20170531final_order_no_33777.pdf

Office of the Secretary
Service Date
May 31,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION FOR )CASE NO.IPC-E-17-02
AUTHORITY TO IMPLEMENT FIXED )
COST ADJUSTMENT RATES FOR SERVICE )
FROM JUNE 1,2017 THROUGH MAY 31,)ORDER NO.33777
2018.)
On March 15,2017,Idaho Power Company applied to the Commission for authority
to implement Fixed Cost Adjustment (FCA)rates for electric service from June 1,2017 through
May 31,2018,and to approve changes to tariff Schedule 54,Fixed Cost Adjustment.The
Company proposed to raise residential rates by 1.29%,and small general service billing rates by
1.33%,for an overall increase of 1.29%.
On April 5,2017,the Commission issued a Notice of Application and Notice of
Modified Procedure that set a May 4,2017 deadline for interested persons to comment on the
Application,and a May 11,2017 deadline for the Company to reply.See Order No.33739.No
parties intervened,Commission Staff filed the only comments in the matter,and the Company
did not file reply comments.
The Commission has reviewed the record.Based on our review,we grant the
Company’s Application as more fully explained below.
OVERVIEW OF THE FCA
A utility’s “fixed costs”are its costs to provide service that do not vary with energy
use,output,or production and remain relatively stable between rate cases.They include costs
associated with long-lasting infrastructure (e.g.,power plants,power lines,and substations)and
certain administrative costs.The Commission approved the current FCA mechanism in 2015.
Order No.33295.
The FCA is designed to be a “decoupling mechanism”that separates the Company’s
ability to recover its fixed costs from the revenue it derives from selling energy.The FCA thus
removes the Company’s financial disincentive to invest in energy efficiency resources and
demand-side management (DSM)resources that might otherwise decrease its customers’energy
use and,consequently,the fixed costs it recovers by selling energy.Under the FCA,the
Company charges customers when it recovers less “actual fixed costs”than the base level of
ORDER NO,33777 1
fixed costs that the Commission authorized it to recover through rates during the last general rate
case.1 Conversely,the Company credits customers when its actual fixed costs”exceed the base
level of fixed cost rates.
The Company calculates the FCA at the end of each calendar year after it knows how
many customers it had during the year and how much energy those customers used.The
Company then recovers the calculated FCA balance through rates that take effect from June 1
through May 31.The Company’s FCA rates are specified in tariff Schedule 54 and apply to the
residential and small general service customer classes.
THE APPLICATION
The Company’s Application provides an overview and supporting documentation of
how it calculates the FCA.By way of summary,the Company first identifies the amount of
fixed costs that the Commission has authorized it to recover from the residential and small
general service customer classes.The Company calculates the fixed costs by multiplying the
number of customers in each class by the fixed-cost per customer rate that was set in the
Company’s last general rate case.The Company then compares the authorized recovery amount
to the weather-adjusted fixed-cost amount recovered.The Company calculates the fixed costs it
recovered by multiplying its weather-normalized sales per customer class by the fixed-cost per
energy rate as set in the Company’s last general rate case.The difference between the authorized
recovery amount and the “actual fixed costs”recovered results in an adjustment each year to the
FCA rate.
In this case,the Company calculates the difference between the authorized recovery
amount and the fixed costs recovered to be $6.96 million for the residential and small general
service classes (the FCA “deferral balance”).This proposed FCA deferral balance is
incrementally more than the FCA balance currently collected through rates.To recover this
incremental increase,the Company proposes to raise residential billing rates by 1.29%and small
general service billing rates by 1 .33%,for an overall rate increase of 1.29%.The new FCA rate
would be 0.6728 cents-per-kilowatt-hour (kwh)for the residential class and 0.8576 cents-per
kWh for the small general service class.The Company says that average residential customers
using 1,000 kWh a month would see about a $1.31 per month increase on their bills starting June
1,2017.
“Actual fixed costs”refers to the fixed costs recovered through weather-normalized sales.
ORDER NO.33777
STAFF COMMENTS
Staffs comments recommend that the Commission approve the Company’s
Application,and accept the Company’s proposed $35,012,042 deferral balance.Comments at 2.
In reviewing the Application,Staff verified that the Company correctly calculated the proposed
FCA deferral balance and rates according to the proper methodology.Id.Staff also provided
commentary and recommendations for improving the FCA process.
Staffs review showed that the Company’s FCA has grown each year since the
mechanism was established in 2012.Id.Staff pointed to declining customer use patterns and
increasing customer counts as the main causes of this trend.Id.at 3.Staff believes this trend
will continue if it is not addressed in a general rate case.Id.This caused Staff to express
concern that the mechanism will allow the Company to increase its authorized fixed-cost
recovery without any formal review due to the expedited nature of the FCA process.Id.Staff
raised the possibility that rates may be causing cross-subsidization between classes in the FCA.
Id.To address this,Staff stated that it may propose a cap on recovery,or a sharing band,in a
future case.
Staff also provided comments regarding the relation of the Company’s demand-side
management programs to the FCA.Staff acknowledged that DSM programs were responsible
for some decline in sales that were later recovered through the FCA,but contended that those
programs account for less than half of the net decline in sales since 2012.
FINDINGS AND DISCUSSION
The Commission has thoroughly reviewed the record in this case,including the
Application,comments,and supporting documentation.Based on the record,the Commission
approves the Company’s Application.The Company’s current rates are insufficient to enable it
to recover its authorized fixed costs.The proposed FCA rates are fair,just,and reasonable,and
adequate to allow the Company an opportunity to collect its authorized fixed costs in the coming
FCA year.
We thus approve the Company’s FCA filing with a net deferral balance of positive
$35,012,042 for the 2017-2018 period,and FCA rates equal to 0.6728 cents-per-kWh for
residential class customers and 0.8576 cents-per-kWh for small general service class customers.
ORDER NO.33777 3
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application is granted and
its proposed FCA rates are approved effective June 1,2017 through May 31,2018.
IT IS FURTHER ORDERED that the Company shall have a net deferral balance of
positive $35,012,042 for the 2017-2018 period,and FCA rates equal to 0.6728 cents-per-kWh
for residential class customers and 0.8576 cents-per-kWh for small general service class
customers.The Company’s proposed Schedule 54,which is provided as Attachment 1 to the
Company’s Application is approved as filed.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one days of the service date of this Order.Within seven 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
day ofiVay 2017.
ATTEST:
/
/f Jj
Diane M.Hania
Commission Secretary
0:IPC-E-1 7-02bk2
I1A
K ISTINE RAPER,
ERIC COMMISSIONER
ORDER NO.33777 4