20060414Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:APRIL 13, 2006
SUBJECT:IDAHO POWER'S PCA APPLICATION FOR ELECTRIC SERVICE
FROM JUNE 1 2006 THROUGH MAY 31, 2007, CASE NO. IPC-06- 7
On April 12, 2006, Idaho Power Company filed its annual Power Cost Adjustment
(PCA) Application. This Application concerns the Company s PCA component of the energy
rates charged to its Idaho customers.! The Company s PCA filing would reduce the Company
PCA revenues by more than $123 million from existing rates and result in an overall average
PCA rate reduction of 19.34%. The actual rate reduction varies from class to class.
THE PCA MECHANISM
The PCA annually adjusts the Company rates based primarily upon three
components: (1) Snake River stream flows and storage; (2) the true-up of forecast costs for the
preceding 12 months to account for actual costs; and (3) the true-up of the true-up. The
Company reports this year s water forecast April-July inflows at Brownlee Reservoir is 8.
million acre feet (mat). Application at 3. The 30-year average inflows at Brownlee are 6.3 maf
(1971-2000). In other words, this year s water forecast is roughly 33% above the 30-year
average. Idaho Power calculated a net effect of the water forecast of approximately $63.
million, or 0.4691 cents per kilowatt hour (kWh). After the 90-10 sharing, this results in a credit
of 0.2507 cents per kWh.
Next, Idaho Power estimates that the projected power costs from the proceeding PCA
year will produce a credit of approximately $39.5 million for customers through the PCA true-up
1 Retail energy rates for Idaho Power customers have two components: the PCA rates and the Company s "base
rates. All the parties in the Company s pending rate case have urged the Commission to approve a settlement
Stipulation to increase base rates by 3.2%. See Case No. IPC-O5-28.
DECISION MEMORANDUM
component. This component also includes additional items that inure to the benefit of customers
including: reduce power supply costs from Bennett Mountain Power plant; an adjustment to
reflect the settlement of the Valmy outage; last year s non-recurring tax credit addressed in Order
No. 29600; and one year of interest on the income tax assets (Order No. 29789). Id. at 4. This
results in a 0.3113 cents per kWh credit.
The third component is the true-up of the true-up. During the true-up period, the
Company collected all but approximately $24.5 million of the 2005/2006 PCA true-up balance.
This large carry-over balance was primarily due to the Commission s decision last year to defer
$28.6 million to this PCA year. This results in a true-up of the true-up rate of 0.1931 cents per
kWh. Combining the three PCA rate elements produces a PCA rate credit of 0.3689 cents per
kWh or $46.8 million below the normalized PCA base.
Last year s PCA rate was 0.6039 cents per kWh, or $76.6 million above the
normalized PCA threshold. Consequently, the proposed PCA rates represent a $123.5 million
decrease in revenues from last year s PCA rates.
Offsetting the proposed PCA reduction with the Company s proposed base rate
increase of 3.2% would result in a proposed overall rate reduction averaging 16%. The average
residential customer using 1200 kWh per month during both the summer and non-summer
seasons would experience a $10.00 billing reduction per month. The proposed class reductions
are: 15.3% for residential (Schedule 1); 12.8% for small commercial (Schedule 7); 21.8% for
large commercial (Schedule 9); 27% for industrial (Schedule 19); and 19.3% for irrigation
(Schedules 24-25). The PCA rates for special contract customers would decrease by about 31 %.
Exhibit 8.
CUSTOMER NOTICE AND CASE PROCESSING
The Company has prepared and distributed a PCA press release to media outlets.
addition, the Company will notify existing customers by means of bill stuffers. The press release
and bill stuffer were attached to the Application. The Company has also provided an electronic
copy of its PCA Application to the parties in the pending rate case.
The Company requests that the Commission process this Application via Modified
Procedure so that new PCA rates (and new base rates) would become effective on June 1 2006.
Application at 5. Company witness Celeste Schewendiman has prefiled testimony and exhibits
in support of the Application.
DECISION MEMORANDUM
STAFF RECOMMENDATION
The Staff agrees with the Company s request that this case be processed via Modified
Procedure.
The settlement Stipulation in the Company s pending rate case provides that "the
PCA load growth rate issue will be addressed contemporaneously" with the Company s PCA
Application. Today the Company filed a new docket (IPC-06-8) to examine the PCA load
growth rate so that any change in the PCA load growth rate methodology will become effective
with next year s PCA.
Staff recommends that comments regarding the PCA Application be due May 12
2006. This matter could then be placed upon the Commission s May 24 decision meeting
agenda.
COMMISSION DECISION
1. Does the Commission wish to process this case via Modified Procedure?
2. Does the Commission wish to adopt Staff s suggested comment schedule?
3. Anything else?
f) ffV1/
Don Howell
bls/M:IPC-O6-07 dh
DECISION MEMORANDUM