20150331notice_of_proposed_settlement_order_no_33261.pdf

Office of the Secretary
Service Date
March 31,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION’S )CASE NO.IPC-E-14-17
INQUIRY INTO IDAHO POWER COMPANY’S )
FIXED COST ADJUSTMENT MECHANISM )NOTICE OF
)PROPOSED SETTLEMENT
)
)NOTICE OF
)MODIFIED PROCEDURE
)
______________________________
)ORDER NO.33261
On July 1,2014,the Commission opened this docket to allow Commission Staff,
Idaho Power Company,and other interested persons to evaluate the Fixed Cost Adjustment
(FCA)mechanism and whether it effectively removes the Company’s financial disincentive to
aggressively pursue energy efficiency programs.The Commission set an intervention deadline
and directed Staff to convene an informal prehearing conference after the opportunity for
intervention expired.See Order No.33068.The Commission granted intervention to the Idaho
Conservation League (ICL),Snake River Alliance (SRA),and Industrial Customers of Idaho
Power (ICIP).The parties then held four settlement conferences to discuss FCA issues.
On March 26,2015,Idaho Power filed a Settlement Agreement and Motion to
Approve Settlement Agreement.Staff,Idaho Power,ICL,and SRA signed the Settlement
Stipulation.As the Settlement Stipulation does not directly affect ICIP,ICIP has declined to
sign it and has advised the other parties that ICIP will not support or oppose it before the
Commission.
With this Order,the Commission provides background on this case,summarizes the
proposed settlement,and sets a 21-day deadline for interested persons to file comments regarding
the proposed settlement and this case.’
On March 13,2015,Idaho Power applied to the Commission for authority to implement Fixed Cost Adjustment
(FCA)rates for electric service from June 1,2015 through May 31,2016.See Case No.IPC-E-15-05.The
Commission’s Order in this case will not apply to Case No.IPC-E-15-05,but to future FCA cases.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.33261 1
BACKROUND
The Commission opened this docket in response to Staff’s comments in the
Company’s last FCA case,IPC-E-14-03.There,Staff recommended that the Commission re
evaluate the FCA mechanism for future application because the mechanism may be flawed in the
following respects:
•Weather-Normalization Adjustment.The weather-normalization
adjustment in the FCA permits the Company to significantly over recover
the fixed costs that the Commission authorized it to recover in the last
general rate case;
•Customer Count Methodology.By calculating allowed fixed costs based
on the average number of customers,the Company overstates the “typical”
number of customers that it serves in a month.The Company should use
the median to more accurately represent its actual customer count.Further,
the Company’s FCA calculations ignore that high energy use customers
have been switching from the small general service class (Schedule 7)to
the large general service class (Schedule 9),which artificially inflates the
Company’s FCA recovery by inappropriately lowering per customer use
in the small general service class for FCA purposes;
•Rate-Adjustment Cap.The FCA “incorporates a 3%cap on annual
increases with carryover of unrecovered deferred costs to subsequent
years.”See Order No.30267.Staff notes the Company calculates the rate
increase and cap using forecasted sales and revenues,which results in a
layering effect that continuously increases the FCA deferral balance from
year-to-year,understates the magnitude of the cumulative FCA rate
change on customers,and annually increases the absolute dollar amount
represented by the 3%cap;
•Cross-Subsidization.The Commission intended for the FCA to apply in a
manner that minimizes cross subsidies across rate classes.See Order
30267,at 6.But the FCA is calculated in a manner that leads the
residential and small general service classes to subsidize fixed-cost
shortfalls from the other classes.
See Order No.33047 at 4.Staff also warned that the FCA may no longer serve its intended
purpose of removing the Company’s perceived financial disincentive to investing in energy
efficiency and DSM,the FCA has harmed customers far more than it has benefitted them,and
the FCA’s efficacy has diminished in proportion to the Company’s declining energy efficiency
investments and savings.Id.
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ORDER NO.33261 2
NOTICE OF PROPOSED SETTLEMENT
YOU ARE HEREBY NOTIFIED that the Settlement Stipulation addresses the
following issues:
1.Weather Normalization.Idaho Power will modify the quantification of the annual
FCA deferral by replacing weather normalized billed sales utilized in the current annual FCA
determination with actual billed sales.The modification will occur with the determination of the
year-end 2015 FCA deferral,impacting rates effective June 1.2016.
2.Rate Adjustment Cap.In Order No.30267,the Commission approved a
discretionary rate adjustment cap for annual FCA-rclated rate changes as follows:“The FCA
mechanism ...incorporates a 3%cap on annual increases with carryover of unrecovered
deferred costs to subsequent years.”Order No.30267 at 13.The Company currently calculates
the 3%cap by dividing the Proposed FCA Deferral Change by the Forecasted Base Rate
Revenue.2 The parties ask the Commission clarify that this method of determining the 3%cap is
appropriate.
3.Fixed Cost per Energy (FCE)and Fixed Cost per Customer (FCC).The parties
acknowledge that Staff has concerns about the calculation of the FCE and FCC,but that these
issues are more effectively addressed when base rates are reset.
4.Rate Design.The parties agree that without the FCA,the current rate design
causes a financial disincentive for the Company to pursue all cost-effective demand-side
management.The parties thus agree to consider,at a later time,modified rate design for
residential and small general service customers.This may include,but is not limited to,reduced
energy charges,increased monthly service charges,and the introduction of demand charges for
these rate classes.
YOU ARE FURTHER NOTIFIED that the parties to the Settlement Stipulation agree
that it is in the public interest and is a fair,just,and reasonable resolution of the issues in this case.
The parties recommend that the proposed settlement be processed under Modified Procedure
pursuant to Rules 201-204,274,IDAPA 3l.Ol.Ol.20l-.204,.274.
2 Forecast reflects currently-approved base rates applied to forecasted usage for the subsequent June 1 through May
3 1 FCA rate effective year.
Although the parties requested a 14-day comment period,we find a 21-day comment deadline more consistent with
our Procedural Rule 202.02.
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ORDERNO.33261 3
YOU ARE FURTHER NOTIFIED that the Settlement Stipulation and other case
documents have been filed with the Commission and are available for public inspection during
regular business hours at the Commission offices.The Application and testimonies are also
available on the Commission’s web site at ww\ptIci(lafioov.Click on the “File Room”tab at
the top of the page,scroll down to “Open Electric Cases,”and then click on the case number as
shown on the front of this document.
YOU ARE FURTHER NOTIFIED that the Commission is not bound by any
settlement reached by the parties.The Commission will independently review any proposed
settlement to determine whether the settlement is just,fair and reasonable,and in the public
interest,or otherwise in accordance with law or regulatory policy.The Commission may accept
the settlement,reject the settlement,or state additional conditions under which the settlement
will be accepted.IDAPA 31.0l.01.274-.276.
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 NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission’s Rules of Procedure,IDAPA 31.01.01.000 et seq.
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 pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission’s Rules
of Procedure,IDAPA 31.01.01.201 through .204.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Settlement Stipulation or any issues raised in this case may file a written comment in support or
opposition with the Commission no later than 21 days after the date of service of this Order.
The comment must contain a statement of reasons supporting the comment.Persons desiring a
hearing must specifically request a hearing in their written comments.Written comments shall
be mailed to the Commission and the parties to this case at the addresses reflected below:
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.33261 4
Commission Secretary
Idaho Public Utilities Commission
P0 Box 83720
Boise,Idaho 83720-0074
Street Address for Express Mail:
Lisa D.Nordstrom
Idaho Power Company
P0 Box 70
Boise,ID 83707-0070
Email:
docke.ts@idahjporcom
472 W.Washington Street
Boise,ID 83702-59 18
Zachary L.Harris
Greg Said
Idaho Power Company
P0 Box 70
Boise.ID 83707-0070
E-mail:
Peter J.Richardson
Richardson Adams PLLC
515 N.27th Street
P0 Box 7218
Boise,ID 83702
E-mail:peter@ riehardsonadarncoin
Dr.Don Reading
6070 Hill Road
Boise,ID 83703
E-mail:
Benjamin J.Otto
Idaho Conservation League
710 N.6th Street
Boise,ID 83702
E-mail:hotto@idahoconservationor
Ken Miller
Snake River Alliance
Box 1731
Boise,ID 83701
E-mail:k ml IIer@ snaIeri veraliianceom
These 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 Click the “Case Comment or Question
Form”under the “Consumers”tab,and complete the comment form using the case number as it
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ORDER NO.33261 5
appears on the front of this document.These comments must also be sent to the parties 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
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.
Persons interested in submitting comments on the proposed Settlement Stipulation or other issues
in this case must do so no later than 21 days after the date of service of this Order.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3/
day of March 2015.
PAUL KJELL R,P SIDENT
MACK A.REDFORD,MMIS STONER
K STTNE RAPER,C’OMMISSIONER
ATTEST:
D.Jewel()
Commission Secretary
O:IPC-E-14-1 7kk2
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ORDER NO.33261 6