20060512final_order_no_30035.pdf

Office of the Secretary
Service Date
May 12, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS BASE
RATES AND CHARGES FOR ELECTRIC
SERVICE IN THE STATE OF IDAHO ORDER NO. 30035
CASE NO. IPC-05-
On October 28, 2005 , Idaho Power Company filed an Application seeking authority
to increase its "base" rates! an average of 7., or an annual revenue increase of approximately
$44 million. On January 20, 2006 , the Commission issued its scheduling Order that suspended
the rate increase and set the matter for public hearing. On February 27 , 2006, all the parties
entered into a settlement Stipulation that resolved all of the issues in the case. As set out in
greater detail below, the parties agreed in the Stipulation that Idaho Power should be allowed to
increase its Idaho jurisdictional base rates by $18.1 million annually. To recover the agreed
revenue requirement, the parties recommended a uniform rate increase to most customer classes
of approximately 3.2%. On March 9, 2006, the Commission issued a notice of the settlement
and invited public comment and testimony on the settlement.
Based upon our review of the initial Application, the settlement Stipulation, the
testimony of the parties and the public comments, we approve the settlement Stipulation.
Consequently, base rates for most classes of service shall increase an average of 3.2% on June 1
2006.
BACKGROUND
A. The Original Application
In its Application Idaho Power initially sought an annual revenue increase of
$43 947 847 based upon a 2005 test year. The Company asserted that it needed the additional
revenue to cover its increased operating costs. The Company sought a return on rate base of
8.42%, realizing a return on common equity in the range of 11 to 12%. Order No. 29919 at 1.
The Company proposed an adjusted total rate base of$1 790 150 058. Id.
1 Base rates are combined with the annual Power Cost Adjustment (PCA) rates to produce a customer s overall
energy rate. On April 12, 2006, Idaho Power filed its annual PCA Application to reduce PCA rates by an average of
about 19%. Case No. IPC-06-
ORDER NO. 30035
Turning to the proposed rate design, Idaho Power recommended that base rates for
each customer class (except for dusk-to-dawn lighting and unmetered servicei increase by a
uniform percentage of 7.84%. The Company also proposed that the base rates for its three
special contract customers (lR. Simplot, Micron, and the U.S. Department of Energy at the
Idaho National Laboratory) also increase by 7.84%. Id. at 2.
The Company proposed to maintain its seasonally adjusted rate design (a 25%
increase in rates to dampen demand in June, July and August) and maintain the 300 kilowatt
hour (kWh) initial usage threshold for residential and small commercial customers. Idaho Power
also proposed to increase the monthly service charge for residential, small commercial, large
commercial and industrial customers. If approved, the monthly service charge for residential
(Schedule I) and small commercial (Schedule 7) customers would increase from $3.30 to $6.
per month. For large commercial (Schedule 9) and industrial- secondary service (Schedule 19)
customers, the Company proposed to increase the service charge from $5.60 to $12.00 per
month. For industrial (primary service) customers the service charge increase would be from
$125 to $200 per month. Id. at 3.
The Company also proposed several other rate design changes for the large customer
classes. For large commercial customers taking secondary service (Schedule 9), the Company
proposed a declining-block two-tier energy charge, and blocked demand and basic charges with
no charge for the first 20 kW of billed demand and basic load capacity. For industrial customers
(Schedule 19), Idaho Power proposed to increase the service charge, basic charge, and the
seasonal time-of-use demand charges and energy charges. For irrigation customers (Schedule
24), Idaho Power proposes to eliminate the out-of-season demand charge and reinstate the
differentiated in-season and out-of-season energy charges.
B. Parties
In Order No. 29919 dated November 22, 2005 , the Commission issued its Notice of
Application and established a deadline for intervention. Besides Idaho Power and the Staff, the
Commission granted intervention3 to the following parties:
2 Rates for dusk-to-dawn (Schedule 15) and unmetered service (Schedule 40) would not be increased.
3 On December 6, 2005 , Time Warner Telecom of Idaho filed a Petition to Intervene and Idaho Power opposed the
intervention. Before the Commission ruled on the Petition and objection, Time Warner withdrew its Petition
pursuant to Rule 67, IDAPA 31.01.01.067.
ORDER NO. 30035
Idaho Power Company:Barton L. Kline
Monica B. Moen
Commission Staff:Donald L. Howell, II
Cecelia A. Gassner
Deputy Attorneys General
Idaho Irrigation Pumpers Association:Randall C. Budge
Eric L. Olson
Racine, Olson, Nye, Budge &
Bailey, Chartered
Industrial Customers of Idaho Power:Peter 1 Richardson
Richardson & O'Leary, LLP
Micron Technology:Conley E. Ward
Givens Pursley LLP
u.S. Department of Energy:Lawrence A. Gollomp
Assistant General Counsel
Northwest Energy Coalition:William M. Eddie, Esq.
Advocates for the West
Kroger Company:Michael L. Kurtz
Kurt J. Boehm
Boehm, Kurtz & Lowry
C. Course of Proceedings
On November 22, 2005 , the Commission issued its Notice of Application and a
deadline for intervention. The initial Notice of Parties was issued on December 21 , 2005. On
January 5, 2006, the parties convened a telephonic scheduling conference. Based upon the
agreement of the parties, the Commission issued its scheduling Order No. 29957 on January 20
2006. Pursuant to the Commission s scheduling Order, the Staff convened public workshops for
the purpose of providing information about the rate case in Boise, Twin Falls and Pocatello.
The parties held two settlement conferences on February 7 and 14, 2006. All of the
parties or their representatives attended or participated in the settlement conferences. As a result
of the settlement negotiations, all the parties executed a settlement Stipulation. The Stipulation
and Motion for Approval of Stipulation were filed by Idaho Power on February 27, 2006. The
ORDER NO. 30035
Motion urged the Commission to adopt and approve the Stipulation in its entirety. On March
and 2 , 2006, respectively, the Commission Staff and the Irrigators filed testimony in support of
the settlement Stipulation. On March 16, 2006, Idaho Power filed its testimony in support of the
Stipulation.
On March 9, 2006, the Commission issued Order No. 29995 serving as a public
notice that the parties had entered into a settlement Stipulation. In its Order, the Commission
invited public comment regarding the Stipulation be filed no later than March 30, 2006. This
Order also required that all petitions for intervenor funding be filed no later than April 19, 2006.
On April 11 , 2006, the Commission convened its technical hearing on the settlement
Stipulation. All the parties except Kroger Company entered appearances and participated in the
hearing. The Commission also convened public hearings in Boise, Pocatello and Twin Falls on
April 11 , 24, and 26, 2006, respectively.
THE SETTLEMENT STIPULATION
1. Revenues, Test Year and Adjustments. All the parties agree that Idaho Power
should be allowed to increase its Idaho jurisdictional base rates to recover $18.1 million in
additional annual revenue. The parties did not set a return on common equity but agreed to
utilize an overall rate of return of 8.1 %. Stipulation at ~ 6. The parties agreed that Idaho
Power s system net power supply cost is $45 279 800. This amount is calculated by subtracting
the Company s Cloud Seeding Program in the amount of $1. 9 million from the net power supply
cost of $47 179 800 (including the Bennett Mountain Power Plant). The parties also agreed to
use 2005 system loads in the amount of 14 819 152 MWh as proposed in the Company
Application. Id. at ~ 6(a) and (b).
The parties agreed to exclude incentive pay for senior managers from the test year
revenue requirement. The parties also agreed that it is reasonable to include an employee
incentive component in this and future test years "so long as such incentive component is based
upon goals that benefit customers and the amounts payable (to employees) for achieving the
goals are limited to reasonable 'target' or medium goals.Id. at ~ 6(e). The parties further
agreed to examine the Power Cost Adjustment (PCA) load-growth rate as part of the Company
PCA application in Case No. IPC-06-7. Id. at ~ 6(d).
2. Rate Spread. To recover the agreed-upon $18.1 million revenue requirement, the
parties recommended a uniform percentage increase for each customer class (except Schedules
ORDER NO. 30035
15 and 40) and the special contract customers of approximately 3.2%. Id. at ~ 7. The parties
also agreed that the underlying cost-of-service model filed by the Company in this proceeding
will not constitute precedent in any subsequent general rate case.Id. The parties specifically
recognize that any party s failure to specifically object to the Company s cost-of-service analysis
in this case will not constitute a waiver in any future general rate case proceeding. Id.
3. Rate Design With three exceptions, the parties agreed in the settlement
Stipulation that the rate design proposals in the Company s Application should be implemented
albeit with the smaller percentage increase. First, the monthly service charge for residential
(Schedule 1) and small commercial (Schedule 7) customers will increase from $3.30 per month
to $4.00 per month. Idaho Power further agreed to not file for an increase in the $4.00 service
charge for at least two years from the date of the Commission s final Order in this matter. Id.
~ 8(a). Second, the parties stipulated that the average 3.2% increase for large commercial
(Schedule 9) customers will first be spread upon the non-energy rate components and any
residual revenue requirement will be spread upon the energy related rate components. Id. at ~
8(b).
Third, the parties agreed that implementation of the proposed $10 "continuous
service reversion" program4 described in the testimony of Company witness Timothy Tatum will
be delayed for a period of 60 days from the date ofthe Commission s final Order. The delay will
allow landlords and property managers to be notified of the optional program prior to its actual
implementation.
Idaho Power also agreed no later than November 1 , 2006 to convene a working group
to review the current operations and results of the Irrigation Peak Rewards program. The
Stipulation provided that any proposed modifications to the program would be presented to the
Company s Energy Efficiency Advisory Group and ultimately to the Commission "in time for
such modifications to be in effect for the 2007 irrigation season.Id. at ~ 10.
The parties assert the settlement Stipulation represents a compromise of their
respective positions in this case. They urge the Commission to approve the Stipulation in its
entirety. They maintain that the settlement Stipulation is in the public interest and that all of its
terms and conditions are fair, just and reasonable. Motion at 3.
4 This optional program allows landlords or property managers to have customer accounts automatically transferred
to them when their tenants terminate electric service. Landlords and property managers subscribing to this optional
service will be notified when the account reverts to them. Tatum Direct at 9-13.
ORDER NO. 30035
THE TECHNICAL HEARING
The Commission held its technical hearing on April 11 , 2006.As previously
mentioned, all the parties except Kroger entered appearances.The Commission Staff, the
Irrigators and the Company presented testimony in support of the settlement Stipulation.
1. The Staff.The Utilities Division Administrator, Randy Lobb, urged the
Commission to adopt the Stipulation. He testified that the Staff had conducted a comprehensive
audit of test year results and concluded that the proposed settlement "is in public interest and
should be approved by the Commission.Tr. at 43. He pointed out the agreed revenue
requirement was $26.9 million lower than that originally proposed by the Company. Tr. at 45.
He asserted the $18.1 million revenue requirement reasonably balanced the needs of the
Company for more revenue while ensuring that ratepayers pay rates based upon reasonable costs.
Tr. at 48.
Mr. Lobb explained that the parties could not agree that the methodology used in the
Company s cost of service studies properly allocated costs to the individual customer classes.
Tr. at 55. Consequently, the parties agreed to spread the revenue requirement on a uniform basis
to all customer classes except Schedules 15 and 40. See Staff Exhibit 102.
2. Idaho Irrigation Pumpers Association. The Irrigators filed a Motion to spread the
testimony of their expert witness, Tony Yankel, without requiring him to travel to Boise. No
party objected to the Motion, and it was granted.
Stipulation.
Mr. Yankel's testimony supported the
3. Idaho Power.The Company s Vice-President of Regulatory Affairs, John R.
Gale, testified in support of the Stipulation. Mr. Gale stated that the Stipulation provides the
Company with the ability to economically finance new investments in infrastructure in its
system. He further stated that the Stipulation reflected a satisfactory perspective on the net
power supply cost and overall rate of return. According to Mr. Gale, the Company believes that
the compromised settlement produces the correct alignment of interests between ratepayers and
shareholders.
THE PUBLIC COMMENTS AND TESTIMONY
Only one person testified at the public hearings and he did not oppose the proposed
rate increase.The Commission also received about 50 written comments: 46 before the
ORDER NO. 30035
settlement and 4 after the settlement. The four comments received after publication of the
Commission s Notice of Settlement all opposed the 3.2% rate increase.
Of the 46 comments the Commission received before the settlement, approximately
half opposed any increase. Eight of these customers indicated that they were on fixed incomes
and it was unreasonable to increase rates. Seven other customers did not necessarily oppose the
8% increase but suggested the increase should be distributed primarily to larger users
(irrigation or industrial customers) rather than residential customers. Twelve other customers
acknowledged that a more moderate increase may be necessary. They urged the Commission to
review whether such an increase should be spread to larger customers or be contingent on the
Company acquiring more renewable resources.
DISCUSSION AND FINDINGS
At the outset, we note that this is the first instance in our recollection of settling an
Idaho Power rate case. We appreciate that the parties were able to compromise and settle the
disputed issues in this case. We commend them for their efforts.
Based upon our review of the Stipulation, the supporting testimony, and the public
comments, we find that the terms of the Stipulation are fair, just and reasonable. Procedural
Rules 274-276, IDAP A 31.01.01.274-276. The Stipulation represents a reasonable compromise
of the positions held by the parties. We find it reasonable to authorize Idaho Power to increase
its jurisdictional base rates to recover $18.1 million in additional annual revenue based upon an
overall rate of return of 8.1%. We also agree and adopt the system net power supply cost of
$45 279 800 and the 2005 system load in the amount of 14 819 152 MWh.
We further find that it is appropriate to increase most rates a uniform percentage
increase of approximate 3.2% (except Schedules 15 and 40). In addition, the Commission
accepts the three rate design exceptions dealing with the monthly service charge, the rates for
Schedule 9 customers, and the 60-day delay before imposing the $10 continuous service
reversion charge.
We also order Idaho Power to convene a working group to examine the Irrigation
Peak Rewards Program. If the working group and the Company s Energy Efficiency Advisory
Group recommend improvements to the program, we urge Idaho Power to file such
improvements in advance of the 2007 irrigation season.
ORDER NO. 30035
INTERVENOR FUNDING
The Irrigators were the only party to file a Petition for Intervenor Funding. The
Irrigators sought $32 742 in intervenor funding. This amount comprises $6 867 in legal fees
(37.8 hours) and consulting fees in the amount of$25 875 (207 hours x $125/hr.). No party filed
an objection to the Irrigators' Petition for Intervenor Funding.
Idaho Code ~ 61-617 A sets out the standards for intervenor funding and allows the
Commission to award up to $40 000 in intervenor funding. To award intervenor funding, the
Commission must find that: (1) the Irrigators materially contributed to the decision rendered by
the Commission; (2) the costs of intervention are reasonable and that the costs represent a
significant financial hardship for the Irrigators; (3) the advocacy of the Irrigators differed
materially from the Commission Staff; and (4) the testimony and participation of the Irrigators
addressed issues of concern to the general body of customers or a particular customer class.
Rule 162, IDAPA 31.01.01.162.
In their Petition for Intervenor Funding, the Irrigators assert that they materially
contributed in the case by serving discovery and participating in the settlement conferences.
They also maintain that the expenses incurred are reasonable and that failure to recover the
requested funds would work a financial hardship on them. Petition at 2-3. The Irrigators state
that they have a balance in their bank account of $11 599 and accounts payable exceeding
$50 000. Petition at 3. The Irrigators state that they rely solely upon dues and contributions
voluntarily paid by members together with intervenor funding to participate in utility cases. Id.
The Association only has one part-time employee "receiving a small retainer plus expenses for
office space, office equipment and secretarial services. Officers and directors are elected
annually and serve without compensation.Id. at 4. The Irrigators were proponents of forming
a working group to examine Idaho Power s Irrigation Peak Rewards program. The Irrigators
were also prepared to challenge the Company s cost allocation methodology, and in particular
the apportionment ofload growth between customer classes. Id. at 4-
Commission Findings
Based upon our review of the petition and the standards for awarding intervenor
funding, we find that the Irrigators have met the standards necessary to obtain intervenor
funding. As laid out in the Petition and in the testimony of Mr. Yankel, the Irrigators materially
ORDER NO. 30035
contributed to the settlement and advocated issues different from the Commission Staff. Based
upon our review of the billing statements, we find that the legal and consulting fees were
reasonable and grant intervenor funding in the amount of $32 742. We further find it reasonable
for Idaho Power to recover the intervenor funding costs from the irrigation class of customers.
ULTIMATE FINDINGS OF FACT AND CONCLUSIONS OF LAW
Idaho Power Company is an electric corporation subject to the Commission
regulation under the Idaho Public Utilities Law. Idaho Code ~ 61-129. The rates of all its tariff
schedule customers in the State of Idaho and its contract customers are subject to this
Commission s regulation.
The Company s present rates do not provide it with an opportunity to earn a fair and
reasonable return on its investment. Allowing the Company to increase its rates and charges by
$18.1 million annually will provide it with the opportunity to earn a fair and reasonable return.
The 2005 test year is the appropriate test year for use in this proceeding. The Company is
authorized to earn an overall rate of return of 8.1 %. The Stipulation is in the public interest.
We find the Company s system net power supply cost is $45 279 800. We further
find that the Company s 2005 system load in the amount 14 819 152 MWh is reasonable for
setting rates.
The Commission finds that the average 3.2% rate increase for the customer classes
and special contract customers (except for Schedules 15 and 40) is just and reasonable. The
Commission further finds that the other rate design issues contained in the Stipulation are fair
just and reasonable.
Finally, the Commission awards intervenor funding in the amount of $32 742 to the
Irrigation Pumpers Association. These costs shall be recovered from the irrigation customer
class.
ORDER
IT IS HEREBY ORDERED that the Motion for Approval of Stipulation is granted.
IT IS FURTHER ORDERED that Idaho Power is authorized an overall rate of return
of 8.1 %. As set out in the approved Stipulation, the Company is authorized to recover $18.
million in additional annual revenue.
IT IS FURTHER ORDERED that the Company file new base rate schedules in
conformance with this Order. The change in base rates shall be effective on June 1 2006.
ORDER NO. 30035
IT IS FURTHER ORDERED that the Idaho Irrigation Pumpers Association is
awarded intervenor funding in the amount of $32 742 to be recovered from customers in the
irrigation class. Idaho Power is directed to pay this amount within 28 days of the date of this
Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. 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 / J,.,tJ..
day of May 2006.
EkiL
MARSHA H. SMITH, COMMISSIONER
ENNIS S. HANSEN, COMMISSIONER
ATTEST:
J a D. Jewell
Commission Secretary
bls/IPC-05-28 dh4
ORDER NO. 30035