20110531final_order_no_32250.pdf

Office of the Secretary
Service Date
May 31,2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-11-06
AUTHORITY TO IMPLEMENT POWER )
COST ADJUSTMENT (PCA)RATES FOR )
ELECTRIC SERVICE FROM JUNE 1,2011 )ORDER NO.32250
THROUGH MAY 31,2012 )
On April 15,2011,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 reflect the Company’s annual “power supply costs.”Because
about half 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 streamfiows,the amounts of purchased power,the market price of power,and other
factors (such as sale of sulfur dioxide (S02)allowances).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
decreased below the normalized PCA expenses.After recovering its power costs,the Company
estimates that the existing PCA rates should be decreased by about $40.4 million,or an average
decrease in the existing rates of approximately 4.78%.
On April 21,2011,the Commission issued a Notice of Application and a Notice of
Modified Procedure.Order No.32227.The Notice invited interested persons to file written
comments no later than May 17,2011.Written comments were filed by one customer1 and the
Commission Staff.The Company also filed timely reply comments.As set out in greater detail
below,the Commission approves Idaho Power’s Application to reduce its PCA rates effective
June 1,2011.
BACKGROUND
A.The PCA Mechanism
The annual PCA mechanism is comprised of three major components.First,PCA
rates are calculated to reflect projected or “forecasted”power costs for the coming year using the
The customer did not specifically address the PCA rates but encouraged the State to develop intrastate energy
sources to meet our energy needs.
ORDER NO.32250 1
Company’s most recent Operating Plan.This method replaced the previous method that was
based on streamflow forecast and a regression formula derived from rate case data.Order No.
30715.While streamflows will still be a factor in the projected power costs,the new method
should be more reliable.In years of abundant snowpacks and streamfiows,the Company’s
power supply costs are usually lower because of the availability of relatively inexpensive hydro
generation.Conversely,when streamfiows or snowpacks are low,Idaho Power must rely
increasingly upon its other thermal generating resources and power purchased from the regional
market.The Company’s other thermal generating resources (coal and gas plants)and purchased
power are typically more costly than the Company’s hydro-generation.Projected power costs
also include:revenues from the sale of Renewable Energy Credits (RECs)and sulfur dioxide
(SO2)allowances;and the Hoku PCA adjustment based on Hoku’s first block energy revenue.
The forecast rate is designed to recover 95%of the difference between projected and base power
costs except for differences in PURPA purchased power costs that are included at 100%.Order
No.30715.
Second,because the PCA includes a rate based on forecasted costs,the preceding
year’s forecast revenue is “trued-up”up to the difference between actual and base power supply
costs during the prior year.Third,“reconciliation”2 of the previous year’s true-up component
under which any over-recovered or under-recovered balance from the second component and the
previous year’s reconciliation is credited to or collected in this year’s PCA rate.This third
component is designed to ensure the Company recovers the actual approved costs.
Consequently,ratepayers will pay for the actual amount of power sold by Idaho Power to meet
native load requirements —no more or no less.Order No.29334 at 4.Thus,ratepayers receive a
credit when actual power costs are below those power supply costs included in rates,but are
assessed a surcharge when actual power costs are above the power supply costs included in rates.
B.The 2010-2011 Application
This year’s PCA Application includes the forecast of projected power costs;a true-up
of last year’s forecasted costs to reflect actual costs;and reconciliation of the 2010-2011 PCA
year.The Company calculates that the adjusted PCA forecast amount is about $125.64 million
which is $32,274,850 less than the PCA base amount approved in Order No.31042.Thus,the
aggregate rate for the non-PURPA expenses (shared at 95%)is a credit of (0.2167)cents per
2 This reconciliation component is often referred to as the “true-up of the true-up”
ORDER NO.32250
kWh.Application at 4.The Operating Plan’s quantification of PURPA expenses (tracked at
100%)is $36,949,600 greater than the $62.8 million quantified in the power supply expenses
approved in Order No.31042.This results in a surcharge rate for PURPA expenses of 0.2612
cents per kWh.Id.Consequently,the projected forecast of the PCA rate is a surcharge of
0.0445 cents per kWh (.2612 cents per kWh -.2167 cents per kwh).Application at 4;Larkin
Dir.at 6-8.
Idaho Power reports that the difference between last year’s base costs and actual
costs and revenue recovered from the forecast rate (the true-up component)is $3,689,374.Id.at
5.This amount is divided by the projected jurisdictional sales of 13,478,411 MWh to arrive at a
surcharge of 0.0273 cents per kWh.Larkin Dir.at 9.
The third PCA rate element is the reconciliation of the previous year’s true-up.Last
year the Company over-collected the PCA deferral balance by $18,152,666.Application at 5;
Larkin Dir.at 10.Dividing this amount by the projected jurisdictional sales of 13,478.411
MWh,results in a PCA reconciliation credit of negative (0.1347)cents per kWh.Id.
Combining the three components —the projected power costs surcharge of 0.0445
cents per kWh,the true-up surcharge of 0.0273 cents per kWh and the adjusted reconciliation
credit of 0.1347 cents per kWh —results in a uniform PCA rate credit for the 2011-2012 PCA
year of (0.0629)cents per kwh.
This year’s PCA also has two other adjustments.First,in Order No.32217 the
Commission authorized the Company to recover $10 million of deferred Energy Efficiency Rider
(EER)costs from this year’s PCA case.Case No.IPC-E-10-27.Idaho Power allocated the $10
million among the customer classes based upon each class’s proportion of total base revenues for
the PCA year (June 1,2011 through May 31,2012).Application at ¶15,Atch.1 (proposed tariff
Sch.55);Larkin Dir.at 10;Exh.No.2.Second,in Order No.32206 the Commission directed
each electric utility to compute its new Load Change Adjustment Rate (LCAR)“based on its
most recent Commission-approved cost of service rates and apply the new LCAR to PCA
calculations beginning on April 1,2011.”Order No.32206 at 7.The LCAR is intended to
eliminate the double recovery of power supply expenses associated with changes in loads due to
weather,customer usage,or the number of customers.Larkin Dir.at 12.Idaho Power calculated
its new LCAR is $19.36 per MWh to be effective April 1,2011.Id.at 13.
ORDER NO.32250 3
C The PCA Rate Proposal
Idaho Power proposed to implement the PCA rates on June 1,2011.The proposed
PCA rate represents an overall average decrease of 4.78%but due to the equal cents/kWh
adjustment and allocation of the $10 million EER costs,each customer class will receive a
different decrease.The table below shows the proposed decreases in the PCA rates for the major
customer classes:
Customer Group Current Proposed Percentage
(Schedule)PCA Rate PCA Rate Decrease
Residential (1)0.31140/kWh .02890/kWh 3.58%
Small Commercial (7)0.31 14/kWh .0539t/kWh 2.59%
Large Commercial (9S)0.31 140/kWh .00400/kWh 5.38%
Industrial (l9P)0,31140/kWh (.0137)0/kWh 7.83%
Irrigation(24)0.31140/kWh .01140/kWh 4.72%
Source:Exh.Nos.2 and 3;Atch,1
The PCA rates for Idaho Power’s four special-contract customers would also
decrease.Under the Company’s proposal,the PCA rates for the special-contract customers
would be:(0.0208)cents per kWh for Micron;(0.0234)cents per kWh for Simplot;(0.0238)
cents per kWh for INL;and 0.1195 cents per kWh for Hoku.
THE COMMENTS
Staff analyzed each of the three separate PCA components and their supporting
calculations.Based upon this review,Staff confirmed that the Company has correctly recorded
its annual power supply costs and correctly calculated the three separate rate components.
As part of its audit,Staff also reviewed the Company’s Irrigation Peak Rewards
Program.3 This voluntary program is used to decrease the Company’s summer peak load by
requiring participating irrigation customers to temporarily shut-off their irrigation pumps for
specified hours during the irrigation season.This demand response program is dispatchable,
reliable and often less expensive than purchasing power during periods of heavy load.In its
The Peak Rewards Program has two options.Under the original option,the Company installs timers on the
electric panel controlling specific irrigation pumps at the metered service point.The timers are set to interrupt
specified irrigation pumps on a designated weekday or days as selected by the customer.Service is interrupted
during the hours of 4 p.m.to 8 p.m.on one,two,or three regularly scheduled weekdays for each week during the
program season.Under the second option,the Company “dispatches”service interruptions remotely to specified
irrigation pumps any weekday during the program season between the hours of 2 p.m.and 8 p.m.Service
interruptions may last up to 4 hours per day but will not exceed 15 hours per calendar week or 60 hours per program
season.Under the second option,the Company is obligated to provide customers with notice of the pending service
interruption by 4 p.m.on the day prior to each service interruption.
ORDER NO.32250 4
audit Staff determined that participants in the 2010 irrigation season were interrupted for 12
hours out of 60 potential hours,or 20%of potential hours.Staff Comments at 4.To reduce the
Company’s power supply costs during these heavy-load hours,Staff recommended that the
Company increase the use of its curtailment hours in the Irrigation Peak Rewards Program.Id.
Staff next determined that the Company properly allocated the recovery of the $10
million in Energy Efficiency Rider (EER)expenses among the customer classes.Idaho Power
allocated the ERR expenses based upon forecasted revenues during the 2011/2012 PCA year.Id.
at 13.Staff also accepted the calculation of the new LCAR at $19.36 per MWh to be effective
on April 1,2011.Id.at6.
Staff also proposed one adjustment to the Company’s PCA calculations.In Case No.
IPC-E-09-30,the Commission approved a stipulation between the Company,Staff,and other
parties.Order No.30978.In the stipulation,the parties agreed that if the Company’s return on
equity (ROE)exceeded a 10.5%return,then the Company and ratepayers would share equally in
the returns above this threshold.Staff calculated that the Company’s ROE exceeded the sharing
threshold and recommended that additional revenues be shared with ratepayers.Staff Comments
at 10-12.
In its reply comments,the Company opposed Staffs ROE adjustment.After
reviewing the reply comments and the accounts involved,Staff filed ‘Additional Comments”
withdrawing its proposed ROE adjustment.Consequently,both the Company and Staff
recommended that the Commission approve the PCA Application and the implementing tariff
Schedule No.55 effective June 1,2011.Reply Comments at 4;Additional Comments at 2.
DISCUSSION AND FINDINGS
After reviewing the PCA Application and the comments filed in this case,the
Commission finds it is reasonable to grant Idaho Power’s Application to decrease its PCA rates
for the 2011/2012 PCA year.We find that the combination of the three PCA components results
in a fair,just and reasonable uniform PCA rate component of 0.0629 cents per kWh.
We further find that the Company has reasonably allocated the $10 million
attributable to the Energy Efficiency Rider (EER)expenses in compliance with our Order No.
32217.In reviewing the Company’s EER allocation,Staff observed that the Company used a
forecast of 2011/2012 customer revenues to allocate the DSM expenses to the individual
ORDER NO.32250 5
customer classes.We find this methodology reasonable.We also approve Idaho Power’s new
Load Change Adjustment Rate (LCAR)of $19.36 per MWh to be effective April 1,2011.
Combining the uniform PCA rate component with the rates necessary to recover the
EER allocation,results in the rates set out in the Company’s proposed Schedule No.55.We find
the rates contained in Schedule 55 to be fair,just and reasonable.Idaho Code §61-502 and 61-
503.
Finally,Staff recommended that the Company consider increasing its use of
curtailment hours in the Irrigation Peak Rewards Program as a means of decreasing power
supply costs during this PCA year.The Company should use all available opportunities to
reduce its power supply costs consistent with operating and reliability constraints.Consequently,
we encourage the Company to consider using more curtailment hours in lieu of purchasing
power during the expensive,heavy-load hours if is cost-effective to do so.
ORDER
IT IS HEREBY ORDERED that the Application of Idaho Power Company to
decrease its Power Cost Adjustment (PCA)rates effective June 1,2011 through May 31,2012,is
approved as set forth in this Order.The uniform PCA rate shall be 0.0629 cents per kWh for all
customer classes and the four special-contract customers.The Company shall charge the
adjusted PCA rates set out in tariff Schedule No.55.
IT IS FURTHER ORDERED that the PCA rates contained in tariff Schedule No.55
shall be effective for service on June 1,2011.
IT IS FURTHER ORDERED that Idaho Power’s LCAR shall be set at $19.36 per
MWh effective April 1,2011.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutory Orders previously issued in this Case No.IPC-E-1 1-06
may petition for reconsideration within twenty-one (21)days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case.Within seven (7)days after any person has petitioned for reconsideration,any other
person may cross-petition for reconsideration.See Idaho Code §6 1-626.
ORDER NO.32250 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3/
day of May 2011.
;?J ‘i%’E
F
PAUL KJELLA ,PRESIDENT
MACK A.REDFORD,COMMISSIONER
J/!k L’
MARSHA H.SMITH,COMMISSIONER
ATTEST:
/
Jean D.Jewell
Commission Secretary
bls/O:IPC-E-II -06dh2
ORDER NO.32250 7