20121031Application.pdf

RECIFI W7 fl An IDACORP Company
2012OC131 f4
USA D. NORDSTROM
Lead Counsel I
InordstromtidahoDower.com
H TILI I l CO4MlSSKTh
October 31, 2012
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case No. IPC-E-12-24
Custom Efficiency Incentive Payments Recovery in Rates - Idaho Power
Company's Application and Direct Testimony
Dear Ms. Jewell:
Enclosed for filing in the above matter please find an original and seven (7) copies
of Idaho Power Company's Application.
In addition, enclosed are nine (9) copies of the Direct Testimony of Matthew T.
Larkin filed in support of the Application. 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
Boise, ID 83707
LISA D. NORDSTROM (ISB No. 5733)
JULIA A. HILTON (ISB No. 7740)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
lnordstrom(äidahopower.com
ihiIton(äidahoDower.com
RECEIVED
?I0CT31 F1 [:3I
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Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-12-24
AUTHORITY TO IMPLEMENT RATES FOR )
ELECTRIC SERVICE TO INCLUDE ) APPLICATION
CAPITALIZED CUSTOM EFFICIENCY )
INCENTIVE PAYMENTS. )
)
Idaho Power Company ("Idaho Power" or "Company"), in accordance with Idaho
Code §§ 61-502 and 61-622 and RP 52, 121, 123, and 125, hereby respectfully makes
application to the Idaho Public Utilities Commission ("Commission") for an order
authorizing Idaho Power to include in rates a portion of the regulatory asset associated
with capitalized Custom Efficiency incentive payments. The Company is requesting an
order authorizing rates to become effective December 1, 2012, with the expectation that
the Commission will suspend that date to provide for additional time to review and
implement rates on June 1, 2013.
APPLICATION -1
In support of this Application, Idaho Power represents as follows:
I. BACKGROUND
1.On October 22, 2010, the Company filed an application in Case No. IPC-
E-10-27 seeking approval of a regulatory framework that it believed would positively
impact the business rationale for acquiring cost-effective demand-side resources
("DSR"). One component of the Company's proposal was a request to capitalize direct
incentive payments associated with the Company's Custom Efficiency program. The
Custom Efficiency program is designed to provide financial incentives to commercial
and industrial customers for implementing customized energy efficiency measures at
their sites to reduce electrical usage. These projects include motor rewinds, variable
frequency drives, and energy efficient refrigeration, among others. Through
capitalization, the recovery of direct incentive payments associated with this program is
removed from the Energy Efficiency Rider mechanism and into a capitalized regulatory
asset, allowing the Company the opportunity to earn a fair and reasonable return on a
portion of its investment in DSR.
2.On March 3, 2011, the Company filed a motion to approve a settlement
stipulation ("Stipulation") in Case No. IPC-E-10-27 addressing the issues raised in its
initial application. Signatories to the Stipulation included the Company, Commission
Staff, the Community Action Partnership Association of Idaho, the Idaho Conservation
League, the NW Energy Coalition, and the Snake River Alliance (collectively referred to
as the "Parties"). In the Stipulation, the Parties agreed that Idaho Power would
capitalize Custom Efficiency incentive payments as a regulatory asset.
APPLICATION -2
3. On April 1, 2011, the Commission issued Order No. 32217 in Case No.
IPC-E-1 0-27. The Commission ultimately did not accept the Stipulation entered into by
the Parties, leaving the issues raised by the Company to be addressed at a later time.
The regulatory treatment of Custom Efficiency incentive payments was not specifically
addressed in Order No. 32217.
4.On April 22, 2011, the Company filed a Petition for Clarification ("Petition")
in Case No. IPC-E-10-27 requesting further Commission guidance on a number of
issues, including the Commission's intent with regard to the regulatory treatment of
Custom Efficiency incentive payments.
5.On May 17, 2011, the Commission issued an Order authorizing the
Company to account for Custom Efficiency incentive payments as a regulatory asset for
all payments made since January 1, 2011, "with an amortization period to be
determined later by the Commission" as part of a cost review process. Order No.
32245, p. 6.
6.In case number IPC-E-1 2-1 5, on March 15, 2012, Idaho Power requested
designation of $42,641,706 as prudently incurred demand-side management ("DSM")
expenditures, including $7,018,385 of incentive payments in the Custom Efficiency
regulatory asset account. These incentive payments were found prudent in
Commission Order No. 32667 issued on October 22, 2012.
II. OBJECTIVES
7.In light of the foregoing events and as described in more detail in the
Direct Testimony of Matthew T. Larkin that accompanies this Application, Idaho Power
requests the Commission:
APPLICATION -3
a.Recognize that the Custom Efficiency incentive payments made in
2011 are "used and useful" and were found to be prudently incurred expenses for
purposes of recovery in rates;
b.Consider recovery of Custom Efficiency incentive payments outside
of a general rate case proceeding. On page 11 of Order No. 32667 issued in Case No.
IPC-E-1 2-1 5, the Commission:
believe[d] the interest rate to be applied to the balance—
and ultimately included in rates—concerns all customers and
should be thoroughly reviewed and determined in a rate
case. We thus find it reasonable to defer deciding the
interest rate to be applied to the Customer Efficiency
Program regulatory asset account, and the resulting interest
amount, until the Company seeks to recover the deferral
balance in a general rate proceeding.
Although the Commission found it reasonable to defer exercising its decision making
authority, review of the issues contained in this filing outside of a general rate case is
procedurally within the Commission's discretion. Moreover, such review is appropriate
given that DSM activities are annually reviewed for prudence determination outside the
context of a general rate case and have been recovered through the Energy Efficiency
Rider, which can be altered either as part of a general rate case filing or as a single
issue case filing. These DSM incentive expenditures should be viewed as analogous to
supply-side expenses recovered outside of base rates through the Fixed Cost
Adjustment ("FCA") and Power Cost Adjustment ("PCA"). Because this is the first time
Idaho Power has requested such rate treatment for energy efficiency expenditures,
Idaho Power has filed this case seven months prior to the anticipated June 1, 2013, rate
effective date to allow ample time for Commission and public review of its request;
APPLICATION -4
C. Specify the carrying charge for the Custom Efficiency regulatory
asset prior to its inclusion in rates;
d.Specify a 4-year amortization period for the Custom Efficiency
regulatory asset;
e.Acknowledge that once the Custom Efficiency incentive payments
are included in rates, the unamortized portion of regulatory asset will earn the
Company's full rate of return ("ROR") in the same manner as other supply-side
resources;
f.Approve Idaho Powers proposed approach to recovering
Custom Efficiency incentive payments through annual filings each spring, much like the
PCA and FCA; and
g.Authorize Idaho Power to implement Schedule 56 with an effective
date of December 1, 2012.
III. REQUEST FOR APPROVAL OF TARIFF
8. The primary intent of the Company's request described in this Application
is to establish a ratemaking methodology that places investment in this demand-side
resource on equal footing with investment in supply-side resources from a business
evaluation perspective. As described in detail in the Direct Testimony of Matthew T.
Larkin, investment in DSR possesses inherently different qualities than investment in
supply-side resources that must be recognized through unique ratemaking treatment in
order to truly level the playing field between these varying resource types. The
Company believes its proposal accomplishes this objective, and allows all stakeholders
APPLICATION -5
to fully realize the benefits of an efficient business model that does not favor one type of
resource over another.
9.The Company is proposing to include in rates the portion of the Custom
Efficiency regulatory asset associated with incentive payments made during the 2011
calendar year plus associated accumulated carrying charges. As reported on page 135
of the Demand-Side Management 2011 Annual Report, incentive payments made in
2011 totaled $7,018,385 prior to the application of carrying charges. These payments
were deemed prudent in Commission Order No. 32667, issued in Case No. IPC-E-12-
15, on October 22, 2012.
10.Consistent with the Company's proposal in Case No. IPC-E-10-27 and the
subsequent Stipulation of the Parties in that case, the Company calculated the carrying
charge using its full authorized ROR on the balance of the Custom Efficiency regulatory
asset. Following the Company's 2011 general rate case, Case No. IPC-E-1 1-08, the
carrying charge rate was updated to reflect the newly-authorized ROR with an effective
date coinciding with the Commission's final order. The rationale for applying the full
authorized ROR as a carrying charge to this account is described in Mr. Larkin's direct
testimony. After applying carrying charges to the portion of the regulatory asset
associated with 2011 incentive payments, the balance as of May 31, 2013, will be
$8,126,504.
11.At the time of amortization, the Company is proposing to apply its full
authorized ROR to the unamortized balance of the regulatory asset, and to recover the
return of and return on its investment through a four-year amortization schedule.
Applying this methodology to the May 31, 2013, balance of $8,126,504, results in an
APPLICATION -6
annual revenue requirement of $2,949,340. The direct testimony of Mr. Larkin that
accompanies this Application details the Company's rationale for this proposed
ratemaking treatment.
12.The Company is proposing to collect the revenue requirement associated
with this Application through a uniform cents-per-kilowatt-hour charge. Dividing the
annual revenue requirement of $2,949,340 by test year energy sales of 13,428,805,375
kilowatt-hours ("kWh") results in a uniform rate of $0.000220 per kWh. The Company
proposes to collect this charge through the new Tariff Schedule No. 56 ("Schedule 56"),
attached to this Application as Attachment 1. Charges associated with Schedule 56 will
be included on customer bills on the line item labeled "Annual Adjustment Mechanism,"
which currently reflects charges associated with the PCA and the FCA.
13.Attachment I to this Application is a copy of Idaho Power's proposed new
Schedule 56, which contains the proposed rate for providing retail electric service to the
Company's customers in the state of Idaho.
14.Attachment 2 to this Application shows a comparison of revenues from the
various tariff customers under Idaho Power's existing rates and charges with the
corresponding proposed new revenue levels resulting from the implementation of
Schedule 56. This comparison is based upon forecasted normalized energy sales from
June 2013 through May 2014.
15.The Company proposes to update Schedule 56 on an annual basis with
an effective date of June 1 according to the methodology described in Mr. Larkin's direct
testimony. Because DSM expenses are recovered outside of base rates through the
Energy Efficiency Rider and the PCA, it is appropriate to file amortization requests
APPLICATION -7
associated with Custom Efficiency incentive payments in a manner similar to other
annual adjustment mechanisms in early spring, thus consolidating rate changes and
customer communication to correspond with a simultaneous effective date of June 1.
Idaho Power has filed this case to recover its Custom Efficiency incentive payments in
the fall of this year, rather than the spring of 2013, to allow additional time for review by
the Commission and interested parties.
IV. MODIFIED PROCEDURE
16.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. If, however, the Commission determines that a technical hearing is required, the
Company stands ready to present its testimony and support the Application in such
hearing.
V. COMMUNICATIONS AND SERVICE OF PLEADINGS
17.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 cycles beginning on November 15, 2012, with the last notice
being mailed on December 13, 2012. In addition, a copy of Idaho Power's Application,
testimony, and exhibits will be kept open for public inspection at its offices throughout
the state of Idaho. Idaho Power asserts that this notice procedure satisfies the Rules of
Practice and Procedure of this Commission; however, the Company will, in the
APPLICATION -8
alternative, bring the Application to the attention of its affected customers through any
other means directed by the Commission.
18.Communications and service of pleadings with reference to this
Application should be sent to the following:
Lisa D. Nordstrom
Regulatory Dockets
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Inordstromidahopower.com
docketsidahoDower.com
Matt Larkin
Greg Said
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
mIarkin()-idahopower.com
Qsaididahopower.com
VI. CONCLUSION
19.Idaho Power respectfully requests that the Commission issue an Order
that:
a.Recognizes that the Custom Efficiency incentive payments made in
2011 are "used and useful" and were prudently incurred expenses for purposes of
recovery in rates;
b.Considers recovery of Custom Efficiency incentive payments
outside of a general rate proceeding through Modified Procedure;
C. Specifies the carrying charge for the Custom Efficiency regulatory
asset prior to its inclusion in rates;
d.Specifies a 4-year amortization period for the Custom Efficiency
regulatory asset;
e.Acknowledges that once the Custom Efficiency incentive payments
are included in rates, the regulatory asset will earn the Company's full rate of return;
APPLICATION -9
f. Approves Idaho Power's proposed approach to recovering
Custom Efficiency incentive payments through annual updates to Schedule 56
corresponding with a June 1 effective date; and
g. Authorizes Idaho Power to implement Schedule 56 with an effective
date of December 1, 2012.
DATED at Boise, Idaho, this 31st day of October 2012.
LISA D. NORDTROM
Attorney for Idaho Power Company
APPLICATION -10
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-12-24
IDAHO POWER COMPANY
ATTACHMENT 1
Idaho Power Company
I.P.U.C. No. 29, Tariff No. 101 Original Sheet No. 56-1
SCHEDULE 56
CUSTOM EFFICIENCY INVESTMENT RECOVERY
APPLICABILITY
This schedule is applicable to the electric energy delivered to all Idaho retail Customers served
under the Company's schedules and Special Contracts. This schedule is designed to recover
capitalized incentive payments associated with the Company's Custom Efficiency program.
Custom Efficiency Investment Recovery
Effective Date per kWh
December 1, 2012 0.0220
IDAHO Issued by IDAHO POWER COMPANY
Issued per Order No. Gregory W. Said, Vice President, Regulatory Affairs
Effective - December 1, 2012 1221 West Idaho Street, Boise, Idaho
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-12-24
IDAHO POWER COMPANY
ATTACHMENT 2
Idaho Power Company
Calculation of Revenue Impact
State of Idaho
Custom Efficiency
Filed October 31, 2012
Summary of Revenue Impact
Current Billed Revenue to Proposed Billed Revenue
Total Percent
Rate Average Normalized Current Adjustments Proposed Change
Line Sch. Number of Energy Billed Mills to Billed Total Billed Mills Billed to Billed
KQ Tariff Descriction No. Customers (kWh) (1) Revenue Per kWh Revenue Revenue Per kWh Revenue
Uniform Tariff Rates
I Residential Service 1 404,785 4823,318,996 $417,352,464 88.53 $1,061,130 $418,413,594 86.75 0.25%
2 Master Metered Mobile Home Park 3 23 4,889,668 $402,015 82.22 $1,076 $403,091 82.44 0.27%
3 Residential Service Energy Watch 4 0 0 $0 0.00 $0 $0 0.00 0.00%
4 Residential Service lime.of-Day 5 1.152 13,721,181 $1,216,033 8862 $3,019 $1,219,052 88.84 0.25%
5 Small General Service 7 27.998 148,988,687 $16,233,672 108.96 $32,778 $16,266,450 109.18 0.20%
6 Large General Service 9 32,474 3,574,963,107 $218,289,885 61.06 $786,492 $219,076,377 61.28 0.36%
7 Dusk to Dawn Lighting 15 0 6,481,376 $1,231,311 189.98 $1,426 $1,232,737 190.20 0.12%
8 Large Power Service 19 109 2,101,607,557 $99,574,603 47.38 $462,354 $100,036,956 47.60 0.46%
9 Agricultural Irrigation Service 24 17,013 1,695,350,452 $116,083,614 68.45 $372,977 $116,426,591 68.67 0.32%
10 Unmetered General Service 40 1,288 15,807,753 $1,189,372 75.24 $3,478 $1,192,850 75.46 0.29%
11 Street Lighting 41 1,197 23,165.568 $3,327,180 143.63 $5,098 $3,332,277 143.85 0.15%
12 Traffic Control Lighting 42 412 2,981,282 $155,372 52.12 $656 $156,028 52.34 0.42%
13 Total Uniform Tariffs 486,451 12,411,275,627 $875,025,522 70.50 $2,730,481 $877,756,003 70.72 0.31%
14 Special Contracts:
15 Micron 26 1 587,867,669 $23,828,078 40.53 $129,331 $23,957,408 40.75 0.54%
16 JRSimplot 29 1 192,687,586 $7,369,321 38.35 $42,391 $7,431,713 38.57 0.57%
17 DOE 30 1 236,974,493 $9,390,916 39.63 $52,134 $9,443,051 39.85 0.56%
18 Hoku - Retail 32 0 0 $0 0.00 $0 $0 0.00 0.00%
19 Total Special Contracts 3 1,017.529,748 $40,608,315 39.91 $223,857 $40,832,172 40.13 0.55%
20 Total Idaho Retail Sales 486,454 13,428,805,375 $915,833,837 68.18 $2,954,337 $918,588,174 68.40 0.32%
(1) June 1,2013-May 31, 2D14 Forecasted Test Year
Line
hLo Tariff Description
Idaho Power Company
Calculation of Revenue impact
State of Idaho
Custom Efficiency
Filed October 31, 2012
Summary of Revenue Impact. Rate. 9,19, and 24 Distribution Level Detail
Current Billed Revenue to Proposed Billed Revenue
Total
Rate Average Normalized Current Adjustments
Sch. Number of Energy Billed Mills to Billed
No. Customers (1) (kWh) (1) Revenue Per kWh
Uniform Tariff Rates:
1 Large General Secondary
2 Large General Primary
3 Large General Transmission
4 Total Schedule 9
6 Large Power Secondary
7 Large Power Primary
8 Large Power Transmission
9 Total Schedule 19
11 Irrigation Secondary
12 irrigation Transmission
13 Total Schedule 24
Percent
Proposed Change
Total Billed Mills Billed to Billed
Revenue Per kwh Revenue
9S 32,283 3,140,350,716 $195,058,611 62.11 $690,877 $195,749,488 62.33 0.35%
9P 189 431,899,796 $23,086,186 53.45 $95,018 $23,181204 53.67 0.41%
9T 2 2,712,595 $145,088 53.49 $597 $145,684 53.71 0.41%

32,474 3,574,963,107 $218,289,885 61.06 $786.492 $219,078,377 61.28 0.36%
19S 1 6,678,959 $354,845 53.13 $1,469 $356,314 53.35 0.41%
19P 105 2,050,443,491 $97,221,416 47.41 $451,098 $97,672,513 47.63 0.46%
19T 3 44,485,107 $1,998,342 44.92 $9,787 $2.008,129 45.14 0.49%

109 2,10107,557 $99,574,803 47.38 $462,354 $100,036,956 47.60 0.48%
24S 17,013 1,695,350,452 $116,053,614 68.45 $372,977 $116,426,591 68.67 0.32%
24T 0 0 $0 0.00 $0 $0 0.00 0.00%

17,013 1,695,350,452 $116,053,614 66.45 $372,977 $116,426,591 68.67 0.32%
(1)June 1,2013-May 31, 2014 Forecasted Teat Year