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Home My WebLink About20110128Idaho Power Reply Comments.pdfesIDA~PORQ9 An IDACORP Company LISA D. NORDSTROM \Lead Counsel \ fHU Inordstrom~idahopower.com '4 January 28, 2011 VIA HAND DELIVERY Jean D. Jewell, Secretary Idaho Public Utilities 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 Reply Comments in the above matter. Very truly yours, cK~ tJ.1( ~k~ Lisa D. Nordstrom LDN:csb Enclosures 1221 W. Idaho St. (83702) P.O. Box 70 Boise, ID 83707 LISA D. NORDSTROM (ISB No. 5733) DONOVAN E. WALKER (ISB No. 5921) Idaho Power Company 1221 West Idaho Street P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5825 Facsimile: (208) 388-6936 Inordstrom(ëidahopower.com dwalker(ëidahopower.com 21WI JAN 28 Piî~: 32 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 ) CASE NO. GNR-E-10-03 GROWTH ADJUSTMENTS THAT ARE ) PART OF POWER COST ADJUSTMENT ) IDAHO POWER COMPANY'S REPLYMECHANISMS. ) COMMENTS ) ) COMES NOW, Idaho Power Company ("Idaho Powet' or "Company") and hereby responds to the Comments of the Industrial Customers of Idaho Power ("ICIP") filed on January 14, 2011. I. BACKGROUND On January 14, 2011, Avista Corporation ("Avista"), Idaho Power, Rocky Mountain Power ("the Utilties") and the Idaho Public Utilities Commission Staff ("Staff') each filed Comments generally supporting Avista's proposal to implement a new method for calculating the load growth adjustment rates ("LGAR") used in each utilty's IDAHO POWER COMPANY'S REPLY COMMENTS - 1 Power Cost Adjustment ("PCA") mechanism. Idaho Power and Rocky Mountain Power both filed Comments advocating for the complete removal of all fixed cost components from their respective PCA mechanisms. However, the Utilties and the Commission Staff ultimately agree that the Avista proposal represents a reasonable compromise that wil avoid the unintended recovery of fixed costs, thereby resulting in customer rates that are fair and reasonable. For Idaho Power, the Avista proposal also eliminates the potential for double recovery of fixed costs between its LGAR and its Fixed Cost Adjustment ("FCA"). Also on January 14, 2011, the ICIP filed Comments recommending that the Idaho Public Utilties Commission ("Commission") reject the Avista proposaL. As an alternative, the ICIP recommended the Commission consider an LGAR based solely on the marginal cost of energy and only be applied asymmetrically when loads are growing. II. ICIP'S RATIONALE FOR REJECTING THE AVISTA PROPOSAL On page one of its Comments, ICIP states that the Commission should reject the Avista proposal because it wil "operate the LGAR mechanism in a way for which it was never intended and in a manner that would allow the utilty to recover non-existent expenses." This statement by the ICIP is incorrect. An LGAR mechanism derived and applied according to the Avista methodology would not result in the recovery of "non- existent expenses." The LGAR is a necessary component of the PCA mechanism that must be applied on a symmetrical basis to adjust actual power supply costs to reflect normal load levels. In periods of load growth, the LGAR eliminates the double recovery of IDAHO POWER COMPANY'S REPLY COMMENTS - 2 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 customers do not receive a double benefit associated with reduced costs through the PCA. ICIP further states on page 8 of its Comments that "Avista and the other utilties have not demonstrated that what costs they are recovering through the LGAR at times of declining loads." Again, the LGAR does not result in the recovery of "non-existent expenses" in times of declining loads. For Idaho Power, the LGARsimply provides consistency between the numerator and denominator of the PCA rate determination. If the PCA was not adjusted to take into account the reduced revenues from decreased load, the customer would automatically receive double benefits in the PCA. First, customers would receive the benefit of actual reduced costs. Second, customers would receive an additional benefit when the PCA rate was computed based upon a load that was higher than actually occurred. Avista also points out this same fundamental aspect of an LGAR on pages 2 and 3 of its Comments. On page 8 of its Comments, the ICIP seems to confuse decoupling with double recovery of costs. The ICIP states that because the Staff points out in its Comments that Avista's proposal wil only "minimize the decoupling effect of the LGAR mechanism," the Avista proposal is "inconsistent with the Commission's directive to 'eliminate potential double recovery.'" On the contrary, the Avista proposal completely eliminates the potential for double recovery of costs, which was only an issue for Idaho Power. As stated in Idaho Power's Comments, the Avista methodology would remove any double counting between the FCA and the LGAR. IDAHO POWER COMPANY'S REPLY COMMENTS - 3 Because each of the utilties classifies a portion of their fixed investment in production plant as energy-related, the LGAR calculated under the Avista proposal 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. Therefore, an LGAR derived under the Avista proposal should not be viewed as a decoupling mechanism. II. ICIP'S PROPOSAL The ICIP recommended the Commission consider an LGAR that is (1) based solely on the marginal cost of energy and (2) only applied when loads are growing; Le., an asymmetrical basis. Idaho Power disagrees with ICIP's entire recommendation. First, ICIP's recommendation with regard to an LGAR based solely on the marginal cost of energy would have the Utilties move back to a methodology that has already been discarded by the Commission. Order No. 30715 in Case No. IPC-E-08-19 approved a settlement Stipulation under which the parties (including ICIP and Idaho Power) agreed to abandon a marginal cost-based LGAR and adopt Idaho Power's current LGAR methodology. As ICIP correctly points out on page 4 of its testimony, Order No. 30715 approved the settlement Stipulation that discontinued the use of marginal cost in the derivation of the LGAR. The parties to the Stipulation agreed that an LGAR methodology that was based on embedded costs of production would result in rates that are fair and reasonable. The Avista proposal builds upon that stipulated approach with refinements that effectively address the Commission's concerns with regard to unintended recovery of fixed-costs. IDAHO POWER COMPANY'S REPLY COMMENTS - 4 Second, for reasons already discussed, Idaho Power disagrees with ICIP's recommendation with regard to an asymmetric application of the LGAR. As stated below, Avista effectively captures Idaho Powets position with regard to symmetry and the LGAR or ("LCAR") on pages 2 and 3 of its Comments: NEED FOR SYMMETRY IN GROWING AND DECLINING LOADS Symmetry is needed in applying the same LCAR when loads increase or decline. In a given twelve-month period retail loads could be higher than authorized in some months, and lower than authorized in other months with the change in load for the twelve-month period being higher, lower, or the same as authorized loads. Not applying a consistent LCAR in every month would produce inequitable results for the company and its customers. When retail loads are higher than authorized loads, there is a higher power supply expense to serve the increase in load that is included in Avista's Power Cost Adjustment (PCA). In Avista's PCA its retail revenue credit, or LCAR, is applied to the increase in load to take into account that there is an increase in retail revenue to correspond with the increase in power supply expense. Absent the LCAR adjustment, customers would be overcharged through the PCA for the increase in power supply expense. Likewise, when retail loads are lower than authorized loads, there is a lower net power supply expense to serve the decrease in load that is included in the PCA. Avista's retail revenue credit, or LCAR, is applied to the decrease in load to take into account that there is a decrease in retail revenue that corresponds with the decrease in power supply expense. Absent the LCAR adjustment, customers would receive an undo benefit through the PCA, since the net reduction in power supply expense is directly related to a reduction in retail revenue. IV. CONCLUSION Based on the evidence in the Commission's record and for the reasons described above, Idaho Power respectfully requests the Commission issue its Order IDAHO POWER COMPANY'S REPLY COMMENTS - 5 accepting the Avista proposed LGAR methodology and reject the ICIP's alternative proposaL. DATED at Boise, Idaho, this 28th day of January 2011. ~£J~ cA. NaRDS ROM Attorney for Idah ower Company IDAHO POWER COMPANY'S REPLY COMMENTS - 6 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 28th day of January 2011 I served a true and correct copy of IDAHO POWER COMPANY'S REPLY 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 P.O. Box 83720 Boise, Idaho 83720-0074 Avista Corporation David J. Meyer Kelly Norwood Avista Corporation P.O. Box 3727 Spokane, Washington 99220 PacifiCorp Mark C. Moench Daniel E. Solander Rocky Mountain Power 201 South Main Street, Suite 2300 Salt Lake City, Utah 84111 Ted Weston Rocky Mountain Power 201 South Main Street, Suite 2300 Salt Lake City, Utah 84111 Industrial Customers of Idaho Power Peter J. Richardson Gregory M. Adams RICHARDSON & O'LEARY, PLLC 515 North 27th Street P.O. Box 7218 Boise, Idaho 83702 IDAHO POWER COMPANY'S REPLY COMMENTS - 7 -- Hand Delivered U.S. Mail _ Overnight Mail FAX -- Email kris.sasser(ëpuc.idaho.gov Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email david.meyer(ëavistacorp.com kelly. norwood(ëavistacorp.com Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email mark.moench(ëpacificorp.com daniel.solander(ëpacificorp.com Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email ted.weston(ëpacificorp.com Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email peter(ërichardsonandoleary.com greg(ërichardsonandoleary.com Dr. Don Reading Ben Johnson Associates 6070 Hil Road Boise, Idaho 83703 IDAHO POWER COMPANY'S REPLY COMMENTS - 8 Hand Delivered -- U.S. Mail _ Overnight Mail FAX -- Email dreading(ëmindspring.com ¿12~ Lisa D. Nordstro