20150522final_order_no_33303.pdf

Office ofthe Secretary
Service Date
May 22,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION FOR )CASE NO.IPC-E-15-13
APPROVAL OF SPECIAL CONTRACT AND )
TARIFF SCHEDULE 32 TO PROVIDE )
ELECTRIC SERVICE TO J.R.SIMPLOT )ORDER NO.33303
COMPANY’S CALDWELL FACILITY )
On March 13,2015,Idaho Power Company (the “Company”)applied to the
Commission for an Order approving:(1)its April 8,2015 contract to provide electric service to
J.R.Simplot Company’s new Caldwell,Idaho facility;and (2)rates as reflected in proposed
tariff Schedule 32.The Company asks that the contract and proposed Schedule 32 take effect on
or before June 1,2015.
On April 17,2015,the Commission issued a Notice of Application and Notice of
Modified Procedure that set a May I 5,2015 deadline for interested persons to file comments and
a May 21,2015 deadline for the Company to file any reply comments.Commission Staff and
the Company filed the only comments in the case and support the Application.
Having reviewed the record,we enter this Order granting the Company’s Application
as discussed below.
BACKGROUND
On December 4,2013,the Company applied to the Commission for an Order
approving an earlier special contract in which the Company was to provide electric service to
Simplot’s Caldwell facility.See Case No.IPC-E-13-23.The Company and Simplot had not,
however,agreed to all contract terms when the Company filed its Application.The companies,
for example,disagreed on certain limited liability provisions and pricing methodology.The
Commission ultimately resolved the limited liability issue and provided guidance about the
appropriate way to determine the special contract rates.See Order Nos.33038 and 33078.
Specifically,the Commission stated “that a rate utilizing cost-of-service as a starting point for
negotiation is consistent with prior Commission Orders and is fair,just and reasonable.”Order
No.33038 at 12.
Following resolution of Case No.IPC-E-13-23,the Company and Simplot entered
into the April 8,2015 contract attached to the Company’s current Application.
ORDERNO.33303 1
THE APPLICATION
In its Application,the Company explains that it currently provides electric service to
Simplot’s Caidwell facility under Schedule 19,Large Power Service.Schedule 19 requires
customers with an aggregate power requirement of more than 20,000 kilowatts (“kW”)at the
same premises “to make special contract arrangements with the Company.”The Company
explains that Simplot recently expanded its Caidwell facility and that the facility may need more
than 20,000 kW of electricity by summer 2015.The Company and Simplot thus entered into a
special contract,as required by Schedule 19.The contract is subject to Commission approval.
See Application at 1-2,9.
The Company’s Application summarizes the contract.The Company explains that
Section 5 of the contract requires the Company to initially provide Simplot’s Caidwell facility
with 25,000 kW of electricity per month (the “Contract Demand”).During the first year of the
contract,Simplot may increase or decrease its Contract Demand so long as the changes for the
year collectively do not exceed 10,000 kW,absent Company agreement.After one year,Simplot
may increase or decrease its monthly Contract Demand in 1,000 kW increments,but it may not
change the Contract Demand by more than 15,000 kW in any 12-month period.The contract
caps Simplot’s ability to increase its total demand under the contract to 50,000 kW of electricity
per month (the “Total Contract Demand”).See Application at 4-5.If Simplot’s Billing Demand
(i.e.,the kW supplied to Simplot during the coincident 15-consecutive minute period of
maximum use in a month,as adjusted based on a “power factor”described in Section 7.2 of the
contract)exceeds the established Contract Demand,the Company may satisfy Simplot’s excess
demand as described in Schedule 32,or the Company may,in its discretion,curtail service to
Simplot’s Caldwell facility.Id.at 4,8.
The Company explains that it calculates rates for new special contract customers by
accounting for factors like existing operational conditions,and how the new load will impact the
Company’s system.Here,Simplot expects its new Caldwell facility will replace its existing
facilities in Aberdeen,Nampa,and Caldwell.The Company expects the Caldwell facility to
consolidate the load from these existing facilities,plus another 5,000 kW of load.Based on
these circumstances,the Company developed fully-embedded.cost-based rates to serve the
Caldwell facility according to the Company’s class cost-of-service study from the Company’s
201 1 rate case,Case No.IPC-E-1 1-08.The Company then adjusted these rates to reflect
ORDER NO.33303 2
changes that have occurred since the 2011 rate case.Id.at 5-7.The Company claims the new
rates will appropriately recover the Company’s cost to serve the Caldwell facility,and will limit
upward rate pressure on other customer classes,because the new Caidwell facility primarily
consolidates existing load.The Company maintains that it developed the new rates according to
the Commission’s direction to use the 2011 cost-of-service study (see Order No.33038,Case
No.IPC-E-13-23).and that the new rates are reasonable and in the public interest.The
Company advises that the new rates will be identified by billing component in the then-current
Schedule 32,and that Simplot has agreed to pay those rates.Id.at 7-8.
The Company notes that the contract allows it or Simplot to terminate the contract for
convenience and without cause by notifying the other party of the impending termination 12-18
months before the proposed termination date.The contract provides that Simplot will reimburse
the Company for the Company’s costs associated with terminating the contact,minus any credits
the Company owes to Simplot under the contract.Id.at 8-9.
The Company asks the Commission to approve the 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 Caidwell
facility exceeds 20,000 kW.”The Company explains that Simplot is uncertain about when it will
first exceed the 20,000 kW aggregate power requirement (see page 1,above),and that the
flexible applicability section of Schedule 32 will allow the new facility to remain on Schedule 19
until it no longer is eligible for service under Schedule 19.Id.at 9.
THE COMMENTS
Commission Staff and the Company filed the only comments in the case,and support
the Application.The comments,which are collectively summarized below,assert that the
Company based its proposed Schedule 32 charges on the 2011 cost-of-service study,as directed
by the Commission.
The parties observe that the Company used the 2011 cost-of-service study,as
modified to reflect that Simplot is replacing three Schedule 19 facilities with the Caldwell
facility,to determine a revenue requirement of $6,974,836.The Company then adjusted the
revenue requirement and rates to capture base rate changes that occurred after the 2011 rate case
ORDER NO.33303 3
ended.1 The adjustments increased the total revenue requirement to $8,757,002,or $0.05014 per
kWh,given Simplots estimated annual usage of 174,653,834 kWh.The Company’s revenue
requirement calculations are consistent with the methodology used in the 2011 cost-of-service
study.
Staff explains that the Company determined the Schedule 32 rates using the
methodology that the Company applied to tariff Schedule 45,Standby Service.Staff notes that
the Commission first approved this methodology in the Company’s 1994 general rate case.See
Order No.25880,Case No.IPC-E-94-5.Staff opines that it is reasonable for the Company to
use its Schedule 45 methodology to determine cost-of-service based rates for Schedule 32.Staff
notes that Schedule 32 recovers energy costs through summer and non-summer rates of
$0.030974 and $0.030391,respectively.Staff opines that the Company’s Schedule 32 energy
charges represent the energy-related costs the Company will incur on Simplot’s behalf.
The Company cites Commission Order No.33038 for the proposition that “each
special contract customer is considered a separate class with different conditions and contract
terms affecting their rates.”The Company notes it must account for many factors when
determining rates for new special contract customers,including the unique circumstances that
exist when the contract is developed.The Company notes that it developed its contract with
Simplot to provide Simplot with additional flexibility as the Caldwell plant adjusts to its
expanded operations.The contract,for example,modifies the Company’s standard rate design
and power factor requirements,as summarized on page 2,above.
The parties opine that the Company’s contract and method of determining Schedule
32 charges are consistent with Commission Order Nos.25880,33038,and 33071,and are a
reasonable way for the Company to determine the costs it incurs on Simplot’s behalf.The
parties also opine that the contract is fair,reasonable,and in the public interest.Further,as the
Company is agreeing to serve a new Simplot facility that mostly consolidates load from other
Simplot plants,the parties note that the contract will not disadvantage other customers;the
embedded cost-of-service rates limit the potential for upward rate pressure on other classes.The
The changes result from Commission Orders relating to the Open Access Transmission Tariff defeffal adjustment
(Case No.IPC-E-12-06);depreciation study adjustment (Case No.IPC-E-l2-08);Boardman balancing account
adjustment (Case No.IPC-E-12-09);Langley Gulch power plant adjustment (Case No.IPC-E-l2-14);and Net
Power Supply Expense update (Case No.IPC-E-14-05).
ORDERNO.33303 4
parties thus recommend that the Commission approve the Company’s proposed tariff Schedule
32,and accept the Company’s contract with Simplot as filed.
FINDINGS AND DISCUSSION
The Commission is authorized and directed to supervise and regulate electrical
utilities,and has ratemaking authority over such utilities.As part of its statutory duties,the
Commission determines reasonable rates and investigates and reviews contracts.Idaho Code §
61—501,-502,-503;Empire Lumber Co.v.Washington Water Power Co.,114 Idaho 191,192,
755 P.2d 1229,1230 (1987).We have reviewed the record in this case,including the
Application and comments.Based on our review,we find that the Company appropriately
responded to Order No.33038 by using its 2011 cost-of.service study as a starting point for
determining the rates for service at Simplot’s Caldwell facility.We further find that the resulting
contract,rates,and charges are consistent with our prior Orders,and are fair,just,and
reasonable.We thus approve the contract and the proposed Schedule 32 as filed,effective June
1,2015,and direct the Company to begin serving Simplot’s Caldwell facility under Schedule 32
on the first day of the month in the first month in which Simplot’s aggregate power requirement
at the facility exceeds 20,000 kW.We appreciate the parties’efforts in reaching an agreement
consistent with guidance provided by the Commission.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application is granted.
The Company’s April 8,2015 contract with Simplot,and the proposed Schedule 32,is approved
as filed effective June 1,2015.Service under Schedule 32 shall commence on the first day of the
month in the first month in which Simplot’s aggregate power requirement at the new Caidwell
facility exceeds 20,000 kW.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
ORDER NO.33303
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 2
day of May 2015.
MACK A.REDFORD,C MMISSIONER
ATTEST:
O:IPC-E-1 5-13kk2
KRTINE RAPER,COMMISSIONER
ORDER NO.33303 6