20090515ICIP Comments.pdf

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A T TOR NE Y S AT LAW t.Mß~Y \ 4 Pi'~~: 48
Peter Richardson
Tel: [phone] Fax: [phone]
peterfi richardson andol eary. com
P.O. Box 7218 Boise, ID 83707 - 515 N. 27th St. Boise, ID 83702
14 May 2009
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilties Commission
POBox 83720
Boise 10 83720-0074
RE: Case No.lPC-E-09-11
Dear Ms. Jewell:
Enclosed please find nine (9) copies of the COMMENTS OF THE
INDUSTRIAL CUSTOMERS OF IDAHO POWER in the above case.
1 have also enclosed an extra copy to be serviæ-dated and returned to us for
our files. Thank you.
~~~\
Nina Curtis
Administrative Assistant
enc!.
Peter J. Richardson
ISB No. 3195
Richardson & O'Leary
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone] Tel
Fax: [phone] Fax
peter~richardsonandolear .com
Attorneys for the Industrial Customers of Idaho Power
o e¡~:;~..~.j.i,..,i f..,.,.,:
2009 MAY ill PH 4: 48
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-E-09-11
COMMENTS
OF THE INDUSTRIAL CUSTOMERS
OF IDAHO POWER
COMES NOW, The Industrial Customers of Idaho Power ("ICIP") and pursuant to this
Commission's Notice of Application and Notice of Modified Procedure embedded in Order No.
30786 provides its Comments on Idaho Power Company's ("Company" or "Idaho Power") 2009
anual Power Cost Adjustment ("PCA") Application:
i.
SUMMARY
The ICIP respectfully seeks an order from this Commission that would provide rate relief
in the form of a three year amortization of Idaho Power's 2009 PCA balance. The ICIP's request
is based on sound ratemaking principles as well as this Commission's order allowing Idaho
power to establish the PCA in the first instance.
II.
IDAHO POWER'S RATEPAYERS ARE FACING
AN UNPRECEDENTED BARRGE OF RATE INCREASES THIS YEAR
WHICH DEMANDS AN ALTERNATIVE APPROACH TO PCA RECOVERY
The Company is proposing to recover an additional $93.8 milion dollars in its 2009
PCA. This equates to an overall increase of 11.4% for all customers in its Idaho jurisdiction.
However, because PCA dollars are recovered on energy, the percentage increase vares widely
among the customer classes, with the high load factor customers bearng the brut of the PCA
burden. Ifthe PCA is approved as proposed, the industrial class will suffer an 15.6% increase
despite an overall increase of 11.4%. The residential class, by way of contrast, wil 'only'
receive an increase of 9.3%, which is roughly half the increase the industrial class receives.
In addition to the 18.0% increase under the proposed PCA mechansm, all customer
classes are now being asked to pay an additional 2.2% for energy efficiency measures. This is
on top of the 6% increase in rates the industral class will suffer as a result of the Company's
recently completed general rate case.
Overall so far this year, the industrial customers will have seen their rates, absent
remedial action by this Commission, increase twenty-four percent! That the industrial class is
suffering through the curent economic downtu is undisputed -- with the levels of impact being
unprecedented and continue to be unpredictable. With all of the uncertinty in the economy
including the loss of jobs, and potential loss of some industrial customers themselves, it is time
for the Commission to seriously consider its responsibilities to the ratepayers in relieving rate
shock and rate instability while stil making Idaho Power whole. The Commission has an
established a mechansm for addressing those concerns and now is the time for that mechanism
to be deployed. That mechanism is to permit recovery of the PCA balance over a period of time
with an appropriate carying charge.
Comments - IPC-E-08-07 2
The loss of industrial load on Idaho Power's system could have a spiraling effect on
ratepayers. With less load on the system there are fewer customers to spread Idaho Power's
fixed costs. This in tum leads to the need for higher rates for the remaining customers, which in
tum threatens their viability --- and on and on. The theat is reaL.
This Commission was very concerned about rate stability when it first allowed Idaho
Power to tae advantage of a PCA mechanism. This Commission ariculated its rate stability
concerns in response to Idaho Power's offer to attempt to ameliorate potential "rate shock":
Idaho Power represented during the hearing that it was willng to accommodate the
Commission's desire to ameliorate the "rate shock" that could result during periods of
very low water. We accept this offer but note that the goal of rate stability is of such
importance that we would have imposed a similar requirement even in the absence
of the Company's acquiescence.
Order No. 24806, IPC-E-92-25, emphasis provided.
Ths Commission was so concerned about possible rate shock that it set a bright line test
for triggering an investigation into deferrals of large PCA rate increases:
F or the purose of giving a degree of specificity to this rate stability goal, we require the
following: if forecasted increases above normalized power supply costs in any given year
are predicted to exceed 7% of the Company's normalized base revenues for the Idaho
jurisdiction, then Idaho Power is instructed to make a filing with the Commission for
the purose of determining whether a means to defer a percentage of that year's power
supply cost recovery should be investigated.
Id, emphasis provided.
Without explaining why it has chosen to ignore this Commission's requirement, Idaho Power has
made no "fiing for the purose of determining whether a means to defer" this very large PCA
should be investigated.
1
1 The Commission explained that the notification requirement is applicable when curent rate
changes, when combined with the true up adjustments for the previous year, exceed 7% as is the
Comments - IPC-E-08-07 3
Due to this large PCA increase, and in conformance with this Commission's guidelines
on deferrals for PCA's in excess of 7%, the ICIP respectfully requests that the curent year's
PCA be deferred and recovered in three equal anual installments. This water year is projected
to be slightly above normal; as a result the Snake River hydro storage system is scheduled to
refilL. In considering a deferral, the Commission should be cognizant that this year's PCA is
NOT driven by the curent water conditions. The large PCA balance is driven by the tre up
from last year's failure to accurately project power supply costs.
This year's PCA increase is driven by two major factors. First, the forecast in last year's
PCA was for power supply costs of $3.7 milion. Actual power supply costs tumed out to be a
staggering $109 milion. Power supply cost forecasts have plagued the PCA and caused
significant tre-ups since 2001. As can be seen in the attached Exhibit A, the PCA was
symmetrical from its inception in 1993 through 2000. However, since 2001 there has been only
one year when the PCA has yielded a credit to the ratepayers. The cumulative impact of PCA
charges have amounted to $755 milion since 2000.
The cause of this asymetr has been a fuction of several factors. First, the energy
crises of 2000/200 1 created a large positive balance in the PCA. There have also been
significant periods of drought over the past eight years that have reduced power production from
the Company's hydro resources. In addition, and significantly, the forecast formula, as
originally established by the Commission, relied only on expected water conditions measured by
inflow into Brownlee Reservoir to predict futue power supply costs. Electric markets have
changed significantly since 1993 and the portion of generating resources the Company receives
from its hydro resources has shr significantly since that time.
case this year.
Comments - IPC-E-08-07 4
In order to remedy the asymmetr of the PCA workshops were held between the
Company and its ratepayers last year resulting in major changes in the way power supply costs
are forecast. One of those significant changes is that in this year's PCA the forecast is now
based on the Company's operating plan, not on the old regression formula using only expected
water conditions. The forecast in this year's PCA considers many variables that affect power
supply costs - including expected loads, fuel prices, market prices and etc. This has resulted in
higher expected power supply costs than would have been tre under the old methodology.
Therefore, for this year's PCA the ratepayers are suffering from a double hit. That is they are
paying for the under forecast of power supply costs from last year ($109 milion versus $3.7
milion) as well as using the new methodology that produces higher expected power supply
costs. In futue years the true up is anticipated to be much smaller because of the new
methodology. But in'the inaugual year of this new methodology the ratepayers should not be
required to bear the double burden of poor forecasting last year with (hopefully) more accurate
forecasting this year.
RESPECTFULLY SUBMITTED THIS 14th day of May 2009.
Richardson & O'Lear, LLP
By~4l~,
eter J. Richah
Industrial Customers of Idaho Power
)
Comments - IPC-E-08-07 5
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A
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 14th day of May, 2009 a true and correct copy of the
within and foregoing COMMENTS OF THE INDUSTRIL CUSTOMERS OF IDAHO
POWER, was served by HAND DELIVERY, to:
Baron L. Kline
Donovan E. Walker
Idaho Power Company
1221 WestIdaho Street
Boise, Idaho 83707-0070
Jean Jewell
Commission Secreta
Idaho Public Utilties Commission
472 West Washington
Boise, Idaho 83702
~Cu~)
Nina Curis
Administrative Assistat
Comments - IPC-E-08-07 6