20150528final_order_no_33307.pdf

Office of the Secretary
Service Date
May 28,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION FOR )CASE NO.IPC-E-15-15
APPROVAL OF COMPUTATIOfAL )
MODIFICATIONS TO THE TRUE-UP )
PORTION OF THE POWER COST )ORDER NO.33307
ADJUSTMENT )
On April 28.2015,Idaho Power Company applied to the Commission for an Order
approving a Settlement Agreement in which the Company and Commission Staff agree to
modify how the Company calculates the Power Cost Adjustment (“PCA”)true-up deferral
balance,with the modifications to take effect for the period beginning January 1,2015.The
Settlement Agreement,if approved by June 1,2015,would reduce the true-up deferral balance to
be collected from customers in the current PCA case.TPC-E-15-14,by about $1.4 million.
On May 5,2015,the Commission issued a Notice of Application and Notice of
Modified Procedure setting a May 19,2015 comment deadline.See Order No.33293.
Commission Staff and the Company filed the only comments in the case,and support the
Application.
Having reviewed the record in this case,including the Application and comments,we
enter this Order approving the Settlement Agreement because it is reasonable and in the public
interest.We explain our decision below.
BACKGROUND
On May 30,2014,the Commission issued Order No.33049 in Idaho Power
Company’s 2014 PCA case,IPC-E-14-05.In that Order,the Commission acknowledged Staff’s
concern that the Company may have applied the true-up in a way that inflated the true-up
revenue to be collected.The Commission found,however,that the “abbreviated time allotted for
the consideration of a PCA case constrains the parties’ability to more thoroughly vet this issue.”
The Commission thus directed:“that a separate docket be opened to allow Commission Staff,the
Company,and other interested persons to hold a workshop to further evaluate the Company’s
application of the [PCA]true-up [component]and whether a deferral balance adjustment is
appropriate.”Order No.33049 at 13.
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On July 1,2014,the Commission opened Case No.IPC-E-14-16 (PCA Inquiry Case)
and scheduled a workshop for the Company,Staff,and interested persons to further explore
Staffs concerns.See Order No.33067.Workshop participants included Staff,the Company,the
Industrial Customers of Idaho Power,Idaho Conservation League,and Snake River Alliance.
Following the workshop,Staff reported to the Commission that the Company had alleviated
Staffs concern about how the Company had applied the true-up component in the last PCA case.
and that Stati was withdrawing its previously recommended adjustment to the PCA deferral
balance.Staff also recommended the Commission close the PCA Inquiry Case,and noted that
Staff would continue to informally meet with the Company and other interested persons to
discuss refining the PCA mechanism to make it more accurate and easy to understand.See
Order No.33067.The Commission then closed the PCA Inquiry Case,and stated:“We
appreciate the parties’willingness to continue to meet outside this case to discuss possible ways
to make the PCA mechanism more accurate and understandable.Our goal in implementing the
PCA was to ensure the amount recovered is no more or less than the actual power costs paid by
the Company.”See Order No.30828,Case No.IPC-E-09-1l.If the parties’informal
discussions lead them to believe the PCA’s accuracy can be improved,Staff should advise us of
that fact.”
After the PCA Inquiry Case closed,the Company and Staff informally explored
possible ways to improve the PCA’s accuracy.As a result of these discussions,the Company
and Staff agreed to a number of changes to the calculation of the PCA true-up balance that they
believe will improve the existing methodology.The Company and Staff memorialized their
agreement in the Settlement Agreement the Company now asks the Commission to approve.
THE APPLICATION AND SETTLMENT AGREEMENT
The Settlement Agreement proposes to modify how the Company calculates the PCA
true-up component.The Company currently calculates its PCA,in part,by truing-up the prior
year’s projected power supply costs based on the Company’s actual power supply costs during
that year.In this case,the proposed Settlement Agreement would modify the true-up calculation
by:(1)converting the PCA’s existing Load Change Adjustment deferral calculation to a Sales
Based Adjustment,effective January 1,2015;and (2)modifying the PCA deferral balance’s
monthly interest calculation to better reflect the Company’s actual interest expense from the
monthly accrued deferral.The Company claims the Settlement Agreement,if approved,will
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improve the PCA’s accuracy and decrease by $1,470,797 the PCA amounts that would otherwise
be collected from customers in the ongoing 2015-2016 PCA case,Case No.IPC-E-15-14.
Because the new PCA rates are to take effect on June 1,2015,and the Settlement Agreement
would benefit customers if applied to those rates,the Company asks the Commission to approve
the Settlement Agreement by June 1,2015.
In its Application,the Company explains that it and Staff believe the proposed
changes will better align the PCA deferral balance calculation with the Commission’s intent that
the PCA “ensure the amount recovered is no more or less than the actual power costs paid by the
Company.”Application at 1,quoting Order No.33089.The Company notes that if the
Commission approves the Settlement Agreement effective January 1,2015,the changes will:(1)
decrease the April 2014 through March 2015 PCA deferral amount from $34,515,981 to
$33,045,184;and (2)decrease the deferral amount to be collected from customers in the ongoing
2015-2016 PCA case,Case No.IPC-E-15-14,by $1,470,797.The Company states:
Idaho Power and the Staff agree that it is appropriate to adjust this year’s
requested PCA deferral amount to align with the terms of the Settlement
Agreement and will recommend in comments to be filed in Case No.IPC-E
15-14 that the Commission approve such an adjustment.Acceptance of the
proposed 2015-2016 PCA deferral adjustment will result in a greater PCA
decrease for customers effective June 1,2015,adjusting the total PCA
revenue decrease from $10.1 million to approximately $11.6 million.For the
changes agreed to above to be included in the Commission’s order associated
with the Company’s annual 2015-2016 PCA filing,the Parties request that the
Commission approve the Settlement Agreement no later than June 1,2015.
See Application at 7.
THE COMMENTS
Staff and the Company filed the only comments in the case.The parties recommend
that the Commission approve the Settlement Agreement,and explain that it will improve the
accuracy of the PCA’s true-up component by:(1)converting the existing Load Change
Adjustment to a Sales-Based Adjustment;and (2)modifying the PCA deferral balance’s monthly
interest calculation to more accurately reflect the Company’s actual interest expense from the
monthly accrued deferral.The parties’comments on these proposed adjustments are collectively
summarized below.
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1.Converting Existing Load Change Adjustment to a Sales-Based Adjustment
The parties explain that the Settlement Agreement addresses Staffs concern that the
true-up’s current Load Change Adjustment inaccurately calculates actual energy sales by using
load-at-generation instead of Idaho jurisdictional energy sales.In summary,Staff is concerned
that the current Load Change Adjustment introduces a line-loss bias because it is based on the
difference between actual load-at-generation and assumed load-at-generation used to establish
base rates.However,actual line-loss should be calculated using the difference between actual
load-at-generation and actual load-ar sales.Actual line-loss typically is much less than the line-
loss assumed in a general rate case.And using a Load Change Adjustment that considers
assumed line losses instead of actual line-loss can lead the Company to underestimate the actual
sales it uses to calculate the Net Power Supply Expense (“NPSE”)that it actually collected.The
Settlement Agreement corrects the line-loss bias by replacing the existing Load Change
Adjustment with a Sales-Based Adjustment,and thus improves the PCA’s accuracy.
The parties note that the Settlement Agreement requires four adjustments to
accurately implement the Sales-Based Adjustment:(1)recalculating the Load Change
Adjustment rate with Idaho test year sales rather than test year system loads to produce an Sales-
Based Adjustment rate of $26.72/MWh (which is less than the current Load Change Adjustment
rate of $24.34/MWh);(2)applying the new rate to the difference between Idaho test year sales
and actual Idaho sales;(3)incorporating a one-time adjustment to eliminate double-counting
during the transition from a calendar month Load Change Adjustment to a billing-month Sales-
Based Adjustment;and (4)applying a monthly Idaho jurisdictional allocator to assure that actual
Idaho jurisdictional NPSE matches actual Idaho jurisdictional sales.The parties agree that the
PCA methodology should incorporate the Sales-Based Adjustment beginning January 1,2015,
and that the resulting $1.47 million in benefits should be returned to customers through the
ongoing PCA case,IPC-E-l5-l4,with the benefits allocated to each customer class based on
forecasted energy consumption.
2.Modifying Monthly Interest Calculation on PCA Deferral Balance
The Company currently calculates monthly interest on the accrued PCA deferral
balance by using its AURORAxmp (“Aurora”)modeling software to allocate annual base NPSE
to each month of the PCA year.The parties note that using Aurora to model hypothetical
monthly NPSE fails to recognize how the Company actually collects its sales revenues during the
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year.The Settlement Agreement,on the other hand,would require the Company to calculate
monthly interest on the deferral balance by assigning annual base NPSE to each month according
to expected base rate revenue collection as set in the Company’s last general rate case,Case No.
IPC-E-l 1-08.The parties observe that this change ensures the monthly deferral balance reflects
the difference between the Company’s actual monthly NPSE expenses and its actual sales
revenues.And because the deferral balance is more accurate,the Company will be able to more
accurately calculate accrued interest on that balance.The parties agree that this change should
take effect as of January 1,2015,and,as a result,the deferral balance in the Company’s ongoing
PCA case should be adjusted to incorporate the new methodology.
Staffs comments in the ongoing PCA case (IPC-E-l5-14),with which the Company
concurs,recommended a true-up rate adjustment that accounts for the agreed upon Sales-Based
Adjustment and deferral balance interest change described above.
DISCUSSION AND FINDINGS
We have reviewed the record,including the Company’s Application and the
comments filed in this case.We note that there is no disagreement between the parties in this
matter,or any opposition to their proposed changes to the PCA’s true-up component.Based on
our review of the record,we find the Settlement Agreement should be approved because it is
reasonable and in the public interest.We find that the proposed changes will result in a more
accurate PCA calculation by correcting the line-loss bias that the prior Load Change Adjustment
introduced into the true-up,and by ensuring the Company calculates accrued interest on the
deferral balance using actual NPSE instead of hypothetical NPSE.The modified true-up will
benefit customers in this year’s PCA case,Case No.IPC-E-15-14,by reducing the PCA balance
that customers would otherwise have to pay by about $1.47 million.And,while the modified
true-up’s impact on future PCAs will depend on specific generation and consumption conditions,
we expect it will always result in more accurate NPSE recovery and interest calculations.
ORDER
IT IS HEREBY ORDERED that Idaho Power’s Application is granted;the
Settlement Agreement is approved as noted above.
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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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
dayofMay2Ol5.
PAUL KJELL D PRESIDENT
MACK A.REDFORD,COMMISSIONER
KRISTINE RAPER,OMMIS STONER
ATTEST:
Jn D.Jewej
Commission secretary
0:IPC-E-15-1 5kk2
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