.
The stipulated LGAR methodology produces a rate with three components: (1) a
return component, (2) an expense component, and (3) a revenue component. Each
rate component is based upon the Idaho jurisdictional production-related revenue
requirement established in the most recent revenue requirement proceeding, which for
Idaho Power is Case No. IPC-E-08-10.
The Company has maintained for many years that the LGAR calculation should
be based solely upon the per unit variable power supply expense amount included in
base rates. See the Company's Reply Comments in Case No. IPC-E-10-12, Rebuttal
Testimony in Case No. IPC-E-06-08 (Tr. pp. 18, 51), Order No. 30215. However, the
IDAHO POWER COMPANY'S COMMENTS - 3
Company agreed to the current method of calculating the LGAR as a reasonable
alternative to its LGAR-preferred methodology ("Preferred Methodology") as part of the
settlement stipulation in Case No. IPC-E-08-19. Under its Preferred Methodology,
Idaho Powets LGAR is derived using only variable power supply expenses and would
be $13.41 per MWh as shown on Attachment No.1 under the section, "IPC's LGAR
using IPC's Preferred Methodology."
II. THE AVISTA PROPOSAL
Under the methodology proposed by Avista at the September 28, 2010,
workshop and described in Order No. 32124 ("Avista Methodology"), the LGAR would
be calculated based upon each Company's embedded production revenue requirement
that is classified as energy-related or "variable" for ratemaking purposes. Because each
of the Utilties classifies a portion of their fixed investment in production plant as energy-
related, the LGAR calculated under the Avista Methodology would stil have a fixed-cost
component. However, the variable classification of the fixed-costs would be consistent
with that used for all other ratemaking purposes, including Idaho Powets Fixed Cost
Adjustment ("FCA"). Because Idaho Power derives its FCA rates based upon the
portion of revenue requirement that is classified as fixed, the Avista Methodology would
remove any potential double counting between the FCA and the LGAR. Further, the
Avista Methodology would maintain symmetry between cost recovery and customer
refunds whether loads are growing or declining. For these reasons, the Company
believes that the proposed Avista Methodology is a reasonable alternative to the
Company's preferred approach and an improvement over the stipulated methodology
currently in effect.
IDAHO POWER COMPANY'S COMMENTS - 4
The Company provided the following example in previous reply comments,
ilustrating why symmetry must be maintained:
The LGAR does not result in the recovery of "phantom" costs
in times of declining loads; rather, the LGAR simply provides
consistency between the numerator and denominator of the
PCA rate determination. In periods of declining growth, the
adjustment reflects normalization of weather and water
conditions to properly estimate power supply expenses at
normalized load levels.
Reply Comments of Idaho Power Company, Case No. IPC-E-10-12.
When the proposed Avista Methodology is applied to the same functionalized
and classified revenue requirement amounts used to calculate the current LGAR
approved in Case No. IPC-E-08-10, the result is an LGAR rate of $15.43 per MWh, as
shown on Attachment NO.1.
iv. PROPOSED IMPLEMENTATION
Should the Commission approve the Avista Methodology to be applied to Idaho
Powets LGAR, the Company recommends the LGAR be updated to reflect the base
level power supply expenses approved in final Order No. 31042 issued in Case No.
IPC-E-10-01. The 2008 account balances approved in Case No. IPC-E-08-10 for
Account 501, fuel; Account 547, gas; Account 447, Surplus Sales; and Account 555,
Purchased Power, were all updated with the 2010 approved values. This update would
increase the numerator for the LGAR calculation to reflect the same level of power
supply expenses currently contained in base rates.
Because the Company does not have an approved cost of service study that
functionalizes and classifies its currently approved revenue requirement, the Company
proposes to calculate the revised LGAR using the applicable fixed-cost components
IDAHO POWER COMPANY'S COMMENTS - 5
from the study approved in Case No. IPC-E-08-10. The Company further recommends
that the denominator (Idaho jurisdictional firm load) used in the revised LGAR
calculation also be updated to include the current Idaho jurisdictional firm load used in
the calculation of the base rates that went into effect on June 1, 2010. Current base
rates were established using updated base level power supply expenses as well as
updated Idaho jurisdictional firm load; therefore, it is appropriate to use updated power
supply expenses and updated loads for purposes of calculating the LGAR.
When Idaho Powets LGAR is derived under the proposed Avista Methodology
with updated base level power supply expenses and the updated Idaho jurisdictional
firm load, the LGAR increases from $15.43 to $19.36 per MWh, as shown on
Attachment NO.1. The Company recommends that the new LGAR rate of $19.36 be
implemented on April 1 ,2011, to correspond with the 2011/2012 PCA year.
The Company believes that future LGAR rates should continue to be calculated
at the time of a revenue requirement proceeding. The numerator should only change
when a general revenue requirement is approved or when new base power supply
expenses are approved, as was the case in 2010. As mentioned above, the
denominator should be equal to the Idaho jurisdictional firm loads that are used to
calculate the base rates that wil be in effect during the period in which the LGAR wil be
applied.
v. CONCLUSION
The Company continues to believe that a LGAR that includes only variable power
supply expenses is the most effective and appropriate method of addressing the
Commission's concerns with regard to fixed-cost recovery through the LGAR (i.e., its
IDAHO POWER COMPANY'S COMMENTS - 6
preferred methodology).However, the proposed Avista Methodology is an
improvement over the current LGAR methodology as it removes a significant portion of
the fixed-costs included in the rate. In addition, for Idaho Power, it also eliminates any
overlapping of fixed-cost recovery between the FCA and LGAR. If approved, Idaho
Power recommends the Commission apply the LGAR methodology change for Idaho
Power as set forth above.
DATED at Boise, Idaho, this 14th day of January 2011.
L SA D. NORDST
Attorney for Idaho
IDAHO POWER COMPANY'S COMMENTS - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 14th day of January 2011 I served a true and
correct copy of IDAHO POWER COMPANY'S COMMENTS upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Kristine A. Sasser
Deputy Attorney General
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
-. Hand Delivered
U.S. Mail
_ Overnight Mail
FAX
-. Email kris.sassercæpuc.idaho.gov
Avista Corporation
David J. Meyer
Kelly Norwood
Avista Corporation
1411 East Mission Avenue - MSC-23
P.O. Box 3727
Spokane, Washington 99220-3727
Hand Delivered
-. U.S. Mail
_ Overnight Mail
FAX
-. Email david.mevercæavistacorp.com
kelly.nordwoodcæavistacorp.com
Rocky Mountain Power
Mark C. Moench
Daniel E. Solander
Ted Weston
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
Hand Delivered
-. U.S. Mail
_Overnight Mail
FAX
-. Email mark.moench(ipacificorp.com
daniel.solander(ipacificorp.com
ted. weston(ipacificorp. com
IDAHO POWER COMPANY'S COMMENTS - 8
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. GNR-E-10-03
IDAHO POWER COMPANY
ATTACHMENT NO.1
IDAHO POWER COMPANY (IPC) LOAD GROWTH ADJUSTMENT RATE (LGAR)
IPC's Current LGAR: $26.63
IPC's LGAR using Avista's Proposed Methodology
Idaho Jurisdiction Firm Load
Energy-Related Generation Function Rev Req
Proposed LGAR under Avista Method
2008 GRC
Case No. IPC-E-08-10
15,036,726
$ 231,988,322 $
1$ 15.431 $
2010 PCA
IPC-E-l0-12
14,812,596
231,988,322
15.66
Avista's Proposed LGAR Methodology Updating IPC's 2010 Power Supply Base Components
Idaho Jurisdiction Firm Load
Energy-Related Generation Function Rev Req
Proposed LGAR under Avista Method with
updated 2010 Power Supply Base Components
2008 GRC
Case No. IPC-E-08-1O
15,036,726
$ 286,698,607 $
$19.07 $19.36
IPC's LGAR using IPC's Preferred Methodology
(FERC Accounts Approved in Case No. IPC-E-l0-0l)
FERC Account Expense
Account 501, Coal $167,718,084
Account 547, Gas $6,062,472
Account 555, Purchased Power $65,156,589
Account 447, Surplus Sales $(92,642,114)
PURPA $62,851,454
Total System $209,146,485
Idaho Jurisdictional Allocation 95%
Total Idaho Jurisdictional $198,689,161
Idaho Jurisdictional Firm Load 14,812,596
1$13.41 IVariable LGAR
2010 PCA
IPC-E-l0-12
14,812,596
286,698,607