20150313Harris Direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY EOR
AUTHORITY TO TMPLEMENT FIXED COST
ADJUSTMENT (*FCA") RATES FOR
ELECTRIC SERVICE FROM .'UNE 7,
201,5, THROUGH MAY 31, 2076.
CASE NO. IPC-E-15-05
IDAHO POWER COMPANY
DIRECT TESTIMONY
OE
ZACHARY L. HARRIS
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address j-s I22l West Idaho Street, Boise, Idaho 83702.
Please state your name and business address.
My name j-s Zachary L. Harris and my business
By whom are you employed and in what capacity?
f am employed by Idaho Power Company ("Idaho
Please describe your educational background.
In December of 2008, I received a Bachelor of
Power" or "Company") as a Regulatory Analyst in the
Regulatory Affairs Department.
Science degree in Accounting from Brigham Young University-
Hawaii. fn December of 2017, I received a Master of
Science degree in Accounting from Boise State University.
After I began my career with Idaho Power in May 20L7, I
attended the electric utility ratemaking course offered
through New Mexico State University's Center for Public
Util-ities. I also attended the "Cost-of-Service Concepts
and Techniquesr" as weII as the "Rate Design for El-ectric
Utilities" courses offered by Electric Utility Consultants,
Inc., in 2072.
o.What is the purpose of your testimony?
A. The purpose of my testimony is to descrj-be the
Company's request to implement its annual- Eixed Cost
Adjustment (*FCA") rates per Idaho Public Utilities
Commission ("Commission") Order No. 32505 (Case No. IPC-E-
11-19), which approved the ECA as a permanent rate
HARRIS, DI 1
Idaho Power Company
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mechanism for the Residential and Smal-l- General Service
customers. The Commission's subsequent Order No. 3273L
issued i-n Case No. IPC-E-11-19 directed that the FCA
mechanism continue with its existj-ng methodology.
Specifically, my testimony wil-l- discuss three areas
rel-ated to the FCA mechanism and Schedule 54, Fixed Cost
Adjustment. Eirst, I will briefly discuss the FCA
mechanism itself and how the FCA amount is determined.
Second, I will describe the determination of the 201-4 FCA
amount. Lastly, I will discuss the calculation of the FCA
rates the Company j-s proposing to go into effect on June 7,
2075.
I. FIXED COST ADiN'STI'ENT MECIIA}IISM
What is the purpose of the FCA mechanism?
The FCA is a true-up mechanism that
"decouplesr" or separates, energy sales from revenue in
order to remove the financial disincentive that exists when
the Company invests in demand-side management resources.
Under the ECA, rates for Residential Service (Schedules 7,
3, 4, and 5) and Smal-I General Service (Schedule 7)
customers are adjusted annually to recover or refund the
difference between the level of fixed cost recovery
authorized by the Commission in the Company's most recent
general rate case and the l-evel of fixed cost recovery that
HARRIS, DI 2
Idaho Power Company
1 the Company received based upon the weather-normalized
2 energy sales during the previous calendar year.
3 Q. Please describe the ECA mechanism.
4 A. For both the Residential and Smal1 General-
5 Service classes, the FCA mechanism is the same. The
6 formula used to determine the FCA amount is:
1 ECA : (CUST X ECC) (NORM X ECE)
I Where:
9 FCA : Fixed Cost Adjustment;
10 CUST : Average Number of Customers, by class;
11 FCC : Fixed Cost per Customer rate, by class;
72 NORM : Weather-Normali-zed Energy, by class; and
1-3 FCE : Eixed Cost per Energy rate, by class.
1,4 O. How is the ECA amount determined?
15 A. The FCA amount is the difference between the
16 Company's Ievel of "authorj-zed fixed cost recovery" (CUST X
tl ECC) and the level of weather-adjusted "actual fixed cost
18 recovery" (NORM X FCE).
19 O. Can the FCA true-up amount be ej-ther posj-tive
20 or negative?
21 A. Yes. The ECA true-up amount can be either
22 positive or negatj-ve. If the FCA is positive, that
23 indicates the Company's authorized level- of fixed cost
24 recovery is greater than the l-eveI of fixed costs recovered
25 through the energy rate. This stems from the fact that the
HARRIS, DI 3
Idaho Power Company
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growth rate in weather-normalized energy sales is less than
the growth rate in customers; i.e., the use per customer
has decreased. The effect would be that the Company has
under-collected its authorized l-eve1 of fixed costs. In a
similar fashion, if the ECA is negative, that indicates the
Company's authorized fixed cost recovery amount is less
than the fixed costs determined to have been recovered
through the energy rate and results in a refund.
II. FCA DEEERMINATION FOR CJAI.EIIDAR YEAR 2OL4
o.
2014?
Did the rates for the FCC and FCE change in
A. No. The FCC and FCE rates used to determine
the 2074 ECA bal-ance did not change and are the same rates
used to determine the 2073 FCA balance. The FCC and FCE
rates were established in the Company's most recent general
rate case, Case No. IPC-E-11-08, and are found in the
Company's tariff under Schedul-e 54, Fixed Cost Adjustment.
O. How is the authorized leveI of fixed cost
recovery derived?
A.The authorized level of fixed cost recovery is
the product of the ECC and the average number of customers,
by class. The Company uses a prorated customer count based
on the number of active utility service agreements at the
end of each month. This approach applies the same
methodol-ogy that was used to determine customer counts in
HARRIS, DI 4
Idaho Power Company
1 the Company's most recent general rate case. The annual
2 average customer count is derived by calculating the
3 average of the 12 monthly prorated customer counts.
O. How is the actual l-eveI of fixed cost recovery
5 determined?
A. The actual level of fixed cost recovery is the
7 product of the ECE and the weather-normalized energy sales
8 for the calendar year, measured in kilowatt-hour (*kIllh") .
O. Does the Company compute a monthly FCA balance
10 and report the estimated monthly ECA balance to the
l-1- Commissi-on?
12 A. Yes. Although the FCA is an annual mechanism
13 that is ul-tj-mately calcul-ated and determined using customer
t4 count and energy sales data for the entlre calendar year,
15 to maintain compl-j-ance with Generall-y Accepted Accounting
1,6 Principles, a monthly FCA balance is estimated and recorded
L7 in the Company's accounting records. At year-end, once the
18 annual ECA amount j-s determJ-ned, an adjustment is made to
L9 the sum of the previously recorded 12 monthly reported
20 estimates to alj-gn with the annual- FCA balance.
27 Since 2009, the Company has continued to report the
22 estimated monthly FCA balance in the monthly FCA Report
23 provi-ded to the Commission. Exhibit No. 1 is a copy of the
24 monthly ECA Report for calendar year 20L4.
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HARRIS, DI 5
Idaho Power Company
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o.Were any adjustments made to these estimated
amounts once the Company's final year-end 2014 weather-
normal-ized sales and customer count informati-on became
avallabl-e?
A.Yes. Because the monthly ECA balance is an
estimate made for accounting compliance, an adjustment is
typically needed to align with the final- annual FCA amount
for fi-nancj-al reporting purposes. This adjustment varies
from year to year. When the Company's final annual average
customer counts and annual weather-normal-ized energy sales
were determined, the annual "authorized fixed cost
recovery" (average customer count X FCC) and the "actual
fixed costs recovered" (weather-normalj-zed energy X FCE)
could be calcul-ated.
The difference between this year-end determinatj-on
of the FCA balances and the sum of the 12 monthly reported
estimates of the FCA bal-ances required adjustments to align
with the annual FCA amount to be recorded in the Company's
2074 financial statements.
The adjustment amounts can be found in Exhibit No.1.
A downward adjustment of ($578,024.16) was made for the
Residential customer class, reflected on line 6 column O.
A downward adjustment of ($26,978.08) was made for the
Small General Service customer class, reflected on l-ine 20
HARRIS, DI 6
Idaho Power Company
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column O. The total downward adjustment for both customer
cfasses is ($605,002.24) .
o.What is the total calculated amount of the
FCA, not including interest?
A.The total calcul-ated amount of the FCA for
both the Residential and Small- General Service customer
classes, not including interest, is $16,751,798.39.
Exhibit No. 2 shows the calculation for each customer
cl-ass. The calculated FCA balance for the Residential
customer class, not including interest, is $15r869,567.83.
This amount is also found in Exhibit No. 1, line 6 col-umn
P. The calculated ECA bal-ance for the SmaII General
Service customer class, not including interest, is
$882,230.56. This amount is also found in Exhibit No. 1,
Iine 20 column P.
O. What is the total amount of the 2014 FCA,
including interest, the Company is requesting to implement
in rates on June L, 201,5?
A.The total- amount of the 2074 FCA the Company
is requesting to begin recovering in rates on June L, 20L5,
is $16,887,710.40, refl-ected on Iine 32, column U, of
Exhibit No. 3. The ECA for the Residential- cfass i-s
$15,992,1,09.41 reflected on line 15, column U, of Exhibit
No. 3. The FCA for the SmaII General Service Class is
$889,600.99 reflected on line 29, column U, of Exhibit No.
HARRIS, DI 7
Tdaho Power Company
1 3. Exhibit No. 3 shows the FCA balances and adjustments,
2 plus interest, through May 201,5. Exhibit No. 3 and Exhibit
3 No. 1 both contaln the same j-nformation as the FCA Report
4 sent to the Commission each month; however, Exhibit No. 3
5 cal-culates interest from January 20L4 through May 201-5
6 while Exhibit No. 1 shows that lnformation only for the
1 201,4 cal-endar year.
I Q. What is the significance of these numbers with
9 respect to the Company's recovery of its fixed costs?
10 A. Because the Residential ECA 1s a positj-ve
11 number, it means that the average use per customer has
12 decreased from the l-eve1 establ-ished in the Company's last
13 general rate case. Therefore, in accordance with the
t4 approved mechanism, the Residential class will receive an
15 adjustment to allow for recovery of the fixed costs that
76 were not collected, on a weather-normalized basis, through
L7 the energy charges during the year. The same holds true
18 for the Sma1l General Service class, meaning that the use
t9 per customer for this cl-ass has also decreased, and the
20 Company has under-col-lected its authorized l-evel of fixed
2L costs on a weather-normalized basis for the Small- General
22 Service c1ass.
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Idaho Power Company
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III. CALCI'I.AETON OF THE FCA RATE
O. Please describe the calculation of the FCA
rates the Company is proposing to go into effect on June 7,
2075.
A. The ECA rates the Company proposes to go into
effect on June L, 20L5, were calculated by taking the FCA
balances for each customer cl-ass described above and
dividing by the respective energy sales forecast for the
June 7, 20L5, through May 31, 20L6, time frame. This j-s
the same period as the Power Cost Adjustment test year.
O.What has the Company determined the forecast
energy sales to be for both the Residential and Sma11
General Service classes?
A.The Company's forecasted energy sales are
5,006,760,739 kwh for the Residentlal class and 739,242,087
kwh for the Smal-I General Service class.
O. What are the corresponding FCA rates for the
Residential and Small General Service classes based on a
combined and equal ECA rate changer ds defined j-n the
approved mechanj-sm?
A.To recover the authorized l-evel of fixed
costs, the FCA rate for the Residential class would be
0.3258 cents per kWh and the corresponding rate for the
Smal1 General Service class wou1d be 0.4099 cents per kwh.
HARRIS, DI 9
Idaho Power Company
1 The calculation of these rates is found in Exhibit No. 4.
2 ln Order No. 32505, the Commission ordered that the ECA
3 deferral bal-ance wil-I continue to be recovered or refunded
4 equally between the Residential and SmaII General Service
5 customer classes. Order No. 32505 at 9. Because the
6 Residential and SmaII General Service classes reduced their
7 energy consumption per customer such that the Company
8 under-collected its authorized leveI of fixed costs as
9 established in Case No. IPC-E-11-08, each cl-ass requires a
10 rate surcharge.
11 O. What is the difference between the FCA
72 deferral- balance currently in amortization and the proposed
13 FCA deferral balance?
1,4 A. In this filing, the Company is proposing to
15 collect rates based on an FCA deferral balance of
16 $16,881,110, which would be $1,969,268 more than the
71 current FCA deferral balance. In Order No. 33047, issued
18 in Case No. IPC-E-I-4-03, the Commission approved the total
L9 ECA deferral- balance of $74,9L2,442 with rates based on
20 that bal-ance ef fective for the period June l, 201,4, through
21, May 31 , 2 015 .
22 O. Does the proposed FCA balance exceed the 3
23 percent cap on annual increases over base revenue as
24 established in Order No. 30267?
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HARRTS, Dr 1_0
Idaho Power Company
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A.No, the proposed FCA bal-ance does not exceed
the 3 percent cap on annual j-ncreases over base revenue.
The proposed FCA balance is an increase of $1r 969,268 over
the existing ECA deferral balance. The total base revenue
for the Company's test year for the Residential and Small
General Service customer cl-asses is $470,477,052. The FCA
increase is 0.42 percent higher than base revenue
($1,969 ,268/$q10,471 ,052) , which is bel-ow the 3 percent
cap.
O. What is the percentage change in bilIed
revenue as measured from total billed amounts currently
recovered from Residenti-a1 and Smal1 General Service
customers, including the current ECA?
A.The total FCA deferral balance of
$16,881,710.40, including interest, the Company i-s
proposlng to collect through the FCA rates effective June
l, 20L5, through May 31, 20L6, represents an annual
increase of 0.35 percent from current billed rates for the
affected customer cl-asses. The percentage change in billed
revenue is found in Exhibit No. 5.
o.How will the Company incorporate the ECA
Sma11 General Servicesurcharges for the Residential and
classes on customers' bi1ls?
HARRTS, Df 11
Idaho Power Company
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A. The Company proposes to continue includj-ng the
FCA with the Annual Adjustment Mechanism Charge on
Residential and Sma1l General Service customers' bi11s.
O. Does this complete your testi-mony?
A. Yes, it does.
HARRTS, Dr 1"2
Idaho Power Company
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ATTESTATION OE TESEI}TONY
STATE OF IDAHO )
) ss.
County of Ada )
I, Zachary L. Harris, having been duly sworn to
testify truthfully, and based upon my personal knowledge,
state the following:
I am employed by Idaho Power Company as a Regulatory
Analyst and am competent to be a witness in this
proceeding.
I decl-are under penalty of perjury of the laws of
the state of Idaho that the foregoi-ng pre-filed direct
testimony is true and correct to the best of my j-nformation
and belief.
DATED this 13th day of March 201,5.
SUBSCRIBED AND SWORN to before me this 13th day of
March 2075.
Notary Public
Residing at:
exp].res:
HARRTS, DI 13
Idaho Power Company
Harris
"aOt{f .*,- -
'oE u rc
for Idaho
My commisslon
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-I5-05
IDAHO POWER COMPANY
HARRIS, DI
TEST!MONY
EXHIBIT NO. 1
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Exhibit No. 1
Case No. IPC-E-15-05
Z. Harris, IPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. !PC-E-l5-05
IDAHO POWER COMPANY
HARRIS, DI
TESTIMONY
EXHIBIT NO.2
2014 Fixed Cost Adjustment Annual Galculation
Residential FCA Calculation
FCC
Customer Count
Authorized Recovery
FCE
Normalized Energy
Actual Recovery
2014 Residentia! FCA Balance
Small General Service FGA Galculation
FCC
Customer Count
Authorized Recovery
FCE
Normalized Energy
Actual Recovery
2014 Small General Service FCA Balance
Total2014 FCA Balance
Note: Amounts do not include interest
$650.63
411.470.09
$267,714,7U.07
$0.051602
$15,869,567.83
$360.57
28,046.05
$10,112,565.77
$0.068633
Exhibit No. 2
Case No. IPC-E-15-05
Z. Hanis,lPC
Page 1 of1
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-15-05
IDAHO POWER COMPANY
HARRIS, DI
TEST!MONY
EXHIBIT NO,3
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Exhibit No. 3
Case No. IPC-E-15-05
Z. Hanis,lPC
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Exhibit No. 3
Case No. IPC-E-15-05
Z. Harris,lPC
Page2 of2
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC-E-15-05
IDAHO POWER COMPANY
HARRIS, DI
TESTIMONY
EXHIBIT NO.4
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Case No. IPC-E-15-05
Z. Hanis,lPC
Page 1 of 1
BEFORE THE
IDAHO PUBLIC UTILITIES GOMMISSION
GASE NO. IPC-E-15-05
IDAHO POWER COMPANY
HARRIS, DI
TESTIMONY
EXHIBIT NO.5
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Case No. IPC-E-15-05
Z. Harris,lPC
Page 1 of 1
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