20140515Comments.pdf

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An IDACORP Company
LISA D. NORDSTROM
Lead Counsel
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Very truly yours,
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"ti"rD. Nordstroum
May 15,2014
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, ldaho 83720-OOl 4
Re: Case No. IPC-E-14-03
Fixed Cost Adjustment Rates for June 1, 2014, Through May 31 , 2015 -
ldaho Power Company's Reply Comments
Dear Ms. Jewell:
Enclosed forfiling in the above matter please find an original and seven (7) copies
of Idaho Power Company's Reply Comments.
LDN/KKI
Enclosures
LISA D. NORDSTROM (!SB No. 5733)
ldaho Power Company
1221West ldaho Street
P.O. Box 70 (83702)
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I no rd stro m @ id a hopowe r. com
Attorney for ldaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
AUTHORITY TO IMPLEMENT FIXED COST
ADJUSTMENT RATES FOR SERVICE
FROM JUNE 1,2014, THROUGH MAY 31,
2015.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. !PC-E-14-03
IDAHO POWER COMPANY'S
REPLY COMMENTS
On March 14, 2014, ldaho Power Company ("ldaho Powe/' or "Company")
applied to the ldaho Public Utilities Commission ("Commission") for an order allowing
the Company to increase its Fixed Cost Adjustment ('FCA') rates for electric service
provided from June 1,2014, through May 31 ,2015. The total FCA balance the
Company is proposing to collect from the Residential and Small General Service
customers is $1 4,91 2,442.
ldaho Power respectfully submits the following Reply Comments in response to
the comments filed by Commission Staff ("Staff') and the ldaho Conservation League
('lCL') on May 8,2014. ln these Reply Comments, the Company does not respond to
every issue raised by the parties; silence on an issue should not imply agreement.
]DAHO POWER COMPANY'S REPLY COMMENTS - 1
I. IDAHO POWER GORRECTLY CALCULATED THE PROPOSED FCA RATE.S
ACCORDING TO THE COMMISSION.APPROVED METHODOLOGY
Staff reviewed the Company's filing and verified the Company correctly
calculated the proposed FCA deferra! balance and associated rates according to the
Commission-approved methodology. Based on its review, Staff recommends that the
Commission approve the proposed FCA rates effective June 1,2014. Staff Comments
at 14. ICL expressed overall support for the mechanism and also suggests the FCA
rates as proposed by the Company be approved. ICL Comments at 1. ldaho Power
continues to recommend the Commission approve the proposed 2014-2015 FCA rates
as filed.
II. THE FCA IS FUNCTIONING AS INTENDED ACCORDING TO
THE COMMISSION.APPROVED METHODOLOGY
While Staff recommends approva! of the FCA rates as proposed, Staff also
mentions perceived "fundamenta! flaws" it believes exist in the FCA. In general, the
Company disagrees with Staff's characterization of the FCA mechanism. Staff identifies
four areas of concern: (1) the weather normalization adjustment, (2) the customer count
methodology, (3) the calculation of the 3 percent cap, and (4) an issue related to cross-
subsidization. Staff Comments at 3. Each of the four aspects of the FCA methodology
Staff has identified in this case as "flaws" were thoughtfully considered during the FCA's
initial design. These four aspects of the FCA methodology have been appropriately and
consistently applied in every annual FCA determination since the Commission approved
the pilot mechanism in 2007 (Order No. 30267 in Case No. IPC-E-04-15) and then
subsequently approved as a permanent mechanism in 2012 (Order No. 32505 in Case
No. IPC-E-1 1-19).
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
When considering whether to remove the FCA's provisional status in Case No.
IPC-E-11-19, the FCA mechanism received an exhaustive review by the Company,
Staff, and a number of intervening parties. Through multiple rounds of testimony and
comments, the Commission was presented with a number of alternatives to the FCA for
its consideration. Ultimately, on January 31, 2013, after five years of implementation in
a pilot status, the Commission ordered that the FCA mechanism continue unchanged as
a permanent mechanism. Order No. 32731 at 4. The Commission further stated it
"welcomes closer scrutiny of the effectiveness of the FCA in ldaho Power's next general
rate case." ld. Just one year after that order was issued, Staff is requesting the
Commission open a separate docket with workshops to investigate the FCA mechanism
and reevaluate its intended purpose and performance, and whether the FCA should be
d iscontinued or altered.
The Company agrees with the Commission that the appropriate venue for
assessing the effectiveness of the FCA is as part of a genera! rate case, or at a
minimum, a case where cost-of-service and rate design issues can be comprehensively
examined. This treatment would be similar to that identified in the recent Commission
net metering order in Case No. IPC-E-12-27. Order No. 32846 at 12-13. Staff suggests
that issues such as weather normalization, cross-subsidization, and proper rate design
be addressed in workshops. Modifying the aspects of the FCA methodology identified
by Staff without the benefit of a comprehensive cost-of-service study and rate
development process may result in unintended financial impacts to customers and/or
the Company.
IDAHO POWER COMPANY'S REPLY COMMENTS .3
III. PROPER RATE DESIGN IS AN APPROPRIATE
ALTERNATIVE TO THE
Staff suggests that a demand charge may be an option for modifying or replacing
the FCA. The Company agrees that proper rate design is an appropriate alternative to
the FCA that would address the effective recovery of fixed costs. !n fact, in Case No.
IPC-E-04-15, the case that initially established the FCA, Company witness John R. Gale
addressed the issue of rate design in his testimony. Mr. Gale stated that significant
movement in the rate design would address the same issues that a true-up mechanism
would. Case No. IPC-E-04-15, Direct Testimony of John R. Gale at 4. A straight fixed-
variable rate design based on the cost-of-service analysis with a demand charge and
appropriate service charge would effectively allow the Company to recover the fixed
costs incurred to serve a customer and mitigate the need for the FCA mechanism.
While Idaho Power agrees with Staff that thoughtfully implemented rate design
changes could modify or eliminate the need for the FCA, the Company believes that
such rate design changes are more appropriately addressed in a general rate case or
cost-of-service/rate design specific case. The Commission recently articulated a similar
view with regard to the Company's proposal to implement rate design changes for
approximately 350 net metering service customers in Case No. !PC-E-12-27. On pages
12-13 of Order No. 32846 issued in this case the Commission stated:
Further, we believe dramatic changes such as those
proposed in this case - including increasing the monthly
customer charge, imposing a new BLC charge, and reducing
the energy charge for the residential and small general
service customers - should not be examined in isolation but
should be fully vetted in a general rate proceeding.
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
The Company believes that the Commission should apply this same rationale to any
proposed modifications to the FCA mechanism.
IV. THE COMPANY HAS NOT DIMINISHED ITS EFFORTS IN PURSUING
DEMAND.SIDE MANAGEMENT ("DSM''} ACTIVITIES
The intent of the FCA is to remove the financial disincentive that exists for the
Company to pursue DSM activities. The Company has developed a healthy DSM
portfolio that offers cost-effective energy efficiency programs available to all customer
classes, including Residential and Small General Service customers. Staff implies that,
because energy savings have declined in recent years, the Company has diminished its
efforts in pursuing DSM activities. Staff Comments at 8-9. This is simply not true. The
decline in energy savings in recent years is due partially to ldaho Powe/s and the
region's increased evaluation, measurement, and verification activities, including new
lower estimated or deemed savings amounts approved by the Regional Technical
Forum ("RTF"). This decline in energy savings may give the perception the Company
has diminished its efforts in pursuing DSM activities. However, in this case, perception
is not reality.
ldaho Powe/s Demand-Side Management 2013 Annual Report ("DSM Report"),
filed with the Commission on March 14, 2014, shows the annual energy savings
attributable to the multiple DSM programs offered by ldaho Power. These savings are
the incremental savings isolated to one year and do not reflect the cumulative effect
these programs have over time. These savings also do not reflect the impact of the
Company's outreach and educational programs that primarily affect the Residential and
Small General Service customer classes. The Company's continued support and
pursuit of cost-effective energy efficiency activities is evidenced by the customer
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
participation in the available DSM programs. Of the 12 energy efficiency programs
available to the Residential customer class, eight programs experienced an increase in
customer participation in 2013. Energy Efficient Lighting and See ya Iater, refrigerator@,
the two programs with the largest energy savings for Residential customers in 2013,
experienced increases in customer participation but also had a decline in annual energy
savings. As discussed earlier, this decline is due to the lower deemed savings amounts
by the RTF. The lower deemed savings amounts by the RTF are impacting the
determination of energy savings of other utilities in the region and are not exclusive to
ldaho Power.
The FCA is critical to the sustainability of ldaho Powe/s efforts to seek out and
achieve continued energy savings. When cost-effective energy savings are becoming
more difficult to achieve with energy efficiency, the Company believes that jeopardizing
the business model that supports DSM endeavors by altering or discontinuing the FCA
would not be prudent.
V. THE COMPANY'S DSM REPORT EFFECTIVELY
IDENTIFIES FUTURE STRATEGIES
lCL expressed overall support for the FCA mechanism and recommends
approval of the FCA rates as filed. ln its comments, ICL recommends the Company file
a detailed plan, within three months, to increase participation and energy savings for
Residential and Small General Service customers. The Company believes ICL's
proposa! is unnecessary and duplicates reporting that already exists. As mentioned
earlier, Idaho Power files its DSM Report annually, and recently submitted its 2013 DSM
Report to the Commission under docket IPC-E-14-04 in March of this year. ln
accordance with the Memorandum of Understanding signed by ldaho's investor-owned
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
utilities and ldaho Commission Staff in January 2010, the DSM Report already outlines
all of the activities the Company is pursuing regarding DSM programs as well as
strategies for the upcoming year. The DSM Report identifies the Company's current
and continued pursuit of cost-effective energy efficiency activities. ldaho Power
believes a separate plan, as requested by !CL, is not necessary.
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All parties agree the Company correctly calculated the FCA deferra! balance and
recommend the Commission approve the proposed FCA rates to become effective June
1, 2014. The other comments and concems expressed are better addressed in a
general rate case or cost-of-service/rate design specific case, or are already addressed
in the Company's annual DSM Report. The Company recommends the Commission
approve the FCA rates as filed and address the other concems during a future
proceeding where issues related to cost-of-service and rate design are appropriately
explored.
Respectfully submitted this 1sth day of May 2014.
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 1Sth day of May 2014 | served a true and correct
copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Karl T. Klein
Deputy Attomey General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
ldaho Conservation League
Benjamin J. Otto
ldaho Conservation League
710 North Sixth Street
Boise, ldaho 83702
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IDAHO POWER COMPANY'S REPLY COMMENTS - 8