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Home My WebLink About20010921Decision Memo.pdfDECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RON LAW LOUANN WESTERFIELD BILL EASTLAKE TONYA CLARK DON HOWELL LYNN ANDERSON DAVE SCHUNKE MICHAEL FUSS RANDY LOBB TERRI CARLOCK GENE FADNESS WORKING FILE FROM: SCOTT WOODBURY DATE: SEPTEMBER 21, 2001 RE: CASE NO. IPC-E-01-30 (Idaho Power) BPA RESIDENTIAL AND SMALL FARM ENERGY RATE ADJUSTMENT CREDIT On August 31, 2001, Idaho Power Company (Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting approval of a new tariff Schedule 98, which will implement a Bonneville Power Administration (BPA) Residential and Small Farm Energy Credit (BPA Credit). The Credit for which approval is sought is for the period October 1, 2001 through September 30, 2006. The Company requests an effective date of October 1, 2001. The Company requests approval of the proposed accounting entries that are required to track the BPA calculations and for related modifications to the Power Cost Adjustment (PCA) calculation. Settlement Agreement In support of its Application, Idaho Power represents that it signed a Settlement Agreement (Agreement) with BPA whereby Idaho Power received 120 aMW of benefits from DECISION MEMORANDUM 1 the federal Columbia River Power System beginning October 1, 2001. The benefits provided for under this Agreement are to be passed through and shared by the residential and small farm customers of Idaho Power. Idaho Power Company’s Idaho residential and small farm customers will receive 115 aMW of benefits. The Company’s customers in the state of Oregon will receive 5 aMW of benefits. The Agreement between Idaho Power and BPA settles the parties’ rights and obligations for the Residential Exchange Program provided for by the Northwest Regional Power Act that was designed to benefit the residential and small farm customers of the Pacific Northwest investor-owned utilities (IOUs). The benefits of the Settlement Agreement consist of two components: a monetary benefit and a firm power sale benefit. The monetary benefit is a direct payment each month by BPA to Idaho Power and is determined by the difference between BPA’s forward flat-block price forecast ($38/MWh) and BPA’s base residential load firm power (RL) rate ($19.76/MWh). The Company proposes to calculate the power sale benefit as the difference between the average monthly Mid-C price and the monthly residential load firm power (RL) rate. The Mid-C heavy load hours (HLH) and light load hours (LLH) prices will be weighted by the amount of power delivered in HLH and LLH hours. The RL rate, adjusted by BPA’s cost recovery adjustment clause (CRAC), will be the actual amount billed to Idaho Power by BPA calculated on a daily basis for each revenue month. The Company has a number of additional options related to the firm power sale component. Idaho Power may take delivery of power and calculate the value of this firm power delivery. The Company may elect to terminate the Firm Power Sale Agreement and convert it to the monetary benefit. Idaho Power Company retains the right to terminate the Firm Power Sale Agreement up to 30 days after FERC grants interim approval for the BPA’s wholesale power rates that are effective October 1, 2001. If the Company decides not to terminate the Firm Power Sale Agreement, Idaho Power has the right to have all or a portion of the power delivered or not delivered. If all or a portion of the power is not delivered, it is converted to a cash payment. The cash payment is calculated as the difference between the average firm Mid-C index price for the month and the BPA RL rate less wheeling and losses multiplied by the amount of power Idaho Power does not schedule. DECISION MEMORANDUM 2 BPA’s RL rate is subject to three cost recovery adjustment clauses (CRAC): a “load base” (LB) CRAC, a “financial base” (FB) CRAC, and a “safety net” (SN) CRAC. The firm power sale benefits are subject to all three CRAC amounts, whereas the monetary benefit is only subject to the SN CRAC. The CRAC amounts will be calculated by BPA every six months. Thus, a change in the CRAC amount will change the value of the benefits that flow to residential and small farm customers. Accounting Benefits derived, as a result of the Settlement Agreement, will be deferred to Account 254—Other Regulatory Liabilities. Separate subaccounts will be used to distinguish between residential and qualifying small farms by state. The monetary benefit and the net benefit value- cost will be directly credited to Account 254 as well as interest calculated on qualifying small farms retentions. Interest will be charged to Account 431—Other Interest Expense. The payment for power deliveries taken at BPA energy prices will be charged to Account 555— Purchased Power Expense. The benefit associated with the power deliveries taken, will be the difference between the Mid-C price and the amount paid to the BPA for the power and will be accounted for by debiting Account 557—Other Power Supply Expense and crediting Account 254. The result being that the charges to Account 555 and Account 557 will reflect a purchased power expense amount equivalent to having purchased power at the average Mid-C price for the month. Charges to Accounts 555 and 557 will be included in the calculation of the deferral of power cost under the PCA mechanism. Account 254 will be cleared (debited) and the offsetting credit being applied to Account 142—Customer Accounts Receivable for the total benefit passed through to the qualifying customers including any interest on qualifying small farms retentions. Power Cost Adjustment (PCA) Modification Without a modification to the PCA, the net benefits of the BPA power acquisition will be distributed twice. The PCA calculations will reflect the same net benefit used to establish credits on residential and small farm accounts. Three line item modifications to the PCA calculation are required. Two of the line item modifications relate to the purchase power expense for the 63 MW. The third line item modification is required to reflect the value of the 63 MW purchase in excess of the direct 63 MW purchase expense. Benefit Distribution/Calculation DECISION MEMORANDUM 3 The Company proposes to pass through the estimated benefit amount on a uniform cents per kilowatt hour basis to all qualifying customers served under Schedules 1, 3, 24, and 25, as well as Prairie Power schedules A and I. The calculation of the benefit for all residential customers will be performed monthly and passed through beginning with the Cycle 1 billing cycle commencing October 25, 2001. The calculation of benefit for qualifying irrigation customers is, the Company states, much more problematic since the benefits may only be received by irrigation customers with agricultural pumping loads 222,000 kilowatt hours per month or less. Benefit dollars to be passed through to qualifying small farm loads will be calculated monthly, but will be retained and passed through on an annual basis, concurrent with the annual kWh and property tax rebate program. The Company’s Application is accompanied by supporting testimony and exhibits. On September 12, 2001, the Commission issued Notices of Application and Modified Procedure in Case No. IPC-E-01-30. The deadline for filing written comments was Thursday, September 20, 2001. The Commission Staff was the only party to file comments (attached). Staff recommends that the Company’s Application be approved with the following modifications: 1. The cost of delivered BPA power and the quantified benefit of that power that is disbursed by Idaho Power to qualifying customers should be allocated to all jurisdictions within the PCA like any other power supply expense. 2. The cost of delivered BPA power should be shared 90/10 by customers and Idaho Power like any other non-QF power supply expense. 3. Benefits derived and paid by Idaho Power to qualifying customers for BPA power delivered should be excluded from the 90/10 sharing provision of the PCA. 4. The Company should report monthly market prices, monthly energy use subject to the credit and monthly credits paid in conjunction with current reports provided for the PCA. Staff’s recommendation does not change the calculation of benefits derived nor the benefits returned to qualifying customers as a result of power purchases from BPA. It simply applies existing PCA methodology to recover expenses associated with power actually delivered. The only exception is that Idaho Power is not required to share the cost of benefits quantified and returned to customers. Moreover, Staff recommendation assures that the FERC jurisdiction DECISION MEMORANDUM 4 DECISION MEMORANDUM 5 shares in the cost of a BPA power purchase program that reduces system power supply costs in other areas such as fuel, other power purchase expenses or increased power sales. Non- qualifying customers in Idaho and Oregon share the BPA purchased power expense and, Staff contends, so should the FERC jurisdiction as would be required for any other non-QF power purchase expense. Commission Decision Idaho Power proposes to implement a tariff Schedule 98 BPA Residential and Small Farm Energy Rate Adjustment Credit. Staff recommends approval of the Company’s Application with modification. Idaho Power recommends that the Commission approve the credit and requests an opportunity to file written comments regarding Staff’s proposed modifications. Does the Commission find this procedure acceptable? Scott Woodbury vld/M:IPC-E-01-30_sw