2001618_dh.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK
LISA NORDSTROM
BEV BARKER
LYNN ANDERSON
KEITH HESSING
TERRI CARLOCK
RANDY LOBB
GENE FADNESS
WORKING FILE
FROM:
DATE:
JUNE 18, 2001 RE: IDAHO POWER’S REQUEST TO ESTABLISH THE MINIMUM ENERGY COST AMOUNT (“THE TRIGGER”) BEFORE ISSUANCE OF ENERGY COST BONDS; CASE NO. IPC-E-01-19

Earlier this year the Legislature enacted a new law to provide for the issuance of Energy Cost Recovery Bonds. Energy Cost Recovery Bonds allow natural gas and electric utilities to recover short-term costs over several years, thus leveling or decreasing the amount of such rate increases in PCA or PGA mechanisms. Prior to authorizing a company to issue Energy Cost Bonds, the Commission must establish a “trigger” or a minimum energy cost amount (expressed in cents per kilowatt-hour (kWh) or cents per therm) for each electric or natural gas public utility. On May 25, 2001, Idaho Power filed an Application seeking to establish its trigger for energy cost bonding.

BACKGROUND
Before an energy utility may submit an Application requesting Commission permission to issue Energy Cost Bonds, the Commission must first establish the trigger threshold for each utility. Once established, then the utility may seek to recover “qualifying energy costs” through the issuance of Energy Cost Bonds. Bonds may be issued for a duration of one to five years as set by the Commission. Energy costs, which may be recovered through the issuance of the Bonds, include fuel or power cost adjustments, commodity electricity rate adjustments, or purchased power trackers. See Idaho Code § 61-1502(4). Once a utility files an application seeking to establish its trigger, the Commission must issue its Order regarding the trigger within 28 days, or in this case, no later than June 22, 2001.
In its Application, Idaho Power recommends that the Commission establish a trigger of 1¢ per kWh. The Company reports that based on its 1999 normalized Idaho jurisdictional revenues, a trigger of 1¢ equates to an annualized revenue increase of $127,704,000. In other words, Idaho Power could seek to recover its operating costs through the issuance of Energy Cost Bonds when requesting a rate increase in excess of $127.7 million.
On June 1, 2001, the Commission issued a Notice of Application and a Notice of Modified Procedure in this matter. Given the statutory requirement to issue its Order within 28 days, the Commission found that there was good cause to request public comment in fewer than 21 days. Consequently, the Commission directed that comments in this matter be submitted no later than June 14, 2001. The only party to submit comment was the Commission Staff.
STAFF COMMENT
In its analysis, the Staff compared the Company’s proposed trigger amount of $127.7 million with triggers set at $50 million, $100 million, and $200 million. The side-by-side comparison was included in Staff comments as Attachment A (attached to this decision memorandum). Staff suggested that the potential savings and benefits to the Company and its customers are best analyzed at the time that the Company files an Energy Bond Application. However, for comparative purposes, Staff was able to calculate potential benefits for the use of the Bonds at various triggers. Line 16 of the Attachment represents the overall revenue increase utilizing each of the four comparative triggers.
According to Staff’s analysis, using any of the four comparative trigger amounts would be reasonable. Staff recommends that the Commission choose a trigger amount that represents the lowest single-year percentage increase that the Commission is willing to pass through to customers without considering multiple-year securitization.
COMMISSION DECISION
What trigger does the Commission wish to establish for the potential use of Idaho Power Energy Bonds?

vld/M:IPC-E-01-19_dh

DECISION MEMORANDUM 2