20120410Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
RECEIVED
'Citiri I_'-UBUIG TtLTES OMi
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR APPROVAL ) CASE NO. IPC-E-12-07
TO DECREASE BASE RATES TO REMOVE )
ACCELERATED DEPRECIATION EXPENSE ) COMMENTS OF THE
FOR ITS NON-ADVANCED METERING
) COMMISSION STAFF
INFRASTRUCTURE. )
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 32483 on March
20, 2012, submits the following comments.
BACKGROUND
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 advanced metering infrastructure (AMI) metering equipment. The Commission first
directed Idaho Power to begin installing AMI in 2003. The first meters were installed in Emmett
and McCall in 2004. In May 2007, the Company filed a status report and implementation plan
proposing a three-year deployment of an AMI system covering roughly 99% of the Company's
customers. The plan called for completion of the meter installations by the end of 2011.
STAFF COMMENTS 1 APRIL 10, 2012
In August 2008, the Company filed a request with the Commission asking for a
Certificate of Public Convenience and Necessity for the AMI technology. The Commission
subsequently issued Order No. 30726 approving the Company's request for a CPCN and
accelerating the depreciation of existing metering equipment over a three-year period. Idaho
Power thereafter filed an Application requesting an increase in rates caused by including the
AMI investment in rate base. On May 29, 2009, the Commission approved the Company's
Application authorizing a $10,497,354 increase to revenues.
With the Commission's approval, 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
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 as a result, the depreciation
expense will be removed. Accordingly, Idaho Power proposes to decrease annual base rate
revenue that is recovered from the affected customer classes by $10,551,216.
The Company proposes that the new rates reflecting the reduced depreciation expense for
its non-AM! meters be effective June 1, 2012. The Company did not, however, file tariff sheets
with its Application in this case. The Company simultaneously filed applications in three other
cases, all of which will affect rates, and all proposed to be effective June 1, 2012.' The tariff
sheets in this case are included in the Company's Application for authority to increase rates to
recover the Boardman balancing account, Case No. IPC-E-12-09.
STAFF REVIEW
Revenue Requirement
Staff has reviewed the Company's Application and the testimony and exhibits of
Company witness Courtney Waites and supports the Company's request to decrease annual base
rate revenue to remove the effects of the accelerated depreciation of the non-AM! metering
equipment.
The Company has concurrently filed three other applications. See Case Nos. IPC-E- 12-06, IPC-E- 12-08, and
IPC-E- 12-09. The Company says the four filings cumulatively will decrease rates for most customers. The
Company's press release and customer notice describe the cumulative rate-impact by customer class as: Residential
Customers, (0.80%); Small General Service, (0.56%); Large General Service (1.03%); Large Power, 0.54%; and
Irrigation, (1.10%).
STAFF COMMENTS 2 APRIL 10, 2012
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 a fundamental assumption in the Company's financial
analysis of AMI deployment. It was Idaho Power's desire 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. See Gale Direct.
In reply comments in that case, the Company also stated that a three-year recovery of
accelerated depreciation would provide the adequate cash flow to improve cash flow coverage
ratios to levels that are 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 the final order of that case (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 inevitably lead to lower financing costs and, ultimately,
lower the pressure for increased rates for energy consumers." The Commission strongly urged
Idaho Power to "move forward with all deliberate speed with its phased AMI implementation
plan."
Compliant with Commission order, the Company began depreciating the non-AMI
metering equipment balance over a three-year period at a rate of $879,268 per month for an
annual depreciation expense of $10,551,216. The non-AMI metering equipment will be fully
depreciated by May 31, 2012 and thus the Company no longer requires the annual revenue
associated with the accelerated depreciation.
Revenue Allocation and Rate Design
For the purposes of Revenue Allocation and Rate Design, Idaho Power Company updated
the billing determinants for all customer classes. Idaho Power Company proposes to use forecast
billing determinants for the period June 1, 2012 through May 31, 2013. Overall, the forecast
showed reduced energy consumption relative to the amounts accepted by the Commission in the
recently completed 2011 general rate case. Although the forecast showed an overall decrease, it
showed increases for some individual customer classes. Attachment A shows the energy
amounts accepted by the Commission in the 2011 rate case and the amounts proposed by the
Company in this filing. The updated energy amounts include Schedule 4 and 5 customers in
STAFF COMMENTS 3 APRIL 10, 2012
Schedule 1. Demand amounts and numbers of customers were also updated. Hoku energy and
demand amounts were updated to reflect the settlement recently accepted by the Commission.
The Company is proposing to use the same updated billing determinants in all of the following
cases that are currently before the Commission:
Case No. IPC-E-12-06
Case No. IPC-E-12-07
Case No. IPC-E-12-08
Case No. IPC-E-12-09
Case No. IPC-E-12-12
Case No. IPC-E-12-13
Case No. IPC-E-12-14
OATT Revenue Shortfall
Meter Depreciation (This Case)
General Depreciation
Boardman
FCA (Fixed Cost Adjustment)
Revenue Sharing & Pensions
Langley Gulch Combustion Turbine
The Staff accepts the updated billing determinants proposed by the Company with some
reservation. The update represents what the Company expects during the first year that the
proposed rates will be in effect. The updated billing determinants should be the best information
available on which to base rates. On the other hand, the billing determinants have not been
reviewed and approved by the Commission. When energy and demand amounts change in a
general rate case, jurisdictional and class allocations change and Net Power Supply Expense
changes. Such changes can have far reaching effects. In this case, the impact happens to be
minimal and Staff does not oppose use of the Company's energy forecast.
In Case No. IPC-E-08-16 the recovery of accelerated depreciation was approved. Costs
were allocated to the affected customer classes on a percent of billed energy basis. The
Company therefore proposes to remove accelerated depreciation on that same basis in this case.
This results in a decrease in all energy rates of the affected classes of 0.001073 $/kWh.
On March 14, 2012, Idaho Power filed a clarification with the Commission that updated
the average class decreases proposed by the Company. The decrease measures the difference
between current billed revenue and proposed billed revenue. Attachment B shows average
percent decreases by Customer Class. Not all customer classes receive a decrease as a result of
this filing. In 2009, when accelerated depreciation rate recovery was approved, some customer
classes already had AMI meters and, therefore were not subject to the rate increase. Since their
rates were not increased to recover accelerated depreciation, they are not now decreased.
The Staff accepts the equal cents/kWh revenue allocation and rate design proposed by the
Company.
STAFF COMMENTS 4 APRIL 10, 2012
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the Company's Application to decrease base
rate revenue by $10,551,216 to remove the accelerated depreciation of non-AM! metering
equipment from the Company's annual revenue requirement. Staff recommends approval of an
equal cents/kWh rate of -0.1073 applied to the energy rates of all affected schedules. As shown
on Attachment B, this results in a 1.25% average decrease in billed revenue. Staff further
recommends that these rates become effective June 1, 2012 as proposed by the Company.
Respectfully submitted this day of April 2012.
L/
Weldon B. Sfutzman
Deputy Attorney General
Technical Staff: Keith Hessing
Donn English
i:umisc:eomments/ipce I 2.7wskhde comments
STAFF COMMENTS 5 APRIL 10, 2012
— —
Idaho Power Company
Calculation of Test Year Energy Differences
State of Idaho
2011 2012-2013
Rate Case Forecasted Difference Difference
Normalized Normalized
Rate Energy Energy
Line Sch. w/ Hoku Reformed
No Tariff Description No. kWh (kWh) kWh %
Uniform Tariff Rates:
I Residential Service
2 Master Metered Mobile Home Park
3 Residential Service Energy Watch
4 Residential Service Time-of-Day
5 Small General Service
6 Large General Service
7 Dusk to Dawn Lighting
8 Large Power Service
9 Agricultural Irrigation Service
10 Unmetered General Service
11 Street Lighting
12 Traffic Control Lighting
13 Total Uniform Tariffs
Special Contracts:
14 Micron
15 J R Simplot
16 DOE
17 Hoku - Block I
18 Hoku- Block 2
19 Total Special Contracts
20 Total Idaho Retail Sales
1 5,003,578,752 4,896,272,827
3 5,175,311 4,942,681
4 743,939 0
5 1,178,608 0
7 148,946,670 144,888296
9 3,492,140,651 3,480,101,459
15 6,562,095 1 6,481,376
19 2,040,681,796 1,978,623,647
24 1,679,776,734 1,720,204,410
40 16,000,941 15,807,753
41 23,018,849 23,165,568
42 3,477,113 2,981,282
12,421,281,459 12,273,469,299
26 464,652,076 451,138,622
29 180,758,797 203,558,197
30 235,100,000 244,266,665
32 370,006,219 0
32 197100,000 0

1,447,617,092 898,963,484
0

13,868,898,551 13,172,432,783
(107,305,925) -2.1%
(232,630) -4.5%
(743,939) -100.0%
(1,178,608) -100.0%
(4,058,374) -2.7%
(12,039,192) -0.3%
(80,719) -1.2%
(62,058,149) -3.0%
40,427,676 2.4%
(193,188) -1.2%
146,719 0.6%
(495,831) -14.3%
(147,812,160) -1.2%
(13,513,454) -2.9%
22,799,400 12.6%
9,166,665 3.9%
(370,006,219) -100.0%
(197,100,000) -100.0%

(548,653,608) -37.9%

(696,465,768) -5.0%
(D o
(1) June 1, 2012 - May 31, 2013 Forecasted PCA Test Year
- -
Idaho Power Company
Calculation of Revenue Impact
State of Idaho
Meter Depreciation Reversal
Proposed to be Effective June 1, 2012
Summary of Revenue Impact
Current Billed Revenue to Proposed Billed Revenue
Total Percent
Rate Average Normalized Current Adjustments Proposed Change
Line Sch. Number of Energy Billed Cents to Billed Total Billed Cents Billed to Billed
No Tariff Descriøtion No. Customers (1) (kWh) (1) Revenue Per kWh Revenue Revenue Per kWh Revenue
Uniform Tariff Rates:
1 Residential Service 1 399,329 4,896,272,827 $397,700,569 8.123 ($5,256,125) $392,444,444 8.015 (1.32)%
2 Master Metered Mobile Home Park 3 23 4,942,681 $381,220 7.713 ($5,306) $375,914 7.605 (1.39)%
3 Residential Service Energy Watch 4 0 0 $0 0.000 $0 $0 0.000 0.00%
4 Residential Service Time-of-Day 5 0 0 $0 0.000 $0 $0 0.000 0.00%
5 Small General Service 7 28,165 144,888,296 $14,990,300 10.346 ($155,537) $14,834,763 10.239 (1.04)%
6 Large General Service 9 31,614 3,480,101,459 $196,754,244 5.654 ($3,281,637) $193,472,607 5.559 (1.67)%
7 Dusk to Dawn Lighting 15 0 6,481,376 $1,173,934 18.112 $0 $1,173,934 18.112 0.00%
8 Large Power Service 19 116 1,978,623,647 $83,660,290 4.228 $0 $83,660,290 4.228 0.00%
9 Agricultural Irrigation Service 24 16,642 1,720,204,410 $109,785,557 6.382 ($1,846,631) $107,938,926 6.275 (1.68)%
10 Unmetered General Service 40 2,030 15,807,753 $1,096,245 6.935 $0 $1,096,245 6.935 0.00%
11 Street Lighting 41 361 23,165,568 $2,959,897 12.777 ($2,780) $2,957,117 12.765 (0.09)%
12 Traffic Control Lighting 42 397 2,981,282 $142,887 4.793 ($3,200) $139,686 4.685 (2.24)%
13 Total Uniform Tariffs 478,677 12,273,469,299 $808,645,142 6.589 ($10,551,216) $798,093,926 6.503 (1.30)%
14 Special Contracts:
15 Micron 26 1 451,138,622 $17,176,418 3.807 $0 $17,176,418 3.807 0.00%
16 J R Simplot 29 1 203,558,197 $6,727,934 3.305 $0 $6,727,934 3.305 0.00%
17 DOE 30 1 244,266,665 $8,393,976 3.436 $0 $8,393,976 3.436 0.00%
18 Hoku - Retail 32 1 . 0 $2,835,760 0.000 $0 $2,835,760 0.000 0.00%
19 Total Special Contracts 4 898,963,484 $35,134,087 3.908 $0 $35,134,087 3.908 0.00%
20 Total Idaho Retail Sales 478,681 13,172,432,783 $843,779,229 6.406 ($10,551,216) $833,228,013 6.326 (1.25)%
-
21 Hoku - Blocki Energy 32 109,702,243 $6,764,240 6.166 $0 $6,764,240 6.166 0.00%
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 10TH DAY OF APRIL 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-12-07, BY E-MAILING AND MAILING A COPY THEREOF,
POSTAGE PREPAID, TO THE FOLLOWING:
JASON B WILLIAMS
LISA D NORDSTROM
IDAHO POWER COMPANY
P.O. BOX 70
BOISE IDAHO 83707
E-MAIL: [e-mail]
[e-mail]
COURTNEY WAITES
GREG SAID
TIM TATUM
IDAHO POWER COMPANY
P.O. BOX 70
BOISE IDAHO 83707
E-MAIL: [e-mail]
gsaid(idahopower.com
[e-mail]
'.k I~Lvc-
SECRETiyY
CERTIFICATE OF SERVICE