20091120Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL

DATE: NOVEMBER 16, 2009

SUBJECT: IDAHO POWER’S APPLICATION TO MAKE THE FIXED COST
ADJUSTMENT PERMANENT, CASE NO. IPC-E-09-28

On October 1, 2009, Idaho Power Company filed an Application requesting an Order
authorizing the Company to convert its current Schedule 54 – Fixed Cost Adjustment (FCA) –
from a pilot schedule to an ongoing, permanent schedule. In Order No. 30267 issued March 12,
2007, the Commission approved implementation of a three-year FCA pilot program applicable to
residential service and small general service customers. The FCA mechanism allows Idaho
Power to separate collection of fixed costs from volumetric energy sales. A surcharge or
customer credit is applied when fixed-cost recovery per customer varies from a Commission-
established base. During the first two years of the pilot program, the FCA true-up resulted in a
refund in one year and a surcharge in the next.
Because utilities recover a large portion of their fixed costs through sales of kilowatt-
hours of energy, the Company contends that traditional rate design discourages utilities from
reducing their sales volume by investing in energy efficiency programs. Idaho Power alleges the
purpose of the FCA pilot program “was to test the FCA mechanism to determine its efficacy in
removing the unintended rate design disincentive for the Company to aggressively pursue DSM
programs.” Application, p. 4. Idaho Power asserts that so far during the three-year pilot
program the Company has made “strong progress in improving and enhancing its efforts to
promote energy efficiency and demand-side management activities.” Application, p. 3. The
Company credits this effort “in no small part to removal of the disincentive provided by the FCA
mechanism during the term of the FCA pilot.” Id.
DECISION MEMORANDUM 2
The Company’s Application requests that the FCA continue to be applicable only to
residential and small general service customer classes. During the first two years of the pilot
program, the FCA balances for both classes were combined and the same FCA rate adjustment
applied to both classes. Idaho Power requests, if the FCA is made permanent, that the FCA
balances and annual rate adjustment amounts for each class remain separate so that each class is
assigned its own fixed-cost adjustment rate.
Idaho Power requests that its Application be processed by Modified Procedure. Staff
recommends, however, that the Commission issue only a Notice of Application and right of
intervention (21 days) at this point, and determine later whether Modified Procedure is
appropriate to process the Application.
COMMISSION DECISION
Should the Commission issue a Notice of Application and right of intervention in
Case No. IPC-E-09-28?

Weldon B. Stutzman
Deputy Attorney General

bls/M:IPC-E-09-28_ws