20080521Irrigators Comments.pdf

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Eric L. Olsen (lSB# 4811)
Racine, Olson, Nye, Budge & Bailey, Cht.
P.O. Box 1391; 201 E. Center Street
Pocatello, Idaho 83204-1391
Phone: [phone]
Fax: [phone]
E-mail: elo(Ðracinelaw.net
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Attorneys for Idaho Irrgation Pumpers Association, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO IMPLEMENT A POWER )
COST ADJUSTMENT (PCA) RATE FOR )
ELECTRIC SERVICE FROM JUNE 1, 2008 )
THROUGH MAY 31, 2009. )
)
Case No. IPC-E-08-07
COMMENTS OF THE IDAHO
IRRGATION PUMPERS
ASSOCIATION, INC.
COMES NOW the Idaho Irrigation Pumpers Association, Inc. ("Irrgators"), through
undersigned counsel, and hereby respectfully submits its comments on Idaho Power Company's
("IPCo") application for approval of Schedule 55 implementing the Power Cost Adjustment
("PCA") and affected tariffs for the fiscal year from June 1,2008 to May 31,2009.
INTRODUCTION
The Irrigators have reviewed IPCo' s application in this case, its prior PCA filings, and
the Commission's prior PCA Orders. This review has exposed a critical issue that the Irrgators
believe the Commission must address in IPCo' s application before it can approve the PCA for
the curent fiscal year.
THERE MUST BE NO CHANGE IN THE NON-QF GENERATION SHARING RATIO
For most ofIPCo's history, rates were set in a general rate case with no adjustments for
changes in the cost of generation between cases. Durng most ofthis history, IPCo was more of
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a hydro-based utilty than it is today. Thus, historically it was more subject to the whims of the
weather (snow pack and ruoff) as well as the prices in the wholesale market than it is today.
Approximately 15 years ago the Commission adopted a Power Cost Adjustment ("PCA")
mechanism for IPCo as a major concession to relieve IPCo of the burden of cost varability in a
fixed rate environment. Adjustments are now made anually to reflect 100% of the actual cost
of PURP A1QF supply resources, and 90% of the deviation from the normalized base cost of non-
QF generation (including purchase power and sales for resale) established in a previous general
rate case. The general philosophy has been that the QF resource costs are generally beyond the
control of IPCo, while the other costs and revenues can be impacted by IPCo decisions.
Given IPCo's ability to make both good and bad decisions regarding its dispatch of
generation (as well as the sale of power in the wholesale market), it is imperative that the
Commission insure that the rates charged to customers are as low as reasonably possible. Short
ofthe Commission micro managing each of the IPCo's power supply decisions, the 90:10
sharing split in the recovery of non-QF costs is designed to serve as both a stick and a carrot to
insure that costs are maintained as low as reasonably possible. When IPCo's total power supply
costs come in less than the normalized base level, IPCo gets to keep 10% of the difference.
When IPCo's total power supply costs come in more than the normalized base level, IPCo must
absorb 10% of the difference.
The 90: 1 0 sharing mechanism in the PCA methodology may not be perfect, but it is a
mechanism that has worked welL. Should the PCA be dropped and should we go back to where
we were 15 years age? No, the PCA mechanism affords an equa chance for both IPCo and its
customers to pay something near the actual cost to serve durng the year in question as opposed
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to the cost to serve under some theoretical conditions that may not in fact be occurrng in a given
year.
Should the PCA mechanism reflect 100% of the cost recovery as opposed to the present
90:10 split? No. Without the 90:10 sharing mechanism, the Commission (and thus the
ratepayers) would loose a very important rate making tool-the financial incentive to insure that
IPCo minimizes costs. Prior to the PCA being put in place, IPCo had a very strong financial
incentive to manage its power supply costs. It could keep 100% (not 10%) of all savings realized
due to cost reductions below the normalized base amount. It was also responsible for 100% (not
10%) of any costs above the normalized base amount-a very strong incentive to minimize
costs.
This financial incentive is exactly the same ratemakng tool/incentive that is in place
today regarding all non-QF expenses-albeit at a 10% level compared to the 100% level of 15
years ago. The fixing of rates between rate cases with no ability to pass on additional costs is a
strong financial incentive to a utility to operate as efficiently as possible. This is the very
financial incentive or ratemaking tool/incentive that IPCo is trying to remove in this case. The
removal of this incentive is bad rate makng policy and the Irrigators oppose the same.
CONCLUSION
IPCo's testimony has addressed a number of specific issues that it believes supports its
temporary move away from the 90: 10 sharing mechanism, with a look to the futue or a complete
removal of ths sharing mechanism. The issues raised by IPCo' s have not undergone any type of
review or scrutiny-without which there should be no change in a long standing policy. The
change or suspension of such a long-standing policy should not be done under Modified
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Procedures. If the Commission does not reject the Company's proposal for a temporary
suspension of the 90:10 sharng mechanism, then the Irrgators request a hearing on the matter.
Regarding the long-ru use of the sharing mechanism as a par of the PCA, the Irrgators
find IPCo' s proposal to address this issue in a workshop to be acceptable. A workshop would be
an appropriate foru to get the issues on the table and determine what consensus (if any) exists
between the paries. A workshop is a far better foru than the IPCo' s present proposal to simply
abandon the sharing mechansm for this paricular case.
DATED this 20th day of May, 2008.
RACINE, OLSON, NYE, BUDGE & BAILEY,
CHARTERED
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. ,
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 20th day of May, 2008, I served a tre, correct
and complete copy of the Idaho Irrigation Pumpers Association, Inc.'s foregoing Comments to
each of the following, via U.S. Mail, e-mail or hand delivery:
Commission Secretar
Idaho Public Utilties Commission
P.O. Box 83720
Boise, Idaho 83720-0074
E-mail: jean.jewell(ßpuc.idaho.gov Hand deliveryÆ-mail
Baron L. Kline
Donavan E. Walker
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707-0070
E-mail: bkline(ßidahopower.com
E-mail: dwalker($idahopower.com E-mail/Mail
John R. Gale
Gregory W. Said
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707-0070
E-mail: rgale($idahopower.com
E-mail: gsaid($idahopower.com E-mail/Mail
Peter J. Richardson, Esq.
Richardson & O'Leary
515 N. 2ih Street
P.O. Box 7218
Boise, ID 83702
E-mail: peter($richardsonandoleary.com
E-mail/Mail
Don Reading
Ben Johnson Associates
6070 Hil Road
Boise, ID 83703
E-mail: dreading($mindspring.com
E-mail/Mail
E~r
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