20070416Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER RED FO RD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:APRIL 16, 2007
SUBJECT:IDAHO POWER'S PCA APPLICATION FOR ELECTRIC SERVICE
FROM JUNE 1,2007 THROUGH MAY 31, 2008, CASE NO. IPC-07-
On April 13 , 2007, Idaho Power 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 increase the Company
PCA revenues by more than $77.5 million from existing rates and result in an overall average
PCA rate increase of 14.5%. The actual rate increase 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 3.
million acre feet (mat). Application at 3 , Exhibit 2. The 30-year average inflows at Brownlee
are 6.3 maf (1971-2000). In other words, this year s water forecast is about half the 30-year
average.2 Idaho Power calculates a net effect of the water forecast of approximately $129.23
million, or 0.9575 cents per kilowatt hour (kWh). This is approximately 0.2098 cents above the
normalized" PCA rate. After the 90-10 sharing, this results in a surcharge of 0.1888 cents per
kWh.
I Retail energy rates for Idaho Power customers have two components: the PCA rates and the Company s "base
rates.
2 By way of comparison, last year s Brownlee inflows were 8.38 maf; the PCA revenue decrease was more than
$123 million; and the overall average PCA rate reduction was 19.34%.
DECISION MEMORANDUM
Next, Idaho Power estimates that the projected power costs from the proceeding PCA
year will produce a surcharge of approximately $15 090 267 for customers through the PCA
true-up 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 plant outage; and the sale of SOz emission
credits (including tax benefits) of $76.million. Schwendiman at 5-7. Last year the
Commission ordered that revenue from emission credits be included in the PCA true-up. Order
No. 30041. The Company proposes to include the known after-tax benefit of selling the
emission credits to this year s PCA true-up. Schwendiman at 6-7. The offsetting true-up
components result in a 0.1120 cents per kWh surcharge.
The third component is the "true-up of the true-up." During the true-up period, the
Company collected $7.9 million more than the 2006/2007 PCA true-up balance. This results in a
true-up of the true-up credit of 0.0589 cents per kWh. Combining the three PCA rate elements
produces the PCA rate surcharge of 0.2419 cents per kWh, or $30.7 million above the
normalized PCA base.
Last year s PCA rate credit was 0.3689 cents per kWh, or $46.8 million below the
normalized PCA threshold. Consequently, this year s proposed PCA rate represents a $77.
million increase in revenues from last year s PCA rates.
A typical residential customer using 1050 kWh per month during the summer and
non-summer seasons would experience a $6.41 billing increase per month. The proposed class
increases are: 11 % for residential (Schedule 1); 8.8% for small commercial (Schedule 7); 16.
for large commercial (Schedule 9); 22.5% for industrial (Schedule 19); and 14.6% for irrigation
(Schedules 24-25). The PCA rates for special contract customers (e., Micron, Simplot
Department of Energy (INL)) also would increase. Exhibit 5, Schedules 26, 29-30.
CUSTOMER NOTICE AND CASE PROCESSING
The Company has prepared and distributed a PCA press release to media outlets. In
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 interested parties.
The Company requests that the Commission process this Application via Modified
Procedure and that new PCA rates would become effective on June 1 2007. Application at
DECISION MEMORANDUM
Company witness Celeste Schwendiman has prefiled testimony and exhibits in support of the
Application.
STAFF RECOMMENDATION
The Staff agrees with the Company s request that this case be processed via Modified
Procedure. Staff recommends that comments regarding the PCA Application be due May 14
2007. This matter could then be placed upon the Commission s May 21 (proposed) decision
meeting agenda.
CO MMISSI 0 N D ECISI ON
1. Does the Commission wish to process this case via Modified Procedure?
2. Does the Commission wish to adopt Staffs suggested comment schedule?
3. Anything else?
Don Howell
jn/M:IPC-O7-
DECISION MEMORANDUM