20070418notice_of_application_order_no_30302.pdf

Office of the Secretary
Service Date
April 18 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO IMPLEMENT POWER
COST ADJUSTMENT (PCA) RATES FOR
ELECTRIC SERVICE FROM JUNE 1, 2007
THROUGH MAY 31, 2008
CASE NO. IPC-07-
NOTICE OF APPLICATION
NOTICE OF
MODIFIED PROCEDURE
ORDER NO. 30302
On April 13, 2007, 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 cost) varies from year to year depending on changes in Snake River
streamflows 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 $30.7 million above the normalized PCA rates. The Company estimates that this
represents a $77.5 million increase in revenues from existing PCA rates (which are below
normalized rates), or an average increase in the PCA rates of 14.5%.
In this Order the Commission decides to process the PCA Application USIng
Modified Procedure and establishes a deadline for written comments. Interested persons are
invited to comment on the PCA Application.
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 abundant snowpacks and streamflows, the Company s power supply costs are usually
lower because of correspondingly plentiful relatively inexpensive hydro-generation.
Conversely, when streamflows or snow packs are low, Idaho Power must rely increasingly upon
1 Base rates were last established in Idaho Power s 2006 general rate case.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302
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
balanced with the following year s true-up. Consequently, ratepayers will pay for the actual
amount of power sold by Idaho Power to meet native load requirements - no more or no less.
Order No. 29334 at 4. Thus, ratepayers receive a rate credit when power costs are low, but are
assessed a surcharge when power costs are high. For example, last year s abundant streamflows
and snowpack resulted in a PCA rate decrease of nearly 20%; this year s below-normal
streamflows contribute to a proposed 14.5% increase in PCA rates.
NOTICE OF PCA APPLICATION
A. The PCA Components
YOU ARE HEREBY NOTIFIED that this year s PCA Application includes the
forecasted costs based on water conditions; a true-up of last year s forecasted costs to reflect
actual costs; and the true-up of the 2006-2007 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 3.3 million
acre-feet (mat). The Company reports the 30-year average inflows at Brownlee is 6.3 maf. This
year s water forecast is roughly half the 30-year average. Application at 3 , Exh. 2.
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
$129.23 million for the 2007-2008 PCA year (June 1, 2007 to May 31 , 2008). The projected
power costs equal 0.9575 cents per kWh. The 0.9575 cents per kWh estimate is 0.2098 cents per
kWh above the Commission s approved normalized PCA base of 0.7477 cents per kWh.
Consequently, the Company is proposing a surcharge of 0.1888 cents per kWh (90% of 0.2098
cents) for the power cost projection component. Application at 3; Schwendiman Dir. at 4-
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302
YOU ARE FURTHER NOTIFIED that Idaho Power reports that the difference
between last year s forecast costs and actual costs (the true-up) results in a surcharge to
customers of $15 090 267. Id at 4. The PCA true-up component also includes several
additional items previously approved by the Commission. Id These additional items include the
customer benefits associated with settlement of the Valmy plant outage, reduced power costs
associated with the new Bennett Mountain power plant, and the sale of SO2 emission credits
(including tax benefits) of $76.7 million. Schwendiman Dir. at 5-7. Last year the emission
credits were ordered to be included in the PCA true-up. Order No. 30041. The Company also
proposes to include the known after-tax benefit of $27 million that would normally be included
in next year s PCA case in this year s true-up. The proposed true-up balance of $15 090 267 is
then divided by the estimate of total jurisdictional sales in 2007 of 13 475 244 MWh. Idaho
Power witness Celeste Schwendiman calculates that the true-up portion of the PCA rate is a
surcharge of 0.1120 cents per kWh. Id at 7.
YOU ARE FURTHER NOTIFIED that the third PCA rate element is the "true-up of
the true-up.Last year the Company over-collected $7 941 094 of the PCA deferral balance.
Schwendiman Dir. at 7. Dividing this amount by the projected 2007 Idaho jurisdictional sales of
475 244 MWh results in a PCA true-up ofthe true-up rate credit of 0.0598 cents per kWh.
YOU ARE FURTHER NOTIFIED that combining the three components - the
projected power costs surcharge of 0.1888 cents, the true-up component surcharge of 0.1120
cents and the true-up of the true-up credit of 0.0598 cents - results in a proposed PCA rate
surcharge for the 2007-2008 PCA year of 0.2419 cents per kWh. This represents an increase of
6108 cents from the existing PCA credit rate of 0.3689 cents per kWh. Id at 8.
B. The PCA Rate Proposal
YOU ARE FURTHER NOTIFIED that Idaho Power has proposed to implement the
PCA rates on June 1 , 2007. The proposed PCA rate represents an overall average percentage
increase of 14.5% but due to the fixed cents adjustment, each customer class will receive a
different percentage increase. The Table below shows the proposed increases in the PCA rates
for the major customer classes:
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302
Customer Group Current Proposed Percentage
(Schedule)PCA Rate PCA Rate . Increase
Residential (1)0.3689~0.2419~11.
Small Commercial (7)3689~2419~
Large Commercial (9)0.3689~2419~16.
Industrial (19)3689~2419~22.
Irrigation (24-25)3689~2419~14.
The PCA rates for Idaho Power s three special contract customers (Micron, Simplot and the
Department of Energy (!NL)) would also increase. The Company s Application includes the
proposed PCA tariff in Schedule 55.
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 public input
and participation in past PCA cases.
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 any person desiring to state a position on this
PCA Application may file a written comment in support or opposition with the Commission
no later than May 14,2007. The comment must 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:
NOTICE OF APPLICA nON
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Barton L. Kline
Lisa Nordstrom
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
Mail: bkline~idahopower.com
lnordstrom~i dahopower. com
472 W. Washington Street
Boise, ID 83702-5983 John R. Gale
Gregory W. Said
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: rgale~idahopower.com
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 Idaho Power at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that Idaho Power s PCA Application together
with the Company s prefiled exhibits and the testimony of 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 testimony and exhibits are also available on the
Commission s Web site at www.puc.idaho.gov under "File Room" 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
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.
NOTICE OF APPLICA nON
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302
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 14, 2007.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of April 2007.
M RSHA H. SMITH, COMMISSIONER
ATTEST:
illJe D. Jewell
Co mission Secretary
bls/O:IPC-07-1O dh
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30302