20140422notice_of_application_order_no_33026.pdf

Office of the Secretary
Service Date
April 22,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-14-05
AUTHORITY TO IMPLEMENT POWER )
COST ADJUSTMENT (PCA)RATES FOR )NOTICE OF APPLICATION
ELECTRIC SERVICE FROM JUNE 1,2014 )
THROUGH MAY 31,2015,AND TO UPDATE )NOTICE OF
BASE RATES IN COMPLIANCE WITH )MODIFIED PROCEDURE
ORDER NO.33000 )
______________________________
)ORDER NO.33026
On April 15.2014,Idaho Power Company (“Idaho Power,”or the “Company”)filed
its annual Power Cost Adjustment (“PCA”)Application.According to the Company,if the
Application (including a base rate increase and mitigation proposal)is approved,the Company’s
Idaho customers will collectively pay about $11 .I million (or 1 .04%)more for electricity in the
upcoming year than they do now,and a typical residential customer’s bill would increase by
about 570 per month.The Company asks for a June 1,2014 effective date,and for the
Commission to process the Application under Modified Procedure.
With this Order,the Commission provides an overview of the PCA mechanism,
summarizes this year’s Application,and solicits written comments about the Application.
THE PCA MECHANISM
Since 1993.the PCA mechanism has permitted Idaho Power to adjust its PCA rates
upward or downward to reflect the Company’s annual “power supply costs.”Because about half
of the Company’s generation is from hydropower facilities,Idaho Power’s actual cost of
providing electricity (its power supply cost)varies from year-to-year depending on changes in
Snake River streamfiows,the amount of purchased power,fuel costs,the market price of power,
and other factors.1 The annual PCA surcharge or credit and the Company’s “base rates”are
major components of the overall rates that customers pay for power.
The annual PCA mechanism consists of three standard components.
First,the Company forecasts or projects its power costs for the coming PCA year
(June 1,2014 to Niay 31,2015)using its most recent “Operating Plan.”Order No.30715.
For example,the revenue from the sale of sulfur dioxide (SO2)allowances.
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Projected power costs include:fuel costs;transmission costs for purchased power;Public Utility
Regulatory Policies Act of 1978 (“PURPA”)contract expenses;surplus sales revenues;and
revenues from the sale of renewable energy credits (“RECs”)and sulfur dioxide allowances.
The Company may recover 95%of the difference between the non-PURPA projected power
costs and the approved base power cost,100%of the costs of its PURPA contracts,and 100%of
its demand-side management (“DSM”)incentive and conservation costs.See Order No.30715,
and Order No.32426 at 3.
Second,the Company “trues-up”the prior year’s projected power costs based on the
Company’s actual power costs during that year.
Third,the Company reconciles the prior year’s “true-up”by crediting to or collecting
from this year’s PCA rate any overrecovered or underrecovered balance from the prior year’s
“true-up.”This third,“reconciliation”component ensures that the Company recovers its actual
approved costs while ratepayers pay only for the actual amount of power that the Company sold
to meet native load requirements.Order No.29334 at 42 Thus,ratepayers receive a rate credit
when power costs are low,but are assessed a rate surcharge when power costs are high.
Besides the three standard components described above,a fourth,“revenue sharing”
component applies to this year’s PCA.In 2010 and 2011,Commission Order Nos.30978 and
32424 established a mechanism by which the Company must share certain revenues with
customers.The first Order requires the Company to provide customers with 50%of any
earnings above a 10.5%year-end return on equity (“ROE”).This customer “revenue sharing”
benefit serves as a customer credit against the standard PCA components to yield a combined
rate to be set forth in Schedule 55.The second Order requires the Company to provide an
additional customer benefit;specifically:(1)for actual year-end earnings greater than 10%ROE
up to and including 10.5%in any year from 2012 through 2014,the earnings will be shared
equally between Idaho customers and the Company,with the customer revenue sharing benefit to
appear as a reduction to rates when the PCA takes effect;and (2)earnings above 10.5%will also
be shared,with the customers receiving 75%of the Company’s Idaho jurisdictional year-end
ROE above 10.5%as an offset against amounts in the Company’s Pension Balancing Account
2 This reconciliation component has been referred to as the “true-up of the true-up.”
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that the Company otherwise would collect from customers through rates.See Order Nos.30978
and 32424.
NOTICE OF APPLICATION
YOU ARE HEREBY NOTIFIED that the Company’s Application asks the
Commission to approve the Company’s proposed:(1)revenue neutral base rate update;(2)new
PCA rates;and (3)plan to mitigate the new rates’impact on customers.The Company’s
proposals are summarized below.
A.Base Rate Update
YOU ARE FURTHER NOTIFIED that the Company asks the Commission to
determine that the Company has correctly calculated new base rates as directed by the
Commission’s Net Power Supply Expense (NPSE)Order in Case No.IPC-E-13-20,Order No.
33000.In that Order,the Commission approved a new normalized or “base level”NPSE for the
Company of $305,684,869,and directed the Company to use the new base level NPSE to:(1)
update base rates effective June 1,2014,and (2)quantify the 2014/2015 PCA rates to be
effective June 1,2014.The Order also directed the Company to implement the new base level
NPSE without impacting the overall revenue collected through customer rates and in a manner
that is “revenue neutral”for all classes of Idaho customers.See Order No.33000 at 9.With this
Application,the Company says it has updated base rates as required by the prior Order and that
the new base rates will allow it to collect an extra $99.3 million in base level NPSE and increase
Idaho Energy Efficiency Rider (“DSM Rider”)funds by about $4 million per year.To ensure
the base rate increase is “revenue neutral,”the Company proposes to use the extra $4 million in
the DSM Rider revenue to credit customers in the 2014-2015 PCA and until such time as the
NPSE recovery level is again reset.The Company also is updating Schedule 89 (Unit Avoided
Energy Cost for Cogeneration and Small Power Production)to reflect the new NPSE amounts.
Application at 5-6;Press Release accompanying Application.
B.New PCA Rates
YOU ARE FURTHER NOTIFIED that the Company asks the Commission to
approve an $87.5 million PCA amount for 2014-2015.The Company primarily attributes its
proposed PCA request to persistent dry weather conditions that occurred in 2013 through
January 2014.The Company explains that it had forecasted 6.8 million megawatt-hours
(“MWh”)of hydroelectric generation for the 2013-2014 PCA year,but that the dry weather
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decreased actual hydroelectric generation to only 5.7 million MWh.Because there was less
hydro generation than the Company forecast,the Company had to use more expensive resources
to meet its customers’electricity needs and had lower than expected surplus sales.The
Company notes,however,that the proposed PCA request is $72.1 million less than 2013-2014
PCA collection.See Application at 9;Tatum Direct at 14-16,24-25;Idaho Power News Release.
YOU ARE FURTHER NOTIFIED that to recover the new PCA amount,the
Company proposes a new,0,73050/kWh PCA rate for the 2014-2015 PCA year.The Company
calculates the new PCA rate by combining the three standard PCA components referenced above
(i.e.,forecasted power costs,“true-up,”and reconciliation of the “true-up”)and then applying the
fourth,revenue sharing component as specified in Order Nos.30978 and 32424.The Company
says its Idaho jurisdictional 2013 year-end ROE was 11.22%;thus,under the rate sharing
component customers would receive a $24,114,895 total benefit consisting of a $16,512,853
offset to the Company’s pension balancing account and a $7,602,043 revenue sharing rate credit.
The Company says the revenue sharing rate credit reduces the 2014-2015 PCA calculation by
about $7.6 million.Application at 2,6-9;Tatum Direct at 5.
YOU ARE FURTHER NOTIFIED that the Company says that if its Application is
approved,the new PCA and new base rates would combine to increase the Company’s annual
billed revenue from customers by $27.1 million.Application at 2.
C.Mitigation ofPCA Impact
YOU ARE FURTHER NOTIFIED that the Company asks the Commission to
approve the Company’s plan to mitigate how this year’s PCA will impact customers.In
summary,the Company proposes to offset this year’s $87.5 million PCA collection with $16
million in surplus funds from the DSM Rider balancing account.The Company says this would
result in a total transfer of $20 million of DSM Rider funds into this year’s PCA.
YOU ARE FURTHER NOTIFIED that the Company says if its Application is
approved in all respects (i.e.,the updated base rates,new PCA,and mitigation plan),Idaho
customers would collectively pay about $11.1 million (or 1.04%)more for power in the
upcoming year than they do now (i.e.,the combined $27.1 million base rate/PCA increase minus
the $16 million in surplus DSM Rider funds).See Application at 2,9;Tatum Direct at 4-5.
Major customer classes would be impacted as follows:
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Proposed 2014 Billed Revenue Impact by Class:
Percentage Increase from Current Prices
Small Large
General General Large Agricultural Overall
Residential Service Service Power Irrigation Change
0.56%0.15%1.29%2.02%1.04%1.04%
See Application Atch.2 (as corrected by Companys April 16,2014 filing);see also,Company
News Release accompanying Application.Billed revenue from the Company’s three special
contract customers during the PCA year would be:Micron—2.60%;Simplot—-2.63%;DOE
(INL)—2.56%.Id.
YOU ARE FURTHER NOTIFIED that the Application and supporting workpapers
have been filed with the Commission and are available for public inspection during regular
business hours at the Commission offices.The Application is also available on the
Commission’s web site at www.puc.idaho.gov.Click on the “File Room”tab at the top of the
page,scroll down to “Electric Cases,”and then click on the case number as shown on the front of
this document.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission’s jurisdiction under Title 61 of the Idaho Code.The Commission
may enter any final order consistent with its authority under Title 61.
YOU ARE FURTHER OTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission’s Rules of Procedure,IDAPA 31.01.01.000 et seq.,
including the Modified Procedure rules referenced below.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure (that is,persons will present their views through written comments)pursuant to Rules
201 through 204 of the Idaho Public Utilities Commission’s Rules of Procedure,IDAPA
31.01.01.201 through .204.The Commission notes that Modified Procedure and Titten
comments have proven to be an effective means for obtaining public input and participation.
YOU ARE FURTHER NOTIFIED that the Commission does not at this point plan to
schedule public informational workshops in this matter.However,if customers request that Staff
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conduct a workshop,or if numerous public comments are received,one or more workshops may
be scheduled.Members of the public will be notified if any workshops are to occur.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application must file a written comment in support or opposition with the Commission by May
16,2014.The Company shall have until May 21,2014,to file a reply comment (if any).The
comment must contain a statement of reasons supporting the comment.Persons desiring a
hearing must specifically request a hearing in their written comments and explain why they
believe that Modified Procedure should not be used to process this case.
YOU ARE FURTHER NOTIFIED that written comments concerning this
Application shall be mailed to the Commission and Idaho Power at the addresses reflected
below:
Commission Secretary Lisa D.Nordstrom
Idaho Public Utilities Commission Idaho Power Company
P0 Box 83720 P0 Box 70
Boise,ID 83 720-0074 Boise,ID 83707-0070
E-Mail:lnordstrorn(iiidahopower.corn
Street Address for Express Mail:dockets(idahopower.com
472 W.Washington Street Timothy F.Tatum
Boise,ID 83702-5918 Gregory W.Said
Idaho Power Company
P0 Box 70
Boise,ID 83 707-0070
E-mail:[e-mail]
gsaid@,idahopower.corn
The comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission’s home page located at www.puc.idaho.gov.Click the “Case Comment or Question
Form”under the “Consumers”tab,and complete the form using the case number as it appears on
the front of this document.These comments must also be sent to the Company at the e-mail
addresses listed above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set,the Commission will consider this matter on its merits and
enter its Order without a formal hearing.If written comments are received within the time limit
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set,the Commission will consider them and,in its discretion,may set the same for formal
hearing.
ORDER
IT IS HEREBY ORDERED that this case be processed under Modified Procedure.
Interested persons shall have until May 16,2014,to file written comments,and the Company
shall have until May 21,2014,to file reply comments (if any).
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this “
day of April 2014.
PAUL KJELLAN ER,SIDENT
MACK A.REDFORD,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jean D Jewel1
Commission Secretary
O:TPC-E-I 4-O5kk
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