20031027Decision Memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:OCTOBER 24, 2003
RE:IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR AUTHORITY TO INCREASE ITS INTERIM AND BASE RATES AND
CHARGES FOR ELECTRIC SERVICE. CASE NO. IPC-03-13.
On October 16, 2003 , Idaho Power Company filed an Application with the Commission
for authority to increase the Company s general rates an average of 17.7%. If approved, Company
revenues would increase $86 million annually. The Company s filing also included a request for $20
million in interim rate relief in the event the Commission suspended Idaho Power s proposed rates
and charges for further proceedings.
THE APPLICATION
The Company s Application stated that the overall rate of return and return on equity
allowed in its last rate case (Case No. IPC-94-5) are no longer reasonable given the Company
increased costs. Therefore, Idaho Power argued that increased revenues are necessary immediately if
Idaho Power is to maintain a stable financial condition and continue to render reliable electric service
to customers. Idaho Power asks that the Commission grant it a return on rate base of 8.334%
(utilizing an 11 % return on common equity) on a $1 547,443 530 rate base. This would result in an
additional revenue requirement of$85 561 ,91 0 for the Idaho jurisdiction. Idaho Power requests that
2003 be used as the test year.
In the filing the Company requested an overall increase of 17.7% to its base rates. The
chart below shows an average of all rate components by kilowatt-hour (kWh) for certain customer
groups. Idaho Power also requested that the PCA effective date be moved from May 16 to June 1 to
coincide with the Company s proposal to establish a seasonal rate schedule.
DECISION MEMORANDUM
--"--
Customer Group Current Average Proposed Average Overall Percentage
Base Rate Base Rate of Increase
Residential 17 cents 16 cents 19 percent
Small Commerciall
"----
33 cents 66 cents 21 percent
" Large Commercial 57 cents 11 cents 15 percent
Industrial 78 cents 17 cents 13.9 percent
Irrigation 72 cents 65 cents 25 percent
** PCA Component Not Reflected In Request **
Idaho Power also proposes to increase the rates of its three special contract customers - lR. Simplot
Company by 3.12%, the Department of Energy (lNEEL) by 14.16%, and Micron Technology, Inc. by
8%.
The Company requests that these rates go into effect as filed for electric service rendered
on and after November 15 2003, and that the effective date not be suspended.
Seasonal Rates
The Company requested a change in how the time of year impacts the rates charged for
electricity. If approved, the price Idaho Power charges its customers during the summer months
would reflect the Company s seasonably higher costs of producing or purchasing power. The change
would result in summer and non-summer base rates. The proposed energy rate for residential and
small commercial customers would be 25% greater during the summer months than non-summer
months. The proposed rate during the non-summer months would be slightly lower than today
base rates.
Service and Demand Chan!es
The service charge is designed to recover a portion of the costs associated with providing
electrical service such as meters, distribution facilities and billing services. Idaho Power proposed to
increase the service charge ( currently called the Customer Charge) from: $2.51 to $10 per month for
residential and small commercial customers, $10.07 to $25 per in-season month for irrigators, and
$5.54 to $21 for large commercial customers.
Under the Company s Application, demand charges for irrigation customers would
increase from $3.58 to $5.40 per in-season month. Large commercial demand charges would also
increase from $2.73 to $4.00 perkW in the summer months and to $3.35 perkW during non-summer
months. Idaho Power also proposed increasing service charges and implementing mandatory time-
of-use energy charges for industrial customers.
DECISION MEMORANDUM
Interim Rate Relief
lithe Commission determines that it should suspend the effective dates ofthe Company-
proposed rates and charges, Idaho Power requested the Commission authorize a uniform 4.16%
increase on all existing tariffs effective November 15, 2003 pending a determination of Idaho
Power s rates and charges in this case. In making this $20 million interim rate request, the Company
cited four items with revenue requirements that should be immediately recovered:
(1) the construction and operation of the Danskin Power Plant ($7.7 million),
(2) the costs associated with relicensing the Company s Middle-Snake
Shoshone, and C.J. Strike hydro facilities ($1.6 million),
(3) the change in depreciation expenses approved in Case No. IPC-03-5 ($3.
million), and
(4) the increase in Idaho s share of net power supply costs from 85.5% in 1993 to
94.1 % in 2003 due to reallocation between wholesale and retail j urisdictions
($7 million).
Idaho Power stated that requiring the Company to absorb these financial costs during a regulatory
suspension would jeopardize the Company s financial viability.
COMMISSION DECISION
Based upon its review ofthe Application and Idaho law, does the Commission wish to do
any of the following:
Issue a Notice of Application?
Issue a Notice of Intervention Deadline?
Suspend the proposed interim and/or permanent rates for period of 30 days
plus five months from the November 15 effective date, or until such time as
the Commission enters an Order accepting, rej ecting or modifying the
Company s request pursuant to Idaho Code 9 61-622?
Build an evidentiary record regarding the interim rate request? Given the
Commission s calendar and the interim rate s November 15 effective date
the Commission could require the parties and intervenors to file legal
memoranda no later than November 12 at 5 p.m. explaining why the
Company s Application does or does not meet the standard for interim rate
relief. If the Commission would like the opportunity to ask the parties and
intervenors questions regarding their filings, the Commission is available the
morning of November 13 for oral argument.
DECISION MEMORANDUM
M:IPCEO313 In
Set a prehearing conference to schedule hearing dates and deadlines for the
filing of discovery and testimony? If so, the Commission could schedule a
prehearing conference on November 13 to follow oral arguments on the
interim rate request.
DECISION MEMORANDUM
Lisa D. Nords om