20030916Final Order No 29334.pdf

Office of the Secretary
Service Date
September 16 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AUTHORITY
TO IMPLEMENT A POWER COST
ADJUSTMENT (PCA) RATE FOR ELECTRIC
SERVICE FROM MAY 16, 2003 THROUGH
MAY 15, 2004.ORDER NO. 29334
CASE NO. IPC-03-
In June 2003 , the Commission urged the parties to move expeditiously so that
contested issues involving the proper amount of normalized energy to calculate true-up and class
deferral rates could be resolved in a timely manner. Order No. 29258 at 2. Following several
months of negotiations, the parties reached an agreement regarding the outstanding issues in this
PCA docket. On August 20, 2003, Idaho Power Company filed a Motion for Acceptance of
Settlement on behalf of itself Commission Staff, the Industrial Customers of Idaho Power
(ICIP), and the Idaho Irrigation Pumpers Association (Irrigators). After reviewing the record and
the provisions of the Stipulation, the Commission accepts the Stipulation as a fair, just and
reasonable resolution to the contested issues remaining in this case.
PROCEDURAL BACKGROUND
Idaho Power is an electric utility engaged in the generation, transmission, distribution
and sale of electric energy and provides retail electric service to approximately 380 000
customers in southern Idaho and eastern Oregon. On April 15, 2003 , Idaho Power Company
filed an Application to decrease its electric rates under the annual Power Cost Adjustment (PCA)
mechanism first approved by the Commission in 1993. In Order No. 29243 , the Commission
approved the rates proposed in the Company s Application (with one adjustment) effective May
2003, subject to refund and interest. In addition, the Commission set a prehearing conference
to schedule six disputed issues valued at approximately $5.1 million for evidentiary hearing.
These six issues included: 1) pricing of real-time transactions between Idaho Power and
IDACORP Energy (IE); 2) recovery of IE- Tri State Transmission costs; 3) Company sharing of
the anticipated FERC settlement; 4) continuance of payment for IE management contract
benefits; 5) the proper amount of normalized energy to compute the true-up rate; and 6) the
ORDER NO. 29334
proper amount of normalized energy to compute the rates to be paid on PCA amounts deferred
from the prior PCA period. Order No. 29243 at 10.
At the prehearing conference held May 30, 2003, Idaho Power, Staff, the Irrigators
and ICIP entered appearances. Although the Commission had intended to immediately set a date
for an evidentiary hearing at the prehearing conference, the parties proposed an alternative with
the hope that an evidentiary hearing could be avoided.
To further explore the possibility of settlement and achieve a quicker resolution than
might be available through an evidentiary hearing, the Commission adopted the parties' proposal
to move the following four issues to Case No. IPC-01-16 for further proceedings: 1) pricing of
real-time transactions between Idaho Power and IE; 2) recovery of IE- Tri State Transmission
costs; 3) Company sharing of the anticipated FERC settlement; and 4) continuance of payment
for IE management contract benefits. Order No. 29258. Because real-time affiliate pricing,
transmission costs, and resolution of outstanding IE matters are already part of ongoing
settlement discussions in Case No. IPC-01-, the parties felt it would be more efficient to
consolidate these issues under that case number. The Commission directed the remaining two
issues involving the proper amount of normalized energy to calculate true-up and class deferral
rates to continue under this case number (IPC-03-5). Id.
PRO POSED SETTLEMENT
According to the Stipulation, the parties discussed three major issues. First, the
parties sought to determine the appropriate kWh sales level to use as the denominator for
computing the true-up rate for this case and future PCA periods. Second, Idaho Power proposed
inclusion of a carrying charge on the unamortized balances during future true-up collection and
refund periods. The ICIP and Irrigators were also concerned that collection of their allocated
true-up amounts may be too great if 1993 normalized sales were used rather than the 2000
normalized sales levels initially used to compute the deferral amount.
In the signed settlement document, all four parties agreed that:
1. The currently-approved PCA rates will remain in effect through May 15
2004, i., the remainder ofthis 2003-2004 PCA year.
2. The PCA methodology will be modified to include a true-up of the true-
up. At the time the Company makes its April 2004 PCA application, the
Company will compute the amount of any under-collection or over-
collection of the $38.million true-up amount approved by the
ORDER NO. 29334
Commission in Order No. 29243. This amount will then be applied as a
credit (or debit) against the 2004-2005 PCA ("true-up of the true-up
The approved PCA methodology will thereafter include a true-up of the
true-up for each succeeding PCA year.
3. Carrying charges on the unamortized balance at the rate of 2% per annum
(the currently approved rate for the true-up deferral balance
accumulation) will be included during the 2004-2005 true-up of the true-
up period. Thereafter, carrying charges will be determined for either the
true-up collection period or true-up refund period, whichever occurs from
year to year. Idaho Power will compute the carrying charges using the
same interest rate the Commission annually determines to be appropriate
for the true-up deferral balance accumulation. The methodology for
computing carrying costs is more particularly described in Appendix 1 to
the Settlement.
4. For Schedule 7 , 19, and 24 customers, the true-up of the true-up will not
be applied to the $16 million total of class-specific adders from the 2002-
2003 PCA year. Instead, the customers in those classes will receive a
credit during the 2004-2005 PCA year which will be computed based on
the difference between the true-up rate credit computed under the
currently-approved PCA rate (using 1993 sales data) and the rate credit
that would have been computed using 2000 normalized kilowatt-hour
sales for each of the three classes. Attachment 2 to the Settlement
describes this process in more detail and shows the 2004-2005 rate credit
on a cents per kilowatt-hour for Schedule 7, 19 and 24 customers.
5. Beginning with the April 2004 PCA application, the Company will make
its annual PCA application utilizing its best estimate of the total Idaho
jurisdictional sales that will be made during the ensuing PCA year rather
than a sales constant set in a general revenue requirement case. The
intent of this change to the approved PCA methodology is to set a firm
sales denominator that will minimize the magnitude of subsequent true-
ups of the true-up.
According to the Motion for Acceptance of Settlement, all parties to this case are
signatories to the Stipulation, which is intended to be an integrated document. Furthermore, the
parties agree that the Stipulation is in the public interest and all the terms of the Stipulation are
fair, just and reasonable. The parties request the Commission issue an Order accepting the
Stipulation in settlement of all remaining issues in this case. As a result, the parties do not
believe that an evidentiary hearing is required according to Procedural Rule 274.
ORDER NO. 29334
COMMISSION FINDINGS AND DISCUSSION
Pursuant to Commission Rule 274 we shall decide whether to accept the Stipulation
based on the record currently before us. IDAPA 31.01.01.274. The record is substantial and all
parties that participated in the settlement negotiations in this case have signed this Stipulation.
Accordingly, we find further proceedings are not necessary for us to determine whether we
should accept this Stipulation.
Normalized kWh Sales Level
The present PCA methodology uses the 1993 normalized kWh sales level as the
denominator for computing the true-up rate. Because the last two PCA years deviated from the
methodology by using 1999 and 2000 normalized sales levels respectively, Staff and Irrigators
argued for using more recent normalized sales data during the 2003-2004 PCA period as well.
Due to variations in energy consumption, actual sales to Idaho jurisdictional customers during
any PCA year will never match the Commission-approved 1993 denominator of 10 802 636
MWh. Order No. 25880.Consequently, the parties agreed to modify the current PCA
methodology to eliminate under-collection, over-collection, under-refunding, and over-refunding
of the authorized true-up amounts by "truing up the true-up.Beginning in its 2004 PCA
application, the Company will make its annual PCA application using its best estimate of the
total Idaho jurisdictional sales that will be made during the ensuing PCA year rather than using
sales constant set in a general rate case.
After reviewing the Stipulation signed by the parties, the Commission finds that it
embodies an appropriate resolution of the proper amount of normalized energy to calculate the
true-up of the true-up rate in this case and true-up rates on a going forward basis. We also find
that it is appropriate for the Company s future PCA applications to use a best estimate of total
Idaho jurisdictional sales for the upcoming PCA year to minimize the magnitude of the true-up
of the true-up. The Stipulation s true-up of the true-up will then eliminate any remaining
imbalance. Thus, ratepayers will pay for the actual amount of kWh sold by Idaho Power to meet
native load requirements - no more, no less. The Commission finds that these changes will
allow an up-to-date normalized sales level to be used even if several years have passed since a
rate case. The Commission believes that these permanent changes to the PCA methodology will
1 This Order was later adjusted in Case No. IPC-98-5 for a change in the FMC contract. Order No. 27516.
ORDER NO. 29334
better ensure Idaho Power and its customers will both be treated fairly, particularly during
periods of volatile power supply costs and energy consumption.
Class Deferral Rates
Because payment of their prior true-up amounts were deferred, customers receiving
service under Schedule 7 (Small General Service), Schedule 19 (Large Power Service), and
Schedule 24 (Irrigation Service) have class-specific adders that are still to be recovered during
the 2003-2004 PCA year. As a result and unlike most PCA years, these classes have a different
PCA true-up rate than do the other customer classes. The Irrigators and ICIP were concerned
that collection of their allocated true-up amounts may be too great if 1993 normalized sales
levels were used to compute the deferral amount rather than the 2000 normalized sales levels
initially used during the 2002-2003 PCA year.
As part of the Stipulation, the parties agreed that the currently-approved PCA rates
should remain in effect through May 15, 2004, i., the remainder of this 2003-2004 PCA year.
Furthermore, Schedule 7, 19, and 24 customers that have class-specific adders will receive a
credit during the 2004-2005 PCA year based on the difference between the true-up rate credit
computed under the currently-approved PCA (using 1993 sales data) and the rate credit that
would have been computed using 2000 normalized kilowatt-hour sales for each of the three
classes.
To minimize confusion and implementation issues, the Commission agrees that rates
should remain constant through this current PCA year. Given the unique circumstances of this
case, we believe the Stipulation reasonably resolves the concerns of the parties regarding the
rates used to collect class deferrals. Thus, we find it reasonable and appropriate to adopt the
parties' settlement on this issue.
Carrvio2: Char2:es
The present PCA methodology does not allow computation of carrying charges
during the true-up collection or true-up refund period. When the PCA was first developed, the
parties agreed that over time the true-up collections and refunds would offset each other. Thus
computation of carrying charges during the term of actual rate recovery would be symmetrical
and therefore unnecessary. As noted in the Stipulation, true-up collections in recent years have
not been offset by large true-up refunds. Thus, the parties have agreed to include a carrying
charge on the unamortized balance during true-up collections and refunds using the same interest
ORDER NO. 29334
rate the Commission annually determines to be appropriate for the true-up deferral balance
accumulation.
The Commission finds this provision will add symmetry to portions of the PCA
mechanism that have not allocated costs evenly in years past. Moreover, carrying charges
recognize the financial cost of money that is owed by the Company to customers and vice versa.
The Commission finds that this permanent change to the carrying charge for true-up collections
and refunds will fairly allocate this cost.
Based on our review of the Stipulation and the above justifications, we find that this
Stipulation in its entirety is just, fair and reasonable, and in the best interest of the public based
on the information known at this time. Likewise, the Stipulation is in accordance with state law
and regulatory policy. Thus, the Commission accepts the Stipulation without modification.
CONCLUSION
After reviewing the Stipulation, the Commission adopts and approves it as presented.
We find that this Stipulation finally resolves issues regarding the proper amount of normalized
energy to calculate true-up and class deferral rates. We further find that this Stipulation has been
made to compromise contested claims and is entered largely for the purpose of fairly resolving
contested issues, avoiding expense, inconvenience, and uncertainty of further litigation. Finally,
pursuant to Commission Rule 275 we find that the parties have carried their burden of showing
that the Stipulation is just, fair and reasonable, in the public interest, and in accordance with the
law and regulatory policy of this State. IDAP A 31.01.01.275. Accordingly, we accept the
Stipulation as proposed by the parties in this case.
ORDER
IT IS HEREBY ORDERED that the proposed Stipulation is just, fair and reasonable
in the public interest, and in accordance with the law and regulatory policy of this State.
Accordingly, we accept the Stipulation as proposed by the parties in this case.
IT IS FURTHER ORDERED that the parties shall comply with all terms contained in
the Stipulation.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-03-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
ORDER NO. 29334
this Case No. IPC-03-Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code ~ 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /1, tit.
day of September 2003.
clkiJ
MARSHA H. SMITH, COMMISSIONER
ISSIONER
ATTEST:
O:1PCEO305 In4
ORDER NO. 29334