20050425Notice of Application Order No 29763.pdf

Office of the Secretary
Service Date
April 25, 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR CASE NO. IPC-05-
UTH 0 RITY TO IMPLEMENT POWER
COST ADJUSTMENT (PCA) RATES FOR NOTICE OF APPLICATION
ELECTRIC SERVICE FROM MAY 16, 2005
THROUGH MAY 31, 2006 NOTICE OF
MODIFIED PROCEDURE
ORDER NO. 29763
On April 15 , 2005 , Idaho Power Company filed its annual power cost adjustment
(PCA) Application. Since 1993 the PCA mechanism has permitted Idaho Power to adjust its
rates upward or downward to reflect the Company s annual "power supply costs." Because of its
predominant reliance on hydroelectric generation, Idaho Power s actual cost of providing
electricity (its power supply costs) varies from year-to-year depending on changes in Snake
River streamflow and the market price of power. The annual PCA surcharge or credit is
combined with the Company s "base rates"! to produce a customer s overall energy rate.
In this PCA Application Idaho Power calculates that its annual power costs have
increased by approximately $28 million, or 4.75% higher than the current PCA rates. The
Company also acknowledges that it has two other Applications before the Commission that, if
approved, would increase base rates by more than 6%. The cumulative impact of all three cases
(if approved) would result in a rate increase of more than 11 % on June 1 , 2005.
To mitigate the effects of such a substantial rate increase, the Company has proposed
two PCA rate alternatives. The Commission could either approve the proposed PCA rate
increase of 4.75%, or in the alternative, maintain the current PCA rates and defer recovery of the
PCA costs until next year (June 1 , 2006 to May 31 , 2007). In essence, the second alternative
would avoid any PCA rate increase this year.
1 Base rates were set by the Commission in Idaho Power s last general rate case in September 2004 (Case No. IPC-
03-13).
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 29763
In this Order the Commission decides to process the PCA Application under
Modified Procedure and establishes a schedule for written comments. The Commission invites
interested persons to comment on the PCA Application and the Company s two rate proposals.
BACKGROUND
A. The PCA Mechanism
The annual PCA mechanism is comprised of three major components. First, PCA
rates are adjusted to compensate for the forecast in Snake River streamflows and storage. In
years of abundance of streamflows with correspondingly plentiful, relatively inexpensive hydro-
generation, the Company s power supply costs are usually lower. Conversely, when streamflows
or snow packs are low, Idaho Power must rely increasingly upon its other thermal generating
resources and purchased power from the regional market. The Company s other thermal
generating resources (coal and gas plants) and purchased power, are typically more costly than
the Company s hydro-generation. Under the PCA mechanism, the Company may recover 90%
of the difference between the projected power costs and the approved base power costs. Order
No. 25880.
Second, because the PCA includes forecasted costs, the preceding year s forecasted
costs are "trued-up" to account for actual costs. Third, is the "true-up of the true-up.Idaho
Power uses "normalized" power sales (measured in kilowatt hours (kWh)) from the ensuing PCA
year as the denominator to computing the true-up of the true-up. Over or under recovery is
balanced with the following years true-up. Thus, ratepayers will pay for the actual amount of
pO'Ner sold by Idaho Power to meet native load requirements - no more or no less. Order No.
29334 at 4. In summary, ratepayers receive a rate credit when power costs are low, but are
assessed a surcharge when power costs are high.
B. The Two Base Rate Cases
As mentioned above, Idaho Power filed two cases that affect customer base rates.
September 2004 the Commission issued Order No. 29601 approving a settlement that resolved
the Company s general rate case, No. IPC-03-13. The settlement related to the calculation of
the Company s federal income tax expense. As approved in the settlement, the Company s base
rates will increase by an average of 4.45% on June 1 , 2005 to recover $22.756 million of tax
expense. Gale Dir. at 2; Exh. 6 (IPC-04-14). The 4.45% increase is comprised of two
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ORDER NO. 29763
components: a base rate increase of 2.2% for only one year and a base rate increase of 2.25%
which is ongoing. In other words, after 12 months (on June 1 , 2006), base rates would decrease
by an overall 2.2%. Id.
In the second case filed in March 2005, Idaho Power seeks to recover its costs of
constructing the new Bennett Mountain generating facility located in Mountain Home, Idaho.
The Company asserts that the cost of building the generating plant and the necessary
transmission and interconnection facilities totaled $58 022 983. Case No. IPC-05-, Order
No. 29748. To recover these costs, the Company proposes to increase its base rates by a uniform
percentage increase of approximately 1.84%. The Company requests that this proposed increase
to its base rates become effective June 1 , 2005.
NOTICE OF PCA APPLICATION
YOU ARE HEREBY NOTIFIED that this year s PCA Application includes the
forecasted costs based on water condition; a true-up of last year s forecasted costs to reflect
actual costs; and the true-up of the 2004-2005 PCA year true-up (the true-up of the true-up).
This year s water forecast for April through July inflows at Brownlee Reservoir is 2.18 million-
acre feet (mat). The 30-year average inflows at Brownlee are 6.3 maf. This year s water
forecast is roughly 67% below the 30-year average, or the third worst year in the last 30 years.
YOU ARE FURTHER NOTIFIED that based upon the projected water inflow and
replacement power costs, the Company calculates that the projected power supply costs are
$155 390 795 for the 2005-2006 PCA year (June 1 , 2005 to May 31 , 2006). The projected
power costs equall.2080~ per kWh. The 1.2080~ per kWh estimate for projected power costs is
0.4765~ per kWh higher than the Commission s approved base of 0.7315~ per kWh.
Consequently, the Company is proposing to collect 0.4288~ per kWh (90% of 0.4765~) for the
power cost projection component. Application at 3-4; Schwendiman Dir. at 4.
YOU ARE FURTHER NOTIFIED that Idaho Power reports that the unrecovered
difference between last year s forecast costs and actual costs (the true-up) is $36 285 912.
Schwendiman Dir. at 4. The PCA true-up component also includes several additional items
previously approved by the Commission. Application at 4. These additional items include the
customer benefits associated with settlement of the Valmy outage, the growth rate adjustment
non-recurring tax credit issues, and the Bonneville Power Administration water option agreement
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ORDER NO. 29763
credit. The true-up also included cloud seeding expenses authorized by the Commission in
Order No. 29670 ($690 550) and the recovery of the Company s "lost revenue" ($13 482 882) as
ordered by the Idaho Supreme Court in Case No. IPC-01-34. Adding the subcomponents to
the true-up balance equals $49 768 794 to be collected. This amount is then divided by the
estimate of total jurisdictional sales in CY 2004. Idaho Power witness Celeste Schwendiman
calculates that the true-up portion of the PCA rate is 0.3996~ per kWh. Dir. Test. at 7.
YOU ARE FURTHER NOTIFIED that the third PCA rate element is the "true-up of
the true-up.Last year the Company collected all but $635 653 of the PCA deferral balance.
Dividing this amount by the 2004 Idaho jurisdictional sales results in a PCA true-up of the true-
up rate element of 0.0051~ per kWh. Combining the three components - the projected power
costs of 0.4288~, the true-up component of 0.3996~ and the true-up of the true-up of 0.0051 ~ -
results in a PCA rate for the 2005-2006 PCA year of 0.8335~ per kWh. This represents an
increase of .2296~ above the existing PCA rate of 0.6039~ per kWh.
B. The Two PCA Rate Proposals
YOU ARE FURTHER NOTIFIED that Idaho Power has proposed two PCA rate
alternatives. Under the first alternative, the Company would increase current PCA rates by
2296~ for all classes or an average of 4.75% effective on June 1 , 2005. This represents an
overall percentage increase of 4.75% but due to the fixed cents adjustment, each customer class
will receive a different percentage increase. The Table below shows the proposed increase in the
maj or customer classes:
Customer Group Overall %
(Schedule)Increase
Residential (1)75%
Small Commercial (7)13%
Large Commercial (9)34%
Industrial (19)62%
Irrigation (24)71%
The PCA rates for Idaho Power s three special contract customers would also increase. The
proposed PCA rate increases would be: 7.41 % for Micron; 7.84% for Simplot; and 7.71 % for
the Department of Energy. Schwendiman Exh. 6.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 29763
YOU ARE FURTHER NOTIFIED that the alternative PCA rate proposal is to
continue the current PCA rates without any increase. Thus, the overall PCA rate would remain
at the current level of 0.6039~ per kWh. Application at 5. Idaho Power is proposing this
unique rate treatment" to avoid having both its base rates and PCA rates increase in 2005. Id.
YOU ARE FURTHER NOTIFIED that under the second alternative, Idaho Power
proposes to defer recovery of a portion of this year s PCA increase ($28.6 million) until next
year. Application at 5-6. Idaho Power s vice-president, John Gale, stated two reasons for the
deferral. First, deferring the PCA expenses until next year would reduce the overall rate increase
that customers may experience on June 1 2005. If the Commission only approves the base rate
increases (1.84% for Bennett Mountain and 4.45% for the rate case settlement), overall energy
rates would increase by 6.29%, instead of an 11.71 % increase. Gale Dir. at 4. Second, there are
offsetting rate changes scheduled to occur in 2006. As mentioned above, the 2.2% increase in
base rates would expire on June 1 , 2006. In addition, the 2005 PCA carry-over of $28.6 million
will be offset by an anticipated credit of $9.65 million. Consequently, the actual deferral amount
for the next PCA year would be approximately $19 million. Gale Dir. at 8.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission s Rules
of Procedure IDAP A 31.01.01.201 through .204.The Commission notes that Modified
Procedure and written comments have proven to be an effective means for obtaining publicinput
and participation.
YOU ARE FURTHER NOTIFIED that the Commission does not intend to hold a
hearing in this proceeding unless it receives written protests or comments opposing the use of
Modified Procedure. Persons desiring a hearing must specifically request a hearing in their
written comments and state why Modified Procedure is inappropriate in this case.
YOU ARE FURTHER NOTIFIED that the Commission specifically invites
comments regarding Idaho Power s proposal to defer recovery of the PCA costs for one year.
Any person desiring to state a position on this PCA Application may file a written comment
support or opposition with the Commission no later than May 16, 2005. The comment must
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ORDER NO. 29763
contain a statement of reasons supporting the comment. Written comments concerning this
Application shall be mailed to the Commission and the Applicant at the addresses reflected
below:
Street Address for Express Mail:
Barton L. Kline, Senior Attorney
Monica Moen, Attorney II
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
Mail: bkline~idahopower.com
mmoen~idahopower .com
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
472 W. Washington Street
Boise, ID 83702-5983 Gregory W. Said
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: gsaid~idahopower.com
These comments should contain the case caption and case number shown on the first page of this
document. Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to the Applicant at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that Idaho Power may file a written response to
any comments, ifit so desires, no later than May 19 2005.
YOU ARE FURTHER NOTIFIED that the Idaho Power s PCA Application together
with the Company s pre filed exhibits and testimony of John Gale and Celeste Schwendiman can
be viewed at the Commission offices and at the principal office of Idaho Power during regular
business hours. Idaho Power Company is located at 1221 West Idaho Street, Boise, Idaho ((208)
388-2323). Idaho Power s Application, prefiled testimonies and exhibits are also available on
the Commission s Website at www.puc.idaho.gov under the "File Room" icon and then "Electric
Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and specifically
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ORDER NO. 29763
Idaho Code ~~ 61-307, 61-503, and 61-622. The Commission may enter any final Order
consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAP A 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that this case be processed under Modified Procedure.
Interested persons wishing to file comments must do so no later than May 16, 2005. Idaho
Power may file reply comments no later than May 19 2005.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ~5~
day of April 2005.
MARSHA H. SMITH, COMMISSIONER
MISSIONER
ATTEST:
Je . Jewell
Co mission Secretary
bls/O:IPCEO515 dh
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 29763