HomeMy WebLinkAbout20081014Petition.pdfBARTON L. KLINE
Lead Counsel
1190
\DÀHO pi
UT\L\l\ES CO
1SIDA~PORq¡
An IDACORP Company
October 14, 2008
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-08-19
IN THE MATTER OF IDAHO POWER COMPANY'S PETITION FOR
APPROVAL OF CHANGES TO ITS POWER COST ADJUSTMENT ('PCA')
MECHANISM
Dear Ms. Jewell:
Enclosed please find for filing an original and seven (7) copies of Idaho Powets
Petition in the above matter.
In addition, enclosed are an original and eight (8) copies ofthe testimony of Gregory
W. Said submitted in support of Idaho Powets enclosed filing. One copy of Mr. Said's
testimony has been designated as the "Reporter's Copy." In addition, a disk containing the
Word version of Mr. Said's testimony has been provided for the Reporter and has been
marked accordingly.
Finally, I would appreciate it if you would return a stamped copy of this letter for
Idaho Power's file in the enclosed stamped, self-addressed envelope.
veryrJlÚ. ' _
Barton L. Kline
Lead Counsel for Idaho Power Company
BLK:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise, ID 83702
BARTON L. KLINE (ISB No. 1526)
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street
P.O. Box 70
Boise, Idaho 83707
Telephone: 208-388-5317
Facsimile: 208-338-6936
bklinecaidahopower.com
dwalkercaidahopower.com
RECEiveD
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PH 4: 02
IDAHOUTILITies PU13uç
COMMISS¡ON
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S PETITION FOR )
APPROVAL OF CHANGES TO ITS )
POWER COST ADJUSTMENT ("PCA") )MECHANISM )
)
CASE NO. IPC-E-08-19
PETITION
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company") and, in
accordance with Idaho Code §§ 61-503 and RP 053, hereby requests that the
Commission issue its Order authorizing the Company to modify its Power Cost
Adjustment mechanism ("PCA") consistent with the terms of the settlement Stipulation
enclosed herewith. This Petition is based on the following:
1. This Petition is the outgrowth of several Commission Orders addressing
the need to modify the Company's current PCA methodology. The most recent Order
PETITION -1
addressing this issue was Order No. 30563 issued in Case No. IPC-E-08-07, which was
the Commission's final Order in the Company's 2008-2009 PCA case. In that Order,
the Commission stated, "With respect to further evaluation of the PCA mechanism,
Staff, Idaho Power, and the Irrigators all proposed workshops to address issues such as
sharing methodology, forecasting methodology, distribution of power cost deferrals, and
load growth adjustment rates. We support these proposals and direct Idaho Power to
schedule such workshops as soon as practicable." Order No. 30563 at page 6-7, Case
No. IPC-E-08-07.
2. In response to the Commission's Order, Idaho Power hosted workshops
and settlement discussions addressing a number of issues related to the PCA. As a
result of those settlement discussions, the Commission Staff, Micron Technology, the
Industrial Customers of Idaho Power, the United States Department of Energy, and the
Idaho Irrigation Pumpers Association (the "Parties") have agreed to support this Petition
to modify the PCA in accordance with the provisions of the settlement Stipulation, which
is enclosed as Attachment No.1 to this Petition.
3. Filed concurrently with this Petition, is the direct testimony of Idaho Power
witness Gregory W. Said. Mr. Said's testimony provides additional detail regarding the
rationale underlying the changes to the PCA reflected in the Stipulation. Commission
Staff has advised the Company that they intend to file supporting testimony as well.
4. The Parties recommend that the Commission issue its Order approving
the Stipulation in its entirety, without material change or condition, and authorizing Idaho
Power to modify the PCA methodology in the manner set out in the Stipulation.
PETITION -2
5. As noted in paragraph 1 of the Stipulation, all of the Parti.es agree that the
Stipulation is in the public interest and that all of its terms and conditions are fair, just,
and reasonable.
6. Idaho Power believes that a hearing is not necessary to consider the
issues presented herein and therefore respectfully requests that this Petition be
processed under modified procedure, Le., by written submissions rather than by
hearing. RP 201, et seq. If, however, the Commission determines that a technical
hearing is required, the Company stands ready to present its testimony and support this
Petition at hearing.
NOW, THEREFORE, Idaho Power respectfully request the Commission issue a
final Order: (1) accepting Attachment No.1, the Stipulation, in its entirety, without
material change or condition and (2) authorizing the Company to implement the
changes to the PCA mechanism consistent with the terms of the Stipulation.
Respectfully submitted this 14th day of October 2008.
w~Barton L. Kline
Attorney for Idaho Power Company
PETITION -3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 14th day of October 2008 I served a true and
correct copy of the within and foregoing PETITION upon the following named parties by
the method indicated below, and addressed to the following:
Commission Staff
Weldon B. Stutzan
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
Idaho Irrigation Pumpers
Association, Inc.
Eric L. Olsen
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391
201 East Center
Pocatello, Idaho 83204-1391
Industrial Customers of Idaho Power
Peter J. Richardson, Esq.
RICHARDSON & O'LEARY PLLC
515 North 2th Street
P.O. Box 7218
Boise, Idaho 83702
Micron Technology
Conley Ward
GIVENS PURSLEY, LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Department of Energy
Lot R. Cooke
Offce of the General Counsel
United States Department of Energy
1000 Independence Avenue SW
Washington, DC 20585
Routing Symbol GC-76
PETITION -4
X Hand Delivered-U.S.Mail
== Overnight Mail
FAX
X Email Weldon.stutzmancapuc.idaho.gov
Hand Delivered)(U.S.Mail
== Overnight Mail
FAX
X Email elocaracinelaw.net
Hand Delivered)(U.S.Mail
== Overnight Mail
FAX
X Email petercarichardsonandolearv.com
Hand Delivered)(U.S.Mail
== Overnight Mail
FAX
X Email cewcagivenspursley.com
Hand Delivered
U.S. Mail
X Overnight Mail
FAX
X Email Lot.Cookecahg.doe.gov
Qt~Barton L. Kline
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-08-19
IDAHO POWER COMPANY
ATTACHMENT NO.1
BARTON L. KLINE (ISB No. 1526)
DONOVAN E.WALKER (ISB No. 5921)
Idaho Power Company
1221 West Idaho Street
P.O. Box 70
Boise, Idaho 83707
Telephone: 208-388-5317
Facsimile: 208-338-6936
bklinecaidahopower.com
dwalkercaidahopower.com
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S PETITION FOR )
APPROVAL OF CHANGES TO ITS )
POWER COST ADJUSTMENT ("PCA") )MECHANISM )
)
CASE NO.IPC-E-08-19
STIPULATION
This stipulation ("Stipulation") is entered into by and among Idaho Power
Company ("Idaho Power" or the "Company"), the Staff of the Idaho Public Utilities
Commission ("Staff'), the Idaho Irrigation Pumpers Association, Inc. ("IIPA"), the
Industrial Customers of Idaho Power ("ICIP"), Micron Technology, Inc. ("Micron"), and
the United States Department of Energy ("DOE"). These entities are collectively
referred to as the "Parties."
STIPULATION - 1
I. INTRODUCTION
1. The terms and conditions of this Stipulation are set forth herein. The
Parties agree that this Stipulation represents a fair, just and reasonable compromise of
the issues raised in this proceeding and that this Stipulation is in the public interest.
The Parties maintain that this Stipulation and its acceptance by the Idaho Public Utilities
Commission ("I PUC" or the "Commission") represent a reasonable resolution of multiple
issues identified in this matter. The Parties, therefore, recommend that the
Commission, in accordance with RP 274, approve the Stipulation and all of its terms
and conditions without material change or condition.
II. BACKGROUND
2. In the settlement Stipulation for Idaho Power's 2007 general rate case, the
Parties agreed that they would "make a good faith effort to develop a mechanism to
adjust or replace the current Load Growth Adjustment Rate (LGAR) to address cost of
serving load growth between rate cases." Stipulation at p.4, Case No. IPC-E-07-08. In
the Commission's final Order for the 2008-2009 Power Cost Adjustment ("PCA") case
the Commission stated:
With respect to further evaluation of the PCA mechanism,
Staff, Idaho Power, and the Irrigators all proposed
workshops to address issues such as sharing methodology,
forecasting methodology, the distribution of power cost
deferrals, and load growth adjustment rates. We support
these proposals and direct Idaho Power to schedule such
workshops as soon as practicable.
Order No. 30563 at p.6-7, Case No. IPC-E-08-07.
3. Idaho Power held three workshops where issues related to the PCA
mechanism were discussed. All of the Parties to this Stipulation participated in the
STIPULATION - 2
workshops. The first workshop, held on July 30, 2008, introduced the issues. The
second and third workshops, held on August 13, and September 3, 2008, respectively,
consisted of continued dialogue on the relevant issues, as well as discussions regarding
the consensus of the Parties, which is represented by the terms of this Stipulation.
4. Idaho Power, like other regulated public utilities in Idaho, is compensated
for historically "normal" power supply expenses through its base electricity rates
established by the Commission in general rate cases. Because the Company's actual
power supply expenses have significant variation from yearJo year, while the power
supply expense component embedded in base rates is static, the Commission has
adopted a PCA that is intended to mitigate, but not entirely eliminate, the impact of
power supply expense variabilty on the Company's earnings. Net power supply
expense~ vary from year to year in inverse correlation to the amount of electricity
generated by the Company's hydro generation facilities.
Although the PCA benefits the Company by reducing the variability associated
with power supply expenses, certain elements of the PCA methodology, such as the
"sharing methodology" and the "load growth adjustment rate" can reduce the
Company's ability to earn its authorized rate of return. Two primary conditions in recent
years - sustained low water (and resultant low hydro production) and sustained system-
wide increased demand for electricity - have amplified the adverse effect of these
elements of the PCA methodology on the Company's earnings and cash flow.
In the workshops, Idaho Power presented evidence that the Company's inability
to recover its authorized rate of return is one of the reasons for the deterioration of the
Company's credit quality as measured by the national credit rating agencies over the
STIPULATION - 3
last several years. The evidence presented by the Company included statements from
analysts noting that this summer the Company's inability to fully recover power supply
expenses, coupled with capital expansion outlays, have gradually whittled away the
Company's financial strength. These factors contributed to Standard and Poors recent
downgrade of IDACORP and Idaho Power debt and to Moody's placement of IDACORP
and Idaho Power debt on watch for possible downgrade from its current ratings leveL.
Deterioration of the Company's credit rating has increased the cost to access capital
and resulted in increased costs to customers.
5. Based upon the discussions and consensus among the Parties at the
workshops, as a compromise of the positions in this case, and for other consideration as
set forth below, the Parties agree to the following terms:
II. TERMS OF THE STIPULATION
6. Sharing Methodology. The PCA Sharing Methodology establishes a fixed
allocation of non-PURPA power supply expenses between customers (90%) and
shareholders (10%). The Parties agree to change the current 90%/10% Sharing
Methodology to 95%/5%. When the 90%/10% Sharing Methodology was initially
established, the 10% component represented approximately 50 basis points of the
Company's earnings. Today, because of the many changed conditions referenced
below, the 10% sharing component represents more than 100 basis points of Company
earnings. Modifying the Sharing Methodology to 95%/5% restores the Company's risk
parameter to approximately 50 basis points of earnings.
The historic rationale for the 90%/10% sharing has been to assure that the
Company's interests are aligned with those of the customer, and that the Company
STIPULATION -4
makes prudent decisions regarding its power supply expenses. The stated reason for
the 90%/10% sharing ratio in the PCA was to incent the Company to make wise
decisions with regard to the purchase or sale of energy because the Company was "on
the hook" for 10% of expenditures. Two things have changed since the adoption of the
Sharing Methodology that necessitate its change: (1) a substantial increase in the
magnitude and volatility of power supply expenses driven by market and fuel price
volatility coupled with increasing loads and (2) development of the Company's Risk
Management Policy.
The more significant change is the fact that the magnitude and volatility of power
supply expenses have increased substantially since the initial implementation of the
PCA. Volatility from high to low water conditions has increased from the expectation of
slightly over $100 millon in 1992 to over $330 milion based upon modeled scenarios.
This large increase in magnitude and volatility is primarily attributable to a fundamental
change in market conditions and increased loads.
The other significant change directly related to supporting a change in the
Sharing Methodology is the development of the Company's prescriptive "Risk
Management Policy." Before the western energy crisis of 2000 and 2001, the Company
exercised considerable discretion with regard to the advance purchase of energy for
anticipated future deficiencies or the advance sale of energy for anticipated future
surpluses. As a direct result of high PCA rates during the energy crisis, the
Commission directed the Company, Commission Staff, and customer groups to
formulate a Risk Management Policy to mitigate risk associated with hydro and market
price variability. The Risk Management Policy is conservatively biased to provide
STIPULATION - 5
adequate resources to meet anticipated demand and to protect against extremes in
market electricity prices. As a result, the market purchase and sale process is now far
more prescriptive in nature than when the PCA was adopted. With a prescriptive buying
and sellng policy driving the vast majority of energy purchases and sales, the need for
the incentive provided by the Sharing Methodology is reduced.
The Parties agree that given the change in circumstances since the PCA was
initially instituted, changing the 90%/10% Sharing Methodology to 95%/5% is fair, just,
and reasonable, and aligns with the original intent of the Sharing Methodology. The
Parties agree that the new 95%/5% Sharing Methodology should be effective on the first
day of the month following Commission approval of this Stipulation.
7. Load Growth Adjustment Rate. The LGAR is an element of the current
PCA formula intended to eliminate recovery of that component of power supply
expenses associated with load growth resulting from changing weather conditions, a
growing customer base, or changing customer usage patterns. The Parties agree to
calculate the LGAR using three components, a return component, an expense
component, and a revenue component of the production related rate base. This
methodology recognizes the generation-related revenue that wil be provided through
base rates by load growth. The LGAR components used in the methodology wil be
updated with other PCA inputs at the conclusion of a general rate case. An example of
the agreed upon calculation is shown in Exhibit A to this Stipulation.
Incident to the PCA true-up, LGAR is currently calculated by comparing actual
system load with normalized system load established in the most recent general rate
case. The difference in megawatt hours is divided by two and multiplied by $62.79.
STIPULATION - 6
When actual load is greàter than normalized base system load, the Company refunds
the difference (subject to the sharing formula) to the customer and records increased
.PCA expense. Because normalized system load is determined in a general rate case
using a historical test year, and because the Company continues to experience system
wide growth, the LGAR has consistently had an adverse effect on the Company's
earnings.
The initial LGAR rate was $16.84 per MWh. The current effective LGAR from the
IPC-E-07-0-8 rate case is $31.40. The previous determination from the IPC-E-06-08
LGAR case was $29.41 per MWh. The LGAR calculation, using the methodology
agreed to by the Parties in this Stipulation, along with the filed data from the IPC-E-08-
10 rate case is $28.14 per MWh, as shown in Exhibit A. The Parties agree that the
calculation set forth in Exhibit A is fair, just, and reasonable. The Parties agree that the
new LGAR methodology should become effective when its components are established
and new rates implemented as a result of the IPC-E-08-10 general rate case.
8. The Forecast. Each April the National Weather Service's Northwest River
Forecast Center ("NWRFC") makes a stream flow forecast upon which the PCA forecast
is based. Projected expenses are calculated by using a natural logarithmic function of a
single variable - projected April through July Brownlee reservoir inflows. Variations in
this forecast from actual expenditures included in rates are collected the following year.
Thus, the more accurate the forecast is, the smaller the amount that accrues in the
deferral for inclusion with the following year's PCA "true-up" rate. All Parties agree that
it is in everyone's best interest to have the most accurate forecast of PCA year
expenses for the annual April 15th PCA filings. The Parties also agree that the
STIPULATION - 7
regression formula used in the past is no longer the best forecast tool. Comparing
forecasts used by the Company in developing its Operation Plan to historical PCA filings
shows that the Operation Plan forecast is a more accurate PCA year forecast than the
regression formula. The Parties agree that the Company's forecast based upon its
Operation Planning tools is the current best forecast and should be utilzed for annual
filings. The Parties agree that the Operation Plan forecast should be utilized for the
Company's next annual PCA rate filing.
9. Third-Party Transmission Expense. The Parties agree that third-part
transmission expenses are a necessary component to facilitate purchases and sales of
energy and are reasonably considered a power supply expense. These third-part.
transmission expenses are reflected in two FERC accounts: Account 555, purchased
power, and Account 565, transmission of electricity by others. Third-part transmission
wheeling expenses necessary to facilitate purchases and sales of energy have been
recorded in Account 565. Transmission expenses paid to third-parties for replacement
of their transmission losses have been recorded in Account 555. Historically, neither of
these items has been reflected in PCA computations. The Parties agree that deviations
in these types of expenses from levels included in base rates should reasonably be
reflected in PCA computations. In the future, the entire Account 555 wil be tracked by
the PCA as wil Account 565. The Parties agree that third-part transmission expense
including losses be included when the base is established as a result of the IPC-E-08-
10 general rate case.
10. Power Supply Expense Distribution. Historically, power supply expenses
were reported throughout the year using an AURORA based distribution. In order to
STIPULATION - 8
provide the financial community more transparent and understandable financial
communications, the Parties agree that for purposes of PCA deferral reporting, the
Base Net Power Supply Expenses wil be distributed to monthly values based upon a
monthly revenue shape. This adjustment wil not affect the total PCA year calculation of
the deviation between actual and Base Net Power Supply Expenses but wil improve
comparability between interim and annual financial reporting periods. A shadow PCA
report that shows the PCA impacts associated with using an AURORA based
distribution of power supply expenses wil be provided to Commission Staff. The
Parties agree that the new Power Supply Expense Distribution wil be utilized when
base rates are changed as a result of the IPC-E-08-10 general rate case.
11. Rate Spread/Revenue Allocation. PCA expenses are currently allocated
to the various customer classes based almost 100% on energy. The Parties agree that
this rate spread and revenue allocation needs to be reexamined following Idaho
Power's current general rate case to determine if this methodology needs to be
changed.
12. The Parties agree that this Stipulation represents a compromise of the
positions of the Parties in this case. As provided in RP 272, other than any testimony
filed in support of the approval of this Stipulation, and except to the extent necessary for
a Part to explain before the Commission its own statements and positions with respect
to the Stipulation, all statements made and positions taken in negotiations relating to
this Stipulation shall be confidential and wil not be admissible in evidence in this or any
other proceeding.
STIPULATION - 9
13. The Parties submit this Stipulation to the Commission and recommend
approval in its entirety pursuant to RP 274. Parties shall support this Stipulation before
the Commission, and no Part shall appeal a Commission Order approving the
Stipulation or an issue resolved by the Stipulation. If this Stipulation is challenged by
any person not a part to the Stipulation, the Parties to this Stipulation reserve the right
to file testimony, cross-examine witnesses and put on such case as they deem
appropriate to respond fully to the issues presented, including the right to raise issues
that are incorporated in the settlements embodied in this Stipulation. Notwithstanding
this reservation of rights, the Parties to this Stipulation agree that they wil continue to
support the Commission's adoption of the terms of this Stipulation.
14. If the Commission rejects any part or all of this Stipulation, or imposes any
additional material conditions on approval of this Stipulation, each Party reserves the
right, upon written notice to the Commission and the other Parties to this proceeding,
within 14 days of the date of such action by the Commission, to withdraw from this
Stipulation. In such case, no Part shall be bound or prejudiced by the terms of this
Stipulation, and each Part shall be entitled to seek reconsideration of the
Commission's order, file testimony as it chooses, cross-examine witnesses, and do all
other things necessary to put on such case as it deems appropriate. In such case, the
Parties immediately will request the prompt reconvening of a prehearing conference for
purposes of establishing a procedural schedule for the completion of the case. The
Parties agree to cooperate in development of a schedule that concludes the proceeding
on the earliest possible date, taking into account the needs of the Parties in participating
in hearings and preparing briefs.
STIPULATION -10
15. The Parties agree that this Stipulation is in the public interest and that all
of its terms and conditions are fair, just, and reasonable.
16. No Part shall be bound, benefited, or prejudiced by any position asserted
in the negotiation of this Stipulation, except to the extent expressly stated herein, nor
shall this Stipulation be construed as a waiver of the rights of any Part unless such
rights are expressly waived herein. Execution of this Stipulation shall not be deemed to
constitute an acknowledgment by any Part of the validity or invalidity of any particular
method, theory, or principle of regulation or cost recovery. No Part shall be deemed to
have agreed that any method, theory, or principle of regulation or cost recovery
employed in arriving at this Stipulation is appropriate for resolving any issues in any
other proceeding in the future. No findings of fact or conclusions of law other than those
stated herein shall be deemed to be implicit in this Stipulation.
17. The obligations of the Parties under this Stipulation are subject to the
Commission's approval of this Stipulation in accordance with its terms and conditions
and upon such approval being upheld on appeal, if any, by a court of competent
jurisdiction.
18. This Stipulation may be executed in counterparts and each signed
counterpart shall constitute an original document.
DATED this 14th day of October 2008.
Idaho Power Company Idaho Public Utilities Commission Staff
By fk~ff
Donovan E. Walker
Attorney for Idaho Power Company
ByQ¿"' ~
Weldon Stutzman
Attorney for IPUC Staff
STIPULATION -11
. n Pumpers Association, Inc.
Eric L. Olsen
Attorney for Idaho Irrigation Pumpers
Association, Inc.
Micron Technology, Inc.
By
Conley E. Ward
Attorney for Micron Technology, Inc.
STIPULATION - 12
Industrial Customers of Idaho Power
By
Peter J. Richardson
Attorney for Industrial Customers
of Idaho Power
U.S. Department of Energy
By
Lot H. Cooke
Attorney for U.S. Department of
Energy
Idaho Irrigation Pumpers Association, Inc.
By
Eric L. Olsen
Attorney for Idaho Irrigation Pumpers
Association, Inc.
Micron Technology, Inc.
By
Conley E. Ward
Attorney for Micron Technology, Inc.
STIPULATION - 12
Industrial Customers of Idaho Power
BYrpd-~
Peter J. Richardson
Attorney for Industrial Customers
of Idaho Power
U.S. Department of Energy
By
Lot H. Cooke
Attorney for U.S. Department of
Energy
Idaho Irrigation Pumpers Association, Inc.
By
Eric L. Olsen
Attorney for Idaho Irrigation Pumpers
Association, Inc.
Micron Technology, Inc.
By-(!Jifl1=
Attorney for Micron Technology, Inc.
STIPULATION - 12
Industrial Customers of Idaho Power
By
Peter J. Richardson
Attorney for Industrial Customers
of Idaho Power
U.S. Department of Energy
By
Lot H. Cooke
Attorney for U.S. Department of
Energy
Idaho Irrigation Pumpers Association, Inc.
By
Eric L. Olsen
Attorney for Idaho Irrigation Pumpers
Association, Inc.
Micron Technology, Inc.
By
Conley E. Ward
Attorney for Micron Technology, Inc.
STIPULATION -12
Industrial Customers of Idaho Power
By
Peter J. Richardson
Attorney for Industrial Customers
of Idaho Power
U.S. Department of Energy
By /zllcJ
Lot H. Cooke
Attorney for U.S. Department of
Energy
EXHIBIT A
LOAD GROWTH ADJUSTMENT RATE ("LGAR") CALCUATION
SETTLEMENT AGREEMENT
The Parties agree to use the following methodology to determine the Load Growth
Adjustment Rate: The LGAR wil consist of three components:
1. A return component based upon production-related rate base.
2. An expense component based upon production-related rate base.
3. A revenue component based upon production-related rate base.
Component 1: Production-Related Rate Base
The Production-Related Rate Base component would be the result of an IPUC order in
general revenue requirement proceedings. As an example from the current Company
request in Case No. IPC-E-08-10, page 1 of Exhibit No. 54 contains the demand and
energy components of rate base allocated to the production function.
Demand
Energy
Total
$428,477,746
$501,479,100
$929,956,845
Assuming the Commission approved cost of capital structure is 50 percent debt and 50
percent equity and the approved overall rate of return is 8.55 percent:
Rate base
Debt
Equity
$929,956,845 (§ 8.55% = $79,511,310
$464,978,423 (§ 5.85% = $27,201,125
$464,978,423 (§ 11.25% = $52,310,185
The Equity piece is grossed-up for taxes (1.642 multiplier)
Grossed-up Equity
Debt
LGAR Component 1
$ 85,893,324
$ 27,201,125
$113,094,449
Component 2: Production-Related Expenses
The Production-Related Expenses component would be the result of an IPUC order in
general revenue requirement proceedings. An example from the current Company
request in Case No. IPC-E-08-10, page 2 of Exhibit No. 54 contains the demand and
energy components of expenses allocated to the production function.
Demand
Energy
Total
$ 84,862,274
$372,833,595
$457,695,869
STIPULATION -13
The Parties recognize that included in this allocation are expenses related to customer
service, and general and administrative expenses that are not directly associated with
production and are reasonably removed. These amounts can be found in Exhibit 53
page 61, lines 467 through 485 and Exhibit 53 page 66, lines 489 through 520. The
sum of these exclusions is $40,508,666.
Total from above
Less exclusions
LGAR Component 2
$457,695,869
$ 40,508,666
$417,187,203
Component 3: Production-Related Revenues
The Production-Related Revenues component would be the result of an IPUC order in
general revenue requirement proceedings. An example from the current Company
request in Case No. IPC-E-08-10, page 3 of Exhibit No. 54 contains the demand and
energy components of revenues allocated to the production function.
Demand
Energy
LGAR Component 3
$ 950,801
$106,270,965
$107,221,766
LGAR Rate
The Load Growth Adjustment Rate (LGAR) is equal to the result of adding Components
1 and 2, subtracting Component 3, and finally dividing by the Commission approved
Idaho jurisdictional firm load.
Component 1:
Component 2:
Component 3:
(1) + (2) - (3)
Idaho jurisdictional load
$113,094,449
$417,187,203
$107,221,766
$423,059,886
15,036,726 MWh (Exhibit 51)
$28.14/ MWhLGAR Rate
STIPULATION - 14