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Home My WebLink About2000505_cc.docDECISION MEMORANDUM TO: COMMISSIONER HANSEN COMMISSIONER SMITH COMMISSIONER KJELLANDER MYRNA WALTERS RON LAW LOUANN WESTERFIELD DON HOWELL STEPHANIE MILLER DAVE SCHUNKE TONYA CLARK BILL EASTLAKE KEITH HESSING TERRI CARLOCK NANCY HARMON WORKING FILE FROM: CHERI C. COPSEY DATE: MAY 5, 2000 RE: IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO IMPLEMENT THE POWER COST ADJUSTMENT RATE FOR ELECTRIC SERVICE TO CUSTOMERS IN THE STATE OF IDAHO FOR THE PERIOD MAY 16, 2000 THROUGH MAY 15, 2001; CASE NO. IPC-E-00-6 On April 14, 2000, the Idaho Power Company filed an Application for approval of Tariff Schedule 55 implementing a power cost adjustment (PCA) of 0.1371 cents per kWh and related tariffs incorporating the PCA adjustment for the period May 16, 2000 through May 15, 2001. In response to Order No. 28348, Notice of Application and Notice of Modified Procedure, in Case No. IPC-E-00-6 issued April 21, 2000, the Commission Staff and the Industrial Customers of Idaho Power submitted comments. APPLICATION Idaho Power states that, in compliance with Commission Order No. 24806, approving a PCA mechanism for Idaho Power in Case No. IPCE-92-25, Idaho Power's PCA for the period May 16, 2000 through May 15, 2001 consists of: 1) ninety-percent (90%) of the difference between the projected power cost and the Commission’s approved base power cost and 2) the true-up of the 1999/2000 power costs. Idaho Power maintains that the projected power cost was computed in compliance with Commission Order No. 24806 by inserting the National Weather Service Northwest River Forecast Center’s projection of 3.93 million acre feet of April through July Brownlee streamflow run off into the Commission adopted equation for projecting PCA expenses. According to Idaho Power, the resulting projected power cost of $101,488,260 equates to a cost of 0.7274 cents per kWh. This 0.7274 cents per kWh is 0.2036 cents per kWh higher than the Commission’s approved base of 0.5238 cents per kWh. Idaho Power contends that, by virtue of Order No. 25880, Idaho Power is authorized to adjust rates by ninety-percent (90%) of the 0.2036 cents per kWh difference or 0.1832 cents per kWh. Idaho Power states that the true-up component of the PCA is -0.0461 cents per kWh. The difference between the projected power cost and the base power cost (0.1832) and the true-up (-0.0461) combine to produce a PCA for the period of May 16, 2000 through May 15, 2001 of 0.1371 cents per kWh. Idaho Power concludes that the change in the PCA from the existing -0.2143 cents per kWh currently in effect results in an increase of 0.3514 cents per kWh to existing rates. Idaho Power further contends that this Application is not subject to Rule 122 of the Commission’s Rules of Procedure (IDAPA 31.01.01.122) because this filing does not constitute a general rate increase and is only a change in rates related to PCA expenses. Finally, pursuant to Rule 123 (IDAPA 31.01.01.123) and Idaho Code § 61-307, Idaho Power requests that the tariff filing implementing the PCA rate of 0.1371 cents per kWh become effective May 16, 2000. INDUSTRIAL CUSTOMERS’ COMMENTS AND RECOMMENDATION The Industrial Customers raise two issues. First, while the Industrial Customers do not take issue with Idaho Power's calculation of the proposed 2000-2001 PCA, they do express concern about rate shock, especially for Idaho Power customers with high load factors like some Industrial Customers. Industrial Customers Comments at 2 and 5. Second, the Industrial Customers recommend that the Commission initiate a separate proceeding to review the current method for compensating Idaho Power and its shareholders for operating Idaho Power. Industrial Customers Comments at 7-8. They point out that the PCA is only one tool and that since its implementation in 1993, there have been significant changes in the electric industry and the rate moratorium and earnings-sharing agreement have expired. Therefore, they recommend the Commission begin a new case to investigate what is the appropriate rate-regulatory structure for Idaho Power. STAFF COMMENTS AND RECOMMENDATION Utilities Division Staff Recommendation. In March 1993, the Commission authorized Idaho Power to file power cost adjustment surcharges or rebates to take effect on a day of its choosing in May or June each year. Order No. 24806. Staff audited Idaho Power's compliance filing and generally found Idaho Power's calculations were appropriate with one correction to Idaho Power's true-up calculation. Exhibit No. 3 to Idaho Power witness Said’s testimony illustrates the calculation of the 19992000 true-up. The Utilities Division Staff reviewed Idaho Power's calculation and agrees with its result; Idaho Power over collected power supply costs by $4,983,547 last year and owes that amount to its Idaho ratepayers. See Staff Attachment B to its Comments, which shows the same calculation. The approximate $5 million true-up is composed of an $11.3 million over collection of costs resulting from last years runoff forecast and a partial offset of $6.3 million created by the under collection of PURPA Qualifying Facility costs. Utilities Division Staff’s audit of the true-up uncovered an error of $70,287.60 that accrues to the customers’ benefit. Utilities Division Staff and Idaho Power agreed to carry this balance forward in the balancing account which accumulates interest and include it in next years PCA true-up. The total adjustment to be placed in the deferral account is $70,287.60. See Attachment C to Staff’s Comments. The Utilities Division Staff recommends that this amount ($70,287.60) be held in the deferral account as the beginning balance for the next PCA, rather than adjusting the current proposed PCA rates. This dollar amount would result in a small percentage change to the current PCA rate. However, debiting it to Account 182, the PCA deferral account, recognizes the adjustment. During the Utilities Division Staff audit of the true-up portion of the PCA filing, Utilities Division Staff audited the non-operating power marketing transactions, along with the operating power marketing transactions and is satisfied that the accounting and reporting procedures in place in reference to Energy Trading are sufficient to provide reasonable results in the Power Cost Adjustment. This year, the overall increase proposed is 9.52 percent and the increase over base rates is 3.51 percent. However, Staff noted that the magnitude of the increase is substantially caused by the expiration of a large rate decrease associated with good water conditions last year. Therefore, Utilities Division Staff recommends that none of the proposed increase be deferred to next year. Finally, Staff recommends the Commission approve the tariff revisions filed by Idaho Power with an effective date of May 16, 2000. Staff also recommends that the $70,287.60 difference be carried in the balancing account where it would be trued up in next years PCA. Consumer Division Staff Recommendation. The Consumer Division Staff recommends that the Commission return Idaho Power's next Application for a rate change, if it fails to give adequate customer notice. Commission Decision Does the Commission wish to approve Idaho Power’s Application for approval of Tariff Schedule 55, implementing a power cost adjustment of 0.1371 cents per kWh, and related tariffs incorporating the PCA adjustment for the period May 16, 2000 through May 15, 2001? Does the Commission wish to order the $70,287.60 difference be carried in Idaho Power's balancing account where it would be trued up in next years PCA? Does the Commission wish to initiate a new case to investigate the appropriate rate-regulatory structure for Idaho Power? Does the Commission wish to order Idaho Power’s next Application for a rate change be returned if it fails to give adequate customer notice? Cheri C. Copsey Staff: Keith Hessing Nancy Harman M:ipce00006_cc2 DECISION MEMORANDUM 3