20120517final_order_no_32549.pdf

Office of the Secretary
Service Date
May 17,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION TO INCREASE )CASE NO.IPC-E-12-09
ITS ELECTRIC RATES TO RECOVER THE )
BOARDMAN BALANCING ACCOUNT )ORDER NO.32549
_________________________________________________________________________________________________
)
On February 15,2012,Idaho Power Company applied to the Commission for an Order
authorizing it to increase its rates to begin recovery of the Boardman balancing account.1 The
Company seeks to recover $1,583,373 in annual revenue,which the Company says will increase all
customer class rates by an average of about 0.18%.The Company asks that the rate change take
effect on June 1,2012.
The Commission subsequently issued a Notice of Application,set an intervention
deadline,and scheduled a public workshop.See Order No.32479.No one intervened,the
workshop occurred,and Commission Staff and the Company recommended that the matter be
processed via Modified Procedure.On April 10,2012,the Commission issued its Notice of
Modified Procedure soliciting written comments on the Application.Order No.32511.Staff filed
the only comments in the case;the Company did not reply.
With this Order,the Commission approves an incremental revenue requirement increase
of $1,525,501.We further authorize the Company to increase its current rates by an overall average
of 0.181%,as more particularly set forth in Attachment A hereto,with the new rates (once
approved)to take effect on June 1,2012.
THE APPLICATION
Idaho Power owns 10%of the coal-fired,Boardman power plant in Oregon.On
February 15,2012,the Commission authorized the Company to establish a balancing account
related to Boardman’s early closure,which is set to occur by December 31,2020.Application at 2-
3;Order No.32457.The balancing account lets the Company track the difference between
revenues and expenses associated with the Boardman shutdown.Application at 2.The Company
The Company concurrently filed three other applications.See Case Nos.IPC-E-12-06,IPC-E-12-07.and IPC-E-12-
08.The Company claims the four filings will cumulatively decrease rates for most customers.The Company describes
the cumulative rate impact for the major customer classes as:Residential Schedule 1,(0.80%);Small General Schedule
7,(0.55%);Large General Schedule 9,(1.07%);Large Power Schedule 19,0.65%;and Agricultural Irrigation Schedule
24,(1.09%).The Company says the rates for its Special Contract customers will cumulatively increase as follows:
Micron,0.66%;Simplot and Department of Energy (INL),0.68%;and Hoku Block 1,0.67%.See Application,Atch.4.
ORDER NO.32549 1
says the balancing account will ensure that customers only pay for actual expenditures.Id.The
Company is replacing the base rate revenue recovery associated with the Company’s existing
investment in Boardman with a levelized revenue requirement to be tracked in the balancing
account.Id.at 2-3.
With this Application,the Company asks to recover the levelized revenue requirement,
which includes:(1)the return associated with Boardman capital investments net of accumulated
depreciation forecasted through Boardman’s remaining life,(2)the costs of accelerating the
Boardman depreciation,and (3)the decommissioning costs associated with the Boardman
shutdown.Id.at 3.The Company asks to recover an Idaho jurisdictional incremental annual
change to base rates of $1,583,373,and to spread this amount to all customer classes and to recover
it by increasing all base rate components except the service charge.Id.The Company says the
overall,average Boardman-related rate change will be a 0.18%increase.Id.
The Company’s Application includes a set of proposed tariff sheets that identifies the
cumulative impact of all four cases.2 The Company says it will make a final compliance filing
when all final Orders are received.Id.at 3-4.
STAFF COMMENTS
Staff says the Company’s request implements the Commission-approved cost recovery
approach for Boardman.See Order No.32457.However,Staff asserts that the Company’s
requested $1,583,373 revenue requirement should be reduced by $59,872 to remove a 10%
contingency estimate from the decommissioning costs.Staff states the contingency is unnecessary
because the Company will update the estimates to actuals.Removing the 10%contingency
decreases the incremental revenue requirement to $1,525,501.
Staff agrees that the Company should continue to annually review the levelized revenue
requirement and the Boardman balancing account components.Staff observed that the Commission
previously ordered the Company to file annual reports detailing all amounts booked to the balancing
account.See Order No.32457.The Company filed a sample annual report as part of this
Application.The Company’s proposed report consists of a narrative and exhibits describing the
investments at Boardman during the prior year and the reason for any changes in forecast
investments,and it tracks the monthly differences between forecast and actual revenue collection.
Staff recommended that the Company’s report update the Company’s exhibits in Excel format with
2 See fn 1,above.
ORDERNO.32549 2
all formulas intact,and that it include all source documents supporting the investments,any new
cost estimates,and all Company calculations and conclusions.Staff notes that it will conduct audits
of any and all proposed investments and future expenses during annual reviews in the year in which
the expense actually occurred.
In discussing the incremental investments,Staff notes that the Company only has
included investments,not currently in plant-in-service,as levelized cost in the balancing account.
Staff grouped the Company’s budget into three categories:(1)emission and regulatory compliance;
(2)maintenance;and (3)obsolescence and upgrades.Of a total $8,453,184 investment,the
Company targets 53%for obsolescence and upgrades,41%for emission controls,and 6%for
maintenance.
Staff says that if the Commission removes the 10%contingency from the Company’s
decommissioning cost estimate (as discussed above),the Company’s share of the decommissioning
cost would be about $6,095,800 (2020 dollars).Staff notes,however,that the Company’s share
could increase by 59%if the Company must dispose of waste ash and excess coal in landfills.Staff
also notes that the Company should avoid the cost to dispose of any remaining coal in landfills by
using proper purchasing and end-of-life inventory control practices.
In discussing revenue allocation and rate design,Staff accepts the Company’s use of
updated forecasted billing determinants for the period June 1,2012 through May 31,2013.Staff
also agreed with the Company’s proposal to spread the incremental revenue requirement to all
customer classes as a uniform percent increase to all base rate components except customer service
charges.
Staff next notes that the Company accounts for the estimated Boardman
decommissioning costs as an Asset Retirement Obligation (ARO)under Accounting Standards
Codification (ASC)410.In accordance with Order No.29414,Idaho Power records:(1)a
regulatory asset for the cumulative financial statement impact resulting from the Company’s
implementation of ASC 410 (previously Statement of Financial Accounting Standards (SFAS)143);
and (2)the ongoing annual differences between the ASC 410 depreciation and accretion expenses
and the annual depreciation expenses that are currently authorized by the Commission in
depreciation rates and reclamation accruals.
Staff says that under the proposed ratemaking treatment for the Boardman
decommissioning,the Company would begin collecting revenues to cover these ARO-related
ORDERNO.32549 3
liabilities.The Company requests,however,that the Boardman-related ARO balances be exempted
from the deferral treatment under Order No.29414.Staff agrees with the Company’s proposal to
exempt Boardman-related ARO balances from the ARO deferral treatment in Order No.29414.
DISCUSSION AND FINDINGS
We have reviewed the record in this case,including the Company’s Application and
Staff’s comments.Based on our review of the record,we find the Company’s filing properly
implements the cost-recovery approach for Boardman contemplated in our Order No.32457.We
continue to believe that it is appropriate for the Company to adjust customer rates to recover
incremental annual costs related to the early retirement of Boardman.
Turning to the issue of decommissioning costs,we find that it is reasonable and
appropriate to remove the 10%contingency in the amount of $59,872.This “contingency”is
unnecessary because the Company will be reporting its actual decommissioning costs in its annual
reports.In addition,we direct Staff to carefully review landfill costs to ensure that the Company
and its partners are utilizing appropriate purchasing and end-of-life inventory controls for coal costs
to avoid the need to dispose of excess or remaining coal in landfills.The Company and its
operating partners shall also continue scrutinizing the need for upgrades and the planned shutdown
date with the goal of minimizing costs.
In summary,we find it fair,just and reasonable that the incremental revenue requirement
be increased by $1,525,501.We find that a revenue increase of this amount results in a 0.1914%
increase to all non-service charge rates and an overall average rate increase of 0.181%.The
Company will be allowed to increase customer rates as set forth in Attachment A.We believe it is
appropriate for Boardman-related deferral balances to be exempted from deferral treatment,and for
the Company’s annual reports to include additional detail as suggested by Staff.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Application to increase its rates to begin
recovery of the Boardman balancing account is approved as qualified below.
IT IS FURTHER ORDERED that the Company’s annual revenue requirement will be
increased by $1,525,501 effective June 1,2012,and that the Company’s proposed revenue
allocationlrate design methodology is approved.The Company may increase current revenues by
an overall average of 0.181%,as more particularly set forth in Attachment A.
ORDER NO.32549 4
IT IS FURTHER ORDERED that the Boardman-related ARO balances are exempted
from the deferral treatment under Order No.29414.
IT IS FURTHER ORDERED that the Company’s annual reports to the Commission
related to the Boardman balancing account include the narrative and exhibits described by the
Company,that the exhibits be updated in Excel format with all formulas intact,and that work
papers include all source documentation necessary to verify the Company’s calculations and
conclusions.
IT IS FURTHER ORDERED that the Commission expressly reserves its right to
determine the prudency of any investment or future expenses when it reviews the annual reports of
the actual investments and expenses.
IT IS FURTHER ORDERED that Idaho Power is directed to file appropriate tariffs
consistent with this Order.The Commission expressly reserves its approval of the proposed
cumulative changes to tariff schedule rates for this case and cases IPC-E-12-06,IPC-E-12-07,and
IPC-E-12-08 (as contained in Attachments 2 and 3 to the Company’s Application here)until the
Commission has completed its review of the aforementioned cases.If the Commission’s final
Orders in the 12-06,12-07,or 12-08 cases result in a modification to the proposed tariff schedules
contained in Attachments 2 and 3 of this case,the Company shall immediately submit revised tariff
schedules that conform to the Commission’s Orders in these cases.Revised tariff schedules shall
not become effective until they have been submitted to the Commission for its final review and
approval.
THIS IS A VENAL 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 §61-626.
ORDERNO.32549 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 1
day of May 2012.
PAUL KJELLA1ER,PRESIDENT
MACK A.REDFO4Kp,CO ER
ATTEST:
Jean D.Jewell
Commission Secretary
\JL /JS
fARSHA H.SMITH,COMMISSIONER
O:IPC-E-I 2-09kk3
ORDER NO.32549 6
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0
4
,
7
3
0
6.
4
1
7
0.
1
8
1
%
05
/
0
3
/
1
2