20130325press release.pdf

Idaho Public Utilities Commission
Case No. IPC-E-12-24, Order No. 32766
March 22, 2013
Contact: Gene Fadness [phone], 890-2712
Website: www.puc.idaho.gov

PUC denies Idaho Power funding mechanism request

The Idaho Public Utilities Commission has denied an Idaho Power Company request to immediately
begin recovering from customers the expenses and carrying charges associated with an energy
conservation program geared toward large commercial and industrial customers.

Idaho Power asked the commission to approve a yearly rate mechanism that would be adjusted every
June 1 to pay for the program. The first adjustment under the new tariff schedule would have increased
average residential rates by about 23 cents a month beginning June 1.

Under the program, eligible energy efficiency projects are customized to serve large customers at each
of their sites to reduce electric use. Idaho Power pays financial incentives to these customers to
implement efficiency measures such as motor rewinds and energy efficient refrigeration. The cost of
the program is included in rates for all customers because all customers benefit from the reduced
demand on Idaho Power’s generation system. That reduced demand prevents the company from having
to generate or buy energy from more expensive sources.

The large commercial and industrial program is Idaho Power’s largest energy efficiency program, saving
about 68 million kilowatt-hours in 2011, enough energy to serve the average needs of 5,400 residential
customers for one year. The commission does not approve demand reduction programs like these
unless cost-effectiveness tests show that all customers, not just those participating in the program, pay
less for electricity than they would if the programs were not in place.

Idaho Power incurred about $8.1 million in expenses and carrying charges attributed to the program
during 2011. The commission earlier determined the 2011 expenses were prudently incurred, but
directed the company to defer the expenses in a regulatory account until it files its next rate case.

That deferral allows the company to accrue annual program expenses for recovery with profit later on.
The commission had directed Idaho Power to address the issues of the amount of interest it ought to be
allowed to accrue on the deferred balance and the amount of time over which customers would pay
down the deferred account in its next general rate case. Rather than waiting for its next rate case, Idaho
Power proposed the yearly mechanism to more timely recover the expenses. Under the current method
of waiting until a rate case filing, there can be a lag of between 18 and 36 months before Idaho Power is
allowed to recover expenses, the company claimed.

The commission disagreed, stating that a rate case provides a forum for all parties to address questions
that would not be as thoroughly addressed in an annual rate recovery mechanism. “In fact, the
comments filed by the parties demonstrate reasonable disagreements over issues necessarily reviewed
when expenditures are placed in customers’ rates,” the commission said. These issues have direct
bearing on the amount of recovery that can be included in rates, the commission said.

One of those issues is the amount of interest the company ought to be allowed on the deferred account.
Both Idaho Power and the Idaho Conservation League (ICL) argued that allowing the company to earn
the same rate of return on demand-side resources (acquiring energy from conservation programs that
reduce demand) as it does on supply-side resources (acquiring energy from power plant production),
would further incent conservation measures.

A second issue is about how much time should be allowed for customers to pay back the company’s
investment. The utility and the ICL also said a four-year amortization period should be allowed to
reduce the company’s risk because the incentives are not backed by physical assets and Idaho Power
doesn’t own or have control over the efficiency equipment owned by the large commercial and
industrial customers.

Commission staff noted the custom efficiency program is a 12-year program and that a reduced
amortization period to four years without a reduced interest rate would result in customers paying $12
million (after being grossed-up for taxes) for a program that included only $7 million in direct customer
incentives.

Commission staff and the Industrial Customers of Idaho Power advocated that inclusion of these funds
should be considered in a rate case. The Industrial Customers also recommended the commission open
a docket to investigate whether Idaho Power’s demand-side resource programs should be managed by a
third-party provider “that does not demand unnecessary and unwarranted returns in order to bring the
correct ‘business evaluation perspective’ to the task of energy efficiency and conservation.”

A full text of the commission’s order, along with other documents related to this case, is available on the
commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and
scroll down to Case No. IPC-E-12-24.

Interested parties may petition the commission for reconsideration by no later than Feb. 2. Petitions for
reconsideration must set forth specifically why the petitioner contends that the order is unreasonable,
unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the
petitioner will offer if reconsideration is granted.

Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box
83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.

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