20150507Comments.pdf

KARL T. KLEIN . .:,,:
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION ?T I,i: -I P;1 1: 11
PO BOX 83720
BOISE, IDAHO 93720_0074 .i,j,,.,; , ,.r.,;,,,: ,._.,.I I :i' ' i ii..[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472 W - WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORB THE IDAHO PUBLIC UTILITIES COMMISSION
rN THE MATTER OF rDAHO POWER )coMpANy's APPLICATION FOR ) CASE NO. IPC-E-15-05
AUTHORITY TO IMPLEMENT FIXED COST )
ADJUSTMENT RATES FOR SERVICE FROM ) COMMENTS OF THE
JUNE 1,2015 THROUGH MAY 31,2016. ) COMMISSION STAFF
)
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company' s Application.
BACKGROUND
On March 13,2015, the Company applied to the Commission for authority to implement
Fixed Cost Adjustment (FCA) rates for electric service from June 7,2015 through May 31,
2U6.t The Company calculates the FCA at the end of each calendar year after it knows its
annual customer count and their energy use. The Company then recovers the calculated FCA
balance through rates using the same period as the Power Cost Adjustment (PCA), which is June
I through May 31.
t In July 2014, the Commission opened a separate case for its Staff, the Company, and other interested persons to
evaluate the FCA mechanism and whether it effectively removes the Company's financial disincentive to
aggressively pursue energy efficiency programs. See Case No. IPC-E-14-17, Order No. 33068. The Commission
has not issued a final Order in that case. When it does, that Order will apply to future FCA cases.
STAFF COMMENTS MAY 7,2015
The FCA separates the Company's ability to recover its fixed costs from the revenues it
derives from selling energy.' The FCA thus removes the Company's financial disincentive to
invest in energy efficiency resources and demand-side management (DSM) resources that might
otherwise decrease its customers' energy use and, conseciuently, the fixed costs it recovers by
selling energy. Under the FCA, the Company charges customers when it recovers less "actual
fixed costs" than the base level of fixed costs that the Commission authorized it to recover
through rates during the last general rate case.3 On the other hand, the Company credits
customers when its "actual fixed costs" exceed the base level of fixed costs. The Company's
FCA rates are specified in tariff Schedule 54 and apply to the residential and small general
service customer classes.
The Company's Application summarizes how it calculates the FCA. The Company first
identifies the amount of hxed costs that the Commission has authorized it to recover from the
residential and small general service customer classes. The Company calculates the fixed costs
by multiplying the number of customers in each class by the fixed-cost per customer rate that
was set in the Company's last general rate case. The Company then compares the authorized
recovery amount to the weather-adjusted fixed-cost amount recovered. The Company calculates
the fixed costs it recovered by multiplying its weather-normalized sales per customer class by the
fixed-cost per energy rate as set in the Company's last general rate case. The difference between
the authorized recovery amount and the "actual fixed costs" recovered results in an adjustment
each year to the FCA rate.
In this case, the Company calculates the difference between the authorized recovery
amount and the fixed costs recovered to be $15,992,109 for the residential class and $889,600 for
the small general service class, for a total amount to be recovered through this year's FCA of
$16,881,710 (the FCA "deferral balance"). This proposed FCA deferral balance is incrementally
more than the FCA balance currently collected through rates. To recover this incremental
increase, the Company proposes to raise residential billing rates by 035% and small general
service billing rates by 0.32oA, for an overall rate increase of 0.35%. The new FCA rate would
2A utility's "fixed costs" are its costs to deliver energy that do not vary with energy use, output, or production and
remain relatively stable between general rate cases. They include costs associated with long-lasting infrastructure
(e.g., power plants, power lines, and substations) and certain administrative costs.
3 "Actual fixed costs" refers to the fixed costs recovered through weather-normalized sales.
STAFF COMMENTS MAY 7,2015
be 0.3258 cents per kilowatt-hour (kWh) for the residential class and 0.4099 cents per kWh for
the small general service class.
STAFF ANALYSIS
Staff has reviewed the Company's filing and verified the Company's calculation and use
of the fixed cost per customer (FCC) and fixed cost per energy (FCE) components and the
resulting balance of uncollected fixed costs. Staff also verified that weather-normalized sales per
customer for both residential and small commercial classes were lower in2014 in relation to the
base year established in the Company's 2011 general rate case. The result is that weather-
normalized sales were insufficient to enable the Company to collect its authorized fixed costs.
Staff thus recommends that the Commission accept the Company's proposed $16.9 million net
FCA deferral balance and residential and small commercial FCA rates for the 2015 PCA year.
2014 FCA
Weather-normalized residential and small commercial use per customer continued to
decline when compared to 2011 normalized consumption established during the Company's last
general rate case. The decline in use per customer for the two affected classes results in an
under-recovery of fixed costs and a surcharge to customers. The 2014FCA balance of $16.8
million is $1.9 million more than the existing FCA. While the Company describes this increase
as "incremental" from the prior year, the prior year's $14.9 million FCA was the highest-ever
and 67Yo more than the 2012 FCA balance of $8.9 million. This is the seventh straight year out
of the FCAs eight years of existence that the combined FCA balance results in a surcharge to
customers.
STAFF COMMENTS MAY 7,2015
Annual FCA Defenal Balances
Period Residential Small Commercial Total
2007-2008 ($3.6 million)$1.2 million ($2.4 million)
2008-2009 $1.3 million $1.4 million $2.7 million
2009-2010 $5.2 million S1.2 million $6.3 million
2010-20t1 $7.9 million $1.4 million $9.3 million
20tr-2012 $8.8 million $1.5 million S10.3 million
2012-2013 $8.4 million $530,000 $8.9 million
2013-2014 S14.3 million $573,000 S14.9 million
20r4-2015 $15.9 million $890,000 $16.9 million
Idaho Power DSM Savings
Although the Commission adopted the FCA to remove the Company's disincentive to
acquire DSM resources, recent years have demonstrated very little relationship between FCA
deferral balances and the Company's energy savings acquisitions. Beyond the lack of any
meaningful symmetry, annual FCA balances have nearly doubled since 2010 while the Company
has experienced a large net decline in energy savings.
The Company's2014 Annual DSM report shows that the Company's recent efforts to
improve its residential energy efficiency programs resulted in a 25Yo increase in residential
energy savings. While Staff is encouraged by this improved performance, the FCA generally
produces surcharges when customer counts increase and weather-adjusted use-per-customer
decreases. The Company's most recent IRP forecasts that both of these established trends will
continue, which means that customer surcharges will likely continue, as they have since 2008,
regardless of the impact of the Company's energy efficiency programs.
The FCA Rate
In keeping with established practice from previous FCA cases, the Company proposes
spreading the FCA surcharge uniformly to both customer classes on an equal percentage basis.
Using weather-normalized forecasted sales for June 1 ,2015 - May 31,2016, the Company has
determined that a 0.35% surcharge over current residential and small commercial billing rates
STAFF COMMENTS MAY 7,2075
provides a sufficient opportunity for the Company to recover its approved fixed costs.a Staff
confirmed that the FCA forecasted sales align with the forecast used in the Company's 2014-
)ots pca filing.
Staff verified the Company's 2014 FCA calculation for the residential and small
commercial classes. The combined FCA for the two classes is about $16.9 million, which is
about $1.9 million more than combined class revenues. This increase of 0.42Yo from existing
base revenue does not exceed the 3Yo cap on annual rate increases that the Commission set in
Order No. 30267.5
If the Commission approves the proposed rates, the residential FCA rate will increase
from 0.2913 cents per kWh to 0.3258 cents per kWh. For an average residential customer using
1050 kwh per month, the new FCA rate results in an increase of 36 cents per month over the
current FCA charge. For small commercial customers using 450 kwh per month, the proposed
FCA rate would increase from 0.3709 cents per kWh to 0.4099 cents per kwh, which results in a
monthly increase of 17 cents. Staff believes these rates provide the Company adequate
opportunity to collect its authorized fixed costs in the next FCA year.
Future FCA Filings
Staff acknowledges the Company's effort to improve its FCA filing this year with new
exhibits on the FCA Annual Calculation, FCA Rate Determination, and Summary Revenue
Impact. The new exhibits makes processing the Company's annual FCA more transparent and
efhcient given the timeframe for review. Staff recommends that, in future filings, the Company
provide these exhibits as electronic, executable files to supplement the hard copies the Company
already files. Staff also appreciates that the Company's testimony describes the FCA increase in
the context of the 3Yo cap, and encourages the Company to continue that practice in future
filings.
Pursuant to Order No. 33047, the Staff and parties held workshops to investigate how the
FCA mechanism can be improved (Case No. IPC-E-14-17). As a result of these workshops,
parties have filed a Settlement Stipulation for the Commission's consideration which includes
4 See Exhibit No. 5.5 Dividing the FCA increase ($1,969,268) by the total base revenue for the Company's test year for Residential and
Small General Service customer classes ($470,477,052) shows that the FCA increase is 0.42Yo higher than base
revenue.
STAFF COMMENTS MAY 7,2015
several agreements. These include: 1) replacing weather normalized billed sales with actual
billed sales when determining the FCA balance; 2) clarifying the calculation of the 3%o cap;3)
acknowledging that concerns about the FCE and FCC calculations are more effectively
addressed when base rates are reset; and 4) agreeing to consider modified rate designs for the
residential and small commercial classes.
While Staff believes that these modifications will improve the FCA if the Commission
approves the Settlement Stipulation, the most immediate change for future FCA filings will be
calculating the FCA balance on actual rather than weather-normalized sales. As was the case last
year, weather normalization can have a very large impact on the FCA deferral balance, and this
year's filing would have been easier to analyze had actual sales data been included.
CUSTOMER NOTICE AND PRESS RELEASE
Idaho Power filed copies of its press release and customer notice with its Application.
Staff reviewed both documents and determined that they comply with the Commission's
Procedural Rule 125, IDAPA 31.01.01.125.
The customer notice was mailed with cyclical billings. The last notice was mailed on
Apri|22,2075, which allowed customers a reasonable opportunity to file timely comments with
the Commission by the May 7,2015 deadline.
CUSTOMER COMMENTS
As of May 7,2015, the Commission has received no comments from customers.
STAFF RECOMMENDATION
Staff recommends the Commission approve the Company's FCA filing with a net
deferral balance of positive $16,881,710 for 2014. Based on the Company's sales forecasting
efforts, the resulting FCA rates for 2014 would equal 0.3258 cents per kWh for residential
customers and 0.4099 cents per kWh for small commercial customers. Staff believes these rates
provide adequate opportunity for the Company to collect its deferred authorized fixed costs.
STAFF COMMENTS MAY 7,2015
Respecttully submitted this 7J!day of May 2015.
Technical Staff: Stacey Donohue
Daniel Klein
i:umisc/commentVipce t 5.5kksddetydk comments
Karl T. Klein
STAFF COMMENTS MAY 7,2015
CERTIFICATE SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7M DAY OF MAY 2015, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC.E.Is.Os, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE rD 83707-0070
E-mail: [e-mail]
dockets@ idahopower. com
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
7IO N 6TH STREET
BOISE ID 83702
E-mail: [e-mail]
ZACHARY L HARRIS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail : [e-mail]
CERTIFICATE OF SERVICE