20140929Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472 W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO EXTEND
ITS ACCUMULATED DEFERRED
INVESTMENT TAX CREDITS/REVENUE
SHARING MECHANISM BEYOND 2014.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC.E.I4-IA
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application to extend its Accumulated Deferred Investment Credits/Revenue
Sharing Mechanism beyond 2014.
BACKGROUND
On May 30,2014,Idaho Power Company applied to the Idaho Public Utilities
Commission for an Order authorizing the Company to extend its Accumulated Deferred
Investment Credits/Revenue Sharing Mechanism beyond 2014. The Commission issued a notice
of Proposed Settlement and a Notice of Modified Procedure in Order No. 3 3 1 23 . The
Commission Staff files these comments consistent with Order No. 33 123.
In Order No.32424 dated December 27,2011, the Commission approved a settlement
stipulation (2011 Stipulation) under which Idaho Power Company is authorized to either: (l)
amortize additional Accumulated Deferred Investment Tax Credits ("ADITC"), or (2) share a
portion of its revenues with its Idaho customers. The 201I Stipulation is set to expire at the end
of 2014. See Order No.32424.
STAFF COMMENTS SEPTEMBER 29, 2OI4
STAFT ANALYSIS
On May 30,2014, the Company applied to the Commission for an Order authorizing the
Company to extend the terms of the 201I Stipulation beyond 2014. The extension requested in
this case would allow the 2011 Stipulation's terms to remain in effect until the Company fully
amortizes the total $45 million in ADITC or the Commission otherwise modifies or terminates
terms in the 2011 Stipulation.
On September 3, 2014, the Company filed a Settlement Stipulation (2014 Stipulation)
signed by all parties, and a Motion that asks the Commission to approve the proposed settlement.
Staff believes the proposed settlement is fair, just and reasonable and recommends that the
Commission accept it as being in the public interest. In these comments, Staff only discusses the
2014 Stipulation's terms that differ from the 2011 Stipulation's terms.
1 Revenue Sharine. If the Company's actual annual Return on Equity ("ROE") for
Idaho exceeds 10% during the2015-2019 period, all amounts above a l0%o ROE through a
10.5% ROE would be shared 75o/o and2lohbetween the customers and the Company. The
customers' share of the Company's Idaho earnings between a llYo ROE through a 10.5% ROE
will be applied to reduce customer rates during the next year's power cost adjustment (PCA). If
the Company's actual earned, year-end ROE for Idaho in any year between 201 5-2019 exceeds
10.5yo, all amounts above the 10.5% ROE will be shared 50% with Idaho customers by reducing
their rates during the next year's PCA, 25Yo with Idaho customers as an offset to the Company's
pension balancing account that will reduce the amount that customers would otherwise pay
through rates, and25Yo with the Company.
The revenue sharing provisions in the 2014 Stipulation provide greater benefits to
customers with respect to the percentage of revenue shared. When actual ldaho jurisdictional
ROE is in the l0% through 10.5% band, the proposal increases customer sharing from 50%
under the 2011 Stipulationto 75%o. The Company would retum these dollars to customers during
the annual PCA. Returning these sharing dollars during the PCA is consistent with the 2011
Stipulation for this ROE band.
When the ROE is above 10.5% as proposed in the 2014 Stipulation, the Company will
share 50oZ of the excess revenue with customers as a rate reduction during the PCA, 25oh of the
excess revenue with customers by reducing the pension balancing account and25%o of the excess
revenue will remain with the Company. In the 2011 Stipulation, revenue sharing dollars above
STAFF COMMENTS SEPTEMBER29,2014
10.5% ROE were shared at75o/o with the full amount applied to reduce the pension balancing
account.
The proposed changes in revenue-sharing percentages increase the dollar amounts
returned to customers at the time of the PCA. Using 2013 actual Idaho jurisdictional ROE as an
example, customers would have received $3,801,021 more in revenue-sharing dollars in the first
sharing block, and $11,008,568 of the second sharing block would have reduced rates and not the
pension balancing account. This provides a greater benefit to customers. It also responds to
customer concerns about their ability to pay and their desire for lower bills.
2. ADITC Amortization. The Company may extend its ability to amortize $45 million
of additional ADITC through December 31,2079, to allow the Company to achieve a maximum
actual ROE of 9.5Yo for the Idaho jurisdiction. The Company may use up to $25 million of
additional ADITC amortization in each year from 2015-2019 so long as the total cumulative
ADITC amount used during the five-year period does not exceed $45 million. If the Company
amortizes some of the $45 million in 2014 as previously authorized by Order No. 32424, the
amount of ADITC available for amortization in the2015-2019 periods will be reduced by a
corresponding amount. Once the Company has fully amortized the $45 million ofADITC,
revenue sharing as provided in the proposed settlement will end.
The ability to use ADITC remains consistent with the 2011 Stipulation and accelerating
the ADITC amortization will not violate IRS normalization rules. The maximum ROE
percentage in a year when ADITC is used remains at 9.5oh. The maximum ADITC usage
remains at $25 million in any one year with a total maximum of $45 million.
The 2014 Stipulation also differs from the 2011 Stipulation in how it treats the
relationship between revenue sharing and ADITC use. In the 2014 Stipulation, when the full $45
million of ADITC is accelerated and amortized, the revenue-sharing provisions will end.
Stopping revenue sharing before the end of 2019 if the ADITC is fully amortized reduces the
potential benefit to customers. In the 201I Stipulation, revenue sharing continued for the full
three-year term even if the ADITC happened to be fully amortized. Staff accepts this difference
because the parties negotiated the higher sharing ratio to increase the likelihood of rate
reductions in years when revenues are shared.
3. Chanee in ROE. If the Commission authorizes a change to the Company's allowed
ROE as part of a general rate case in which the Company seeks a rate change before January 1,
2020,the ROE sharing thresholds will automatically adjust in proportion to the ROE change
STAFF COMMENTS SEPTEMBER29,2OI4
from the date on which the newly authorized base rates become effective. This provision is
consistent with the 201I Stipulation, with only the termination date changing. The new ADITC
threshold would be 95% of the newly established ROE, and the sharing thresholds would be set
at the new ROE for the first sharing band and at 105% of the new ROE for the second sharing
band.
4. StaffAudit. The Company will continue to make its year-end earnings results
available for audit by the Commission Staffafter the filing of the Company's and IDACORP,
Inc.'s annual report on Form l0-K with the U.S. Securities and Exchange Commission, which is
required to be filed within 60 days after the end of each fiscal year. Staff will audit the
Company's earnings and write-up its findings for review by parties during the Company's annual
PCA case. Providing an audit report to parties is a new provision in the 2014 Stipulation. Staff
believes the audit report will reassure the parties that the revenue sharing mechanism works as
intended.
STAFF RECOMMENDATION
Staff recommends approval of the Stipulation as filed.
Technical Staff: Terri Carlock
i:umisc/comments/ipcel4. l4kktcsw comments
Respecttully submitted this Z l+L day of September 2014.
't/ / //-
l1.orl l -Kl"r[Deputy Attorney General
4STAFF COMMENTS SEPTEMBER 29 , 2OI4
I HEREBY CERTIFY
SERVED THE FOREGOING
CASE NO. IPC-E.I4.14, BY
THE FOLLOWING:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
515 N 27TH STREET
BOISE TD 83702
ERIC L OLSEN
RACINE OLSON NYE BUDGE
& BAILEY
PO BOX 1391
POCATELLO ID 83204.1391
CERTIFICATE OF SERVICE
THAT I HAVE THIS 29th DAY OF SEPTEMBER 2014,
CoMMENTS OF THE COMMISSION STAFF , IN
MAILING A COPY THEREOF, POSTAGE PREPAID, TO
TIMOTHY E TATUM
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
DR DON READING
6070 HILL ROAD
BOISE ID 83703
ANTHONY YANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44104
CERTIFICATE OF SERVICE