20120316Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: KARL KLEIN
DEPUTY ATTORNEY GENERAL

DATE: MARCH 16, 2012

SUBJECT: IDAHO POWER’S APPLICATION TO SHARE REVENUE WITH
CUSTOMERS, CASE NO. IPC-E-12-13

On March 2, 2012, Idaho Power Company applied for authority to share revenues with
customers based on year-end 2011 financial results. The Company’s rate-sharing proposal has two
components: (1) PCA Sharing, which reduces net rates by $27,098,897 and reduces rates for all
customer classes by 3.25% relative to current base revenues, or by 3.21% in total billed revenues;
and (2) “Pension Balancing Account Sharing,” which results in a $20,324,173 net reduction to the
pension balancing account. Application at 4 and 6. The Company proposes that the rate changes
take effect on June 1, 2012, to coincide with the effective date to be reflected in the 2012 Power
Cost Adjustment (PCA) application. The Company asks that the Commission process this matter
by Modified Procedure.
THE APPLICATION
In 2010 and 2011, the Commission approved settlement stipulations between Idaho
Power, Commission Staff, and other parties that require Idaho Power to share certain revenues with
customers. See Order Nos. 30978 and 32424. The first Order requires the Company to provide
customers with 50% of any earnings above a 10.5% year-end return on equity (ROE). The second
Order requires the Company to provide an additional customer benefit; specifically, the Company
must book 75% of its share of its Idaho jurisdictional 2011 year-end ROE above 10.5% as an offset
against amounts in the Company’s pension balancing account that otherwise would be collected in
rates. With this Application, the Company seeks to share revenues as required by these Orders.
Application at 1-3.
DECISION MEMORANDUM 2
According to the Application, the Company calculates its year-end, 2011 Idaho
jurisdictional ROE to be 12.55%. Id. at 3. The Company says the amount above 10.5% equals
$33,007,182. Id. at 4. The Company proposes to share this amount with customers in two ways.
First, as required by Order No. 30978, the Company proposes to proportionally allocate
50% of this amount to customer classes. After tax gross-up, this 50% amount results in customers
receiving a total, $27,088,897 rate reduction. Id. at 4. For the Company’s four special contract
customers (Micron, Simplot, Department of Energy (INL), and Hoku Materials), the Company
proposes to provide a flat, dollar-per-month credit on billed invoices for the usage months of June
2012 through May 2013. Id. at 5-6. For all other rate classes, the Company proposes to include
allocated revenue-sharing benefits as part of the 2012 PCA filing. Id. at 5.
Second, as required by Order No. 32424, the Company proposes to provide customers
with 75% of its remaining 50% share by reducing the Company’s pension balancing account by that
amount. After tax gross-up, this amount is $20,324,173. The Company proposes to apply this $20
million to the pension balancing account to offset expenses that would otherwise be collected
through rates. Id. at 6.
The Company’s news release and customer notice say the Company’s proposal will
decrease average billed rates by 3.21%, with the revenue impact by class being: Residential,
(3.17%); Small General Service, (3.16%); Large General Service, (3.25%); Large Power, (3.26%);
and Irrigation, (3.25%). See News Release at 3-4; Customer Notice at 1-2.
The Company says it did not file a tariff schedule as part of this proceeding to avoid
potential confusion created by filing a partially updated PCA tariff (Schedule 55) as part of this
Application, and then an updated tariff schedule with the 2012 PCA application in mid-April. The
Company says it cannot provide a complete Schedule 55 now that reflects both revenue-sharing
amounts and updated PCA rates for the June 2012 through May 2013 rate period because the 2012
PCA rate will not be filed until mid-April 2012. Application at 7.
The Company notes that it has filed the proposed revenue-sharing amounts as an exhibit
in this case. The Company says its 2012 PCA application, to be filed in mid-April 2012 requesting
an effective date of June 1, 2012, will include the new electric rate schedule containing the revenue-
sharing amounts. Id. The Company also says it will make an appropriate, compliance filing when
final orders are received on all proposals to change rates effective June 1, 2012. Id.
DECISION MEMORANDUM 3
The Company says it will keep its Application open for public inspection at its Idaho
offices, and that it will notify customers through a press release and bill inserts, with the last notice
to be sent on April 23, 2012. Id. at 8.
STAFF RECOMMENDATION
Staff concurs with the Company’s decision to omit filing a tariff schedule with the
Application in light of the upcoming PCA filing. Staff recommends the Commission process the
case under Modified Procedure, with comments due May 4, 2012, and the Company’s reply, if any,
due May 11, 2012.
COMMISSION DECISION
Should the Commission issue a Notice of Application/Modified Procedure setting a May
4, 2012 comment deadline and a May 11, 2012 reply deadline?

M:IPC-E-12-13_kk