20160325Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF

FROM: DAPHNE J. HUANG
DEPUTY ATTORNEY GENERAL

DATE: MARCH 25, 2016

SUBJECT: IDAHO POWER’S APPLICATION FOR AUTHORITY TO IMPLEMENT
FCA RATES FOR ELECTRIC SERVICE FROM JUNE 1, 2016
THROUGH MAY 31, 2017, CASE NO. IPC-E-16-02

On March 15, 2016, Idaho Power Company filed an Application asking the
Commission for an Order authorizing it to implement Fixed Cost Adjustment (FCA) rates for
electric service from June 1, 2016 through May 31, 2017, and to approve its corresponding tariff
Schedule 54, Fixed Cost Adjustment. Idaho Power asks that its Application be processed by
Modified Procedure. Also, Idaho Power asks for an effective date of June 1, 2016, and thus
requests that the Commission issue its Order by May 27, 2016.
BACKGROUND
Using traditional rate design, utilities recover fixed costs1 through each kilowatt-hour
(kWh) sold, and are thus discouraged from reducing sales volume by investing in energy
efficiency and demand-side management (DSM). See Application at 2. The FCA is a rate
adjustment mechanism that separates or “decouples” Idaho Power’s fixed-cost revenues from its
volumetric energy sales. Id. at 3. This decoupling enables the Company to recover its fixed
costs to deliver energy – as set in its most recent general rate case – even when energy sales and
revenues have decreased. Order No. 33295 at 1; see Application at 3.
Idaho Power’s FCA program was first initiated in 2007, as a pilot program for
residential service and small general service customers. Application at 2. In 2012, the
Commission approved the Company’s request to make the FCA a permanent program. Order
No. 32505. In 2015, the Commission approved a settlement stipulation that changed FCA

1 “Fixed costs” are a utility’s costs to provide service that do not vary with energy use, output, or production, and
remain relatively stable between rate cases.
DECISION MEMORANDUM 2
calculation methodology by replacing use of weather-normalized data with actual data, to ensure
improved accuracy. Order No. 33295 at 5; see Application at 3.
PROPOSED 2016-2017 FCA RATE ADJUSTMENT
Idaho Power proposes an FCA of $26,897,109 for the residential class, and
$1,157,433 for the small general service class, for a total of $28,054,542. Id. at 4. The proposed
FCA deferral balance is an incremental increase above the current FCA deferral balance
collected in customers’ rates. Id. at 4-5. Thus, Idaho Power proposes an FCA rate increase to
allow it to recover its authorized revenues as determined by the FCA mechanism. Id. at 5. The
proposed FCA rates would result in an increase of 2.2% from billed revenue for the affected
customer classes. Id. at 5. The Company proposes a combined rate increase for residential and
small general service customers of 2.2% above current rates. Id. This equates to new FCA rates
of 0.5416 cents per kWh for the residential class and 0.6875 cents per kWh for the small general
service class. Id.
With its Application, Idaho Power submitted its proposed FCA tariff, in clean
(Attachment 1) and legislative (Attachment 2) formats. Id. The Company also provided
supporting Direct Testimony of Zachary L. Harris, a regulatory analyst for Idaho Power.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with a comment
deadline of May 12, 2016, and reply deadline of May 19, 2016.
COMMISSION DECISION
Does the Commission wish to process this case under Modified Procedure with a
comment deadline of May 12, 2016 and reply deadline of May 19, 2016?

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