28886.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE IDAHO POWER
COMPANY APPLICATION FOR A
REFUNDABLE EMERGENCY ENERGY
CHARGE FOR THE RECOVERY OF
EXTRAORDINARY POWER SUPPLY
EXPENSES.
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CASE NO. IPC-E-01-7

IN THE MATTER OF THE IDAHO POWER
COMPANY APPLICATION FOR AUTHORITY
TO IMPLEMENT A POWER COST
ADJUSTMENT (PCA) RATE FOR ELECTRIC
SERVICE FROM MAY 1, 2001 THROUGH MAY
15, 2002.
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CASE NO. IPC-E-01-11

ORDER NO.  28886

After conducting an evidentiary hearing, the Commission issued Order No. 28852 on September 28, 2001 partially granting Idaho Power Company’s Power Cost Adjustment (PCA) Applications. The Company was allowed to recover approximately $48.86 million in PCA costs including $1.19 million in interest. The Company was authorized to impose a uniform 0.3826¢ per kilowatt hour charge for all of its customers over a one-year period. Following issuance of Order No. 28852, the Commission received two Petitions for Reconsideration filed by two Idaho Power customers. Taken together, the petitions generally suggest the Commission: clarify the Order’s language relating to “Transmission and Wheeling Charges”; reconsider elements of the approved rate design; and reconsider whether the Company should have been granted interest. Having fully reviewed the petitions and the record in this matter, the Commission denies the petitions as set out in greater detail below.
PETITIONS FOR RECONSIDERATION
A. Petition from Charles A. Phillips
On October 2, 2001, a Petition for Reconsideration was filed by Charles A. Phillips, owner of Phillips Farms of Weiser, Idaho. Mr. Phillips had previously filed comments in these cases on April 13, 2001. In his Petition, Mr. Phillips first suggests that the Commission “clear up the confusing language of first paragraph of the ‘Transmission and Wheeling Charges’” section located on page 8 of Order No. 28852. He next suggests the Commission recover the PCA costs over “approximately one year or until the funds approved are collected” rather than setting a firm date that may be rendered inaccurate by consumer conservation.
Third, Mr. Phillips advocates raising the rate of the Residential Customer Group using over 2000 kWh because it is “the wealthiest group in our society and most able to pay more for electricity” while “the Residential Customer Group [using] 1-800 kWh has the least funding available and can least afford the minimal electrical service.” Fourth, Mr. Phillips argues that allowing large corporations to have the lowest rates subsidizes the wealthiest in our society by having higher rates for all other customer groups. In his words, “having higher rates for large corporations better spreads the higher overhead costs such as electricity to the wealthier people who can afford to pay more.” He believes the fairest method of distributing new rates would be to have only 2 customer groups: the Residential Customer Group 0-800 kWh and everyone else.
Finally, Mr. Phillips has “trouble justifying increased rates for customers due to the poor management of Idaho Power.” In addition to weaknesses identified by the Commission, Mr. Phillips points to the “new building in Midvale that is being abandoned after one year and the very poor records in computers that Idaho Power has only begun updating to modern times in the last few months.” He acknowledges that “this is below the level the Commission deals with,” but “both of these have cost customers increases in electricity rates.”
B. Petition from Jeff Blain
On October 4, 2001, a Petition for Reconsideration was filed by Jeff Blain of Pocatello, Idaho. Mr. Blain disagrees with two issues found in Commission Order No. 28852. First, he disputes the veracity of Company witness Anderson’s testimony quoted on page 7 of the Order that “once it [the Company] knew in February 2001 that the snow pack would be low and that prices for power were not going to decline.” Mr. Blain claims that Idaho Power and any “amateur meteorologist” would know that the snow pack would be less and that prices would not decline as early as December because it was a season of peak use. In his words, “any contrary testimony is subterfuge.” Given this analysis, Mr. Blain believes that the Company “did not act reasonably/prudently” and that “even a suggestion of an increase does not have merit.” Furthermore, Mr. Blain disputes the Commission’s finding that Idaho Power was not negligent.
Second, Mr. Blain finds it “unconscionable” and “dishonest” that Idaho Power would ask for carrying charges and that “it is simply fraud.” He states that “the Commission allowing any interest, let alone 6% is totally without justification.” Given these two issues, Mr. Blain asks for a “formal hearing and review of process and content” that is “open to the public” because “both of these charges need review prior to giving Idaho Power any further approval for action.” He also requests that “all documentation pertinent submitted by Idaho Power” be given to him prior to the hearing along with a copy of the hearing transcript.
COMMISSION DISCUSSION AND FINDINGS
The Commission has reviewed and considered the filings and testimony of record in Case Nos. IPCE01-7 and IPC-E-01-11, including our final Order No. 28852 and the Petitions for Reconsideration from Mr. Phillips and Mr. Blain. Because the petitioners did not provide the Company with a copy of their respective letters as required by Rule 44, Idaho Power did not have an opportunity to timely respond to their filings. IDAPA 31.01.01.044 and .331.02. The Company indicated informally that it did not wish to file a late response to the Petitions but wished to reserve the right to answer the Petitions should they proceed to the appellate level.
A. Standards for Reconsideration
Reconsideration provides an opportunity for a party to bring to the Commission’s attention any issue previously determined and thereby provides the Commission with an opportunity to rectify any mistake or omission. Washington Water Power Co. v. Kootenai Environmental Alliance, 99 Idaho 875, 591 P.2d 122 (1979). In those instances where an aggrieved party asks the Commission to reconsider its decision based upon the record, it may simply do so. The Commission may also grant reconsideration by rehearing if it intends to take additional evidence or argument. If reconsideration is granted, the Commission must complete its reconsideration within 13 weeks after the date for filing petitions for reconsideration. Idaho Code § 61-626(2). If the Commission grants reconsideration, it “must issue its order upon reconsideration within twenty-eight (28) days after the matter is finally submitted for reconsideration.” Id.
The Commission’s Rules of Procedure set out the requirements to which Petitions for Reconsideration must conform. To allow parties to timely respond to reconsideration filings, Rule 63 provides that all documents must be served upon the representatives of every party of record. IDAPA 31.01.01.063. Rule 331.01 requires Petitions for Reconsideration to “set forth specifically the ground or grounds why the petitioner contends that the order or any issue decided in the order is unreasonable, unlawful, erroneous or not in conformity with the law, and a statement of the nature and quantity of evidence or argument the petitioner will offer if reconsideration is granted.” IDAPA 31.01.01.331.01. To allow the Commission to consider the relief requested by the petitioner, Rule 331.03 requires that a Petition for Reconsideration “must state whether the petitioner . . . requests reconsideration by evidentiary hearing, written briefs, comments, or interrogatories. . . .” IDAPA 31.01.01.331.03.
B. Petition from Charles A. Phillips
1. Clarify the Order. At the start and end of his petition, Mr. Phillips requests that the Commission consider his thoughts on how some items within Order No. 28852 could be “adjusted.” First, Mr. Phillips requests that the Commission “clear up” the discussion of Transmission and Wheeling Charges on page 8. Although we attempted to clearly explain transmission arbitrage and how it operates, it is a complex concept whose technical terms make it difficult to explain succinctly. In essence, our Order expressed concern that Idaho Power’s unregulated affiliate has used the Company’s transmission facilities without properly compensating the regulated utility or its customers.
2. Surcharge Period. Mr. Phillips’ second item pertained to the time-period that the PCA surcharge would be in effect. He suggested that the time-period of the surcharge be flexible, rather than a fixed period. He reasoned that a “fixed” PCA surcharge recovery period might not allow the Company to recover its authorized revenue if customers reduce their energy use due to conservation efforts. Although we understand Mr. Phillips’ thoughtful point, we decline his suggestion.
The PCA mechanism includes a “true-up” component to adjust for the over- or under-collection of power supply costs. The PCA surcharge may under- or over-collect the exact authorized amount because of variables such as weather, customer growth, load growth, economic conditions or conservation. The Commission determined that only one true-up should be allowed because the PCA true-up component was designed to be symmetrical. In other words, any under- or over-collection would favor customers half the time and the other half would benefit the shareholders. Thus, a change in customer usage due to conservation will not change the recovery period because the recovered surcharge amount is not specifically tracked. Given that it is difficult to collect the exact amount given the interplay of many factors, the Commission finds it appropriate to continue to use a fixed one-year period to recover excess power supply costs.
3. Residential Rates. Mr. Phillips’ third point suggests that the PCA surcharge for residential customers be modified to “minimize the increases to the poor, elderly and those on limited income.” He explained that this would occur by “not raising the rate for Residential Customer Group 0-800 kWh and increasing the rates for the Residential Group over 2000 kWh . . . to let everyone have a minimum level.” He stated that the wealthiest residential customers use over 2000 kWh. We decline to adjust the rate design and cannot agree with the premise that the wealthiest customers consume the most electricity.
Under the approved three-tiered rate block structure, all residential customers have “a minimum level” – that is, 800 kWh of relatively inexpensive power. The Commission implemented this structure to respond to public comments that rates needed to be kept low for an amount of minimum usage. However, the Commission also sought to promote energy conservation in our initial Order No. 28722 by increasing the cost of energy to households that use more than 2000 kWh. The result is that the cost burden was shifted from those in the “minimum level” to those who use large amounts of electricity. To the extent that the poor, elderly and those on a limited income have service within the 0-800 kWh range, they benefit from the tiered block structure. Order No. 28852 did not increase the rates of the customers who use more than 2000 kWh because the per kilowatt rate for this group was already approximately 47% more expensive than the rate charged to the 0-800 kWh group in Order No. 28722. Although customers with larger homes may fall within the 2000+ kWh category, so may homeowners with small dwellings that depend solely on electricity for space heating and/or have minimal weatherization. We continue to find that the tiered block rates authorized in Orders Nos. 28722 and 28852 appropriately balance these competing interests and should remain in effect during the current PCA year.
4. Large Business Rates. Mr. Phillips also contends that large corporations pay comparatively lower rates. This difference subsidizes the wealthy corporations. It is true that industrial rates are lower on a per kilowatt-hour basis than other customer rates. However, this occurs because it costs Idaho Power less to serve industrial customers, who use large quantities of electricity at a single location and on a sustained hourly basis. The lower industrial rates do not subsidize the industrial class; they merely reflect the lower cost to Idaho Power of serving high-use industrial customers. Rates differ among customer classes based upon many factors including consumption, the nature of the use, the time of use, the pattern of use, the cost of service, economy of operation, peak load, etc. Grindstone Butte Mutual Canal Co. v. Idaho PUC, 102 Idaho 175, 627 P.2d 804 (1981); Idaho Code § 61-315. The Commission finds that the industrial rates are reasonable and appropriately reflect the costs that Idaho Power incurs to serve them.
5. Management Penalty. Finally, Mr. Phillips argues that customers should not be forced to pay increased rates due to the “poor management of Idaho Power.” He cited an abandoned Idaho Power building in Midvale and the Company’s computer system items as two such examples. The rate increases authorized this year stem from increased purchased power costs – not the capital costs incurred by Idaho Power that Mr. Phillips mentions. In the present case, the Commission suspended recovery of approximately $59 million in purchased power costs to facilitate a thorough investigation of Idaho Power’s trading practices in Order No. 28722 issued May 1, 2001. On September 28, 2001, the Commission denied nearly $12 million of this amount due to the Company’s failure to demonstrate that it acted reasonably in failing to execute a transaction and properly account for its real-time transactions in Order No. 28852. Although Idaho Power’s past management of the regulated utility was investigated, the Commission did not find an adequate basis to deny further recovery. Case No. IPC-E-01-16 continues to investigate and improve Idaho Power’s risk management on a forward-going basis.
C. Petition from Jeff Blain
1. Snow Pack and Prices. Mr. Blain argues that the Company should not recover its PCA costs because “Idaho Power knew [that wholesale] prices would not decline as early as December.” He asserts that the Company also knew that the snow pack was less than normal. In December 2000, power spot market prices were reaching unprecedented highs. However, the price of power over the previous four years was consistently in the $50/MW range. The Company, or for that matter the Commission, could not know if prices would rise or fall in the coming months. During the evidentiary hearings held August 28-30, 2001 in this matter, Idaho Power witness Anderson testified that initial snow pack reports for the 2001 water year indicated that snow pack conditions were “on track with or slightly below normal conditions.” Tr. at 125. Moreover, Mr. Anderson stated that it was not evident until mid-January and early February 2001 that normal or near normal snow pack accumulation was not likely to materialize in 2001. Tr. at 129. Although poor early snow pack returns did give Idaho Power cause for concern, December was too early to adequately assess the seasonal snow pack southern Idaho would receive that winter with January and February yet to come. The Commission cannot use hindsight to judge the reasonableness of Idaho Power’s management decisions last winter. Basing our findings solely upon the information available at the time the Company made its hedging decisions, the evidence does not definitively prove that the Company’s actions were unreasonable under those circumstances. Consequently, the Commission reaffirms its prior decision not to penalize the Company for its hedging decisions during the 2000-2001 PCA period.
2. Interest. Mr. Blain finds the Commission’s authorization of interest to compensate the Company for the cost of carrying the nearly $48 million in recoverable debt to be “totally without justification.” We disagree. During the five months the Commission took to conduct its investigation, Idaho Power paid almost $1.2 million in interest to continue borrowing the nearly $48 million it was later authorized to recover in Order No. 28852. Past practice, PCA policy and basic fairness require the Commission to compensate Idaho Power for the carrying costs incurred while the investigation took place. In Order No. 28575, the Commission approved an annual interest rate of 6% on all customer deposits held during the 2001 calendar year. This is based on the average interest rate for one-year treasury bills for the 12-month period from November 1, 1999 through October 31, 2000. The Commission finds it reasonable and appropriate to pay Idaho Power the same interest rate that Idaho Power must pay customers for holding money that is rightfully owed them.
D. Procedural Defects
Mr. Blain also requested a “formal hearing and review of process and content.” However, the petition does not indicate “the nature and quantity of evidence or argument the petitioner will offer if reconsideration is granted.” IDAPA 31.01.01.331.01. The Commission took extensive testimony during the evidentiary hearings held August 28-30, 2001 and finds that another hearing is not required. The August hearing “reviewed process and content,” was open to public, and was covered by the media. Mr. Blain’s Petition for Reconsideration offers to produce no new evidence of a nature relevant to the issues raised in the Company’s Application and Order No. 28722. For the reasons identified, we find it reasonable to deny both Petitions for Reconsideration. Idaho Code § 61-626(2).

O R D E R
IT IS HEREBY ORDERED that the Petitions for Reconsideration filed by Charles A. Phillips and Jeff Blain in Case Nos. IPC-E-01-7 and IPC-E-01-11 are denied.
THIS IS A FINAL ORDER ON RECONSIDERATION. Any party aggrieved by this Order or other final or interlocutory Orders previously issued in this Case Nos. IPC-E-01-7 and IPC-E-01-11 may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules. See Idaho Code § 61-627.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of October 2001.

PAUL KJELLANDER, PRESIDENT

Commissioner Smith Out of the Office this Date
MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

O:IPCE017_11_ln2_reconsdr

ORDER NO. 28886 1

Office of the Secretary
Service Date
October 30, 2001