20090423notice_of_application_order_no_30786.pdf

Office of the Secretary
Service Date
April 23, 2009
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, 2009
THROUGH MAY 31, 2010
CASE NO. IPC-09-
NOTICE OF APPLICATION
NOTICE OF
MODIFIED PROCEDURE
NOTICE OF
PUBLIC WORKSHOP
ORDER NO. 30786
On April 15, 2009, Idaho Power Company filed its annual power cost adjustment
(PCA) Application. Since 1993 , the PCA mechanism has permitted Idaho Power to adjust its
PCA rates upward or downward to recover the Company s annual "power supply costs.
Because approximately 52% of the Company s generation is from hydropower facilities, Idaho
Power s actual cost of providing electricity (its power supply cost) varies from year to year
depending on changes in Snake River streamflows, the market price of power, and other factors.
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 above normalized PCA amounts. To recover the increased power costs, the Company
estimates that the existing PCA rates must increase to recover about $93.8 million, or an average
increase in the existing Company rates of approximately 11.4%.
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. The first
component, projected power cost, is computed using the results of the Company s most recent
Operating Plan as the basis for the April projection of PCA expenses. This method replaces the
NOTICE OF APPLICATION
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ORDER NO. 30786
previous method that was based on a forecast of water runoff and a regression formula derived
from rate case data. The Commission directed use of the new method for projecting power costs
because the old method resulted in forecasts that differed too greatly from actual results. Order
No. 30715. Thus, while streamflows still factor into the projected power costs, the new method
of calculating those costs should be more reliable. In general, in years of abundant snowpacks
and streamflows, the Company s power supply costs are usually lower because of relatively
inexpensive hydro-generation. Conversely, when snowpack and resulting streamflows are low
Idaho Power must rely increasingly upon its thermal generating resources and purchased power
from the regional market. The Company s 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 95% of the difference between the projected power
costs and the approved base power costs. Order No. 30715.
Second, because the PCA includes forecasted costs, the preceding year s forecasted
costs are "trued-up" to account for the actual costs incurred in the prior year. The true-up
balance in last year s PCA review was reduced by the Company s sulfur dioxide revenue. On
April 14, 2008 , the Commission issued Order No. 30529 in the sulfur dioxide (SO2) case, No.
IPC-07-18. In Order No. 30529 the Commission directed that the majority of SO2 revenue
that Idaho Power received in 2007 from the sale of SO2 emission allowances be included in last
year s PCA case. The SO2 proceeds of about $16 million reduced the 2008 PCA true-up
balance. Consistent with Order No. 30529, Idaho Power used additional SO2 sale proceeds of
approximately $4.6 million to reduce the true-up balance in this year s PCA case.
The third component is the "true-up of the true-up," or reconciliation of the previous
year s true-up. This component is designed to ensure the Company recovers the actual approved
costs. Idaho Power uses "normalized" power sales (measured in kilowatt-hours (kWh)) from the
ensuing PCA year as the denominator to compute the adjusted true-up. Over- or under-recovery
is balanced with the following year s true-up. Consequently, ratepayers will pay Idaho Power
actual power supply costs - no more and no less. Thus, ratepayers receive a rate credit when
power costs are low, but are assessed a surcharge when power costs are high.
I In the case to resolve use of existing 802 revenue, Staff and Idaho Power recommend the S02 proceeds be used to
reduce the PCA balance in this case. Case No. IPC-O9-08.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC WORKSHOP
ORDER NO. 30786
NOTICE OF PCA APPLICATION
A. The PCA Components
YOU ARE HEREBY NOTIFIED that this year s PCA Application includes the
forecasted costs based on projected power costs; a true-up of last year s forecasted costs to
reflect actual costs; and reconciliation of the 2008-2009 PCA year true-up (the true-up of the
true-up). The Company calculates that the net projected power supply cost is $189.8 million for
the 2009-2010 PCA year, resulting in a rate of 0.6451 cents per kWh for the projected power
cost component of the PCA. The rate for projected power supply costs is reduced to 0.5662
cents per kWh after $11 502 269 in net PURPA project expenses is taken into account.
YOU ARE FURTHER NOTIFIED that Idaho Power reports that the difference
between last year s forecast costs and actual costs (the true-up component) is $103 300 137
including a reduction of approximately $4.6 million to reflect S02 sales. Application, p. 4. The
Company calculates the true-up portion of the PCA rate is a surcharge of 0.7465 cents per kWh.
YOU ARE FURTHER NOTIFIED that the third PCA rate element is the "true-up of
the true-up" or reconciliation of the previous year s true-up. Last year the Company under-
collected the PCA deferral balance by $22 003 335. Application, p. 4. Dividing this amount by
the projected 2009 Idaho jurisdictional sales of 13 838 689 MWh results in a PCA adjusted true-
up rate surcharge of 0.1590 cents per kWh. Id.
YOU ARE FURTHER NOTIFIED that combining the three components - the
projected power costs rate of 0.5662 cents, the true-up component surcharge (including the S02
proceeds) of 0.7465 cents and the adjusted true-up surcharge of 0.1590 cents - results in a
proposed PCA rate surcharge for the 2009-2010 PCA year of 1.4717 cents per kWh. This
represents an increase of 0.6853 cents from the existing PCA rate of 0.7864 cents per kWh.
B. The PCA Rate Proposal
YOU ARE FURTHER NOTIFIED that Idaho Power has proposed to implement the
PCA rates on June 1 , 2009. The proposed PCA rate represents an overall average percentage
increase of 11.4% in the Company s revenues. Although the PCA rate is an equal cents per kWh
adjustment for all customers, each customer class will receive a different percentage increase due
to the different energy rates in effect for the different customer classes. The table below shows
the proposed increases in the PCA rates for the major customer classes:
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Customer Group Percentage
(Schedule)Increase
Residential (l)30%
Small Commercial (7)56%
Large Commercial (9)12.58%
Industrial (19)15.64%
Irrigation (24)11.08%
The PCA rates for Idaho Power s three special-contract customers (Micron, Simplot, and the
Department of Energy (INL)) would also increase. Under the Company s proposal (adjusted for
the $4.6 million SO2 credits), the PCA rate for the three special-contract customers would
increase 17.68% for Micron; 18.71 % for Simplot; and 18.36% for the INL.
NOTICE OF PUBLIC WORKSHOP
YOU ARE FURTHER NOTIFIED that the Commission Staff will hold a public
workshop for customers of Idaho Power. The purpose of the public workshop is to provide
customers with an overview of the Company s PCA Application and to dispense information.
Customers attending the workshop will have an opportunity to ask questions of the Staff
regarding the Company s Application. Representatives of Idaho Power may also be available.
The Staff will hold its workshop on TUESDAY. MAY 5. 2009, AT 7:00 P.M. IN THE
COMMISSION'S HEARING ROOM. 472 WEST WASHINGTON STREET. BOISE.
IDAHO.
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 IDAPA 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.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC WORKSHOP
ORDER NO. 30786
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 14,2009. 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:
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Donovan E. Walker
Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
Mail: dwalker(8)idahopower.com
bkl ine(8)idahopower .com
472 W. Washington Street
Boise, ID 83702-5918 Scott Wright
Gregory W. Said
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: swright(8)idahopower.com
gsai d(8)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 Scott Wright 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 ([phone]).
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
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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, IDAPA 31.01.01.000 et seq.
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 2009.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this .;l.:J,.
day of April 2009.
//
D. KEMPTON, P SIDENT
Jf~~
ARSHA H. SMITH, COMMISSIONER
ATTEST:
mission Secretary
bls/0:IPC-O9-PCA
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF PUBLIC WORKSHOP
ORDER NO. 30786