20090518Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03 14
IDAHO BAR NO. 6864
(' r:~,,,/ r.:-
1009 Mit1 \ 8 PH it: 58
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR AUTHORITY) CASE NO. IPC-E-09-7
TO INCREASE ITS RATES DUE TO THE )
INCLUSION OF ADVANCED METERING )
INFRASTRUCTURE ("AMI") INVESTMENT IN) COMMENTS OF THERATE BASE. ) COMMISSION STAFF
)
)
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Neil Price, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure in Order No. 30764 issued on April 2, 2009,
submits the following comments.
BACKGROUND
On March 13,2009, Idaho Power Company ("Idaho Power" or "Company") submitted an
Application, pursuant to Idaho Code §§ 61-502, 61-502A and 61-507, and Commission Rules of
Procedure 52, 121 and 123, for authority to increase its rates due to the inclusion of Advance
Metering Infrastructure ("AMI") investment in rate base. The Company requested that its
Application be processed through Modified Procedure. IDAPA 31.01.01.201-.204.
STAFF COMMENTS 1 MAY 18,2009
Idaho Power proposes a unform percentage increase of 1.61 % to Tariff Schedules 1, 4, 5,
7,9 secondar, 24 secondar, 41 metered service, and 42 (residential, small commercial,
irrigation, and metered lighting customer classes).
Idaho Power requests that the proposed increase take effect on June 1,2009, unless
otherwse ordered by the Commission, for service provided on and after that date.
Idaho Power cites its investment in AMI though the end of May 2010 into the
Company's rate base/revenue requirement as justification for the increase. The Company seeks
to include the capital investment it has made thus far pursuant to a CPCN authorizing the
installation of AMI throughout its service terrtory, see Commission Order No. 30726, as well as
investment made durng a proposed June 1,2009, through May 31, 2010, test year.
Idaho Power estimates that the 1 3-month average plant in service associated with the
AMI system for the proposed test year is $23,981,251. The Company asserts that, after applying
the Commission authorized rate-of-retum of 8. 1 8%, authorized three-year depreciation period,
Operation and Maintenance benefits, and applicable ta rates, an increase of $ 1 1,181,318 to the
Idaho jursdictional revenue requirement is waranted.
Idaho Power's Application includes reductions for removed metering equipment and
changes in operating expenses that accompany the changes in plant investment in its
calculations.
Idaho Power has included revised/proposed tariff sheets reflecting the proposed increase
to the Idaho jurisdictional revenue requirement; and a report comparng revenues under its
existing rates and revenues generated under its proposed revenue requirement as Attachments
1-3 to its Application.
Idaho Power fied the testimony of Gregory W. Said, Director of State Regulation in the
Pricing and Regulatory Services Deparment, and Courtney Waites, Pricing Analyst,
simultaneously with, and in support of, its Application.
STAFF ANALYSIS
REVENUE REQUIREMENT
Idaho Power in Order No. 30726 was granted a Certificate of Public Convenience and
Necessity (CPCN) to install AMI. Idaho Power was also authorized to use accelerated
depreciation on existing meters and include operating and maintenance benefits as they occur for
puroses of rate recovery. In its Application, Idaho Power requests rate recovery of AMI
STAFF COMMENTS 2 MAY 18,2009
investments and associated costs and benefits though May 31, 2010. Staff believes the
appropriate test year should end December 3 1, 2009.
Idaho Power's request reflects investments to date and anticipated installations through
May 31,2010. The anticipated installations are based on the Company's original installation
plan with limited history showing the actual installations and costs for this project. The
commitment estimate and projected number of meters to be installed each month is the basis for
calculating the monthly costs on a per unit cost basis. While these calculations are a reasonable
estimate to match the project recovery with the installation period, the installation plan,
investment and operating costs and benefits are not tested to the point of accepting a fully
forecasted test period for this first recovery phase.
Staff s proposed test period ending December 31, 2009 will reflect the investment, costs
and benefits to date and on a projected basis through 2009. It follows the same methodology
used by Idaho Power in its filing. The Staff proposal is also consistent with the methodology
discussed in the CPCN Case No. IPC-E-08- 1 6, it just isn't projected as far into the future as
requested by Idaho Power. Staff believes the inclusion of the AMI facilties in rates as the
equipment is installed continues to be reasonable for this project. The phased installation of
AMI is specific in nature and the commitment estimate is utilzed as a benchmark. This project
has been supported and encouraged by the Staff and the Commission. Commission support has
been demonstrated by allowing the accelerated depreciation of retired meters over three years to
provide additional cash flow. The Staff proposal, if approved by the Commission, shows
continued support for the project and will further increase cash flow. The inclusion in rates as
the AMI project is completed will improve Idaho Power's abilty to ear the authorized retu
granted by this Commission in the last general rate case, Case No. IPC-E-08-10, Order No.
30722. Stafs proposal allows Idaho Power to begin recovering a return on its AMI investment
and ongoing operating and maintenance expenses with an offset reflecting benefits. The
proposal will allow Idaho Power to better meet the challenges the Company addresses in its
Application and supporting testimony. Use of the calendar year as the test year will also
facilitate ongoing recovery and reviews throughout the project. Staff supports the requested
effective date of June 1,2009. Future general rate cases wil reflect actual investments, costs and
benefits on a going forward basis. For a specific project that is not revenue producing such as
the AMI, this treatment assures customers are not hared while providing the ratemaking and
financial support proposed.
STAFF COMMENTS 3 MAY 18,2009
The AMI revenue requirement for the December 31, 2009 test period proposed by Staff is
$7,322,995 as shown on line 37 of Attchment A. The rate base amount is $6,540,586 (line 16)
and the net operating expenses are $3,924,782 (line 29). The authorized rate ofretum of8.18%
(line 34) and the net-to-gross multiplier of 1.642 (line 36) are the same as approved in the last
rate case Order No. 30722. Staff accepts Idaho Power's request to sta the three-year
accelerated amortization period for existing metering infrastructure on June 1,2009.
The American Recovery and Reinvestment Act of 2009 (ARR), also known as the
stimulus plan, has provisions for Smar Grid and AMI technologies. At this time, Idaho Power
continues to pursue acceptance for the ARR and other fuds but none have been granted to
Idaho Power to date. The ongoing AMI project reviews and inclusion in base rates of future
AMI expenditures will provide for timely inclusion of any ARR fuds that may be received.
These fuds wil benefit Idaho Power and more importantly customers.
Greg Said states in his testimony, page 4, lines 3 - 7 that:
Acquiring adequate fuding for not only the conversion to AMI but also
the Company's other investment requirements given unown changing
economic conditions may affect the Company's ongoing policy related to
AMI.
As stated before, Staff believes that its position addresses these financial challenges. Therefore,
Staff also recommends that Idaho Power be required to continue the AMI conversion and not be
allowed to extend the conversion time period without explicit Commission approval.
RATE DESIGN
Staff reviewed the Company's methodology to allocate the revenue requirement for each
class. The Company used the Energy Revenue from the affected classes which are Schedule 1-
Residential Class, Schedule 4 - Residential Energy Watch Program, Schedule 5 - Residential
Time of Day Program, Schedule 7- Small General Service, Schedule 9S - Large General
Secondar Service, Schedule 24 - Agricultural Irrigation Service, Schedule 41 - Street Lighting
Service, and Schedule 42 - Traffc Control Signal Lighting Service to determine the energy rate
increase for each class. The Company used the ratio of its calculated additional revenue
requirement of $11,181,318 and the Total Energy Revenue of $498,573,608. Based on the
Company's general rate case, Case No. IPC-E-08-10, the required energy rate increase for each
class is 2.24 percent. However, as a result of reconsideration in the Company's general rate case,
STAFF COMMENTS 4 MAY 18,2009
the Commission approved higher energy rates for the affected classes and a Total Energy
Revenue of$504,267,371. Based on revenue requirement reconsideration and the Company's
proposed methodology, the energy rate increase for each class is 2.22 percent with an overall
increase of 1.60 percent from base revenue.
Staff calculated the energy rate increase for each affected class differently from the
Company's methodology. Staff believes that it is more appropriate to use the Base Revenue of
the affected classes rather than only using the Energy Revenue. Using Staffs proposed overall
AMI revenue requirement increase of $7,322,995 shown in Attachment A and the curent overall
base revenue of the affected classes from the reconsideration of general rate case, Case No.
IPC-E-08-l0, Staff proposes a uniform 1.28 percent base revenue increase. The uniform
percentage increase is then applied to the base revenue of each affected class to determine its
revenue responsibility for the increase caused by AMI. Staff recommends that the energy rate
component in each customer class be increased proportionately to generate the base revenue
increase proposed by Staff in this case. Staff believes this methodology more appropriately
assigns revenue responsibilty to each customer class. Staff does not oppose spreading the
increased class revenue solely on the energy component. Staff and Company proposed revenue
spread is shown on Attachment B.
CONSUMER ISSUES
Customer Notice & Press Release
The Press Release was included in Idaho Power's Application. The Application was
received on March 16,2009. The Customer Notice was not received until April 8, 2009. The
Customer Notices were provided to customers in bil statements from March 25 to April 23.
Customer Comments
As of May 13,2008, thee (3) Idaho Power customers had submitted comments regarding
the proposed increase in rates due to the inclusion of Advanced Metering Infrastrcture
investment in rate base. Two comments opposed the increase to rates and one comment was
neutral. The Consumer Assistance Staff has fielded two inquires about the new meters being
installed by the Company.
STAFF COMMENTS 5 MAY 18,2009
Customer Installation Notification Materials
Staff reviewed the customer information materials that will be mailed to customers just
ahead of work performed in the area as well as the door hangers that are left on the customer's
premises after a successful or unsuccessful meter change out and found them to be adequate.
STAFF RECOMMENDATION
Staff recommends a test year ending December 31, 2009. The AMI revenue requirement
Staff recommends is $7,322,995. Staff proposes a 1.28 percent revenue increase for each
affected customer class spread proportionately to all energy rate components. Staff also
recommends acceptance of the June 1, 2009 date to begin the accelerated depreciation on
existing metering infrastructure and as the effective date for rates.
Respectfully submitted this ii.~ day of May 2009.
~~'ci
Deputy Attorney General
Technical Staff: Terr Carlock
TJ Golo
Daniel Klein
i:/umisc/comments/ipce09.7npdkbabtj comments. doc
STAFF COMMENTS 6 MAY 18,2009
Idaho Power Company
Summary of Revenue Requirement
RATE BASE
Electric Plant in Service:1 Intangible Plant $2 Production Plant $3 Transmission Plant $4 Distribution Plant $5 General Plant $6 Total Electric Plant in Service $
7 Less: Accumulated Depreciation $
8 Less: Amortization of Other Plant $9 Net Electric Plant in Service $
10 Less: Customer Adv for Construction $
11 Less: Accum Deferred Income Taxes $
12 Add: Plant Held for Future Use $
13 Add: Working Capital $
14 Add: Conservation - Other Deferred Program~ $15 Add: Subsidiary Rate Base $
16 TOTAL COMBINED RATE BASE $
AMI
Idaho
302,428
12,831,765
13,134,193
4,944,190
32,423
8,157,580
1,616,994
6,540,586
NET INCOME Idaho
Operating Revenues:
17 Sales Revenues 0
18 Other Operating Revenues 0
19 Total Operating Revenues 0
Operating Expenses:
21 Operation & Maintenance Expenses (262,828)
22 Depreciation Expenses 5,908,510
23 Amortization of Limited Term Plant 119,412
24 Taxes Other Than Income 0
Regulatory Debits/Credits 0
25 Provision For Deferred Income Taxes 3,233,987
26 Investment Tax Credit Adjustment 830,654
27 Federal Income Taxes (4,900,057)
28 State Income Taxes (1,004,896)
29 Total Operating Expenses 3,924,782
30 Operating Income (3,924,782)
31 Add: IERCO Operating Income 0
32 Consolidated Operating Income (3,924,782)
33 Rate of Return as filed -60.01%
34 Proposed Rate of Return 8.1800%
Earnings Deficiency 4,459,802
Add: Construction Work in Progress 0
35 Earnings Deficiency w/CWIP 4,459,802
36 Net-to-Gross Tax Multiplier 1.642
37 Revenue Deficiency 7,322,995 Attachmei£A
Case No. IPC-E-09-7
Staff Comments
. 05/18/09
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 18TH DAY OF MAY 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-09-07, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
BARTON L KLINE
DONOV AN E WALKER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: bklineßYidahopower.com
dwalker(ßidahopower.com
COURTNEY WAITES
GREG SAID
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: cwaitesßYidahopower.com
gsaidßYidahopower.com
il~SECRETARY -
CERTIFICATE OF SERVICE