20121211reconsideration_order_no_32690.pdf

Office of the Secretary
Service Date
December 1 1,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR A )CASE NO.IPC-E-12-15
DETERMINATION OF 2011 DEMAND-SIDE )
MANAGEMENT EXPENDITURES AS )
PRUDENTLY INCURRED )ORDER NO.32690
)
__________________________________________________________________________________
)
Idaho Power Company petitioned the Commission to reconsider Order No.32667.
See Idaho Power’s Petition for Reconsideration.’In that Order,the Commission finds that the
Company prudently incurred $41,942,123.50 in 2011 demand-side management (DSM)
expenses,including $34,923,738.50 in net Rider expenses and $7,018,385 in Custom Efficiency
Program incentive expenses.See Order at 1 and 18.The Company now argues that the
Commission should reconsider the Order and increase the amount of the prudency determination
by $616,382,to $42,558,505.50.Petition at 5.The Company says this should occur because the
Commission’s Order erroneously:(1)includes a $526,781 accounting-related adjustment that
was already reflected in last year’s (2010)DSM prudency request (see Order at 6,fn.7);and (2)
excludes S89,601 in Rider-funded,labor expense increases by deferring a finding on those
increases until the Company provides evidence of reasonableness (see Order at 8-9).
Commission Staff and the Industrial Customers of Idaho Power (ICIP)filed timely
answers to the Petition.Staff concurred with the Company that the Commission should grant
reconsideration as to the $526,781 accounting-related adjustment,and ICIP took no position on
that issue.Staff and ICIP disagreed with the Company about the labor-expense increases,and
advocated the Commission deny reconsideration on that issue.
With this Order,we:(1)grant reconsideration as to the accounting-related
adjustment;and (2)deny reconsideration as to the labor-expense issue.
On November 14,2012,Idaho Power filed an errata to its Petition to correct some of the figures set forth in the
Petition.See Errata to Idaho Power Company’s Petition for Reconsideration.The corrected numbers are reflected
here.
ORDER NO.32690 1
DISCUSSION AND FINDINGS
1.The Accounting-relatedAdjustment
The Company’s Petition asks us to reconsider the amount that the Order determined
to be prudent and to increase that amount by $526,781.The Company explains that its 2010
prudency request reduced the requested amount to be deemed prudent by $526,781 to correct for
the fact that the Company had inadvertently charged $526,781 to the Idaho Rider when it should
have been charged to the Oregon Rider.Consequently,the Commission properly reflected this
adjustment when it determined the prudence of the Company’s 2010 expenditures.The
Company’s books did not reflect the adjustment—which corrected the 2010 error—until 2011.
But that adjustment did not relate to 2011 expenditures.Thus,the 2012 Order should not have
removed the adjustment amount from the 2011 expenditures that were deemed prudent.See
Petition at 3.
In its answer,Staff agrees with Idaho Power that the Commission should reconsider
its Order with respect to the $526,781 accounting-related adjustment.Staff says the Commission
should revise its Order to “reflect that the accounting error adjustment did not reduce the DSM
expenses that the Company prudently incurred in 2011,and to find that the actual,prudently
incurred Rider expenses in 2011 were $35,450,519.50 with a 2011 Rider ending balance of
$5,149,195.50.”Staff Answer at 3-5.
ICIP takes no position on the accounting adjustment issue.ICIP Answer at 1,fn.1.
Comnzission Findings:We note that the Company did not request additional briefing
or hearings on this matter.Based on our review of the existing record,including the Company’s
and Staff’s agreement on this issue,we find it reasonable to grant the Company reconsideration
as to the accounting-related adjustment.We further find that the $526,781 accounting-related
adjustment did not reduce the prudently incurred 2011 DSM expenses.Consequently,we find
that in 2011 the Company prudently incurred $42,468,904.50 in DSM expenses,including
$35,450,519.50 in Rider expenses,and $7,018,385 in Custom Efficiency Program incentive
expenses.The Rider ending balance as of December 31,2011 is $5,149,195.50.
2.The Labor-expense Increases
In its Petition,Idaho Power asks us to reconsider our decision to defer our
determination about the prudence of $89,601 in Rider-funded labor-expense increases until the
Company can provide further evidence of reasonableness.The Company argues that our
ORDER NO.32690 2
decision was improper because it retroactively applies a new standard of review for such expense
increases.id.at 4.The Company says it “evaluated all ...Rider-funded expenditures by
incorporating them into the three cost-effectiveness tests”in accordance with the DSM
Memorandum of Understanding (MOU)filed in Case No.IPC-E-09-09 and prior prudency
determinations.The Company stresses that the labor expenses “have proven to be cost
effective.’Petition at 3-4.The Company says it will work with Staff using the new standard
prospectively,but that the “focus of this proceeding should be on the prudence determination of
previously incurred expenditures using historically utilized standards.”Id.
In its answer,Staff disagrees with the Company about labor expenses and argues that
the Commission should deny the Petition on that issue.Staff notes that the Commission’s Order
did not dispute that the Companys DSM programs were cost-effective,but instead found that
the Company had not carried its burden of proving that the salary expense levels included in the
calculation are reasonable.Staff supports the Commission’s decision to defer its findings about
the labor expense increases,and to have the Company work with Staff to identify information
needed to determine the labor expense prudency in this case and in the future.Staff Answer at 5.
ICIP also disagrees with the Company about labor expenses and says the Commission
should deny reconsideration on that issue.ICIP raises four arguments.
First,ICIP says Idaho law requires the Commission to ensure that Idaho Powefs rates
are just and reasonable,Idaho Power bears the burden of proof,and Idaho Power failed to carry
its burden.Thus,“the Commission had no choice but to deny a prudency determination for the
wage increase.”ICIP Answer at 3.
Second,ICIP says Idaho Power’s reliance on the DSM MOU is misplaced.When the
DSM MOU was presented to the Commission in Case No.IPC-E-09-09,the Commission
declined to discuss it other than to recognize that “[t]he Commission’s future review of particular
DSM programs should be assisted,but will not be replaced by,Idaho Power’s compliance with
the terms of the MOU.”Id (citing Order No.31039 at 3).The Commission specifically
acknowledged ICIP’s observation that “even if a utility implements Staff’s prudency guidelines
and evaluation framework in the [MOU],the utility will still need Commission approval of the
expenditures in a formal filing,such as a general rate case.”Id.
Third,ICIP says the Commission has not engaged in retroactive ratemaking to Idaho
Power’s detriment.Id.No prior Order deemed Idaho Power’s 2011 wage increases to be
ORDER NO.32690 3
reasonable and recoverable in rates.If anything.the Commission has engaged in retroactive
ratemaking in Idaho Power’s favor because although the Commission has found that Idaho
Power failed to carry its burden of proof,the Commission is allowing the Company to
demonstrate the prudence of this past expenditure in some unspecified future proceeding.ICIP
claims it and others will be prejudiced if the Company can re-litigate the reasonableness of
expenses in its rates after failing to demonstrate prudence.Id.at 4•2
Fourth,ICIP characterizes Idaho Power’s request to approve the labor-expense
increases as a request for a single-issue rate case.ICIP objects to single-issue rate cases.It
agrees with Staff “that Idaho Power should not side-step the scrutiny of a general rate case
through the limited review available in dockets such as the annual DSM filing.”Id.at 4.
Commission Findings:As we stated in Order No.32667,the Company has the
burden of proving that the increase in labor-related expenses is reasonable.The record lacked
sufficient evidence from which we could determine whether the increase in the Company’s
labor-related expenses was reasonable when compared to the benefits those expenses achieve.
Accordingly,we declined to decide the reasonableness of the Company’s labor-related expense
increase until it provides evidence from which we may better assess the reasonableness of those
expenses.We reaffirm that decision here and deny the Petition for Reconsideration on this issue.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Petition for Reconsideration is
granted in part,and denied in part.The Petition is granted as to the accounting-related
adjustment.For 2011,we approve $42,468,904.50 in DSM expenses,including $35,450,519.50
in Rider expenses and $7,018,385 in Custom Efficiency Program incentive expenses,as the
Company’s actual,prudently incurred expenses.The Rider ending balance as of December 31,
2011 is $5,149,195.50.The Company’s Petition is denied in all other respects.
THIS IS A Fl1’JAL ORDER ON RECONSIDERATION.Any party aggrieved by this
Order or other final or interlocutory Orders previously issued in this case may appeal to the
Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules.See
Idaho Code §6 1-627.
2 While ICIP explains that it believes the Commission’s decision to defer its prudency findings is “if anything
retroactive ratemaking to Idaho Power’s favor,”ICIP does not ask the Commission to reconsider that decision;
rather,ICIP “respectfully requests that the Commission deny reconsideration of the Commission’s determination
related to Idaho Power’s labor expense increase.”Id.at 4-5.
ORDER NO.32690 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this //
day of December 2012.
//J /il/7,/z/
L F
PAUL KJRLLAN’DER.PRESIDENT
MACK A.REDFORD,COMMISSIONER
Ii aL_
MARSHA H.SMITH.COMMISSIONER
ATTEST:
/1 L.
Jan D.Jewel!1/
COmmission Secretary
O:IPC-E-12-1 5kk4Reconsideration
ORDER NO.32690 5