20150515Comments.pdf

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An IDACORP Company
LISA D. NORDSTROM
Lead Gounsel
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May 15,2015
VlA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-15-13
J. R. Simplot Company (Caldwell Facility) Special Contract - ldaho Power
Company's Gomments
Dear Ms. Jewell: "
Enclosed for filing in the above matter please find an original and seven (7)
copies of ldaho Power Company's Comments.
Very truly yours,
Xr-I rp*r-,w
Lisa D. Nodstrom
LDN:csb
Enclosures
1221 W. ldaho St. (83702)
P.O. Box 70
Boise, lD 83707
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I no rd stro m @ ida ho power. co m
Attomey for Idaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR
APPROVAL OF SPECIAL CONTRACT
AND TARIFF SCHEDULE 32TO PROVIDE
ELECTRIC SERVICE TO J. R. SIMPLOT
COMPANY'S CALDWELL FACILITY
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E-15-13
IDAHO POWER COMPANY'S
COMMENTS
ldaho Power Company ("ldaho Powe/' or "Company'), pursuant to the ldaho
Public Utilities Commission's ("Commission") Notice of Application and Notice of
Modified Procedure, Order No. 33280, issued in the above-referenced case, hereby
files the following Comments in support of the Special Contract for Electric Service
("Caldwell Special Contract"l) between ldaho Power and J. R. Simplot Company
("Simplot") and rates proposed in tariff Schedule 32.2
'The fully executed Caldwell Special Contract is Attachment 1 to ldaho Power's Application in
Case No. IPC-E-15-13.
'The proposed Schedule 32 for the new Caldwell facility is Aftachment 2 to ldaho Power's
Application in Case No. IPC-E-15-13.
IDAHO POWER COMPANY'S COMMENTS - 1
I. BACKGROUND
Simplot owns a facility in Caldwel!, ldaho, that cunently takes electric service
under ldaho Power's Schedule 19, Large Power Service. Because its operations at the
Caldwell facility have recently expanded, Simplot anticipates this facility may require an
electric demand in excess of 20,000 kilowatts ('kW"). ldaho Powe/s Schedule 19
requires customers with an aggregate power requirement receiving service at one or
more points of delivery on the same premises that exceeds 20,000 kW "to make special
contract arrangements with the Company."
ln August 2012, Simplot first contacted the Company requesting additional
capacity to serve its Caldwell facility. Simplot's intent for the new expanded Caldwell
facility was to replace the production at three existing Simplot facilities located in
Aberdeen, Nampa, and the existing facility in Caldwell. The existing plants would be
closed. The Company determined that in order to meet Simplot's request, it required
the addition of a second 28 MVA transformer and the construction of additional facilities
to serve the anticipated load at the expanded Caldwell facility. At that same time, in
anticipation that the new load at the expanded Caldwell facility would exceed 20,000
kW, Simplot requested the Company begin the development of a special contract and
the associated rates to serve the new large load.
On December 4, 2013, ldaho Power filed an application in Case No.
IPC-E-13-23 requesting approval of a special contract with Simplot for the new Caldwell
facility. Prior to filing the application in that case, ldaho Power and Simplot had not
come to agreement on all terms of the proposed contract, reaching an impasse on
certain provisions regarding limitations of liability and the appropriate method to be
IDAHO POWER COMPANY'S COMMENTS - 2
applied to determine the special contract rates. After Simplot, ldaho Power, and
Commission Staff filed comments on March 28,2014, and reply comments on April 11,
2014, the Commission issued Final Order No. 33038 on May 19, 2014, and
Reconsideration Order No. 33071 on July 7,2014, resolving the issue of limited liability3
and providing guidance with respect to the appropriate methodology to be utilized for
the determination of special contract rates.
On April 8, 2015, following further analysis and discussions with Simplot, the
Company filed its Application in this case requesting the Commission issue an order
approving the Caldwell Special Contract and rates proposed in tariff Schedule 32.
II. SPECIAL CONTRACT TERMS
In Order No. 33038, the Commission reaffirmed that *'each special contract
customer is considered a separate class with different conditions and contract terms
affecting their rates . . . ;' Order No. 33038 at 11. ldaho Power must account for a
number of factors when determining rates for new specia! contract customers, such as
the impact of the load on its system and the operational conditions that exist at the time
of application. ldaho Power determines rates for new special contract customers on a
case-by-case basis, taking into account the unique circumstances that exist when each
contract is developed. The negotiations between the Company and a large load
customer, regarding the terms and conditions to be included in a special contract,
attempt to identify and incorporate specific issues or differences unique to that single
customer and the electric service being requested. With regard to Simplot's Caldwell
Special Contract, there were a number of unique considerations that were taken into
3 The limitation of liability language approved by Order No. 33071 in Case No. IPC-E-13-23 is
found in Section 11 of the Caldwell Special Contract.
IDAHO POWER COMPANY'S COMMENTS - 3
account and provided for within the contract to provide additional flexibility for Simplot
as its new plant adjusts to its expanded operations.
Contract Demand. The Company's standard rate design for special contract
customers includes a Contract Demand Charge as part of their monthly billing
components. The Contract Demand is the monthly schedule of demand that ldaho
Power has agreed to make available to the large load custome/s facility. Because of
the size of the load for a customer being served under a special contract, variation of
the level of total demand required to serve that customer may have a significant impact
on the Company's operations. The level of Contract Demand the Company commits to
stand ready to provide on a monthly basis is not intended to vary without advance
notification to the Company of the desired change. This provides the Company with
ample time to respond to a change in the Ievel of Contract Demand, either by acquiring
additional capacity or by reducing the amount of capacity the Company may have
already acquired for the large load customer. The level of Contract Demand is initially
requested by the large load customer, and has a direct impact on the facilities required
to serve that customer, and, ultimately, on the overall revenue requirement needed to
be recovered from that customer. The Contract Demand Charge is intended to recover
a portion of the fixed costs for the facilities required to serve that specific large load
customer.
Simplot has requested an initial level of Contract Demand of 25,000 kW.
However, Simplot is uncertain what the ultimate level of Contract Demand will be until
the facility is fully operational and the plant is running at full capacity. Simplot
expressed concem that the lead times required for the notification of changes in the
IDAHO POWER COMPANY'S COMMENTS - 4
level of Contract Demand may prove to be too restrictive in the near term. The concem
was that Simplot may end up paying for a level of contract demand that was not
ultimately needed and would not be able to reduce it lmmediately because of the
notification lead time requirement. Or conversely, if Simplot set the level of Contract
Demand too low and ultimately needed more demand, in which case it would either
curtail operations or incur daily excess demand charges until a time when it could
increase the level of Contract Demand.
Therefore, in recognition of the uncertainty in the level of Contract Demand, the
Company and Simplot agreed to a temporary modification of the standard language for
notification requirements. Section 5 of the Caldwell Special Contract describes the
Contract Demand provisions agreed upon between the Company and Simplot. ln order
to provide flexibility for Simplot regarding changes to the initia! leve! of Contract
Demand, the Company modified the restrictions on changes (increases or decreases)
during the first 12 months after service under Schedule 32 is applicable. During that
initial period, to facilitate variation in actual production and energy consumption, Simplot
may request a change to the contract demand by 1,000 kW per month with 30 days'
written notice and up to 5,000 kW per month with three months'written notice.
Afterthe first 12 months, if the increase is between 1,000 kW and 10,000 kW,
Simplot must provide written notice to ldaho Power of its desire to increase its Contract
Demand at least six months in advance of the first day of the month it desires the
additiona! capacity to be made available. lf the increase in Contact Demand is greater
than 10,000 kW, Simplot must provide written notice to ldaho Power at least 12 months
in advance of the first day of the month it desires the additional capacity to be made
IDAHO POWER COMPANY'S COMMENTS - 5
available. ln order to limit frequent changes up and down, the new level of Contract
Demand may not be decreased for a minimum of six months. Simplot will not increase
its Contract Demand more than 15,000 kW in any 12-month period.
Simplot will provide ldaho Power written notice of requests to decrease its
Contract Demand at least three months in advance of the first day of the month in which
Simplot desires its decreased Contract Demand to be effective. Simplot cannot
decrease its Contract Demand more than 15,000 kW in any 12-month period.
Power Factor. The Company's standard power factor requirement for large load
special contract customers is to maintain a power factor of 95 percent or greater. The
special contract customer may be required to provide additional equipment or facilities
in order to maintain a power factor of 95 percent or greater. However, with uncertainty
of the ultimate !eve! of power requirement and the impact on the power factor that may
occur when all of the equipment is fully operational, the quantification of the adjustment
or the need for additiona! facilities is unknown. Therefore, in order to accommodate the
Caldwell facility's transition to a special contract, the Company and Simplot agreed to a
temporary modification to the Company's power factor requirements for special contract
customers in order to provide time to analyze the power needs at the Caldwell facility
and the changes required to meet the Company's power factor requirements. The
Caldwell Special Contract provides that during the first 12-month period after service
under Schedule 32 is applicable, Simplot must maintain a power factor of 90 percent or
greater, or the Company wil! adjust Simplot's Billing Demand upward by the process
outlined in Section 7.2 oI the Caldwell Special Contract. The 90 percent power factor
requirement is the same requirement that exists for all Schedule 19 customerc. After
IDAHO POWER COMPANY'S COMMENTS - 6
that initial period, Idaho Power will require Simplot's power factor to be 95 percent or
greater, as required by other large load special contract customerc. lf it is not, the
Company wi!! adjust the Billing Demand upward by the process outlined in Section 7.2
of the Caldwell Special Contract.
Rates and Charses. With respect to the Caldwell Special Contract, ldaho Power
evaluated the unique circumstances of the new facility to determine the appropriate rate
methodology and pricing structure that would be reasonable, consistent with previous
cost-of-service determinations, and in the public interest by limiting any potential undue
impact of upward rate pressure on the Company's other customer classes.
Through this evaluation, ldaho Power determined that the circumstances
sunounding the new Caldwell facility warranted fully-embedded, cost-based pricing
according to the Company's most recently reviewed class cost-of-service study ("2011
Study") from Case No. IPC-E-11-08 ("2011 Rate Case"). This determination was based
on the fact that the new Caldwell facility is intended to replace three existing facilities
(Aberdeen, Nampa, and Caldwell) and therefore does not represent a true incremental
!oad, but rather the consolidation of existing load currently subject to fully-embedded
rates. Although the estimated load at the new Caldwell facility is greater than the
combined load of the three facilities slated for consolidation, the level of incremental
load above the combined load of these three operations is estimated to be less than
5,000 kW. Based upon these unique circumstances, the Company developed the rates
and charges for the Caldwell Special Contract to reflect the full embedded cost of
providing electrical service to the new Caldwellfacility.
IDAHO POWER COMPANY'S COMMENTS - 7
To calculate the Caldwell Special Contract rates, ldaho Power applied the most
current cost-of-service information available to projected electrical requirements
provided by Simplot. The foundation for these calculations was the 2011 Study
reviewed in the 2011 Rate Case, reflecting the final revenue requirement apprcved in
the 2011 Rate Case. At a high level, the 2011 Study was modified to reflect the
removal of the three Simplot Schedule 19 locations that the new Caldwe!! facility is
intended to replace and the addition of the new Caldwell facility as an individual rate
class. Costs were then allocated to the new Caldwell facility according to projected
loads and the Company's methodology from the 2011 Study.
Once the revenue requirement from the 2011 Rate Case had been appropriately
allocated to the Caldwell Special Contract, rates were adjusted to reflect changes that
have occurred since the conclusion of the 2011 Rate Case. Specifically, the Company
adjusted the special contract tariff to capture base rate changes resulting from
Commission orders related to the Open Access Transmission Tariff ('OATT') deferral
adjustment,4 the depreciation study adjustment,s the Boardman balancing account
adjustment,o the Langley Gulch power ptant adjustment,T and, most recently, the update
to base net power supply expenses effective June 1,2014.8 To appropriately reflect the
outcomes of these cases, ldaho Power adjusted the Caldwell Special Contract rates in
the same manner as the fina! approved rate changes from those cases. For example,
oCase No. IPC-E-I246, Order No. 32540 (April 27, 2012).
u Case No. IPC-E-12-08, Order No. 32559 (May 31 ,2012).
t Case No. IPC-E-12-09, Order No. 32549 (May 17, 20121.
'Case No. IPC-E-12-14, Order No. 32585 (June 29, 20121.
t Case No. IPC-E-I4-05, Order No. 33049 (May 30, 2014).
IDAHO POWER COMPANY'S COMMENTS - 8
the OATT deferral adjustment was applied to all classes on a uniform cents-per-
kilowatt-hour ("kWh") basis; therefore, cents-per-kWh rates for the Caldwell Special
Contract were adjusted using the same cents-per-kWh adder approved in Case No.
IPC-E-12-06. The sum of the Caldwell Special Contract monthly charges will also
include charges as set forth in Schedule 55 (Power Cost Adjustment), Schedule 91
(Energy Efficiency Rider), and Schedule 95 (Adjustment for Municipal Franchise Fees),
if applicable.
The rates resulting from the calculations described above are reasonable,
consistent with previous cost-of-service determinations, and in the public interest.
Furthermore, the use of the 2011 Study as the basis for this analysis is in alignment with
the Commission's direction provided in Case No. IPC-E-13-23.e The intent of this rate-
setting methodology was to develop the customer-specific cost of providing electrical
service to the new Caldwell facility utilizing the most cunent cost-of-service information
available. Because the new Caldwell facility primarily reflects the consolidation of
existing load rather than the addition of entirely new load, the fully-embedded, cost-
based rates appropriately recover the cost of providing electrical service to the new
Caldwell facility, and limit the potential undue impact of upward rate pressure on the
Company's other customer classes.
Effective Date. Another unique challenge the Company faced when developing
the Caldwell Specia! Contract is the Effective Date for Schedule 32, and the relationship
between the Effective Date and the Applicability section of Schedule 32. Historically,
special contract customers of ldaho Power have requested a special contract knowing
e Case No. IPC-E-13-23, Order No. 33038 at 12 (May 19,2014), "[W]e find that a rate utilizing
cost-of-service as a starting point for negotiation is consistent with prior Commission Orders and is fair,
lust and reasonable."
IDAHO POWER COMPANY'S COMMENTS - 9
that they will be above the 20,000 kW threshold at the beginning of their operations, or
with some anticipated certainty as to the date when the special contract will need to be
in place. While Simplot expects its aggregate load at the Caldwell facility will ultimately
be above the 20,000 kW threshold, the exact timing of when that event may occur is
uncertain. Until that time, Simplot desires to continue receiving electric service under
the provisions of Schedule 19. The challenge occurs because ldaho Powe/s Schedule
19 states that if a customer exceeds 20,000 kW, the customer is ineligible for service
under Schedule 19 and is required to make special contract arrangements with the
Company.
ln order to provide Simplot with the desired flexibility to remain on Schedule 19
and to have Schedule 32 in place for the time when Simplot's load exceeds 20,000 kW,
the Company has included an Applicability section and language, both in Schedule 32
and within the Caldwell Special Contract. The Applicability section of Schedule 32
states that service under the schedule is applicable beginning the first day of the month
in the first month that the aggregate power requirement at the Caldwell facility exceeds
20,000 kW. While Simplot is uncertain as to the exact timing of when the facility's
electric demand will exceed 20,000 kW, it has indicated this may occur as early as the
summer of 2015. In order to remain in compliance with all of the Company's schedules,
ldaho Power requests that the Commission approve the Caldwell Special Contract and
Schedule 32 effective on or before June 1, 2015, with service under Schedule 32
applicable the first day of the month in the first month in which the aggregate power
requirement at the new Caldwell facility exceeds 20,000 kW.
IDAHO POWER COMPANY'S COMMENTS - 1O
ilt. coNcLustoN
The Company requests the Commission approve the Caldwell Special Contract
between ldaho Power and Simplot without modification. The Company believes the
Caldwell Special Contract incorporates the terms and conditions necessary to fumish
Simplot's total energy requirements and prcvides for the unique characteristics and
desired flexibility for the electric service delivered to Simplot's Caldwell facility. ln
addition, the Company requests the Commission approve Schedule 32 effective June 1,
2015. Schedule 32 outlines the rates which are reflective of the cost of providing
service to the new Caldwell facility according to the most cunent cost information
available. These rates will appropriately recover the cost of providing service to the new
Caldwell facility, while limiting the potential for cost shifting between the Caldwell
Special Contract and the Company's other customer classes. These rates are
reasonable, consistent with past cost-of-service determinations, and in the public
interest.
DATED at Boise, ldaho, this 15h day of May 2015.
Attomey for ldaho Power Company
]DAHO POWER COMPANY'S COMMENTS - 11
GERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 1sft day of May 20151 served a true and conect
copy of IDAHO POWER COMPANY'S COMMENTS upon the following named parties
by the method indicated below, and addressed to the following:
Commission Staff
Karl T. Klein
Deputy Attomey Genera!
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-OOT 4
J. R. Simplot Company
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27h Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Don E. Sturtevant
Director, Energy Purchasing
J. R. Simplot Company
P.O. Box27
Boise, Idaho 83707 -0027
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FAXX Email [e-mail]
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_FAXX Email [e-mail]
oreo@ richardsonadams.com
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FAX
Email do n. sturtevant@simplot. com
Christa Bearry, Legal Assistant
IDAHO POWER COMPANY'S COMMENTS - 12