20120420Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

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

FROM: DON HOWELL
DEPUTY ATTORNEY GENERAL

DATE: APRIL 20, 2011

SUBJECT: IDAHO POWER’S PCA APPLICATION, CASE NO. IPC-E-12-17

On April 13, 2012, Idaho Power Company filed its annual Power Cost Adjustment
(PCA) Application. In the current Application, Idaho Power asserts that its annual “power
supply costs” have increased above the normalized PCA rates. The Company proposes to
increase the existing PCA rates by about $43 million, or an average increase in the existing PCA
rates of approximately 5.10%. Atch. 3, p. 1. When the PCA rate increase is combined with the
revenues to be credited to customers from the Company’s Revenue Sharing Case (IPC-E-12-13),
Idaho Power calculates the overall proposed average increase to tariff customers is 1.71%, and
an overall average increase of about 6-7% for the four special contract customers. Atch. 3, p. 2.
The Company proposes that the Application be processed under Modified Procedure and
requests the new PCA rates take effect on June 1, 2012.
THE APPLICATION
This year’s PCA Application represents a rate increase as compared to last year’s
PCA rate decrease. The Company attributes the proposed PCA increase this year to several
factors. First, the Company asserts that the “primary driver” of the increase is the cost to
purchase power under its mandatory PURPA QF contracts. The Company states its PURPA cost
is $66.74 million greater than the base level amount of PURPA expenses approved in Order No.
31042. Wright Dir. at 9-10. Second, in the Company’s last rate case, the Commission ordered
that DSM costs be recovered in the PCA. Order No. 32426. The Company’s Operating Plan
anticipates that the DSM payments will be $3.47 million greater than the DSM expenses
DECISION MEMORANDUM 2
approved in the Company’s last rate case. Id. at 10. Finally, the recent revision to the Hoku-
Idaho Power special contract reduces the amount of revenue from Hoku’s first block (take-or-
pay) charge to $6.77 million (as compared to last year’s projection at $22.19 million), and
reduced its load to zero. Id. at 8-9. These factors contributed to the proposed increase in the
“projected” power costs component of the PCA mechanism.
The remaining two components to the PCA mechanism (the true-up and the
reconciliation) result in rate credits. Thus, the credits from these two components offset the
proposed increase in theprojected power cost component. The Company proposes that the PCA
rate be set at .3367 cents per kWh (.5099 + (.1340) + (.0392)).
RATE DESIGN
Earlier this year Idaho Power filed its revenue sharing application in Case No. IPC-E-
12-13. In the Revenue Sharing Case, the Company proposed to credit certain customers with
approximately $27.1 million in sharing funds. The Company calculates that the impact of the
Revenue Sharing Case will partially offset the PCA rate increase. Application at 6; Atch. 3, p. 2.
The first table below shows just the proposed increases in the PCA rates for the major customer
classes:
Table 1: The Proposed PCA Rates
Residential (1) .0289¢/kWh 0.3367¢/kWh 3.79%
Small Commercial (7) .0539¢/kWh 0.3367¢/kWh 2.73%
Large Commercial (9) .0040¢/kWh 0.3367¢/kWh 5.912%
Industrial (19) (.0137)¢/kWh 0.3367¢/kWh 8.29%
Irrigation (24) .0114¢/kWh 0.3367¢/kWh 5.10%
Source: Atch. 2; Atch. 3, p. 1.

Application at Atch. 3, p. 1; Exh. 2. The PCA rates for Idaho Power’s four special-contract
customers (Micron, Simplot, the Department of Energy (INL), and Hoku) would also change.
Under the Company’s proposal, the PCA rate for the four special-contract customers would
increase to 0.3367¢ per kWh. Id.
The table below shows the proposed rates when the proposed PCA rate increase is
combined with the revenue sharing credit.

DECISION MEMORANDUM 3
Table 2: Combined PCA and Revenue Sharing Rates
Residential (1) .0793¢/kWh .62%
Small Commercial (7) .0094¢/kWh (0.43)%
Large Commercial (9) .1492¢/kWh 2.66%
Industrial (19) .1986¢/kWh 5.03%
Irrigation (24) .1295¢/kWh 1.85%
Source: Atch. 3, p. 2; Exh. 2.

Under the combined rates, each of the four special contract customers will receive a monthly flat
credit for 12 months: Micron –$46,803; Simplot – $18,362; DOE (INL) – $22,906; and Hoku –
$7,685. Atch. 2, p. 3.
PROPOSED SCHEDULING
Commission Rule 127 provides that the Commission will determine whether the Staff
should a conduct a public workshop “[w]hen a public utility files an application to increase any
rate. . . .” IDAPA 31.01.01.127. In this particular case, Idaho Power has proposed a rate
increase. However, Staff does not believe a public workshop is warranted because of the
proposed time line and the opportunity to provide comments.
The new PCA rate is normally effective on June 1 of every year. As in past years, the
Company has requested that its PCA Application be processed under Modified Procedure. Staff
concurs in the proposed effective date and in the use of Modified Procedure. Given the existing
demands upon Staff, we recommend that comments in this case be due no later than May 15,
2012, and reply comments (if any) be due on May 17, 2012.
COMMISSION DECISION
Does the Commission wish to process Idaho Power’s PCA Application via Modified
Procedure?
If yes, does the Commission wish to set comment dates of May 15 and reply
comments (if any) due May 17?

bls/M:IPC-E-12-17_dh