20120305Application.pdf

IHO
PIVER®
An IDACORP Company
—2 P :E6
LISAD.NORDSTROM DC
Lead Counsel
lnordstromidahopower.com
March 2,2012
VIA HAND DELIVERY
Jean D.Jewell,Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise,Idaho 83702
Re:Case No.IPC-E-12-13
IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
FOR AUTHORITY TO SHARE REVENUES WITH CUSTOMERS IN
CONFORMANCE WITH ORDER NOS.30978 AND 32424
Dear Ms.Jewell:
Enclosed for filing please find an original and seven (7)copies of Idaho Power
Company’s Application in the above matter.
Also enclosed for filing are nine (9)copies of the testimony of Matthew T.Larkin.
One copy of Mr.Larkin’s testimony has been designated as the “Reporter’s Copy.”In
addition,a disk containing a Word version of Mr.Larkin’s testimony is enclosed for the
Reporter.
Lastly,four (4)copies of Idaho Power Company’s press release and customer
notice are also enclosed.
Very truly yours,
Lisa D.Nordstrom
LDN:csb
Enclosures
1221 W.Idaho St.(83702)
P.O.Box 70
Boi5e,ID 83707
rrt’fr-r
LISA D.NORDSTROM (ISB No.5733)
JULIA A.HILTON (ISB No.7740)2 D I.6IdahoPowerCompany
1221 West Idaho Street (83702)
P.O.Box 70 :C
Boise,Idaho 83707
Telephone:[phone]
Facsimile:[phone]
lnordstrom(idahopower.com
jhilton(ãidahopower.com
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO SHARE REVENUES WITH
CUSTOMERS IN CONFORMANCE WITH
ORDER NOS.30978 AND 32424.
Idaho Power Company (“Idaho Power”or “Company”),in accordance with Idaho
Code §61-524 and RP 052,121,and 125,hereby respectfully makes application to the
Idaho Public Utilities Commission (“Commission”)for authority to share revenues with
customers based on year-end 2011 financial results per the terms of the revenue
sharing provisions established by Order No.30978 in Case No.IPC-E-09-30 and
modified by Order No.32424 in Case No.IPC-E-1 1-22.
In support of this Application,Idaho Power asserts as follows:
I.BACKGROUND
1.On November 6,2009,Idaho Power filed an Application in Case No.IPC
E-09-30 requesting a Commission order authorizing the Company to amortize
accumulated deferred investment tax credits (“ADITC”)and approving a stipulation
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CASE NO.IPC-E-12-13
APPLICATION
APPLICATION -1
signed by the Company,Commission Staff (‘Staff’),and five other parties.The
stipulation called for a moratorium on the filing of a general rate case,established Idaho
Powers permitted use of ADITC for the years 2009,2010,and 2011,established a
mechanism for potential revenue sharing between the Company and its customers,and
proposed base rate adjustments according to results of the 2010 annual Power Cost
Adjustment (“PCA”).
2.The stipulation specifically addressed Idaho Power’s use of ADITC.
These are tax benefits the Company has already received based on the level of plant
investment in various years.ADITC normally is amortized over the life of the associated
plant investment and is used to reduce customer tax expense in general rate cases.
The stipulation allowed Idaho Power to accelerate the amortization of up to $45 million
of additional ADITC during the years 2009 through 2011.If the Company’s Idaho
jurisdictional year-end return on equity (“ROE”)fell below 9.5 percent,the Company
would be permitted to amortize additional ADITC in an amount up to $45 million over
the three-year period.The Company was authorized to use no more than $15 million of
additional amortization in one year (unless there was a carryover),If the Company’s
Idaho jurisdictional year-end ROE exceeded 10.5 percent,the Company would share 50
percent of any profits in excess of a 10.5 percent ROE with customers.In Order No.
30978 issued on January 13,2010,the Commission approved the stipulation.
3.Following the completion of the 2009 and 2010 fiscal years,the
Company’s Idaho jurisdictional year-end ROE fell between 9.5 percent and 10.5
percent,resulting in no accelerated amortization of ADITC or revenue sharing.
4.On November 2,2011,the Company filed an application in Case No.IPC
E-11-22 requesting authorization to modify and extend the revenue sharing mechanism
established by Order No.30978 in Case No.IPC-E-09-30,serving a copy of the
APPLICATION -2
application on all parties that participated in the Company’s 2011 general rate case
proceeding,Case No.IPC-E-1 1-08.The Company specifically requested authority to
(1)extend its ability to amortize additional ADITC through December 31,2013;(2)
extend the revenue sharing provision of the agreement through December 31,2013,
with modifications;and (3)modify the revenue sharing provision as it applies to year-
end 2011 financial results to allow for increased revenue sharing potential.Micron
Technology,Inc.(“Micron”)and the Industrial Customers of Idaho Power petitioned for
intervention;the Commission granted those intervention requests in Order No.32405.
5.On November 30,2011,Staff convened a public workshop to discuss the
Company’s application.Due to one-time benefits that improved cash flow and earnings
in 2011,the Company expected to exceed the established revenue sharing threshold
following the completion of the 2011 fiscal year.Consequently,as part of settlement
negotiations in Case No.IPC-E-11-22,the Company,Staff,and Micron agreed to a one
time adjustment to the revenue sharing mechanism as it applies to year-end 2011
financial results.This one-time adjustment allows for customers to receive 75 percent
of the Company’s 50 percent share of Idaho jurisdictional year-end ROE above 10.5
percent in the form of an offset to amounts that would otherwise be collected through
rates.On December 12,2011,Idaho Power,Micron,and Staff filed a settlement
stipulation with the Commission requesting approval of this one-time adjustment in
addition to the extension and modification of the mechanism established in Case No.
IPC-E-09-30.In Order No.32424 issued on December 27,2011,the Commission
approved the stipulation.
II.REVENUE SHARING
6.Following the finalization of year-end 2011 earnings,the Company
calculated its Idaho jurisdictional year-end ROE at 12.55 percent.This is greater than
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the revenue sharing threshold of 10.5 percent established in Case No.IPC-E-09-30.
Idaho jurisdictional 2011 year-end ROE in excess of 10.5 percent was quantified at
$33,007,182.
7.Per the terms of the settlement stipulation approved in Order No.32424,
Idaho Power is required to share earnings in excess of 10.5 percent as follows:(1)50
percent of the Idaho jurisdictional year-end 2011 ROE in excess of 10.5 percent will be
provided to customers in the form of a reduction in rates through the PCA and (2)75
percent of the remaining 50 percent of Idaho jurisdictional year-end 2011 ROE in
excess of 10.5 percent shall be provided to customers as a reduction to the pension
balancing account.The mechanics of how each of these revenue sharing mechanisms
will occur are described below.
A.PCA and Special Contract Sharing.
8.After tax gross-up,this provision of the revenue sharing agreement results
in a net rate reduction of $27,098,897.The Company is proposing to allocate this
revenue sharing benefit to customer classes proportionally to forecasted base revenues
for the June 1,2012,through May 31,2013,time period.When allocated in this
manner,the revenue sharing benefit equates to a 3.25 percent rate reduction for all rate
classes relative to current base revenues,or a 3.21 percent reduction in total current
billed revenues.
9.Due to the recently filed settlement stipulation in Case No.IPC-E-12-02
regarding the reformation of the Amended Electric Service Agreement (‘AESA”)with
Hoku Materials,Inc.(‘Hoku”),forecasted base revenues for the June 1,2012,through
May 31,2013,time frame reflect the terms of the stipulation as filed.As described in
that stipulation,revenues received from Hoku under the reformed contract over the
June 2012 through May 2013 time frame reflect revenues associated with First Block
APPLICATION -4
Demand charges,Second Block Demand charges,and First Block Energy charges.
Because First Block Energy charges are treated as surplus sales for ratemaking
purposes,they are not included in the revenue allocation basis utilized in this filing.
Therefore,the revenue forecast utilized as the allocation basis for Hoku’s revenue
sharing benefits reflects expected revenues associated with only First and Second
Block Demand charges over the twelve-month sharing period.The treatment of Hoku
revenues is described in more detail in the Direct Testimony of Matthew T.Larkin that
accompanies this Application.
10.For all rate classes,excluding the Company’s four Special Contract
customers (Micron,Hoku,the U.S.Department of Energy,and J.R.Simplot Company,
collectively “Special Contracts”),the Company proposes to include allocated revenue
sharing benefits as part of the 2012 PCA filing.Under the Company’s proposal,class-
allocated dollar amounts are divided by each rate class’s expected kilowatt-hour (“kwh”)
usage over the twelve-month sharing period to calculate a cents-per-kwh credit for
each rate class.The Company requests that the proposed revenue sharing rates
coincide with the effective date of 2012 PCA rates,resulting in a separate cents-per
kWh rate for each class reflecting PCA recovery less class-allocated revenue sharing
benefits.
11.For the four Special Contract customers,the Company is proposing to
provide revenue sharing benefits in the form of a flat dollar-per-month credit on billed
invoices for the usage months of June 2012 through May 2013.Due to uncertainty
surrounding energy consumption for the Hoku AESA over the twelve-month sharing
period,applying revenue sharing benefits through a volumetric cents-per-kWh rate
would result in increased risk of under-or over-crediting of benefits because the
Company does not currently possess a sound kWh forecast upon which to base the
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calculation of such a rate.Providing a flat dollar-per-month charge to all four Special
Contract customers negates this risk and creates consistency in treatment across all
Special Contracts,while the use of 12 monthly payments aligns the effective revenue
credit time period with all other rate classes.While this approach works well for the
Company’s Special Contract customers,the use of a flat dollar-per-month credit is not
recommended for customers taking service under the Company’s general tariff
schedules due to the administrative burden involved,the current level of granularity of
the retail revenue forecast model,and the potential for intra-class inequality.
B.Pension Balancing Account Sharing.
12.Due to the one-time modification approved in Order No.32424,customers
also receive 75 percent of the Company’s 50 percent share of Idaho jurisdictional 2011
year-end ROE in excess of 10.5 percent in the form of a reduction to deferred pension
expense which would otherwise be collected through rates.After tax gross-up,this
provision of the revenue sharing agreement results in a net reduction to the pension
balancing account of $20,324,173.Following the close of the 2011 fiscal year,the
Company recorded this amount to the pension balancing account effective as of
December 31,2011.
III.PROPOSED RATE CHANGE
13.As explained above,Idaho Power is proposing rate changes associated
with the Idaho jurisdictional 2011 year-end ROE in excess of 10.5 percent with a rate
effective period of June 1,2012,through May 31,2013,coinciding with the effective rate
period for the 2012 PCA Application.Exhibit No.2 to the Direct Testimony of Matthew
T.Larkin shows a comparison of revenues from the various tariff customers under Idaho
Power’s existing rates and charges with the corresponding new revenue levels resulting
APPLICATION -6
from the proposed crediting of revenue sharing benefits to customer classes as
explained herein.
14.To avoid potential confusion created by filing a partially updated PCA tariff
(“Schedule 55”)as part of this Application,then subsequently providing a fully updated
Schedule 55 with the 2012 PCA application in mid-April,the Company is not including a
tariff schedule as part of this proceeding.The Company cannot provide a complete
Schedule 55 at this time that reflects both revenue sharing amounts and updated PCA
rates for the June 1,2012,through May 31,2013,rate period because the 2012 PCA
rate will not be filed until mid-April 2012.Therefore,the proposed tariff including this
rate adjustment will be included as an attachment to the Company’s 2012 PCA
application.By filing the proposed revenue sharing amounts as an exhibit in this case,
the Commission,Staff,and intervening parties will nonetheless have additional time to
review the Company’s proposed revenue sharing implementation ahead of the mid-April
2012 PCA filing while avoiding potential confusion stemming from the filing of varying
and overlapping versions of Schedule 55.
15.The Company will make a compliance filing when final orders are received
on all proposed requests to change rates effective June 1,2012.The compliance filing
will include tariff sheets that show the cumulative impact of rate changes associated
with each case.
16.This Application is filed with the Commission to be kept open for public
inspection as required by law and fully states the changes to be made in the rate
schedules now in force.The new electric rate schedule that contains revenue sharing
amounts will be included in the Company’s 2012 PCA application to be filed in mid-April
2012,and is requested to become effective June 1,2012,for services provided on and
APPLICATION -7
after that date,unless otherwise ordered by this Commission.When effective,this
schedule will supersede and cancel the present electric rate schedule now in existence.
17.It is in the public interest that the Commission allow Idaho Power to
reduce its revenues by approving the rates set out in Exhibit No.2 accompanying the
Direct Testimony of Matthew T.Larkin and that said rates are allowed to go into effect
as filed for electric service rendered on and after June 1,2012,and that the effective
date of said rates not be suspended.
IV.MODIFIED PROCEDURE
18.Idaho Power believes that a hearing is not necessary to consider the
issues presented herein and respectfully requests that this Application be processed
under Modified Procedure;i.e.,by written submissions rather than by hearing.RP 201
et seq.However,in support of this Application,Idaho Power has contemporaneously
filed the Direct Testimony of Matthew T.Larkin.The Company stands ready for
immediate consideration of its Application and to present its testimony in a technical
hearing if the Commission determines that such a hearing is required.
V.COMMUNICATIONS AND SERVICE OF PLEADINGS
19.In conformance with RP 125,this Application will be brought to the
attention of Idaho Power’s customers by means of both a press release to media in the
Company’s service area and a customer notice distributed in customers’bills,both of
which accompany this filing.The customer notice will be distributed over the course of
the Company’s billing cycle,with the last notice being sent on April 23,2012.In
addition to describing this filing,these customer communications also describe
proposed rate changes associated with the annual Fixed Cost Adjustment and the
Langley Gulch power plant filings made simultaneously with this Application.Idaho
Power will also keep its Application,testimony,and exhibits open for public inspection at
APPLICATION -8
its offices throughout the state of Idaho.Idaho Power asserts that this notice procedure
satisfies the Rules of Procedure of this Commission;however,the Company will,in the
alternative,bring the Application to the attention of its affected customers through any
other means directed by this Commission.
20.Communications and service of pleadings with reference to this
Application should be sent to the following:
Lisa D.Nordstrom Matt Larkin
Julia A.Hilton Greg Said
Idaho Power Company Idaho Power Company
P.O.Box 70 P.O.Box 70
Boise,Idaho 83707 Boise,Idaho 83707
lnordstrojidahopower.com rnlarkin(idahopower.com
jhiltonidahoowercorn [e-mail]
VI.REQUEST FOR RELIEF
21.Idaho Power respectfully requests that the Commission issue an Order:
(1)authorizing that this matter may be processed by Modified Procedure;(2)approving
the Company’s determination of 2011 revenue sharing amounts,which results in an
overall 3.21 percent decrease to current billed revenues and a separate reduction to the
Company’s pension balancing account;and (3)approving an effective date of June 1,
2012,for the proposed revenue sharing implementation to coincide with the 2012 PCA.
DATED at Boise,Idaho,this 2 day of March 2012.
LISA D.NORDjROM
Attorney for Idaho Power Company
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