20150515Comments.pdf

KARL T. KLEIN . :
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION illi |ir|i !5 Pii ?: 58
PO BOX 83720
BOISE, IDAHO 83720-0074 . '; '
(zog)334-0320 'tLv-wwta ii;illii'':l ir-'t ''t-';lr'''
IDAHO BARNO.5156
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702.5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF rDAHO POWER )coMPANy'S APPLICATTON FOR APPROVAL ) CASE NO. IPC-E-15-13
OF SPECIAL CONTRACT AND TARIFF )
SCHEDULE 32 TO PROVIDE ELECTRIC ) COMMENTS OF THE
SERVICE TO J.R. SIMPLOT COMPANY',S ) COMMTSSTON STAFF
CALDWELL FACILITY )
)
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company's Application.
BACKGROUND
On March l3,20l5,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 tariff take effect on or before
June 1,2015.
In its Application, the Company explains that it currently provides electric service to
Simplot's Caldwell facility under Schedule 19, Large Power Service. Schedule l9 requires
customers with an aggregate power requirement of more than 20,000 kilowatts ("kW") ooto make
special contract arrangements with the Company." The Company explains that Simplot recently
expanded its Caldwell facility and that the facility may need more than 20,000 kW of electricity
MAY 15,2015STAFF COMMENTS
by summer 2015. The Company and Simplot thus entered into a special contract, as required by
Schedule 9. The contract is subject to Commission approval. See Application at I-2,9.
Section 5 of the contract requires the Company to initially provide Simplot's Caldwell
facility with 25,000 kW of electricity per month (the "Contract Demand"). During the hrst 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 l2-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
20ll rate case, Case No. IPC-E-I1-08. The Company then adjusted these rates to reflect
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 Caldwell 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. atl-8.
STAFF COMMENTS MAY 15,2015
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 l2-18
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. at8-9.
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 Caldwell 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 l, above), and that the flexible applicability
section of Schedule 32 will allow the new facility to remain on Schedule l9 until it no longer is
eligible for service under Schedule 19. Id. at9.
STAFF REVIEW
A. Background
On December 4,2013, the Company asked the Commission to approve an earlier special
contract with Simplot for the Caldwell facility. See Case No. IPC-E-13-23. However the
Company and Simplot had not yet agreed on 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 found "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 agreed to the
contract set forth in Attachment 1 of the Company's present Application. Billing and rate
components of this contract would be under a proposed tariff Schedule 32, which is filed as
Attachment 2 of the Company's Application.
STAFF COMMENTS MAY 15,2015
B. Schedule 32
Service under Schedule 32 applies to Simplot's Caldwell facility. The monthly charge is
the sum of a Demand Charge, Energy Charge, Contract Demand Charge, and Daily Excess
Demand Charge. These charges may also be adjusted in accordance with tariff Schedules 55
(Power Cost Adjustment), 9l (Energy Efficiency Rider), and 95 (Adjustment for Municipal
Franchise Fees).
According to the Company, Schedule 32 charges were determined using the Company's
most recent cost-of-service study, presented in Case No. IPC-E-11-08. The 2011 cost-of-service
study was modified to reflect the removal of three Schedule 19 Simplot facilities that will be
replaced by the new Caldwell facility. The 2011 cost-of-service study and methodology were
used to determine a revenue requirement of $6,974,836.
Rates were adjusted to reflect changes that occurred after the 2011 rate case ended.
These adjustments include changes resulting from Commission orders related to the Open
Access Transmission Tariff (OATT) deferral adjustment, the depreciation study adjustment, the
Boardman Balancing Account adjustment, the Langley Gulch power plant adjustment, and the
update to base net power supply expenses that became effective June I ,2014. The adjustments
increased the total revenue requirement to $8,757,002, or $0.05014 per kWh, given Simplot's
estimated annual usage of 174,653,834 kwh. Staff reviewed the Company's revenue
requirement calculations, and concludes that they are consistent with the Company's cost-of-
service methodology from Case No. IPC-E-I l-08.
The rates shown in tariff Schedule 32 are determined using the same methodology that
the Company applied to tariff Schedule 45, Standby Service. The Company first used this
methodology in its 1994 general rate case (IPC-E-94-5) and the Commission approved it in
Order No. 25880. Under this methodology, the Contract Demand Charge is an estimate of the
costs that the Company incurs to reserve part of its load for Simplot's use. The proposed
Contract Demand Charge is $1.77 per kW.
The Demand Charge, which Simplot pays for its actual demand, is determined using the
Company's cost-of-service methodology, less the Contract Demand Charge. The cost-of-service
methodology used to determine the Demand Charge includes all embedded costs associated with
serving Simplot's demand. The Company's proposed tariff Schedule 32 includes both summer
and non-summer demand charges of $14.74 and $8.57, respectively.
STAFF COMMENTS MAY 15,2015
If Simplot's demand exceeds Contract Demand (currently, 25,000 kW), and if the
Company can supply that demand, Simplot will pay a $0.295 Excess Demand Charge per kW of
demand over Contract Demand. This charge represents the Company's incremental embedded
costs of meeting Simplot's excess demand. The embedded costs used in this computation
exclude those distribution costs that are directly attributable to Simplot, and fully recovered in
the Company's Contract Demand Charge and Demand Charge.
Staff reviewed the Company's Schedule 45 methodology, and believes that it represents a
reasonable approach to determining costs-of-service related to the proposed Schedule 32
Contract Demand Charge, Demand Charge, and Daily Excess Demand Charge.
Schedule 32 recovers energy costs through summer and non-summer rates of $0.030974
and $0.030391, respectively. Staff reviewed the Company's computations related to its Schedule
32 energy charges, and concludes that they represent the energy-related costs incurred by the
Company on Simplot's behalf.
STAFF RECOMMENDATIONS
In Staff s opinion, the proposed contract is consistent with Commission Order Nos.
33038 and 33071. Staff also concludes that the methods used to determine Schedule 32 charges
are consistent with Commission Order Nos. 25880, 33038, and 33071, and are a reasonable way
of determining the costs incurred by the Company on Simplot's behalf. Staff also believes the
proposed contract is fair, and that it will not disadvantage the Company's other customers. Staff
thus recommends that the Commission approve the Company's proposed tariff Schedule 32,
accept the Company's special contract with Simplot as submitted.
Respectfully submitted this JS lt day of May 2015.
lcl 4 ,-
Karl T. Klein
Deputy Attorney General
Technical Staff: Mike Morrison
i:umisc/comments/ipcel 5. l3kkme comments
STAFF COMMENTS MAY 15,2015
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF MAY 2015,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-15.13, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
THE FOLLOWING:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-mail : [e-mail]
dockets@idahopower. com
PETER J zuCHARDSON
GREGORY M ADAMS
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE TD 83702
E-mail : [e-mail]
gre e@ richardsonadams. com
MICHAEL YOUNGBLOOD
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-mail: [e-mail]
DON STURTEVANT
DIR-ENERGY PURCHASING
JR SIMPLOT COMPANY
PO BOX 27
BOISE rD 83707-0027
EMAIL: [e-mail]
CERTIFICATE OF SERVICE