20030508Irrigation Pumpers Comments.pdf

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Eric L. Olsen (ISB# 4811)
Racine, Olson, Nye, Budge & Bailey, Cht.
O. Box 1391; 201 E. Center Street
Pocatello, Idaho 83204-1391
Phone: [phone]
Fax: [phone]
E-mail: elo(g)racinelaw.net
2003 HA'f -8 PM 2: 51
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UT1LiT itS COMMiSSIOH
Attorneys for Idaho Irrigation Pumpers Association, Inc.
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.
COMMENTS OF THE IDAHO
IRRIGATION PUMPERS
ASSOCIATION, INC.
Case No. IPC-03-
COMES NOW the Idaho Irrigation Pumpers Association, Inc. ("Irrigators ), through
undersigned counsel, and hereby respectfully submits its comments on Idaho Power Company
Idaho Power ) application for approval of Schedule 55 implementing the Power Cost
Adjustment ("PCA") and affected tariffs for the fiscal year from May 16 , 2003 to May 15 , 2004.
INTRODUCTION
The Irrigators have reviewed Idaho Power s application in this case, Idaho Power s prior
PCA filings, and the Commission s prior PCA Orders. This review has exposed three critical
issues that the Irrigators believe the Commission must address in Idaho Power s application
before it can approve the PCA for the current fiscal year. The Irrigators hereby request that a
hearing be held on the issues raised herein because the record may be insufficient to allow the
Commission to make an informed decision as further discussed below. Commission Rule of
Procedure, IDAPA 31.01.01.203.
COMMENTS - 1
MORE RECENT SALES DATA MUST BE USED TO ESTABLISH THE TRUE-UP RATE
The PCA has been around for almost a decade, and, admittedly, each party has its own version of
its creation. However, the Irrigators would like to offer two general observations that it believes all
parties could agree on. First, when the PCA mechanism was introduced, it was a first for all parties and
had no prior history. Second, the rationale behind the PCA was to strike a balance such that Idaho
Power s total power costs! where fully recovered, but not over-recovered. In other words, it was meant
to be revenue neutral in its application.
A crucial part the PCA is the True-up mechanism. However, the True-up mechanism has
one fatal flaw-it is based upon outdated, normalized sales data. A lot has changed on the Idaho
Power system in the last ten years, and one of the most significant changes is the fact that there
has been a significant increase in the actual, as well as, normalized load. The increase in system
load would not be as problematic if the size of the dollars that needed to be trued-up would be
equally spread over the time between positive and negative values of the same magnitude.
Nevertheless, the size of the revenue shortfall and thus the magnitude of the positive True-up
revenue in the last few years has been well beyond the expectations of those that helped to
establish the PCA mechanism a decade ago.
The attached Table 1 attempts to generally quantify the magnitude of this disparity if this
situation goes uncorrected. The values in Table I are not offered as exact figures, but as a means
of demonstrating the magnitude of the disparity and how it came about. 2 During the early years
the True-up "Target" revenue was relatively small and was ultimately well balanced. Between
1 Power costs in this context reflect only items such as fuel, purchase power, and opportunity sales and do not reflect
other O&M expenses or rate of return on capital items.
COMMENTS - 2
1995 and 2000 the cumulative impact of over-collections and under-collections due to the
difference in using historic, normalized sales and actual sales values was in the range of only
$200 000.
However, 2001 and 2002 brought levels of True-ups that were on the order of 10 times
greater than anything witnessed previously. The True-up rates were both positive and came at a
time when the difference between actual and historic sales was significant. Table 1 suggests that
in these last two years the True-up mechanism could have become significantly out of balance-
to the tune of over-collecting the True-up by approximately $25 million. However, the
magnitude ofthis over-collection did not occur because the procedure for establishing the True-
up rate was modified during these years by reflecting the most recent normalized sales data.
This was an improvement to the overall PCA mechanism and not just a one-time correction to
make the numbers seem more palatable.
In this case, the "Target" True-up is once again very large and positive. However, Idaho
Power wishes to revert to the original procedures where this "Target" revenue requirement will
be spread over historic (and thus smaller) sales levels. The net effect of such a proposal would
be to (1) significantly increase the chances that Idaho Power will over-collect the True-up
revenue that it is due and (2) call into question the PCA's goal of revenue neutrality.
To avoid such a result, the True-up mechanism must be based upon the most recent sales
data available so that it comes as close as possible to collecting or refunding the "Target"
revenue in a neutral manner. It does not make sense that after using the most recent sales data
available in the last two PCA cases, Idaho Power would now request reverting back to the
2 Table I only uses calendar year sales and applies the True-up rate that comes into effect on May 16th of each year
COMMENTS - 3
outdated values with the perceived intention of over-collection. The Irrigators urge the
Commission to utilize the most recent normalized sales data for establishing the True-up rate in
Idaho Power s application.
THE NORMALIZED SALES DATA NEEDS TO BE REFINED
Although the most recent normalized sales data should be used in establishing the PCA
rate, the normalized sales data for 2002 looks inappropriate. The present PCA rates are based
upon 2000 normalized data as demonstrated in the Appendix 1 of Order No. 29026. A review of
the data that Idaho Power considers 2002 normalized sales reveals that it is less than that listed in
Appendix I of Order No. 29026. Admittedly, FMC/Astaris is no longer being served, but this
does not account for all of the shortcomings of the 2002 normalized data.
If the FMC/Astaris load is removed from Appendix 1 of Order No. 29026, the normalized
sales for the Idaho jurisdiction would be 12 155,472 MWH in 2000. By contrast, the normalized
Idaho jurisdictional sales for 2002 (without FMC) is listed as only 11 926 360 MWH or about
2% less than in 2000. Both of these sales figures are normalized so there should be no impact
due to weather variations between the two years. One of the most puzzling things about this data
is that the normalized load for the residential customers decreased 1.5% between 2000 and 2002
in spite of the fact that the number of residential customers increased 9%.
The Irrigators do not know when Idaho Power s sales normalization procedures were last
reviewed in a formal setting, but we speculate that it was at least 10 years ago. The Irrigators
believe that it would be impossible to address the inadequacies of Idaho Power s normalization
as if it were in effect for the entire year. If a hearing on this matter were to be held, the Irrigators would request
additional information from Idaho Power such that the exact figures could be reviewed.
COMMENTS - 4
procedures using a Modified Procedure. For this reason we recommend a hearing be held that
will, at a minimum, review the Idaho Power s sales normalization process. In the meantime, the
Irrigators recommend that the PCA rates be set by using the 2000 normalized sales levels (that
were once accepted by all) with FMC/ Astaris removed. Once a new normalization procedure
has been accepted by the Commission, the Commission can either use it to amend the PCA rates
set in this case, or simply to use them in future cases.
THE DEFERRAL AMOUNT FOR THE 2002/2003 PCA IS INCORRECT
Because of the magnitude of the last PCA, a portion of that amount was deferred for three
rate schedules until this case. It was a good decision in the last case to defer a portion of these
extremely high costs and spread them out over more than one year. It is now time to repay that
deferral. However, the question once again arises as to what rate should be applied so as to make
Idaho Power whole without giving it an opportunity to over-collect.
It has long been recognized that there is not a true-up of the True-up in the existing PCA
mechanism. This is not to say that there should not be a true-up of a true-up, simply that it has
not happened so far. The Irrigators are not advocating a true-up of a true-up in this case, but
save such a discussion for the future.
However, the deferrals that were instituted in the last PCA for Schedules 7, 19, and 24
are a different matter. The Commission does not need to address the question of a true-up of a
true-up, but simply, what was deferred for each of these rate schedules into this PCA. The
deferral amounts for these three rate schedules was calculated based upon normalized historic
sales levels for each class. For the Irrigators, Schedule 55 lists a PCA rate of 1.3415 cents per
3 Appendix I of Order No. 29026 lists the average number of residential customers in 2000 as 299 321 while the
COMMENTS - 5
kWh as opposed to a PCA rate of 1.9370 cents per kWh for those customers that did not get a
deferral, i., the rate for the Irrigators was reduced by 0.5955 cents per kWh (1.9370 - 1.3415 =
5955) in the last PCA case. In this case, the Company is pricing that same deferral at 0.7120
cents per kWh or 20% higher than the reduction that was originally authorized.
The deferral for the Irrigators was increased by $7 534 to reflect a class-specific
intervener funding charge plus $657 181 for interest on the $10 953 165 that was originally
deferred. These two components only added 6.07% to the deferred amount. Where did the other
14% increase in the deferral that is being requested from the Irrigators come from? Very simply,
the reduction that is found in the present Schedule 55 is based upon using the 2000 normalized
Irrigation sales data from Appendix 2 of Commission Order No. 29026 of 1 835 941 MWH.
Under Idaho Power s current proposal, this deferral amount of approximately $10.9 million is to
be spread over 1 631 722 MWH, thus spreading that deferral over less units and greatly
increasing the rate to be paid in comparison to the prior year PCA.
The deferrals for Schedules 7, 19, and 24 were all based upon 2000 normalized sales
data. It is inappropriate for Idaho Power to now turn the tables and calculate a deferral recovery
rate that is significantly higher than that which was originally to be deferred. The proper PCA
adder to reflect last year s deferral for the Irrigators is 0.6316 cents per kWh.5 The Irrigators
average number of residential customers in 2002 listed in the Idaho portion of the 2002 FERC Form 1 lists 326 788
residential customers.4 There is a slight mismatch in the reduction provided for in Schedule 55 for the Irrigators (0.5955 cents per kWh)
and the rate of 0.5966 cents per kWh that results from dividing the deferred amount of$10 953 165 listed in Said'
testimony at 16 with the 2000 normalized irrigation load of 1 835 941 MWH found in Appendix 2 of the Order. It
appears that the deferral amount is slightly less than originally calculated and an adjustment should be made to
reflect the fact that the Irrigators were only getting the benefit of a 0.5955 cents per kWh deferral (plus interest, plus
a $7 534 intervenor funding charge).5 Based upon the deferral rate authorized by the Commission of 0.5955 cents per kWh and multiplying by the 2000
normalized sales of 1 835 941 MWH, the deferred amount was $10 933 031. Adding interest at 6%, plus $7 534 for
intervenor funding, the amount that needs to be repaid during the next PCA is $11 596 547. Dividing this revenue
COMMENTS - 6
have not calculated a correction to that "deferral adder" rates that have been proposed for
Schedules 7 and 19, but advocate that a similar correction be made.
If the Commission does not see fit to make the proposed adjustment, then the Irrigators
request that a hearing be held in order to more fully develop the issues at hand.
DATED this 8th day of May, 2003.
RACINE, OLSON, NYE, BUDGE & BAILEY
CHARTERED
By:
~.,&
L. LSEN
amount by the same kWh sales level that was used to establish the rate in the last case yields a rate of 0.6316 cents
per kWh.
COMMENTS - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 8th day of May, 2003 , I served a true, correct
and complete copy of the Idaho Irrigation Pumpers Association, Inc. 's foregoing Comments to
each of the following, via u.s. Mail, e-mail or hand delivery:
Commission Secretary
Idaho Public Utilities Commission
O. Box 83720
Boise, Idaho 83720-0074 Hand delivery/E-mail
Barton L. Kline
Monica B. Moen
Idaho Power Company
O. Box 70
Boise, Idaho 83707-0070 Hand Delivery/E-mail
Gregory W. Said
Idaho Power Company
O. Box 70
Boise, Idaho 83707-0070 Hand Delivery/E-mail
ERIC L. 0 SEN
COMMENTS - 8
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