20041029Comments.pdf

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DONOVAN E. WALKER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5921
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO REVISE DEPOSIT
REQUIREMENTS IN SCHEDULES 24 AND
25 FOR ELECTRIC SERVICE TO
IRRIGATION CUSTOMERS.
COMMENTS OF THE
COMMISSION STAFF
CASE NO. IPC-O4-
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Donovan E. Walker, Deputy Attorney General, in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 29609 on October 8, 2004
submits the following comments.
INTRODUCTION AND BACKGROUND
On September 17, 2004, Idaho Power Company filed an Application requesting authority
to revise the deposit requirements under Schedules 24 and 25 for electric service to irrigation
customers. In the Application Idaho Power requests an effective date of October 18, 2004, and
that its Application be processed under Modified Procedure. The Company states that letters
were sent to its current irrigation customers to advise them of the Application s filing with the
Commission. The Commission issued Order No. 29609 authorizing modified procedure and
STAFF COMMENTS OCTOBER 29, 2004
suspending the effective date requested by the Company for a period of 60 days, or such earlier
time as the Commission may issue an Order in this case.
According to the Application, Idaho Power indicates that it has experienced an increase
in unpaid irrigation bills (accounts receivable) and a corresponding increase in bad debt (net
write-offs). At the same time, the number of service locations has been increasing while the
number of persons responsible for those service locations has been decreasing. The Company
states that consolidation of accounts into the hands of fewer customers raises the level of risk to
which it is exposed.
In order to minimize its exposure to uncollectables, Idaho Power proposes to revise its
deposit policy for irrigation customers by collecting a higher deposit from those customers who
pose a higher credit risk. Customers asked to pay a deposit will continue to have the option of
providing an irrevocable Letter of Credit from a financial institution. If approved, a customer
who owes an outstanding balance of over $1 000 on December 31 will be required to pay a "Tier
2" deposit based upon a formula that in essence collects the customer s bill for the next irrigation
season in advance. customer who has been discharged from bankruptcy or who has had
receivership proceedings terminated will also be required to pay a Tier 2 deposit. The Tier 2
deposit will be applied to each monthly bill as it becomes due throughout the season. A
customer who owes less than $1 000 on December 31 but who has received two or more
reminder notices of $100 or more during a 12-month period or customers whose service is
disconnected during the out-of-season period due to non-payment (i., customers who meet the
current criteria for requiring a deposit) will be required to pay a "Tier 1" deposit. The deposit
criteria and formula currently in use for calculating deposit amounts would be applied to
calculate Tier 1 deposits. A customer required to pay a Tier 2 deposit one year will be required
to pay a Tier 1 deposit the following year.
STAFF ANALYSIS
Staff has reviewed supporting data supplied by Idaho Power and confirmed that there is a
slight trend towards consolidation of irrigation accounts over the past few years. As of July
2004, there were 6,457 persons associated with 16 811 service locations, a ratio of 2.6 service
locations per person. As of July 2001 , there were 6 590 persons associated with 15 930 service
agreements, a ratio of 2.4 service locations per person.
STAFF COMMENTS OCTOBER 29, 2004
The Company s bad debt exposure has increased dramatically. Over the past three years
the total amount owed on irrigation accounts at year-end doubled, climbing from $1,414 666 in
2001 to $2 867 849 in 2003. Net write offs increased at nearly the same rate, rising from
$223,426 to $413 712.Although it is comforting to note that the majority of irrigation
customers pay their bills eventually, some do not. Typically, customers whose accounts are
written off in one year do not come back on service the following year. If the prior customer
does not want to reestablish service, there is less incentive for the customer to pay an old bill
and Idaho Power s opportunity to collect payment is diminished. Idaho Power s existing credit
policy already recognizes that certain irrigation customers pose a higher credit risk than others.
In its Application, Idaho Power seeks to further refine its policy to address those circumstances
where there is an even greater credit risk.
A rising level of bad debt places upward pressure on rates. The consolidation of accounts
into fewer hands, coupled with significant increases in bad debt, is cause for concern for Idaho
Power and its ratepayers. If Idaho Power s proposed credit policy had been in place last year
approximately 500 customers would have been asked to pay a deposit for the 2004 irrigation
season. Of these 500 customers, 77 would have been required to pay the higher Tier 2 deposit
amount. These 77 customers owed a total amount past due of $2 643 101 as of December 31
2003 , and would have been asked to pay an aggregate Tier 2 deposit amount of $3 766 301 for
the 2004 season. Each individual deposit would have been applied towards monthly bills
throughout the season.
As of October 28, the Commission had not received any comments from the general
public regarding the Application.
ST AFF RECOMMENDATIONS
Staff recommends approval of Idaho Power s Application. The Company has proposed a
reasonable and impartial method for assessing the degree of credit risk posed by each irrigation
customer. Based on information supplied by Idaho Power, Staff anticipates that a relatively
small percentage of customers will be affected by the proposed change in deposit policy. Asking
those customers who pose the greatest risk to pay higher deposits will minimize bad debt.
1 For purposes of comparing normal year-to-year changes in net write offs, this figure excludes a $668 724 write off
amount for a single irrigation customer. The actual total net write off for irrigation accounts in 2003 was
082 436.
STAFF COMMENTS OCTOBER 29, 2004
Staff notes that under the Company s proposal, customers with balances exceeding
000 as of December 31 st will be required to pay a Tier 2 deposit. If the Commission approves
the Application as proposed, Staff recommends that the Company provide its irrigation
customers at least 30 days advance notice of the change in policy in order to allow customers
with large past due balances sufficient time to take remedial action. To accomplish this, Idaho
Power would need to send letters to customers no later than December 1 , 2004.
DATED this 09 a y 0 f October 2004 at Boise, Idaho.
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Donovan E. Walker
Deputy Attorney General
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Technical Staff: Beverly Barker
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ST AFF COMMENTS OCTOBER 29, 2004
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 29TH DAY OF OCTOBER 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-04-, BY MAILING A COpy THEREOF POSTAGE PREPAID TO THE
FOLLOWING:
BARTON L KLINE
MONICA MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
MAGGIE BRILZ
DIRECTOR, PRICING
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
SECRETARY
CERTIFICATE OF SERVICE