HomeMy WebLinkAbout20111230final_order_no_32426.pdfOffice of the Secretary
Service Date
December 30,2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-l1-08
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
IN IDAHO )ORDER NO.32426
__________________________________________________________________________________
)
On June 1,2011,Idaho Power Company filed an Application seeking authority to
increase its base rates for electric service by an overall average of 9.9%,or by approximately $83
million per year.On June 22,2011,the Commission suspended the proposed effective date and
issued a Notice of Application.Order No.32272.On August 5.2011,the Commission issued
its Scheduling Order and set a technical hearing for early December 2011.Order No.32316.
The Scheduling Order also set two settlement conferences for August 31 and September 8.2011.
All parties attended the settlement conferences.Based upon discussions held during
the conferences,all the parties (except one)entered into a Stipulation that proposed to settle
most,but not all issues in the rate case.The signing parties agreed to an annual revenue increase
of $34 million,or an average rate increase of about 4.07%.The settling parties were unable to
settle three issues and agreed that these issues should be presented to the Commission at the
technical hearing.
Following three public workshops and three public hearings,the Commission
convened its evidentiary hearing on December 5,2011.As outlined in greater detail below,the
Commission approves the Settlement Stipulation with one condition and resolves the remaining
disputed issues.
BACKGROUND
A.The Initial Application
Idaho Power serves nearly 500,000 customers in southern Idaho and eastern Oregon.
The Company maintained it has invested more than $450 million in infrastructure since its last
general rate case in 2008.The Company requested that calendar year 2011 be used as its test
year and that the Commission grant the Company a return on its rate base of 8.17%.Application
at 5.
ORDER NO.32426 1
Idaho Power proposed that its monthly service charge for residential and small
business customers be increased from $4.00 to $5.00 per month.The Company also proposes to
increase the summer-tiered residential rates (but not the winter).The Company also sought
authority to modify its residential Schedules 4 and 5 to offer two time-of-day periods for energy
charges during the summer and non-summer months.Id.at 3-4.
The Company proposed to implement its new cost-of-service study and to increase
the rates for small commercial customers (Schedule 7),industrial customers (Schedule 19),and
irrigation (Schedule 24)customers by moving those rates “closer to the cost-of-service for those
customer classes.”Id.at 4.Under the original Application,the proposed increases for these
three customer classes would be approximately 14.85%.Order No.32272 at 2.Idaho Power
also proposed to increase the rates for each of its four special contract customers (the Idaho
National Laboratory,Micron,Simplot and Hoku Materials)by approximately 14.85%.’
Idaho Power also sought authority to increase the charges for its “overhead costs”2 in
Rule H (New Service Attachments,Installations and Alterations).Id.at 5.The Company also
calculated its load change adjustment rate (LCAR)at $19.28 per megawatt-hour (MWh)using
the methodologies set out in Commission Order No.32206.Id.at 6.Because of a prior rate
moratorium,the Company asked that its rate increase become effective on January 1,2012.
Order No.32272 at 3.
B.Procedural Background
In response to the Notice of Application,the Commission granted intervention to 10
parties including:Idaho Irrigation Pumpers Association (IIPA),Industrial Customers of Idaho
Power (ICIP),U.S.Department of Energy (DOE),The Kroger Company,Community Action
Partnership Association of Idaho (CAPAI),Micron Technology,Idaho Conservation League
(ICL),Snake River Alliance (SRA),NW Energy Coalition and Hoku Materials.The
For Hoku in particular,the Company proposed to increase the rate for the second block demand in energy by
14.84%.Application at 3,Atch.3.
2 Overhead costs are pooled costs that are incurred in the Company’s construction process and allocated to Rule H
customers.Application at 2,Case No.IPC-E-1 1-24.
The prior rate case stipulation allowed for specific increases such as the Power Cost Adjustment (PCA),the Fixed
Cost Adjustment (FCA),recovery of advanced metering deployment,pension expenses,and changes in the Energy
Efficiency Rider.Order No.30978 at 4.
ORDER NO.32426 2
Commission Staff also participated as a party.The Commission issued its initial Notice of
Parties on July 13,2011,and a Second Amended Notice of Parties on September 6,2011.
The Commission Staff held three public workshops on September 20,21,and 22,
2011,in Pocatello,Twin Falls,and Boise,respectively.The Commission also convened public
hearings on November 3 and 9,and December 5,2011,in American Falls,Gooding,and Boise,
respectively.
The Commission received more than 100 written comments regarding the Company’s
proposed rate increase.Most comments were received before the Settlement Stipulation was
filed in September 2011.Many of these comments opposed the rate increase citing the bad
economy or adverse impact on residential customers with low or fixed incomes.After the
Settlement Stipulation was filed,the Commission received four comments —three opposing the
rate increase and one urging the Commission to “hold the line.”Only one public witness
appeared at the American Falls and Gooding hearings.Five public witnesses testified at the
Boise hearing.They generally oppose the rate increase as adversely affecting residential
customers with either fixed incomes or all-electric homes.
C.The Partial Settlement
As mentioned above,all the parties with the exception of CAPAI entered into a
Stipulation that settled most but not all issues in the rate case.On September 23,2011,Idaho
Power filed a Motion for Approval of the partial settlement.On October 13,2011,the
Commission issued a Notice of Partial Settlement.Order No.32380.
In the Settlement Stipulation,the signing parties agreed to resolve all issues in the
rate case except for the three issues discussed in paragraph No.7 below.The signing parties
agreed that Idaho Power should be allowed to recover $34 million more in annual revenues from
its Idaho jurisdiction.This represents a 4.07%overall increase in the Company’s annual Idaho
base rate revenues instead of the original proposal to increase rates 9.9%.Stipulation at ¶6.The
signing parties further agreed that the Company’s net power supply cost is $208,100,936,which
includes $11,252,265 of demand response incentive payment and $23,921,466 of retail sales
revenue associated with Hoku’s first-block energy sales.Stipulation at ¶6(a).The revenue from
Hoku’s first-block is an offset to power supply expenses in the Company’s Power Cost
Adjustment (PCA)mechanism.Other elements of the Stipulation include:
ORDER NO.32426 3
1.Amortization.The signing parties agreed to defer $299,546 in expenses associated
with the Bennett Mountain turbine inspection over a four-year period beginning on the date the
Company’s new base rates become effective.In addition,the parties agreed to a deferral of
$436,047 in expenses associated with the “Light Detection and Ranging”(LiDAR)survey over a
10-year period beginning on the date the new base rates become effective.Stipulation at ¶6(b).
2.Rate of Return.The signing parties agreed that it would be just and reasonable to
allow the Company to earn a 7.86%rate of return on an authorized Idaho jurisdictional rate base
of $2,355,906,412.Id.at ¶6(c).
3.Rate Spread and Cost of Service.The signing parties agreed that the proposed $34
million annual revenue requirement should be recovered by increasing the rates for each
customer class and special contract customers by a uniform percentage instead of using the
Company’s originally-proposed cost-of-service study.This results in a uniform rate increase of
approximately 4.l9%.The signing parties further agreed that Idaho Power’s proposed cost-of-
service study will be used to determine fixed costs for purposes of the fixed-cost adjustment
(FCA)mechanism until such time as the Commission approves a different cost-of-service study.
The proposed cost-of-service study is not binding on the signing parties in future cases.Id.at ¶
7.
4.Rate Design.In determining the individual rates for each tariff schedule and
customer class,the signing parties agreed to use the 2011 test year customer billing determinants
including the proposed increase in the monthly service charge for residential customers.The
parties agreed that the monthly service charge for residential Schedules 1,3,4,and 5 should be
increased from $4.00 to $5.00 per month.Id.at ¶8.The parties also agreed to adopt the
Company’s proposed rate design including no increase in the winter for the third tier for
residential customers.5
5.Load Change Adjustment Rate.In calculating the load change adjustment rate
(LCAR)to be applied in the Company’s PCA mechanism,the parties agreed to use Idaho
Power’s proposed cost-of-service methodology to determine the energy-related jurisdictional
The uniform percentage increase of 4.19%is greater than the overall increase of 4.07%because the overall
increase does not apply to first-block rates under the Hoku Materials special contract.Stipulation at n.2.
The energy rates for wintertime residential customers in the first or second tier will increase 3.1%.There will be
no rate increase in the energy rate for the third tier of residential customers in the wintertime —those using more than
2,000 kWh per month.Exh.3 at 1.
ORDER NO.32426 4
revenue requirement.The resulting LCAR of $18.16 per MWh was developed using 2011
normalized system-wide loads in the amount of 14,822,063 MWh.Id.at ¶9.
6.Separate Proceedings.The signing parties also agreed that two issues should be
removed from the rate case and resolved in separate proceedings.More specifically,the
Company will initiate separate cases related to:(1)increasing the overhead amounts paid by
persons or entities requesting new service under the Company’s Rule H Line Extension tariff;
and (2)deciding whether the Fixed-Cost Adjustment (FCA)pilot program should be made
permanent.The parties further agreed that the FCA case should be processed to allow a final
Order to be issued no later than March 30,2012.Id.at ¶10.6
7.Unresolved Issues.The signing parties were unable to reach agreement on three
issues:(1)the amount of funding for the Company’s low-income weatherization program;(2)the
surcharge level for the Energy Efficiency Rider in Schedule 91 (currently at 4.75%);and (3)the
methodology used to assess facility charges for Schedule 19 customers.These unresolved issues
were addressed by the parties at the technical hearing.Id.at ¶11.
THE TECHNICAL HEARING
A.Motions to Strike
1.Staff Objection to Surrebuttal Testimony.CAPAI’s witness Ten Ottens prefiled
surrebuttal testimony on November 28,2011.On December 2,2011,Staff filed a Motion to
Strike Ms.Ottens’surrebuttal testimony.In its Motion,Staff asserted that the Scheduling Order
did not allow for the filing of surrebuttal testimony and that CAPAI did not seek procedural
relief to file the surrebuttal testimony.Consequently,Staff maintained that the surrebuttal
testimony offered “less than seven days before the hearing works a hardship on Staffs
preparation for this case.”Staff Motion at 3.
CAPAI filed a response to Staffs Motion that was taken up as a preliminary matter at
the hearing.Rule 246,IDAPA 31.01.01.246.In its response,CAPAI insisted as a matter of
equity that Ms.Ottens’surrebuttal testimony ought to be entered into the record.The
Association insists that it was unaware of Staffs specific objections to CAPAI’s proposal to
6 Based upon the Stipulation and the lack of any objection,the Commission subsequently granted the Company’s
Motion to Initiate a Separate Docket to decide the FCA issues.Order No.32380 at 5.On October 19,2011,the
Company filed a new application addressing the FCA issues.Order No.32389 (Case No.IPC-E-11-19).On
November 21,2011,the Company filed a separate application regarding its proposed modifications to its Rule H
line extension tariff.See Case No.IPC-E-1 1-24.
ORDER NO.32426 5
increase the funding for low-income weatherization until Staffs rebuttal testimony was filed on
November 17.2011.In addition.CAPAI argued that the filing of Ms.Ottens surrebuttal
testimony did not work a hardship on Staff.
Commission Findings:We affirm our decision made at the beginning of the
technical hearing that Ms.Ottens’surrebuttal testimony will be admitted.Tr.at 26.However,
we note that as a matter of courtesy,parties that wish to deviate from a scheduling order should
notify the other parties to see if an accommodation can be reached and should request
Commission permission for the deviation.
2.Objection to Non-expert Testimony.Idaho Power’s counsel moved to strike
portions of Ms.Ottens’direct testimony concerning “risk”and rate of return.Tr.at 838.
Counsel observed that Ms.Ottens conceded that she does not possess expertise in utility
ratemaking.In her direct testimony,Ms.Ottens objected to the partial settlement agreement
because the proposed or settled rate of return may be too high and the revenue allocation
disproportionally impacts low-income customers.Tr.at 759-760.However,she testified that
she does not possess “expertise in the areas of utility ratemaking,including calculating a fair and
reasonable return.”Tr.at 763.She also testified that she has “no expertise in evaluating a
utility’s cost-of-service.”Tr.at 773.
Commission Findings:We affirm our decision made at hearing to deny the Motion
to Strike.Tr.at 839.We noted that Ms.Ottens’testimony regarding risk,rate of return,and
cost-of-service are interspersed with other topics,Rather than attempt to parse or dissect the
offending testimony,we find that Ms.Ottens is not an expert in these areas of ratemaking and
consequently afford her testimony in these areas little weight.7 Tr.at 839.
B.The Proposed Settlement Stipulation
At the technical hearing on December 5,2011,testimony in support of the partial
settlement was offered by Idaho Power;Staff;Kroger;and ICL,SRA and the NW Energy
Coalition (collectively referred to as “the Conservation Parties”).8 CAPAI offered testimony
opposing the proposed Settlement Stipulation.
We granted Idaho Power’s Motion to Strike Ms.Ottens’description of the PCA mechanism because it was
contained in a specific portion of her direct testimony.Tr.at 767:843.
By letter dated November 30,2011,the Department of Energy (DOE)asked to be excused from the hearing.The
request was granted.Tr.at 1 3.The DOE letter also stated that the “Department supports the Stipulation and urges
[its]adoption by the Commission.”
ORDER NO.32426 6
1.Idaho Power.Company witness Tim Tatum testified that the Company supports
the Settlement Stipulation.He insisted the proposed settlement “provides the Company with the
ability to update its rates to better reflect current costs and the ability to economically finance
new investments in infrastructure for its system.”Tr.at 32.He observed that the signing parties
agreed that the Company’s overall rate of return should be set at 7.86%;however,a specific
return on equity was not identified as part of the Stipulation.Tr.at 33.He also noted that the
Stipulation proposed that base revenues increase by $34 million,or an overall rate increase of
about 4.07%.Tr.at 34.
In supporting the Stipulation,Mr.Tatum declared that the Company supported the
adjustment to net power supply expense.More specifically,the Stipulation removes
approximately $23.9 million as a result of increased PURPA expenses and the Company will
recover these costs in the PCA mechanism.Tr.at 37.
Mr.Tatum stated the Stipulation represented a compromise among the signing
parties.He testified that the partial settlement is in the public interest and results in just and
reasonable rates for customers.Tr.at 32.He concluded that the Stipulation “strikes the right
balance between the Company’s need for timely cost recovery and the state of the current
economy.”Tr.at 36.The Company will continue its “belt tightening”with regard to ongoing
expenses while maintaining quality service.Tr.at 37.
2.Staff.Staff witness Randy Lobb testified that the Stipulation represented a
reasonable and appropriate settlement of all the revenue issues in the case.Tr.at 705.He noted
that the Stipulation provides that the Company’s cost of service (COS)study be utilized to
establish the fixed costs for the Fixed Cost Adjustment (FCA)mechanism,resets the load change
adjustment rate (LCAR)for the Power Cost Adjustment (PCA),and modifies rate components
within individual customer classes.However,he observed that the COS was not used to spread
the proposed revenue increase among customer classes.Tr.at 701.He calculated that the
Stipulation represents about 41%of the Company’s original request for an annual increase of
$83 million.Tr.at 702.
Mr.Lobb also explained how the Staff evaluated the proposed settlement.In
particular,he said the settlement resulted in a “better outcome for customers than could
reasonably be anticipated through litigation.”Tr.at 705.Overall,he misted the Settlement
Stipulation “results in both a reasonable overall base rate increase and equitable treatment of all
ORDER NO.32426 7
customer classes.”Id.He briefly outlined Staffs revenue adjustments in the case and noted that
the Stipulation included several of Staffs proposed adjustments including amortizing the
Bennett Mountain combustion inspection costs and setting the base level of net power supply
expenses for use in the PCA.
He also explained Staffs rationale in accepting a uniform revenue spread instead of
using the Company’s proposed cost-of-service (COS).Tr.at 713-15.He indicated that using the
Company’s COS would have resulted in rate increases significantly above the overall averages
for irrigators and high load factor industrial customers while residential customers would see
increases below the average.He noted the proposed uniform increase for all customer classes
“represents a compromise that allowed the parties to achieve a comprehensive revenue
requirement settlement.”Tr.at 715.In addition,he maintained that resolving the cost-of-service
issue can wait until the Company’s next general rate case.Tr.at 717.
Turning to rate design issues,Mr.Lobb explained that Staff supported the increase in
the monthly customer charge from $4.00 to $5.00.Tr.at 720.He also stated that Staff
supported the proposed change in the residential non-summer energy rate because energy
production costs in the non-summer period are lower than the summer period.Tr.at 720-22.In
particular,he explained that “maintaining third block non-summer energy rate at its current level
will moderate the impact on [customers with all electric homes]while continuing to provide a
reasonable price signal.Staff further believe[d]that rural Idaho Power customers with all
electric homes have few options to control winter electric consumption when natural gas is not
available.”Tr.at 722.
Finally,he noted that Staff supported separating two issues from consideration in this
case:the Fixed Cost Adjustment (FCA)mechanism and changes to Rule H line extension tariff.
He explained that all the issues associated with the FCA should be heard in a separate docket
focusing on the merits of a permanent FCA.Likewise,he thought that the proposed increase in
overhead charges for Rule H line extensions should be reviewed in a separate proceeding.Tr.at
724.
3.Kroger and Conservation Parties.Kroger witness Kevin Higgins testified that
Kroger fully supported the Stipulation.Tr.at 317.He asserted the Stipulation produces just and
See supra note 6.
ORDER NO.32426 8
reasonable rates and urged the Commission to approve the signing parties’Stipulation.Tr.at
-‘Li.
The Conservation Parties’witness Nancy Hirsh is the policy director for the NW
Energy Coalition.She testified that the Conservation Parties support the Stipulation as a
reasonable balance of the competing interests in this case.Tr.at 496.Ms.Hirsh observed the
stipulated revenue requirement is less than one-half of Idaho Power’s original request which
represents a clear benefit to all ratepayers.Tr.at 496-97.However,she said that a “sizeable
portion”of the foregone revenue represents power purchases costs under the Public Utility
Regulatory Policies Act (PURPA)and will be collected separately through the PCA mechanism.
Tr.at 497.PURPA costs may result in potentially large increases in further PCA cases thereby
making it more important than ever to promote energy efficiency investments.Id.
In the spirit of compromise,the Conservation Parties supported the stipulated increase
being spread equally across all customer classes.“[Ajil else being equal,residential rates should
increase less than rates for the irrigation,large commercial,industrial,and special contract
customers.”Tr.at 498.Ms.Hirsh specifically noted the Stipulation provided that the
Company’s proposed cost of service was used for a limited purpose and does “not set a precedent
for future cost allocation.”Id.
Ms.Hirsh also supported raising the monthly customer charge for residential
customers to $5.00.She stated that raising this rate provides an appropriate conservation price
signal and aligns the monthly service charge with other Idaho investor-owned utilities.Tr.at
498-99.The Conservation Parties also supported restricting the rate increase applicable to the
wintertime third energy block.“Until more refined data is available,we join the Company and
others in assuming this will mitigate rate impacts to electrically heated homes during times when
the risks of reducing usage could be high.”Tr.at 499.However,Ms.Hirsh maintained that the
concern about rates for the third energy block “points again to the need to target energy
efficiency programs to increase energy and bill savings even when the costs of energy production
may be modest.”Id.
4.CAPAI.The Community Action Partnership opposed the Settlement Stipulation.
CAPAI witness Ten Ottens opposed the partial settlement because it failed to include a funding
increase for Idaho Power’s low-income weatherization program.Tr.at 754.“CAPAI simply
could not justify joining in yet another ...settlement agreement resulting in yet another rate
ORDER NO.32426 9
increase without any offsetting provision for low-income customers.”Id.M.Ottens
acknowledged that there were certain aspects of the settlement that are beneficial to ratepayers,
such as the overall rate increase was reduced from the proposed 9.9%to 4.07%.Tr.at 755.
However,CAPAI concluded that agreeing to the settlement as proposed would not be in the best
interest of low-income customers or residential customers as a whole.Id.CAPAI notes that
because of the continuing economic crisis and the fact that poverty rates in Idaho have increased
from 12.6%in 2005 to 15.8%in 2010,there are now an additional 25,000 Idahoans under the
federal poverty guideline limits.Consequently,the importance of every low-income program,
such as Idaho Power’s [Low-Income Weatherization Program],continues to increase.”Tr.at
758.
Commission Findings:Procedural Rule 276 provides that the Commission is not
bound by the parties’settlement agreement.IDAPA 31.01.01.276.The Commission may
accept.reject or amend a proposed settlement.The Commission will independently review any
settlement to determine whether it is fair,just and reasonable;in the public interest;or otherwise
in accordance with law or regulatory policy.Id.Moreover,the proponents of a proposed
settlement have the burden of showing that the settlement is reasonable and in the public interest.
Rule 275.IDAPA 3 1.01.01.275.
In instances —such as this case —where one or more parties is not a party to the
settlement,the Commission may convene an evidentiary hearing to consider the reasonableness
of the settlement and whether acceptance of the settlement is just,fair and reasonable.As set out
in Rule 275,an opponent of the settlement (such as CAPAI)should be prepared to examine
supporting witnesses,offer their own witnesses,or argue against the settlement.Id.
After reviewing the testimony in support and in opposition to the Settlement
Stipulation,we find the parties’partial settlement is just,fair and reasonable,with one condition
regarding the recovery of facilities charge revenue discussed below.Rule 275.We further find
the Stipulation represents a reasonable compromise of the positions held by most of the parties
and,but for CAPAI,the Stipulation had broad support among the customer groups.The revenue
adjustments reduce the magnitude of the proposed rate increases and benefit all customer classes.
In particular,we note that the Settlement Stipulation represents a significant reduction (almost
60%)in the Company’s initially-proposed rate increase.
ORDER NO.32426 10
The Stipulation also contains other benefits for all classes of ratepayers.More
specifically,the Stipulation proposes to spread the revenue uniformly by customer class (with the
exception of determining fixed costs for the FCA).While we recognize that updating the
appropriate cost-of-service for the customer classes is left for the future,we find that a uniform
spread is fair and reasonable to all classes.In addition,we are not persuaded by Ms.Ottens’
testimony that the settled rate of return is unreasonable,or that existing residential ratepayers are
subsidizing the rates for other classes.As she conceded at hearing,Ms.Ottens is not an expert in
ratemaking or cost-of-service issues.Tr.at 763,770,773.Consequently,her testimony in these
areas is afforded little weight.Taken as a whole,CAPAT’s primary focus was to increase the
funding for low-income weatherization programs.This issue was specifically removed from the
Settlement Stipulation and the parties were free to offer evidence on this unresolved issue.
We further find that the Stipulation’s provision to not increase the rates for the third
tier of residential rates in the winter is appropriate.This means that those residential customers
using the highest block of energy in the winter months (more than 2,000 kWh)will not see an
increase in the third tier rate.In summary,we conclude the Stipulation is reasonable and in the
public interest,and we accept it.
C.Low-Income Weatherization
The next issue in dispute was the appropriate funding level for the Company’s low-
income weatherization program.Idaho Power’s base rates include funding for energy
conservation and weatherization projects for eligible low-income residential customers.The
current funding level is $1.2 million annually.CAPAI proposed that this amount be increased by
125%,or to $2.7 million annually.The Conservation Parties supported CAPAI’s request,while
Staff opposed the increase in funding.
1.CAPAI Proposal.Citing continued economic concerns and an increase in Idaho
poverty rates,CAPAI asserted the funding level for the Company’s low-income weatherization
program should be significantly increased to obtain parity with the other large electric utilities in
Idaho.Tr.at 755,760.Ms.Ottens explained that Idaho Power’s funding for the low-income
weatherization program has not increased since 2003 when it was raised to $1.2 million per year.
Until now,CAPAI had not proposed that the Commission increase that funding level because
CAPAI focused its efforts on increasing the weatherization funding for the other two large
electric utilities:Rocky Mountain and Avista.Tr.at 771-72.
ORDERNO.32426 11
Since 2003.Avista and Rocky Mountain have increased their funding for
weatherization programs.Ms.Ottens calculated that Avista’s per capita funding level is
approximately $6.69 per customer,while Rocky Mountain’s per capita funding level is $5.32 per
customer.In contrast,she calculated that Idaho Power’s per capita funding for low-income
customers is now $3.06.Tr.at 780-81.Consequently,she insisted that this per capita
“disparity”between Idaho Power and the other two utilities warrants an increase in Idaho
Power’s funding for low-income weatherization.
Ms.Ottens maintained that the concept of parity is “a very important principle”in
determining the appropriate funding level for Idaho Power’s low-income weatherization
program.Tr.at 778.She asserted the funding disparity among the three utilities means that
Idaho Power’s low-income customers are being discriminated against.Tr.at 779.
Ms.Ottens partially relied upon the number of households on the CAP “waiting list”
to support her proposal to increase funding.Tr.at 793.814.More specifically,she pointed to
the waiting list in Exhibit 49 and said the number of customers on the waiting list continues to
grow.Tr.at 793.
Ms.Ottens testified that CAPAI is aware of Staffs concerns about evaluating the
cost-effectiveness of what is referred to as “non-energy benefits.”“These benefits include the
many positive effects of [low-income weatherization]programs that do not directly affect energy
consumption including such things as reduced billing and collection costs,improved cash flow,
reduced bad debt write-off and others.”Tr.at 788.While CAPAI does not oppose evaluating
the non-energy benefits,it does not want an evaluation to delay increasing the weatherization
funding to $2.7 million per year.Tr.at 789.Delay would mean that the waiting list for
weatherization projects would continue to grow.Tr.at 793.
2.Conservation Parties.The Conservation Parties defer to CAPAI’s funding
proposal but believe the proposed funding level is appropriate given Idaho Power’s most recent
evaluation contained in its 2010 demand-side management (DSM)annual report.Tr.at 502.
Ms.Hirsh testified that the weatherization program should not be viewed as a social program but
as a part of an overall DSM program.Tr.at 504.She explained that Idaho Power and its
customers all save money from effective low-income weatherization programs by reduction of
peak loads,deferral or avoidance of costly new generation,reduction of energy costs for eligible
ORDER NO.32426 12
customers,reduction of unpaid bills,and avoidance of the cost of disconnecting and
reconnecting customers.Tr.at 504-07.
3.Idaho Power.Idaho Power’s witness Theresa Drake reported that Idaho Power
does not object to increasing the funding for low-income weatherization “provided there is the
potential for more cost-effective savings.”Tr.at 62.However,she argued that using the metric
of parity alone “is not a good method for determining need,given that demand for [low-income
weatherization]services may vary significantly between utilities.”Tr.at 63.More specifically,
she stated that increasing the funding for weatherization should be based on need.Tr.at 64.
While she agreed that one of the factors in determining need would be the CAP waiting list,she
asserted that the waiting list for weatherization projects (Exhibit 49)contained data that is
irrelevant and immaterial.In particular,she noted that several of the six community action
agencies shown on Exhibit 49 serve citizens outside Idaho Power’s service territory.Exhibit 49
also included customers who used non-electric heat sources such as propane,coal,wood,and
fuel oil.In addition,the waiting list does not represent eligible customers with projects that will
meet the cost-effective criteria.Tr.at 65-66.She said need could be shown by determining the
number of customers that are federal income eligible,heat their homes solely with electricity,are
on the CAP waiting list,and whose electric consumption could be reduced by a weatherization
project.Tr.at 64-65.
Ms.Drake also took issue with CAPAI’s assertion that Idaho Power has not increased
its funding for low-income weatherization projects since 2003.In particular,she noted that
Idaho Power instituted a new weatherization program called “Weatherization Solutions for
Eligible Customers”(“Solutions”)in 2008.In 2010,Idaho Power expended more than $220,000
for the program;anticipates spending more than $700,000 in 2011;and has budgeted more than
$1.0 million in 2012.Tr.at 70-71.She explained that the eligibility ceiling for Idaho Power’s
low-income weatherization program is 200%of the federal poverty level,while the income
guidelines for Solutions is between 175%and 250%of the federal poverty level.Thus,there is
some eligibility overlap between the low-income and the Solutions weatherization programs.Tr.
at 70,92.In addition,Idaho Power committed $125,000 to fund an energy efficiency education
program for the Community Action Agencies for customers receiving energy assistance.Tr.at
ORDERNO.32426 13
71.10 Finally,all libraries in Idaho Power’s service area have energY efficiency kits that may be
checked out by patrons.Tr.at 73.Thus.Idaho Power estimates that it will contribute a total of
$2.025 million in weatherization and energy programs in 2011 ($1.2 million in low-income
weatherization;Solutions at $700,000;and easy savings program at $125,000),and exceed that
amount in 2012.Tr.at 71.
4.Staff.Staff witness Stacey Donohue took issue with CAPAI’s assertion that
funding “parity”justifies a 125%increase in funding level.Tr.at 630.Instead,Ms.Donohue
explained that the funding for low-income weatherization should be based on the relative
“needs”of customers instead of solely maintaining per capita parity among the three utilities.
Tr.at 633.More specifically,she suggested that “need”could more appropriately be determined
by examining “the number of low-income customers,number of homes needing weatherization,
and poverty rates.”Tr.at 633.Ms.Donohue testified that based on 2009 poverty rates,Avista
had the highest poverty rate at 16.1%,Rocky Mountain was at 14.9%,and Idaho Power was at
14.7%.Tr.at 654.On cross-examination,Ms.Donohue also mentioned that need could be
influenced by the unemployment rate and cost-effectiveness.Tr.at 656-57.She also
acknowledged that parity may be “one of the metrics”for evaluating funding.Tr.at 694.
She took issue with CAPAI’s waiting list (Exhibit 49).In its current form,she said it
is not very useful in determining the waiting list for Idaho Power customers.Tr.at 658.She
recommended the Commission convene public workshops so that the various stakeholders could
“identify appropriate methods for measuring need,and establish proportional funding levels.”
Tr.at 630.
Staff also opposed increasing the funding level for weatherization based upon
concerns regarding the measurement of cost-effectiveness of the Idaho Power program compared
to the programs of the other two utilities.Id.Ms.Donohue explained that Staff believes “that
cost-effectiveness methodologies,including the treatment of non-energy benefits,should be
reasonably similar [amongj utilities rather than necessarily ‘uniform.’This is the standard for
other DSM program cost-effectiveness calculations and Staff sees no reason to modify that
approach for low-income programs.”Tr.at 635.
‘°Idaho Power also provides the CAP agencies with pertinent material on saving energy,and provides customers
with on-line hourly usage information so that customers can monitor their energy consumption.Tr.at 69.
ORDER NO.32426 14
She reported that Staff identified “problematic inconsistencies”among the three
income programs.It is clear that all three utilities “have very different standards for measuring
energy savings,recording measure level data,providing oversight of community action
partnership (‘CAP’)agencies,and calculating cost-effectiveness.”Tr.at 637.Although the
CAP agencies implement low-income programs using identical Department of Energy standards,
there is a significant discrepancy in the results of the cost-effective calculations.Yr.at 639.In
explaining the inconsistencies among the three weatherization programs,she noted that for the
year 2010 the utility cost test ratio for Idaho Power’s program was 3.27,for Avista it was .66 and
for Rocky Mountain it was .66.Yr.at 666,682.Given these discrepancies,she opposed
CAPAI’s proposal to increase weatherization funding until Staff,CAPAI,the utilities,and others
have a clearer understanding of cost-effectiveness calculations.Id.Ms.Donohue recommended
the Commission convene public workshops so the stakeholders can discuss and resolve issues
relating to need,implementation methodology,measurements of cost-effectiveness,
identification of non-energy benefits,and the appropriate level of annual low-income funding for
the three utilities.Tr.at 645.
Commission Findings:Based upon our review of the testimony,we decline
CAPAI’s suggestion to increase the low-income weatherization funding at this time for several
reasons.First,we find that parity alone is not an appropriate measure to determine the funding
levels for low-income weatherization programs.Consequently,we are not persuaded by
CAPAI’s argument that parity demonstrates that the funding for Idaho Power’s weatherization
needs to be increased at this time.We believe there are a host of factors that should be examined
to determine the appropriate need and funding level.The parties in this case have recommended
several measurements for determining need such as:unemployment rates,poverty rates,the
number of electrically-heated homes,the CAP waiting list,and the cost-effectiveness of projects.
We believe these are all appropriate factors in determining need.
Second,although the two programs are funded from different sources,we find that
the Company’s implementation of the “Solutions”weatherization program cuts against CAPAI’s
argument that weatherization funding has not increased since 2003.As indicated above,the
Company anticipated spending $700,000 for the Solutions program in 2011,and contemplates
spending $1.0 million in 2012.Although this program is funded through the Energy Efficiency
Rider,the income eligibility for the Solutions program does overlap with the income eligibility
ORDERNO.32426 15
for the low-income weatherization program.Consequently,we find that Idaho Power’s
expenditure for weatherization projects for 2012 to be approximately $2.2 million,not including
the $125,000 in the education program or the other educational information and tools offered to
CAPAI and libraries.In addition,we note that the ARRA provided $31 million for
weatherization programs that funded more than 2,000 residential projects across the State,
including Idaho Power’s service territory.Tr.at 856-57.Thus,we find that funding for Idaho
Power’s weatherization programs has increased by implementation of Solutions and ARRA.
We further find that Exhibit 49 does not accurately portray the number of Idaho
Power households on the project waiting list.As Ms.Ottens conceded on cross-examination,
Exhibit 49 contains information not applicable to Idaho Power’s service territory and includes
households supplied by other electric suppliers.Moreover,Exhibit 49 is not limited to only
households with electric space-heating.Tr.at 847;857-58.Consequently,we direct the parties
to discuss other appropriate data gathering mechanisms that would more accurately portray the
“waiting lists”for low-income customers for each of the three electric utilities.
Third,we are concerned about the cost-effectiveness of Idaho Power’s low-income
weatherization program.Because ratepayers fund Idaho Power’s weatherization programs,we
have a responsibility to ensure that these programs are cost-effective and designed to maximize
benefits for all customers.We find it reasonable to open a case and convene public workshops
for stakeholders and other interested persons to discuss ways of determining the relative need for
low-income weatherization programs.The workshops will also be an effective tool for allowing
stakeholders to analyze and evaluate the various cost-effectiveness measures and non-economic
benefits derived from low-income weatherization.Consequently,it is our intent to convene
public workshops,as soon as possible,to discuss and resolve these weatherization issues.
D.Energy Rider
Several parties disputed the appropriate surcharge rate for the Energy Efficiency
Tariff Rider,Schedule 91.The Rider is a monthly charge that funds the Company’s energy
conservation,efficiency and demand-side management (DSM)programs,which are generally
intended to reduce electric consumption that in turn reduces the need for generation.11 Order No.
30560.The current Rider surcharge level is 4.75%.The parties did not agree on whether this
Rider-funded programs include:the Solutions low-income weatherization,the air-conditioning cycling,appliance
replacement for residential customers;“peak rewards”for irrigation customers;and conservation/efficiency
programs for commercial customers.Order Nos.30560,30814.
ORDER NO.32426 16
level remains appropriate.At the technical hearing,Kroger,ICIP,Idaho Power,and Staff
offered testimony that the surcharge should be reduced.The Conservation Parties (ICL,SRA,
and NW Energy Coalition)recommended that the existing surcharge level be maintained.
1.Kroger.Kroger witness Kevin Higgins proposed reducing the Rider to 3.4%.He
calculated in Exhibit 501 that Idaho Power would recover about $39.7 million in costs through
the Rider in 2012 at the current rate.’2 Tr.at 319-21.He noted that the Stipulation accepts Idaho
Power’s proposal to shift $11.2 million of demand response program cost recovery from the
Rider into base rates,but no corresponding reduction in the Rider was proposed.Tr.at 317-19.
Mr.Higgins recommended the Commission reduce the Rider level to 3.4%in
recognition that the Company will be shifting $11.2 million in demand response program costs
from energy efficiency funding into base rates.Tr.at 317.Even with a 3.4%Rider,funding for
non-demand response programs would increase by $1.2 million relative to pro forma levels due
to the underlying 4.1%rate increase proposed in the Stipulation.Id.He explained that Idaho
Power’s non-demand response program cost recovery through the Rider at current rates amounts
to $28.5 million (for 20l2),’and that the Company can still recover this amount —at current
rates —with a 3.4%Rider charge.Thus,applying the 3.4%Rider to the stipulated revenue
requirement will increase Rider revenues by nearly $1.2 million,to $29.6 million.Tr.at 320.In
addition,he calculated that going forward.$5.2 million in Custom Efficiency costs will be
booked as a regulatory asset,providing more headroom for non-demand response programs
relative to historical funding levels.Tr.at 327-28;320,n.2.
Mr.Higgins said setting the Rider at 3.4%allows for net growth in funding for non-
demand response programs while being mindful of the overall rate impacts being borne by Idaho
Power customers.In contrast,shifting $1 1.2 million from the Rider into base rates while raising
those base rates by 4.1 %and not decreasing the Rider unreasonably burdens customers.Tr.at
Mr.Higgins noted that a 3.4%surcharge is equal to the surcharge approved for Rocky
Mountain Power in Idaho,and is consistent with the level of percentage surcharges levied
elsewhere in the region for energy efficiency cost recovery.Tr.at 322-23.He concluded that
12 Exhibit No.501,1.18.col.(c).Mr.Higgins said the calculation is consistent with Idaho Power Rider revenues
presented in Idaho Power Exhibits Nos.47 and 43 and includes expected Rider recovery from Hoku First Block
sales effective January 1,2012.
‘Exhibit No.501,1.18,col.f.
ORDER NO.32426 17
reducing the Rider to 3.4%will still provide sufficient funds for DSM projects while benefiting
customers by lowering the surcharge.
2.ICIP.ICIP witness Don Reading proposed reducing the Rider to 3.8%.or at least
to 4.0%as suggested by Staff.Dr.Reading explained that if the Commission were to leave the
Rider at 4.75%(as the Conservation Parties’suggest)and after removing $11.3 million of
demand response costs,the Company would collect about $7.5 million more than the current,
overall DSM expenditure level.Tr.at 422-23.Even though some DSM costs will be collected
in base rates rather than though the Rider,the overall rate impact of Idaho Power’s proposal on
customers is the same as increasing the Rider by $11.3 million.Tr.at 421-22.If the Rider is left
at 4.75%and the demand response programs are moved to base rates,customers would
effectively be paying the equivalent of a 6.1%Rider.A dollar for dollar reduction in the Rider
from removing the $1 1.3 million demand response incentive programs would equal about a 3.8%
Rider.Id.
Dr.Reading said a dollar for dollar ‘reduction to 3.8%may be an equitable and
justifiable path,”particularly because this is how the Commission treated Rocky Mountain
Power’s Rider after one of Rocky Mountain’s conservation programs was removed from the
Rider.Tr.at 422.However,he said that the ICIP fully supports the Commission Staff’s
testimony and recommendation to lower the Rider to 4.0%.Tr.at 422-23.
3.Conservation Parties.The Conservation Parties’witness,Ms.Hirsh,
recommended that the Commission keep the Rider at 4.75%.Contrary to what other parties
suggest,she said that recovering demand response incentives as power supply expenses does not
mean the Commission should reduce the Rider rate.Tr.at 512.She explained that the Rider
faces funding pressure because the Commission has directed Idaho Power to pursue all cost-
effective energy efficiency.Tr.at 516,518.However,she calculated that the current Rider level
enables the Company to acquire less than 20%of available DSM potential.Tr.at 5 17-18.
Ms.Hirsh acknowledged that the Stipulation does reduce pressure on the Rider by
moving certain costs into base rates.However,she cautioned that significant pressure remains
because Idaho Power must fund existing programs,recover the prudently incurred back balance
in the Rider account,and provide reasonable “headroom”for planned growth to achieve more
economic potential.Tr.at 518.She said that any potential “headroom”will be quickly
consumed by ongoing DSM expenses and the need to recover the current Rider balance deficit.
ORDER NO.32426 18
Tr.at 522.Further.while the Company’s current DSM program achievements are laudable,they
do not capture all the economic potential energy savings available in the Company’s service
territory.Tr.at 524.
Ms.Hirsh observed that the Company has identified other cost-effective programs
that will require increased program funding.Tr.at 528-31.Further,she said other programs,
like that contemplated by the Company’s recent agreement with the Idaho Office of Energy
Resources for the K-12 Energy Efficiency Project,might further increase cost-effective energy
efficiency and require increased program flinding.Tr.at 530.Maintaining the Rider funding
level now provides the opportunity to meet expectations for increased administrative costs and
acquire savings from existing programs and new measures that are preliminarily shown to be
cost effective.Tr.at 532.Finally,she said maintaining the current 4.75%Rider will have a
negligible impact on customers and will increase each customer’s bill by less than $3.36
annually.Tr.at 520.
4.Staff.Staff proposed reducing the Rider to 4.0%of billed revenues.Staff witness
Randy Lobb said decreasing the Rider would further reduce the overall rate increase from 4.19%
(the stipulated rate increase)to 3.44%.Tr.at 698.Mr.Lobb insisted that moving $16.5 million
in annual DSM expenditures into base rates and lowering the Rider still provides more revenue
than needed to fund the Company’s existing DSM programs.Tr.at 724-25.He stressed that
Staffs proposal does not signal a decreased commitment to DSM and energy efficiency.Tr.at
725.Rather,Staff sees the partial shift in DSM cost recovery as an opportunity to increase DSM
program funding while simultaneously lessening the impact of the base rate increase in a difficult
economy.Id.
Staff witness Donn English echoed Lobb’s testimony.He explained that the parties’
agreement in the Stipulation to move $1 1.3 million in DSM incentive payments from the Rider
into base rates,produces a net increase of $16.6 million to Rider revenue over 2010 levels,or a
92%increase.Tr.at 560.He noted that Idaho Power collected about $34.6 million in 2010
Rider revenue.Id.He said a 4.0%Rider would bring in about the same amount as the 2010
revenue to fund Rider programs.Additionally,the Commission allowed Idaho Power to account
for custom efficiency program incentives as a regulatory asset beginning January 1,2011,which
adds $5.1 million (based on 2010 levels)to Rider revenue.Tr.at 561 (citing Order No.32245).
ORDER NO.32426 19
However,Mr.English cautioned against decreasing the Rider below 4.0%to avoid falsely
signaling that the Commission and Staff do not support Idaho Power’s DSM efforts.Tr.at 563.
Mr.English agreed that Idaho Power has an existing deferral balance in the Rider
account of over $8 million because Idaho Power spent more on DSM programs than it collected
through the Rider.He testified that a Rider of 4.0%of base revenues will supply sufficient
funding to eliminate the Rider account balance in less than one year,and will provide ample
revenue for expanding DSM programs.He estimated a 4.0%Rider would provide $9.3 million
over 2010 expense levels.Tr.at 566.As programs expand,the Rider rate can be reevaluated.
Mr.English also asserted that reducing the Rider from 4.75%to 4.0%provides rate
relief to almost all customers.Tr.at 564.He disputed Ms.Hirsh’s statement that leaving the
Rider would have a negligible impact on customers.He calculated the average annual impact
per customer of the 0.75%difference is $13.72 instead of the $3.36 claimed by Ms.Hirsh.Tr.at
566-67.
5.Idaho Power.Company witness Theresa Drake evaluated the various Rider
positions offered by the parties.She opposed Kroger’s proposal to reduce the Rider to 3.40%
because it seemingly ignores the negative balance in the Rider account and would not adequately
support the Company’s existing programs.Tr.at 81.
She testified that as of the end of October 2011,Idaho Power had a negative $6
million Rider account balance.Tr.at 75.Ms.Drake analyzed both the 4.75%and 4.0%
surcharge levels.Tr.at 76,Exh.50.She estimated that given current expenditures,a 4.75%
Rider yields more than a $5 million balance at the end of 2012 and more than a $35 million
balance in 2014.A 4%Rider yields a negative $1 million balance at the end of 2012 and $15.8
million balance at the end of 2014.Id.Regardless of the level ordered by the Commission,Ms.
Drake reaffirmed the Company’s commitment to energy efficiency initiatives,and the
Company’s commitment to pursuing all cost-effective energy efficiency.Tr.at 76-77.
Ms.Drake said decreasing the Rider to 4.0%would decrease the Rider’s current
negative balance while supporting existing and new energy efficiency services.Tr.at 79-80.
She said that if a 4.0%Rider level ultimately proved insufficient,the Company would ask the
Commission to let the Company increase the funding.Tr.at 81.
Commission Findings:The Rider recommendations range from keeping its current
4.75%level to decreasing it to 3.4%.Based upon our review of the evidence,we find that
ORDER NO.32426 20
setting the Rider at 4.0%is fair,just,and reasonable.We decline Kroger’s and ICIP’s
recommendation to decrease the Rider to 3.4%or 3.8%.Such reductions would not allow
sufficient “headroom”for enhanced funding or extinguish the existing balance in a reasonable
time period.Instead,we find a 4.0%Rider level will adequately fund Idaho Power’s existing
and future DSM programs,and enable the Company to eliminate the negative balance in the
Rider account.Further,we find that setting the Rider at 4.0%appropriately balances energy
efficiency funding while at the same time providing all customers with lower overall rates.We
continue our commitment that the Company should pursue all cost-effective energy efficiencies.
If the 4.0%Rider proves to be an insufficient rate to fund future DSM programs,we expect the
Company (or other parties)to bring this matter to our attention.
E.Facilities Charge
Idaho Power proposed to lower the facilities charges assessed to certain customers for
utility facilities that are installed,owned and maintained beyond Idaho Power’s “point of
delivery.”Tr.at 217.Idaho Power offered testimony in support of its proposal to lower
facilities charges.while ICIP offered testimony for either further reductions in the charge or even
transferring ownership of the facilities to customers.In addition,one public witness also
requested relief.No other party offered direct testimony on the facilities issue.
I.Idaho Power.Company witness Scott Sparks testified that the Commission last
reviewed the facilities charge rates in 1987 in Case No.U-1006-298.Tr.at 216.Mr.Sparks
explained that at the Company’s option,it may offer facilities charge services to primary and
transmission service level customers under Schedules 9 (Large General Service);19 (Large
Power Service);and 24 (Agricultural Irrigation Service).Tr.at 217.14 Mr.Sparks described the
current and proposed monthly facilities charges as follows:
Current Monthly Proposed Monthly
Schedule Facilities Charge Facilities Charge
9 1.7%1.41%
19 1.7%1.41%
24 1.7%1.41%
15*1.75%1.51%
41*1.75%1.21%
*Seen.14;Tr.at218.
14 As of June 1,2004,customers taking service under Schedule 15 (Dusk to Dawn Customer Lighting)and Schedule
41 (Street Lighting Service)were no longer eligible for facilities charges although some customers continue to pay
monthly facilities charges for facilities installed prior to June 1,2004.Id
ORDER NO.32426 21
Mr.Sparks said the Company updated the facilities charge rates using the nine cost
components the Commission previously found reasonable during the last review of the charges
in 1987.Tr.at 219.These cost components are:
Rate of Return —The rate of return ordered by the Commission in this case.
Booked Depreciation —The straight-line annual depreciation of assets based
on a levelized 31-year basis.
Income Taxes —The tax paid on the revenue amount received from the equity
portion of the rate of return.
Property Taxes —The tax paid for the distribution facilities.Facilities beyond
the delivery point are assessed property taxes.
Other Taxes (Regulatory Fees)—The regulatory fees assessed by the Idaho
and Oregon commissions.Part of these fees are tied to investment in facilities
installed beyond the delivery point.
Operation and Maintenance (O&M)Expenses —An average O&M rate for all
distribution equipment.
Administration and General Expenses —An expense based on total
administration as a percentage of total plant investment.
Working Capital —The carrying cost of inventory.Working capital is based
on the cost of capital to finance the distribution facilities inventory and the
property taxes that the Company pays on its inventory.
Insurance —Reflects Idaho Power’s additional cost for insurance premiums
resulting from facilities installed beyond the delivery point.This insurance
rate covers property,casualty,and worker’s compensation.It does not cover
failed-facility replacement costs.Tr.at 220-22.
In its direct case,the Company proposed the following values or percentage amounts
for each component by rate class:
Cost Components Schedule 15 Schedules 9/19/24 Schedule 41
Rate of Return 4.81%4.81%4.81%
Book Depreciation 3.23%3.23%3.23%
Income Taxes 1.90%1.90%1.90%
Property Taxes 0.5 6%0.56%0.56%
Other Taxes (Regulatory Fees)0.14%0.14%0.14%
O&M 4.73%3.58%1.18%
Administration &General 2.28%2.28%2.28%
Working Capital 0.14%0.14%0.14%
Insurance 0.32%0.32%0.32%
Annual Total 18.10%17.00%14.60%
Monthly Rate 1.51%1.41%1.21%
ORDER NO.32426 22
Source:Ir.at 222.15
Mr.Sparks said the decreased rate of return is the primary cost component
responsible for the proposed rate reduction.Tr.at 223,He estimated that the proposed facilities
charge rate reduction will decrease the Company’s annual revenue by $1.1 million.He said
reducing revenue will increase revenue requirements for each customer class that collects
facilities charge revenue (i.e.,Schedules 9,19,and 24).In turn,the energy rates for these
customer classes will increase slightly to recover the decreased facilities charge revenue.Id.
On rebuttal,Company witness Warren Kline said customers typically own,operate,
and maintain the equipment beyond the Company’s delivery point.Id.However,some
customers ask the Company to assume these obligations because they lack the capital or
expertise to fund,design,install,and maintain necessary facilities,or because they want to take
advantage of other benefits covered by the facility charge (e.g.,the Company’s 24/7 customer
service,equipment inventories,and trained personnel ready to respond in emergency situations).
Tr.at 140-43.He said that Idaho Power provides facility charge service to about 240 Idaho
customers.Tr.at 139.
Mr.Kline said the Company has some mixed-ownership customers left over from the
early days of facilities charges.However,the Company dislikes such arrangements and will
revisit them as opportunities arise.He said the Company has not allowed mixed-ownership for
new facilities since the I 980s.Tr.at 146.He said the Company dislikes mixed-ownership for
operational and safety reasons.For example,without a clearly demarcated “end point”where
Idaho Power’s facilities end and a customer’s facilities begin,confusion arises about who is
responsible for working on what pieces of equipment.Further,Company personnel may not
know of any modifications or repairs a customer may have performed on equipment.Also,the
Company adheres to the National Electric Safety Code while customers follow the National
Electric Code.These different codes may result in different customer equipment with which the
Company and its employees are not familiar.Tr.at 145-48.Mr.Kline said the Company has a
few agreements under which it maintains customer-owned facilities,but the Company is
migrating away from this arrangement and,on a going forward basis,the Company will not
maintain customer-owned facilities.Tr.at 149.
‘s Mr.Sparks said the Schedules 9 and 24 facilities charge rates align with the derived rate for Schedule 19.The
Company and the Commission have determined that the Schedule 19 facilities charge rate accurately reflects
facilities charge costs under Schedules 9 and 24.Tr.at 222.
ORDER NO.32426 23
Company witness Michael Youngblood on rebuttal testified about the proposed
“buyout option”and ratemaking issues associated with facilities charges.He said that facilities
beyond the Company’s delivery point are solely for the purpose of meeting the electrical service
requirements of an individual customer.Tr.at 240.Accordingly,he asserted it is inappropriate
to charge other customers for the investment and maintenance of those facilities.
He explained the Commission-approved methodology for calculating the facilities
charge provides a “levelized”rate of cost recovery for customers.In sum,the facilities charge is
a levelized method for assigning costs,whereas the cost-of-service approach is a point in time
methodology of assigning costs on a non-levelized basis.Tr.at 241.Both are intended to
recover,on average,the same amount of revenue over time.Id.Any differences between the
non-levelized revenue requirement and the levelized revenue requirement exist as intra-class
subsidies between those customers paying facilities charges and those who do not within each
customer class.Tr.at 24 1-42.
Mr.Youngblood said that over time,the levelized revenue methodology recovers the
same revenue as a non-levelized methodology.Tr.at 242.The difference is in the timing of the
revenue recovery.Tr.at 243 (chart).In the early years,the levelized methodology does not
recover the full revenue requirement needed;however,in the later years the levelized
methodology recovers the shortfall from the early years.Id.
Mr.Youngblood said it would be complicated and impractical to determine an
individual revenue requirement for each customer with facilities beyond the point of delivery.
Id.He said with such an approach,the calculated facilities charges would differ for each of the
240 facilities charge customers and each customer’s rate would continually change.Tr.at 243-
44.While the levelized facilities charge recovery is less than the non-levelized rate in the early
years,the revenue shortfall for the individual facilities charge customers is subsidized by the rest
of the class.In the later years,when the levelized facilities charge exceeds the necessary revenue
requirement,the facilities charge customers “repay”the prior subsidy.Id.These intra-class
subsidies are an expected and normal outcome of the levelized ratemaking approach.Tr.at 244-
45.Any facilities charge change for an individual customer would change the revenue credit
amount received as an offset to the class revenue requirement.Tr.at 245-46.This would
necessitate a new revenue requirement determination to adjust the base rates of the entire class.
Tr.at 246.Thus,adopting the recommendation of ICIP would require the Company to
ORDERNO.32426 24
recalculate its revenue requirement for each customer class with a facilities charge whenever an
individual customer’s facilities charge rate changes.Such an approach would be complicated to
administer and require continual changes to class base rates.Id.
Mr.Youngblood also insisted that it is impractical to track the actual depreciation
levels for each individual piece of equipment for each customer.Id.The result would be a
separate facilities charge rate for each of the thousands of individual equipment pieces for each
of the 240 individual facilities charge customers.Yr.246-48.This ICIP approach would be an
administrative nightmare,would be unduly burdensome,and increase the complexity of the
facilities charge rate.Tr.at 248.He said the Company does not track depreciation levels for
individual facilities for any other customer class or service.Id.Rather,per standard ratemaking
practice,the Company averages the actual depreciation levels for a particular level of service or
customer class and spreads cost recovery equally to all customers in the class.Id
Mr.Youngblood explained the Company’s proposal to give facilities charge
customers the option of buying Company-owned facilities.Id.The Company created a new
Rule M (Facilities Charge Service),which would consolidate facility charge rules.’6 This will
enable the Company to more efficiently manage tariff issues related to facilities charge services.
Id.Under the proposed Rule M,customers may ask to buy Company-owned facilities installed
beyond the delivery point.The Commission must approve all sales and they must meet the
following conditions:
•Compliance with Idaho Code §61-328;
•No mixed-ownership of facilities;
•The customer must provide the O&M of all facilities installed beyond the
delivery point after the sale;and
•The customer must pay for the engineering costs for determination of the
sale.
Yr.at 251-52.He said Idaho Code §61-328 provides that the sale of facilities must not
adversely impact remaining customers or customer rates.Yr.at 252-53.Further,the Company
would need to ensure the appropriate equipment is in place at the delivery point so no equipment
failure would degrade the Company’s reliability and service to remaining customers.Tr.at 253.
16 The Company’s proposed new Rule M is set out in Exhibit 52.
ORDER NO.32426 25
If the proposed sale meets these conditions,the Company would make a filing with the
Commission asserting that such sale is in the public interest.Id.
He said the Company does not propose a specific methodology for determining the
facility sales price.Rather,the Company simply proposes changing its tariffs to allow for the
buyout option.Id.He stated that if the Commission approves the Company’s Rule M tariff,and
if a customer asks to buy facilities,the Company would attempt to agree with the customer on a
sales price before bringing the proposed sale to the Commission.Tr.at 253-54.If the Company
and customer cannot agree on a price,either of them could ask the Commission to determine the
appropriate price.Tr.at 254.
Mr.Youngblood next discussed how Stipulation paragraph 11(c)would operate if the
Company were to give away Company-owned facilities as proposed by ICIP.Tr.at 259.’He
said that if fully depreciated facilities were assigned to customers,the Company would
experience a revenue shortfall.Tr.at 259.In that case,the Company would cover the shortfall
by increasing rates for Schedule 19 customers.id.
2.ICIPs Testimony.ICIP witness Don Reading said Idaho Power’s cost-of-service
study shows the Company expects to collect $6,020,018 in facilities charge revenue for the test
year.Tr.at 366.Schedule 19 customers provide 61%of the revenue,Schedule 9 customers
provide 26%,and Special Contract Schedule 29 (Simplot’s Don Plant)provides 9%.Tr.at 367-
68.He criticized Idaho Power’s proposal to decrease the facilities charge percentage rate to
17%.Id.He said the annual 17%charge assessed in perpetuity is excessive because the initial
investment in equipment will never be amortized or depreciated.Tr.at 376.He maintained that
the Company should calculate the percentage rate based on the lower rate of return and other
costs contained in the Stipulation.Tr.at 378-79.Most importantly,he argued that the principal
amount of the initial facilities investment must be depreciated as the equipment ages,just as the
principal amount of any other rate-based asset depreciates over time.Tr.at 378.Absent such
treatment,individual customers will subsidize the rest of the customer class and may overinflate
Company revenues for depreciated equipment.Tr.at 3 79-80.
17 Stipulation paragraph 11(c)states:“Signing Parties agree that any revenue requirement impacts resulting from
changes to the facilities charge methodology or changes in property ownership shall be directly assigned to Schedule
19 customers in the form of a base rate increase or reduction so that no other customer classes shall be impacted by
any resulting change.”
ORDER NO.32426 26
Dr.Reading explained that the Company derives the facilities charge rate by using
costs from distribution facilities equipment on the Company’s side of the meter.Tr.at 380.The
Company then identifies the components of standard distribution equipment that it believes
should be allocated to an individual customer for use of distribution facilities on the customer’s
property.Id.He reported the Company has used FERC Form I data to calculate the percentage
amount for each identified component it believes it would need to recover from an individual
customer.Tr.at 380-81.In this manner,the Company calculated the individual components of
the facilities charge (income taxes,property taxes,other taxes,O&M,administration and
general,working capital,and insurance).Tr.at 381.These components plus the rate of return
and depreciation make up the Company’s facilities charge to the individual customer.
Dr.Reading said the main flaw in Idaho Power’s facilities charge rationale is that the
facilities charge does not take depreciation into account even though the facilities charge
equipment depreciates in rate base.Tr.at 3 82-83.He agreed that facilities charge revenues are
credited back to the customer’s class and reduce the revenue required from that class when rates
are set in a general rate case.Tr.at 383.However,he insisted it is unfair for the Company to not
use depreciated values to calculate monthly facilities charges.1d Such treatment amounts to an
unfair subsidy from individual facilities charge customers to other ratepayers and could result in
the Company being overcompensated for depreciated assets.Tr.at 3 84-85.
He calculated the average ages of the facilities charge equipment for the primary
facilities charge customer classes are 17 years old for Schedule 9,18 years old for Schedule 19,
and 24 years old for Special Contract Schedule 29.Tr.at 389-390.Accordingly,on average
customers do not have “newer”equipment and Idaho Power is overcharging individual
customers for facilities on their premises.Tr.at 388.
Dr.Reading characterized Idaho Power’s proposal to lower the facilities charge from
20.4%to 17.00%annually as a long overdue,“good start.”Tr.at 410.Also,he said the
Company should recalculate its proposed facilities charge percentage to match the costs
contained in the Stipulation.The corresponding decreases in the FERC Form I accounts used to
calculate the facilities charge should also be updated to ensure that the charge and its credits back
to each customer class match the value of the assets contained in that class’s revenue
requirement.Id.Further,the revised percentage should be calculated against the depreciated
value of the initial investment using appropriate amortization schedules.Tr.at 410-11.
ORDER NO.32426 27
Dr.Reading next discussed his recommendations for changes to the ownership
options for facilities charge equipment.He said that over 15 years at a 14%annual interest rate,
the customer pays the Company more than 2.5 times the Company’s original cost for the
currently installed equipment.Dr.Reading said given this,it would be fair for the Company to
assign ownership of facilities charge equipment to existing facilities charge customers (such as
Simplot)who have paid overall facilities charge rates of more than 2.5 times the original
equipment cost.Id.For existing facilities charge customers who have not paid more than 2.5
times the original cost,Dr.Reading proposed that the Company provide such customers with the
option to buy the facilities at depreciated book value for each piece of equipment based on the
Company’s Commission-approved depreciation schedule.Tr.at 413.Dr.Reading also said the
Commission should direct Idaho Power to implement an ownership option which allows the
customer to take over ownership of the equipment and pay a “limited facilities charge”for the
Company’s ongoing O&M expense.Tr.at 413-14.
Dr.Reading also suggested an alternative proposal for a purchase price if the
Company believes it cannot calculate the depreciated book value for each piece of equipment
based on the Company’s Commission-approved depreciation schedule.Tr.at 414.He said the
Company could approximate the remaining book value by calculating the initial value of all
equipment installed at a customer’s facility and applying an appropriate depreciation schedule.
Id.If Idaho Power cannot calculate the actual remaining book value,then for simplification and
compromise,Dr.Reading recommended the Commission should allow customers to buy the
equipment from Idaho Power at a depreciated book value using a 15-year straight-line
depreciation schedule.Tr.at 418.
Finally,Dr.Reading recommended the Commission require Idaho Power to inform
each facilities charge customer in writing of its facilities charge,the costs over the life of the
equipment,and the ownership options.Tr.at 419.He said the Company’s notice should
disclose payoff amounts at different milestones,effective interest rates and other components of
the charge and require written consent from the customer.Id He said the tariff should clearly
state the buyout option,and that a customer can choose to own its distribution facilities (as
opposed to providing only the Company with the option to decide whether to sign a customer up
for the facilities charge).Tr.at 419-20.He also recommended that Idaho Power allow mixed
ownership between the Company and customers on customer property.Tr.at 420.He said
ORDER NO.32426 28
mixed-ownership would enable the customer to choose which equipment will be customer-
owned or be subject to the facilities charge.Id.
Both ICIP witness Don Sturtevant and Dr.Reading discussed how the facilities
charge affects Simplot.Mr.Sturtevant said Simplot supports ICIP’s position on the facilities
charge.Yr.at 455-56.He said Simplot is one of Idaho Power’s largest customers and spends
$1.5 million annually on electricity.Yr.at 456-57.He said Simplot has $4.252 million in assets
for which it pays an $867,426 annual facilities charge.Yr.at 459.He said Simplot would like to
opt-out of the facilities charge,and take on the responsibility for electrical distribution facilities
on Simplot property.Tr.at 460-61.
Mr.Sturtevant said that based on Idaho Power Distribution Facilities Reports and an
inventory of the equipment that he and Idaho Power undertook,Simplot has 1,609 items on the
facilities charge that were installed at a total initial investment of $4,252,088 and an annual
charge of $867,426.Tr.at 465-67.He said that Simplot has paid around $14 million or 3.4
times this equipment’s installed investment.Yr.at 467.Dr.Reading said Simplot has two,66-
year old items (a transformer and a switch)and these items have been fully depreciated but
Simplot would pay 17%in facilities charge.Tr.at 3 94-95.The average age of all Simplot’s
facilities charge equipment is 24 years old.Tr.at 467.Mr.Sturtevant said it is unfair for Idaho
Power to charge the facilities charge rate in excess of Idaho Power’s initial investment.
Mr.Sturtevant calculated the remaining book value of Idaho Power facilities charge
equipment at Simplot premises to be:30-year at $1,753,384;25-year at $1,432,204;20-year at
$1,145,608;and 15-year at $847,660.Tr.at 468-49.However,he said it would be unfair for
Idaho Power to sell this equipment to Simplot for this remaining book value.Tr.at 469.He said
520 items at Simplot plants are over 30 years old,which is 32%of all of Simplot’s facilities
charge equipment.He insisted that Simplot has paid for the initial value of this equipment more
than 3.4 times,and that Idaho Power should immediately give Simplot all the equipment.Id.
Mr.Sturtevant also disagreed with the existing Schedule 19 option to allow facilities
charge customers to stop paying the charge.Yr.at 469-71.Although the tariff and the Don Plant
Special Contract say Simplot may require Idaho Power to “remove”the facilities,Simplot must
pay Idaho Power for the facilities’remaining depreciated value plus the cost to remove them
minus a salvage value credit.Yr.at 470.He said nothing allows a customer to buy facilities and
ORDER NO.32426 29
thereby avoid paying removal costs and other costs that may arise if Idaho Power cannot find a
willing buyer for the facilities or otherwise salvage them.Tr.at 470-71.
In conclusion,Mr.Sturtevant said that Simplot has paid for its current facilities
charge equipment more than three times;Idaho Power has recovered its initial costs and any
authorized rate of return several times;Idaho Power should simply convey the facilities to
Simplot,and that the Commission should reform the facilities charge as described by Dr.
Reading.Tr.at 479-80.
ICIP witness Del Butler also said the proposed facilities charge is unfair.Tr.at 343.
As the former manager of the Don Plant,he calculated it cost Idaho Power $2,619,846.62 for the
original equipment at the Don Plant.Id.He said the Don Plant currently pays an annual
facilities charge of $534,448.71.He estimated the equipment averages 24.5 years old,and that
the Don Plant has 63 pieces of equipment that were installed in 1964,47 years ago.Tr.at 347.
Simplot estimates that,for $2.6 million in currently installed equipment,Simplot has now paid
Idaho Power $10,027,224 (which would be even higher if one were to account for the time-value
of money).Tr.at 348.
Mr.Butler reiterated that Simplot has paid for its facilities charge equipment more
than three times at the Don Plant,and that Idaho Power has more than recovered its initial costs
and any authorized rate of return.Tr.at 353.Accordingly,Idaho Power should simply turn
ownership of these facilities over to Simplot.Id.He concluded by urging the Commission to
reform the facilities charge structure.
Commission Findings:In this rate case,Idaho Power proposed reducing the
facilities charge for the approximately 240 customers that are assessed facility charges.The
Industrial Customers of Idaho Power (ICIP)and others recommended that the facility charges be
further reduced or even eliminated.In addition,the ICIP and Simplot witnesses argued that
customers ought to be provided with an opportunity to purchase (or receive)the distribution
facilities located on the customer’s premises.We first address issues related to the calculation of
the facility charge and then address the issue of a customer acquiring its distribution facilities.
1.Cost Components.We first find that the rate of return component of the facilities
charge should be updated in this case to reflect the rate of return contained in the Settlement
Stipulation.In other words,the return component for calculating the facilities charge should be
equivalent to the overall rate of return of 7.86%.
ORDER NO.32426 30
We further find that the “booked depreciation”component and the income tax
component for pooled distribution assets used to calculate the facilities charge should be
adjusted.As explained by the Company’s witnesses,the “booked value”of distribution facilities
is based upon a levelized return and full straight-line depreciation of assets over an average 31-
year life.However,under the Company’s methodology,the levelized facilities charge after 31
years continues to recover a charge for the rate of return,depreciation,and income tax
components.We find that assessing a charge for the rate of return,depreciation,and income tax
components for assets that have been fully depreciated is unreasonable.While we reject ICIP’s
argument that the facilities charge ought to be individually calculated based upon the specific
distribution facilities assigned to each of the 240 facility charge customers,we believe that it is
neither fair nor reasonable that fully depreciated assets continue to be included in the facilities
charge calculation that encompasses the return,depreciation,and income taxes components.
Consequently,we direct Idaho Power to recalculate its facilities charge rates based upon the
Commission-ordered adjustments to the rate of return,booked depreciation and income tax
components.
The Company is directed to file new facilities charge tariffs within fourteen (14)days
from the date of this Order.In the interim,the Company shall immediately file conforming tariff
schedules that contain rates that produce the approved revenue requirement set out in the
Settlement Stipulation (including the initially-proposed reductions in the facilities charge as
updated by the proper rate of return)to become effective January 1,2012.
We next turn to the revenue recovery mechanism contained in the Settlement
Stipulation.The parties’Stipulation generally states that any revenue shortfall resulting from
changes to the facilities charges shall be directly recovered from Schedule 19 customers “so that
no other customer classes shall be impacted by any resulting change.”Stipulation at ¶11(c).As
discussed above,there are facilities charge customers in Schedules 9,19,and 24.18 Although the
record does not reveal the revenue impacts (if any)of our adjustments to the cost components for
facilities charge adopted above,we find it is unreasonable to charge Schedule 19 customers for
the revenue shortfalls caused by changes to the facility charges for Schedules 9 and 24
18 As noted above,facilities charge customers in Schedules 15 (Dusk to Dawn lighting)and 41 (Street Lighting)are
no longer eligible for facilities charges although some customers will continue to pay facilities charges for facilities
installed prior to June 1,2004.
ORDER NO.32426 31
customers.19 Any revenue impacts in other schedules should be recoveredladjusted in the
applicable customer class.Accordingly,we condition the Settlement Stipulation so that the
revenue impact of the adjustments to the facilities charge be restricted to the affected class
schedule.Rule 276.We further direct the Company to advise the Commission and the parties of
any revenue impacts to the other affected classes when it files conforming tariffs.
We further find it is reasonable and appropriate for the Company to update all the
cost components that comprise the facility charges in each future rate case rather than simply
subject the cost components to the Company’s internal review.Updating the facilities charges in
each rate case will allow interested parties to review the underlying costs of each component.
Because we have ordered the Company to implement the adjustments to the cost components
mentioned above and that the cost components be updated in every rate case,we reject the ICIP
proposal that when a customer has paid a certain level of facilities charges (i.e.,2.5 times),then
the distribution facilities should be provided to the customer.Even if a facility asset is fully
depreciated,there are other costs and expenses (e.g.,O&M,inventory)that are reasonably
associated with the assets.
2.Option to Purchase.We are persuaded by the testimony offered by the ICIP and
other witnesses that customers ought to be provided with an option to purchase distribution
facilities dedicated to their specific use and located on their premises.The Company conceded
in its rebuttal testimony that customers ought to be able to purchase certain facilities in certain
situations.In particular,if a customer wants to bear the responsibility of operating,maintaining
and replacing such facilities,then we believe there ought to be an opportunity for the customer to
purchase the assets on a case-by-case basis.Pursuant to Idaho Code §61-328,a proceeding to
determine the value of such facilities would be necessary.
To assist the Company and other parties in implementing the option to purchase,we
find that there should be no mixed ownership of facilities.In other words,the Company and
customer must clearly delineate a new “point of delivery.”We are persuaded that both the utility
and the customer should be responsible for the operation and maintenance of facilities on their
respective sides of the point of delivery.This demarcation will also serve as the dividing line for
the application of applicable safety standards (the National Electric Safety Code for utilities and
the National Electric Code for customers).In other words,we find it is not appropriate for there
The same would be true for special contract customers.
ORDER NO.32426 32
to be facilities of “mixed ownership”on either side of the point of delivery.20 Thus,the point of
delivery will delineate those facilities that become the responsibility of the customer,and those
facilities that will continue to be the responsibility of the utility.As stated above,we envision
that the sale of facilities will occur on a case-by-case basis and that the purchasing price will be
based upon the value of the facilities to be transferred to the customers.
Finally,we reject Dr.Reading’s suggestion that the Company notify all facilities
charge customers of the remaining lives of the assets on the customer’s property.We find this
requirement to be burdensome,complex,and unnecessary.However,we direct the Company to
explain new Rule M to its facilities charge customers and provide each customer with the
“Acknowledgement Form”so that customers will be aware of the option to purchase the
distribution facilities for which they are assessed facilities charges.
INTERVENOR FUNDING
A.The Petitions
At the conclusion of the technical hearing,the Commission directed parties seeking
intervenor funding to file their petitions no later than December 13,2011.Timely Petitions for
Intervenor Funding were filed by the Idaho Conservation League (ICL)on behalf of the three
“Conservation Parties (ICL,SRA,and NW Energy Coalition),the Idaho Irrigation Pumpers
Association (JIPA or Irrigators),and CAPAI.
ICL is a non-profit organization that works to protect Idaho’s environment.ICL (and
its two partners)supported the Stipulation and filed testimony regarding both the settlement and
the Rider.The three Conservation Parties also participated in the settlement conferences and at
the hearing.ICL requested a total of $14,218.40 in intervenor funds:$1,153.40 in witness fees
for Ms.Hirsh;and $13,065 in attorney fees.ICL Petition,Exh.A.
CAPAT is a non-profit corporation that represents the six Idaho Community Action
Agencies that work to offset the causes and conditions of poverty throughout Idaho.Petition at
6.CAPAT participated in the settlement conferences,opposed the Settlement Stipulation,and
offered testimony in support of increasing the funding for low-income weatherization.CAPAT
requested a total of $19,755.00:$235 in costs;$2,100 in witness fees;and $17,420 in attorney
fees.CAPAI Petition,Exh.A.
20 Those customers that have facilities of mixed ownership are grandfathered.
ORDER NO.32426 33
The Irrigators are a non-profit corporation representing farmers in southern and
central Idaho.The Irrigators issued discovery requests,participated in the settlement
conferences,and signed the Settlement Stipulation.IIPA Petition at 2.The Irrigators requested
intervenor funding in the amount of $30,477.42:$419.92 in costs;$22,750 in witness fees;and
$7,307.50 in attorney fees.IIPA Petition,Exh.A.
B.Standardsfor Intervenor Funding
Intervenor funding is available pursuant to Idaho Code §61-61 7A and Commission
Rules 161-165.Section 61-617A(1)declares that it is the “policy of this state to encourage
participation at all stages of all proceedings before the commission so that all affected customers
receive full and fair representation in those proceedings.”The Commission may award a
cumulative amount of intervenor funding not to exceed $40,000 for all intervening parties in a
single case.
Commission Rule 162 provides the form and content of petitions for intervenor
funding.Each petition must contain:(1)an itemized list of expenses broken down into
categories;(2)a statement of the intevenor’s proposed findings or recommendation;(3)a
statement showing that the costs the intervenor wishes to recover are reasonable;(4)a statement
explaining why the costs constitute a significant financial hardship for the intervenor;(5)a
statement showing how the intervenor’s proposed recommendations differed materially from the
testimony and exhibits of the Staff;(6)a statement showing how the intervenor’s
recommendation or position addressed issues of concern to the general body of the utility users
or consumers;and (7)a statement showing the class of customer on whose behalf the intervenor
appeared.IDAPA 31.01.01.162.
C.Discussion and Findings
Based upon our review of ICL’s Petition,we find its funding request comports with
the procedural and substantive requirements of the statute and the rules.We find that the
Conservation Parties materially contributed to the Commission’s decision-making.Specifically,
they joined other parties in supporting the Stipulation and Ms.Hirsh offered pertinent testimony
regarding the appropriate level for the Energy Efficiency Rider.Consequently,we find the
Conservation Parties’participation added a unique and well-informed perspective to the record.
Accordingly,we find it just and reasonable to award the Conservation Parties intervenor funding
ORDER NO.32426 34
in the amount $14,218.The Conservation Parties’award shall be chargeable to all customer
classes.Idaho Code §61-6l7A(3).
As outlined above,CAPAI opposed the Settlement Stipulation and proposed that
Idaho Power’s funding for low-income weatherization be increased by 125%.Although its
advocacy did not prevail,CAPAI did contribute to our understanding of low-income
weatherization issues.It addressed issues that generally concern low-income residential
customers and benefit the general body of ratepayers.Consequently,weighing the requests that
were made and the limit on our ability to fund these requests,we find it is appropriate to award
CAPAI intervenor funding in the amount of $12,891.CAPAI’s award shall be chargeable to the
residential classes.Idaho Code §61-617A(3).
We find that IIPA also materially contributed to our decision-making.Although it
did not file testimony,it supported the Settlement Stipulation and actively participated in the
discovery and settlement phases of this case.Accordingly,we find it is just and reasonable to
award IIPA intervenor funding in the amount of $12,891.This amount shall be chargeable to the
irrigation classes.Idaho Code §61-617A(3).
ULTIMATE FINDINGS OF FACT
AND CONCLUSIONS OF LAW
Idaho Power Company is an electric utility subject to the Commission’s regulation
under the Public Utilities Law.Idaho Code §61-119 and 61-129.The Company’s rates,
charges and contracts for electric service in the State of Idaho are subject to the Commission’s
jurisdiction.
Based upon the record,we find the Company’s present rates do not provide it with an
opportunity to earn a fair and reasonable return on its investment.Idaho Code §6 1-122.
Allowing the Company to increase its base rates for electric service by $34 million will provide
Idaho Power with the opportunity to earn a fair and reasonable return.Id.The Company is
authorized to earn an overall rate of return of 7.86%.We find the partial Settlement Stipulation,
as amended,is reasonable and is in the public interest.
We further find the 12-month test year ending December 31,2011 is the appropriate
test year for use in this proceeding.We further find the Company’s Idaho electric rate base to be
$2,355,906,412 and the Company’s net power supply expense is $208,100,936.The
ORDER NO.32426 35
Commission finds that the other rate design issues contained in the Settlement Stipulation and
approved in this Order are fair.just and reasonable.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Motion for Approval of the
Stipulation is granted.The Commission approves the Settlement Stipulation as conditioned by
the change in paragraph 11(c).
IT IS FURTHER ORDERED that as set out in the approved Stipulation,Idaho Power
is authorized an overall rate of return of 7.86%.The Company is authorized to recover an
additional $34 million in annual base revenues.
IT IS FURTHER ORDERED that the Energy Efficiency Rider be set at 4.0%.
IT IS FURTHER ORDERED that CAPAI’s request to increase the funding for the
Company’s low-income weatherization program funded through base rates is denied.The
program shall be continued at its current level.The Commission intends to open a generic
investigation with public workshops to examine the common issues of need and determining the
appropriate mechanisms to measure the cost-effectiveness of low-income weatherization
programs.
IT IS FURTHER ORDERED that the Company immediately file new schedules in
conformance with the authorized revenue requirement set out in this Order.The facilities charge
for customers in Schedules 9,19,24,and 66 shall be those proposed by the Company adjusted
for the approved rate of return of 7.86%.These schedules shall become effective on January 1,
2012.
IT IS FURTHER ORDERED that the Company modify its facilities charges to
account for the authorized rate of return approved in this case of 7.86%.The Company shall also
adjust its depreciation and income tax components as set out above.The Company shall file new
tariffs in conformance with the facilities charge adjustments set out above within 14 days of the
service date of this Order.Any revenue impacts caused by the ordered adjustments to the
facilities charges shall be offset by base rate changes to the affected customer class (e.g.,
Schedules 9,19,24).The Company shall advise the Commission of the class revenue changes
and supply supporting workpapers.
ORDER NO.32426 36
IT IS FURTHER ORDERED that the Company shall update the cost components for
the facilities charge in all future rate cases.The Company is also directed to provide its Rule M
(Facilities Charge Service)tariff to all facilities charge customers.
IT IS FURTHER ORDERED that the Petitions for Intervenor Funding are granted or
granted in part.The Conservation Parties are awarded $14,218;CAPAI is awarded $l289l;and
IIPA is awarded $12,891.
THIS IS A FTNAL 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 1-08
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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 33
day of December 2011.
PAUL K LLANTi),PRESIDENT
I
MACK A.REDFORD,cDI4ISSIONER
\/3 /L --ô -_ji
MARSHA H.SMITH,COMMISSIONER
ATTEST:
/1 !f /1 f7/Ai--/
J6an D.Jew1l
Commission Secretary
bls/O:IPC-E-I 1 -08dh4
ORDER NO.32426 37