20160315Harris Direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POV{ER COMPANY FOR
AUTHORITY TO IMPLEMENT EIXED COST
ADJUSTMENT ('FCA") RATES EOR
ELECTRIC SERVTCE EROM JUNE L,
20!6, THROUGH MAY 31, 201.7.
CASE NO. IPC-E-16-02
IDAHO POWER COMPANY
DIRECT TESTIMONY
OE
ZACHARY L. HARRIS
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O. Pl-ease state your name and business address.
A.My name is Zachary L. Harrj-s and my business
address is 1,221, West Idaho Street, Boise, Idaho 83702.
Power" or "Company") as a Regulatory Analyst in the
Regulatory Affairs department.
By whom are you employed and in what capacity?
I am employed by Idaho Power Company ("Idaho
Please describe your educational background.
In December of 2008, I received a Bachel-or of
Science degree in Accounting from Brigham Young University-
Hawaii. In December of 201L, I received a Master of
Science degree in Accounting from Boj-se State University.
After I began my career with Idaho Power in May 201L, T
attended the electric utility ratemaking course offered
through New Mexico State University's Center for Public
Utilities. I also attended the "Cost-of-Service Concepts
and Techniquesr" as well as the "Rate Desj-gn for Electrj-c
Utilities" courses offered by Electric Utility Consultants,
Inc. in 2072. Tn 20L3, I attended the "El-ectrj-c Rates
Advanced Course" offered by the Edj-son Electric Institute.
O. Please describe your work experience with
fdaho Power.
A. I became employed by Idaho Power in May 20tl
as a Regulatory Analyst in the Regulatory Affairs
department and stil-l- retain that position. I have been the
HARRTS, Dr 1
Idaho Power Company
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Company's witness regarding the annual FCA calculation and
corresponding rates since 2072.
Company's request to implement its annual- ECA rates in
conformance with Idaho Public Utilities Commi-ssion
("Commission") Order No. 32505 (Case No. IPC-E-11-19),
which approved the FCA as a permanent rate mechanism for
the Residential and Small General Service customers.
Specifically, my testlmony will dj-scuss three areas
related to the FCA mechanism and Schedule 54, Fixed Cost
Adjustment. First, I will briefly discuss the FCA
mechanism itself and how the ECA amount is determined.
Second, I will describe the determination of the 2075 FCA
amount. Lastly, f will discuss the calculation of the FCA
rates the Company is proposing to be effectj-ve June 7,
2076, through May 31, 2077.
I. FIXED COST ADiN'STI'ENT MECHAIIISM
What is the purpose of your testimony?
The purpose of my testimony is to describe the
V{hat is the purpose of the FCA mechanj-sm?
The FCA is a true-up mechanism that
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"decouplas," or separates, biIled energy sales from revenue
in order to remove the fi-nancial- disi-ncentive that exists
when the Company j-nvests in demand-side management
resources. Under the FCA, rates for Residential Service
(Schedules 7, 3, 4, and 5) and Sma11 General Service
HARRIS, DI 2
Idaho Power Company
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(Schedule 7) customers are adjusted annually to recover or
refund the difference between the leveI of fixed cost
recovery authorized by the Commission in the Company's most
recent general rate case and the level- of fixed cost
recovery that the Company received based upon the actual
billed energy sales during the previous calendar year.
o.What 1eveI of incremental annual demand-side
management energy efficj-ency savings did Idaho Power
achi-eve in 2075?
A. On a system-wide basis, Idaho Power achieved
1,62,533 megawatt-hours of incremental annual energy
efficiency savings in 2015, which is a L2 percent increase
from savings reported in 20L4.
o.Please describe the FCA mechanism.
A. Eor both the Residential and Sma11 General-
Service classes, the ECA mechanism is the same. The
formula used to determine the FCA amount is:
ECA = (CUST x ECC) (ACTUAL X ECE)
hlhere:
FCA : Fixed Cost Adjustment;
CUST : Average Number of Customers, by class;
ECC : Eixed Cost per Customer rate, by cl-ass;
ACTUAL : Actual Bil1ed kilowatt-hours (*kwh")
Energy Sales, by class; and
FCE : Eixed Cost per Energy rate, by cIass.
HARRIS, DI 3
Idaho Power Company
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How is the ECA amount determined?
The ECA amount is the difference between the
Company's level of "authorized fixed cost recovery" (CUST X
FCC) and the level of "actual fixed cost recovery" (ACTUAL
X FCE).
o.Can the ECA deferral balance be either
positive or negative?
A.Yes. The FCA deferral balance can be either
positive or negative. If the FCA is positive, that
indicates the Company's authorized level of fixed cost
recovery is greater than the 1eve1 of fixed costs recovered
through the energy rate. This would occur when the growth
rate in actual biIled energy sal-es is less than the growth
rate in customers, i.e., the use per customer has
decreased. The effect woul-d be that the Company has under-
col-lected its authori-zed leve1 of f ixed costs. In a
similar fashion, if the ECA is negatj-ve, that indj-cates the
Company's authorized fixed cost recovery amount is less
than the fixed costs determined to have been recovered
through the energy rate and results in a refund to
customers.
II. FCA DETERMINArIOII FOR CAI..E![DAR YE]AR 2015
O. Did the rates for the ECC and ECE change in
HARRIS, DI 4
Idaho Power Company
201-5?
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A.No. The ECC and ECE rates used to determine
the 2015 FCA deferral balance did not change and are the
same rates used to determine the 20L4 FCA deferral balance.
The FCC and FCE rates were established in the Company's
most recent general rate case, Case No. IPC-E-11-08, and
are found in the Company's tariff under Schedule 54, Eixed
Cost Adjustment.
o.Were there any changes to the Fixed Cost
Adjustment mechanism methodology beginni-ng in 2075?
A.Yes. As a result of the settlement
stipulation ("Stipulatj-on") reached in Case No. IPC-E-14-17
and approved by the Commission j-n Order No. 33295, the
Company replaced weather-normalj-zed billed sales with
actual bi11ed sales in the calculation to determine the
actual level of fixed costs recovered. Case No. IPC-E-14-
l7 was opened on July L, 20L4, to evaluate the ECA
mechanism. Part of this evaluation exami,ned the use of
weather-normalj-zed billed sales in the annual computation
of the ECA. Parties to the Stipulation agreed that
replacing weather-normalj-zed billed sales with actual
billed sales was appropriate. The Commission found that
replacing weather-normalized sales with actual sales will
improve the FCA's accuracy by ensuring the Company only
collects its actual fixed costs. Order No. 33295 at 5.
The modification to the calculati-on of the actual l-evel of
HARRIS, DI 5
Idaho Power Company
1 fixed costs recovered began with the determination of the
2 201,5 FCA deferral.
O. Did the Stipulation result in any other
4 impacts to the 2075 FCA?
A. No. Ultimately, the only change to the FCA
6 was the adjustment to the calculation of the actual leve1
7 of fixed costs recovered. However, the Stipulation also
8 clarified how the rate adjustment cap of 3 percent on
9 annual increases is to be calculated, the appropriate
10 timing of resetting the FCE and E'CC, and possible rate
11 design modification for Residential and Small General
72 Service customers. In Order No. 33295r orr page 5, the
13 Commission found that "the proposed changes in the
L4 Stlpulation will result in a more accurate, clear, and
15 transparent FCA. "
16 0. How is the authorized level- of fixed cost
Ll recovery derived?
18 A. The authorj-zed level of fixed cost recovery is
19 the product of the FCC and the average number of customers,
20 by class. The Company uses a prorated customer count based
2L on the number of active utility servj-ce agreements at the
22 end of each month. This approach applies the same
23 methodology that was used to determine customer counts in
24 the Company's most recent general rate case. The annual
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HARRTS, Dr 6
Idaho Power Company
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average customer count is derived by calculating the
average of the 12 monthly prorated customer counts.
O. How is the actual l-eveI of fixed cost recovery
determined?
A. In complj-ance with Order No. 33295, the actual-
Ieve1 of fixed cost recovery is the product of the ECE and
the actual- billed energy sales for the calendar year,
measured in kwh.
O. Does the Company compute a monthly FCA
deferral- balance and report the estlmated monthly ECA
deferral balance to the Commission?
A.Yes. Although the FCA is an annual mechanism
that is ultimately calculated and determined using customer
counts and bil-l-ed energy sales data for the entire calendar
year, to maintain compliance wj-th Generally Accepted
Accounting Principles, a monthly FCA deferral- balance is
estimated and recorded in the Company's accounting records.
At year-end, once the annual FCA amount is determined, an
adjustment is made to the sum of the previously recorded L2
monthly estimates to align with the annual FCA deferral-
balance.
Since 2009, the Company has continued to report the
estimated monthly FCA deferral balance i-n the monthly FCA
Report provided to the Commission. Exhibit No. 1 is a copy
of the monthly FCA Report for calendar year 20L5.
HARRIS, DI 1
Idaho Power Company
1 Q. What adjustments were made to the 2075 monthly
2 estimates to align these amounts with the Company's final
3 year-end 20L5 FCA deferral balance?
4 A. To align with the annual FCA amount to be
5 recorded j-n the Company's 2015 financial statements, an
6 upward adjustment of $87,283 was made for the Resj-dential
7 customer class, reflected on line 6, col-umn O of Exhibit
8 No. 1. An upward adjustment of $2,063 was made for the
9 Sma11 General- Service customer cl-ass, reflected on line 20,
10 column O of Exhibit No. 1. The total- upward adjustment for
11 both customer classes is $89,346.
L2 O. What is the total amount of the ECA, not
13 includj-ng interest?
74 A. The total amount of the FCA for both the
15 Residential and Sma11 General Service customer cl-asses, not
76 includj-ng interest, is $27,7'77,602. Exhibit No. 2 shows
!7 the calcul-ation for each customer cl-ass. The calculated
18 FCA deferral balance for the Residential- customer c1ass,
19 not including interest, is $26,630,910. This amount is
20 also found in Exhibit No. 1, l-ine 6, column P. The
27 calculated ECA deferral balance for the Sma1l General
22 Service customer class, not including interest, is
23 $1,146,692. This amount is also found in Exhibit No. 1,
24 l-ine 20, cofumn P.
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HARRIS, DT 8
Idaho Power Company
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O. tr'Ihat is the effect of changing the methodology
to calculate the ECA using actual bi11ed saLes instead of
weather-normal-ized bi11ed sal-es?
A. In years when actual sales per customer are
higher than weather-normal-ized sa1es, the FCA will be lower
with the new methodology. In years when actual sales per
customer are lower than weather-normal-ized sales, the FCA
will be hlgher with the new methodology.
o.What would the FCA have been had the Company
used weather-normalized billed sales to calcu]ate the
actual fixed costs recovered as it would have prior to
Order No. 33295 rather than using actual billed sales?
A.Using weather-normalized bilIed sales in the
cal-culati-on of the 2015 FCA would have resulted in an PCA
deferral balance of $24,833,613, not including interestr or
$2,943,989 less than the ]evel of fixed cost recovery
determined using actual bi11ed sal-es. This indicates that
the Company's actual fixed cost recovery was lower than the
l-evel of fixed cost recovery that woul-d have been
calculated based on weather-normalized billed sales in
20L5. Exhibit No. 3 shows the comparison of the 2015 FCA
deferral usi-ng both actual billed sales and weather-
normaf ized bil]ed sales.
HARRIS, DI 9
Idaho Power Company
1 Q. What is the total amount of the 2015 FCA,
2 including interest, the Company is requesting to implement
3 in rates on June L, 20L6?
4 A. The total amount of the 20L5 FCA the Company
5 is requesting to begin recovering in rates on June 7, 2076,
6 is $28,054,542.06, refl-ected on line 32, column U, of
7 Exhibit No. 4. The ECA for the Residential cl-ass is
8 $26,891,108.83 reflected on l-ine 15, column U, of Exhibit
9 No. 4. The ECA for the Small General Service Class is
10 $1,157,433.23 reflected on lj-ne 29, column U, of Exhibit
11 No. 4. Exhi-bit No. 4 shows the FCA deferra] bal-ances and
L2 adjustments, plus interest, through May 2016. Exhibit No.
13 4 and Exhibit No. 1 both contain the same information as
L4 the FCA Report sent to the Commission each month; however,
15 Exhibit No. 4 calculates j-nterest from January 2015 through
L6 l4,ay 2016 while Exhibj-t No. 1 shows that j-nformation only
!7 for the 2015 calendar year.
18 O. What is the significance of these numbers with
19 respect to the Company's recovery of its fixed costs?
20 A. Because the Residential FCA is a positive
2l number, it means that the cal-culated average use per
22 customer has decreased from the level established in the
23 Company's last general rate case. Therefore, in accordance
24 with the approved mechanism, the Residential cl-ass will
25 receive an adjustment to allow for recovery of the fixed
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Idaho Power Company
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costs that were not recovered through actual- biI1ed energy
charges during the year. The same holds true for the Smal1
General Service cl-ass, meaning that the calculated use per
customer for this class has also decreased from the level
established in the Company's most recent general rate case
and the Company has not recovered its authorized Ievel of
fixed costs based on actual bil-Ied sales for the Small
General Service class.
III. CALCI'I,ATION OF TEE 2016-20L7 FCA RATE
O. Please descrj-be the calculatj-on of the FCA
rates the Company is proposing to go into effect on June 7,
20L6.
A.The ECA rates the Company proposes to go into
effect on June L, 2076, were cal-culated by taking the FCA
deferral bal-ances for each customer cl-ass described above
and dividing by the respective class energy sal-es forecast
for the June l, 20!6, through May 31, 20L7, time frame.
This is the same perJ-od as the Power Cost Adjustment rate
effective period.
o.What has the Company determined the forecast
energy sales to be for both the Residential and Small
General- Service cl-asses?
A. The Company's forecasted energy sales are
5,014,43L,603 kwh for the Residential class and 130,654,69'7
HARRIS, DI 11
Idaho Power Company
1 kwh for the Sma11 General Servi-ce cIass. The forecasted
2 energy sales are found in Exhibit No. 5.
3 Q. What are the corresponding ECA rates for the
4 Residential and Small- General- Service cl-asses based on a
5 combined and equal PCA rate changer dS defined in the
6 approved mechanism?
7 A. To recover the authorized leve1 of fixed
8 costs, the FCA rate for the Residential class would be
9 0.5416 cents per kWh and the corresponding rate for the
10 Sma11 General Service cl-ass would be 0.6875 cents per kwh.
11 The calculation of these rates is found in Exhibit No. 5.
t2 In Order No. 32505, the Commj-ssion ordered that the ECA
13 deferral balance will conti-nue to be recovered or refunded
74 equally between the Residential and Small General- Servj-ce
15 customer classes. Order No. 32505 at 9. Because the
16 Residential and Sma]l General Service classes reduced their
L7 energy consumption per customer such that the Company
18 under-collected its authorized 1evel of fixed costs as
79 established in Case No. IPC-E-11-08, each class requires a
20 rate surcharge.
2l O. What is the difference between the FCA
22 deferral balance currently in amortization and the proposed
23 FCA deferral balance?
24 A. fn this filing, the Company is proposing to
25 collect rates based on an ECA deferral balance of
HARRIS, DI 72
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$28,054,542, which would be $71,,1,72,832 more than the
current FCA deferral- ba1ance. In Order No. 33302, i-ssued
in Case No. IPC-E-15-05, the Commission approved the total
FCA deferral- bal-ance of $16,881,71,0, with rates based on
that balance effective for the period June t, 20L5, through
May 31, 2016. Order No. 33302 at 4.
O. How is the 3 percent rate adjustment cap
determined?
A.As agreed to in the Stipulati-on and approved
by the Commj-ssion in Order No. 33295, the Company
calculates the 3 percent cap on annual increases by
dividing the proposed FCA deferral change by the forecasted
base rate revenue.
o.Does the proposed FCA deferral- bal-ance exceed
the 3 percent cap on annual- increases over base revenue?
A.No, the proposed FCA deferral balance does not
exceed the 3 percent cap on annual increases over base
revenue. The proposed FCA deferral balance is an increase
of $71,172,832 over the existj-ng FCA deferral balance. The
total base revenue for the Company's test year for the
Resi-dential and Smal-l- General Servi-ce customer classes is
$469,627,674. The ECA i-ncrease is 2.38 percent higher than
base revenue ($11,772,832/$469,627,6'14) , which is below the
3 percent cap. Exhibit No. 5 shows the determination of
the percentage of the annual increase over base revenue.
HARRIS, DI 13
Idaho Power Company
1 Q. Vflhat j-s the percentage change in bj-I1ed
2 revenue as measured from total bitled amounts currently
3 recovered from Residential and Small General Service
4 customers, including the current FCA?
5 A. The resulting increase of 9L1,1,72,832 the
6 Company is proposlng to collect through the ECA rates
7 effective June !, 20L6, through May 31, 2017, represents an
8 annual increase of 2.20 percent from current billed revenue
9 for the affected customer classes. The percentage change
10 in bil1ed revenue is found in Exhibit No. 6.
11 O. How will the Company incorporate the FCA
L2 surcharges for the Residential- and Small General Service
13 classes on customers' biIIs?
L4 A. The Company proposes to continue including the
1-5 FCA with the Annual Adjustment Mechanism line item on
L6 Residential and Sma11 General Service customers' biIIs.
L7 O. Does this complete your testimony?
18 A. Yes, it does.
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HARRIS, DI 74
Idaho Power Company
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ATTESTAIION OF TESIIIOIIY
STATE OF IDAHO )
) ss.
County of Ada )
I, Zachary L. Harris, having been duly sworn to
testify truthfully, and based upon my personal knowledge,
state the following:
I am employed by Idaho Power Company as a Regulatory
Analyst and am competent to be a witness in this
proceeding.
I declare under penalty of perjury of the laws of
the state of Idaho that the foregoing pre-fi1ed direct
testimony is true and correct to the best of my information
and belief.
DATED this 15th day of March 20L6.
SUBSCRIBED AND
March 201,6.
SWORN to before me this 15th day of
expr_res:a9c
HARRIS, DI 15
Idaho Power Company
Harris
1rOT.{4*(Da.D
Pusutc
NotAry PubI
Residing a
My commission
r Idaho