20120427final_order_no_32541.pdf

Office of the Secretary
Service Date
April 27,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-12-07
APPROVAL TO DECREASE BASE RATE TO )
REMOVE ACCELERATED DEPRECIATION )
EXPENSE FOR ITS NON-ADVANCED )ORDER NO.32541
METERING INFRASTRUCTURE )
On February 15,2012,Idaho Power Company filed an Application requesting
authority to decrease base rates as the result of removing the accelerated depreciation expense
associated with its non-advanced metering infrastructure (AMI)metering equipment.The
Commission first directed Idaho Power to begin installing AMI in 2003.1n May 2007,the
Company filed a status report and implementation plan proposing a three-year deployment of an
AMI system,with completion of the meter installations by the end of 2011.
In August 2008,the Company filed a request with the Commission asking for a
Certificate of Public Convenience and Necessity for the AMI technology.In Order No.30726
the Commission approved the Company’s request for a CPCN,and also approved accelerating
the depreciation of existing non-AMI metering equipment.Accordingly,Idaho Power began
accelerating the depreciation of its non-AMI metering equipment over a three-year period,and
also began recovery of the incremental increase in depreciation expense,on June 1,2009.The
net plant value of the old metering equipment as of May 31,2009 was $31,653,649.A three-
year straight-line depreciation resulted in an annual depreciation expense of $10,551,216.The
Company’s metering equipment will be fully depreciated by May 31,2012,and the depreciation
expense will be removed.Idaho Power thus proposed to decrease annual base rate revenue that
is recovered from the affected customer classes by $10,551,216,and requested that new rates
reflecting the reduced depreciation expense be effective June 1,2012.
On March 20,2012,the Commission issued a Notice of Application and Notice of
Modified Procedure,providing for a 21-day comment period,to process the Company’s
Application.The Commission Staff was the only party to file written comments.Staff reviewed
the Company’s Application and supports the Company’s request to decrease annual base rate
revenue to remove the effects of the accelerated depreciation of the non-AMI metering
equipment.
ORDER NO.32541 1
When Idaho Power filed for a Certificate of Public Convenience and Necessity
(CPCN)in Case No.IPC-E-08-16,it stated that the accelerated depreciation of old metering
equipment with corresponding rate recovery was an important consideration in the Company’s
financial analysis of AMI deployment.Idaho Power intended to have the non-AMI metering
equipment fully depreciated by the time the AMI deployment was completed,thus avoiding
stranded assets and the possibility of “used and useful”concerns.The Company also stated that
a three-year recovery of accelerated depreciation would provide an adequate cash flow to
improve cash flow coverage ratios to levels necessary to maintain the Company’s credit strength
and its ability to access external markets for funding capital projects such as the AMI
deployment.In Order No.30726,the Commission agreed with Idaho Power that “authorizing
Idaho Power to depreciate its existing meter reading equipment over an accelerated three-year
period will benefit ratepayers because an enhanced credit rating and strong cash flow basis for
the Company will lead to lower financing costs and,ultimately,lower the pressure for increased
rates for energy consumers.”
On the record in this case,the Commission finds it just,reasonable and appropriate to
approve Idaho Power’s Application to remove the expense associated with accelerated
depreciation of its non-AMI meters from its base rates.Effective June 1,2012,the Company’s
annual revenue requirement will be reduced by $10,551,216.The Company proposed to remove
the accelerated depreciation expense by allocating costs to the affected customer classes on a
percent of billed energy basis.The Commission previously approved this method to recover
accelerated depreciation in Case No.IPC-E-08-16,and finds it appropriate in this case.
Removing the accelerated depreciation expense results in a decrease in all energy rates of the
affected classes of 0.001073 $/kWh,a 1.25%average decrease in billed revenue.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Application to remove the expense
associated with accelerated depreciation of its non-AMI meters from base rates is approved.
Effective June 1,2012,the Company’s annual revenue requirement will be reduced by
$10,551,216.
IT IS FURTHER ORDERED that the energy rates of the affected classes will be
reduced by 0.001073 $/kWh,effective June 1,2012.Idaho Power is directed to file appropriate
tariffs consistent with this Order.
ORDER NO.32541 2
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.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 7
day of April 2012.
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PAUL KJELLAN1ER,PRESIDENT
MACK A.RE ORD,SSIONER
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MARSHA H.SMITH,COMMISSIONER
ATTEST:
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JeanD.Jewell(/
Commission Sretary
b!s/O:IPC-E-1 2-07ws2
ORDER NO.32541 3