20170531final_order_no_33775.pdf

Office of the Secretary
Service Date
May 31,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-17-06
AUTHORITY TO IMPLEMENT POWER )
COST ADJUSTMENT (PCA)RATES FOR )
ELECTRIC SERVICE FROM JUNE 1,2017 )ORDER NO.33775
THROUGHMAY31,2018 )
On April 14,2017,Idaho Power Company filed its Power Cost Adjustment (PCA)
Application to adjust rates for electric service from June 1,2017 through May 31,2018,and to
approve changes to tariff Schedule 55.The Company proposed raising residential rates by
0.58%,and small general service billing rates by 0.27%,resulting in an overall increase of
0.93%.
On April 26,2017,the Commission issued a Notice of Application and Notice of
Modified Procedure that set a May 12,2017,deadline for interested persons to comment on the
Application,and a May 19,2017 deadline for the Company to reply.See Order No.33755,and
Errata to Order No.33755.
Two customers filed comments objecting generally to any increase,citing their fixed
incomes or low wages,and concerns that the Company and its executives are profiting from
unnecessary increases.Neither of the commenters specifically addressed the PCA rates.The
Industrial Customers of Idaho Power (ICIP)intervened,but did not filed comments.The
Company did not file a reply.
OVERVIEW OF THE PCA
Since 1993,the PCA has allowed the Company to increase or decrease its rates to
offset the Company’s annual “power supply costs,”the Company’s actual cost to provide
electricity.The PCA adjusts rates each year to pass the benefits and costs of supplying energy to
Idaho Power customers.Neither Idaho Power nor its shareholders receive any financial return as
a result of the filing.
Due to its diverse generation portfolio,Idaho Power’s actual cost of providing
electricity (its power supply cost)varies from yearto-year depending on changes in such things
as streamfiows,the amount of purchased power,fuel costs,the market price of power,and other
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factors.The annual PCA surcharge or credit is combined with the Company’s “base rates”to
produce a customer’s overall energy rate.
The annual PCA mechanism consists of three major components:forecast,true-up,
and reconciliation.
First,projected power costs for the coming PCA year (June 1,2017 to May 31,2018)
are calculated using the Company’s most recent Operating Plan.The projected power costs
include:fuel costs;transmission costs for purchased power;Public Utility Regulatory Policies
Act of 1978 (PURPA)contract expenses;surplus sales revenues;and revenues from the sale of
renewable energy credits (RECs).The Company may recover 95%of the difference between the
non-PURPA projected power costs and the approved base power cost,100%of the costs of its
PURPA contracts,and 100%of its demand-side management (DSM)incentive and conservation
costs.See Order Nos.30715 and 32426 at 3.
Second,because the PCA includes forecasted costs,the preceding year’s forecasted
costs are “trued-up”to reflect the actual costs incurred during the prior year.The Company
converts the true-up amount to a cents-per-kilowatt-hour (kWh)rate by dividing it by projected
energy sales.
Finally,the previous year’s true-up is adjusted so any over-recovered or under-
recovered balance from the second component is credited to,or collected from,this year’s PCA
rate.This third,“reconciliation”component ensures the Company recovers only the actual costs
that the Commission previously authorized it to recover.As a result,ratepayers will pay for the
actual amount of power sold by Idaho Power to meet native load requirements—no more,no
less.Order No.29334 at 4.Ratepayers receive a rate credit when power costs are low,but are
assessed a rate surcharge when power costs are high.
In addition to the three standard components described above (forecast,true-up,and
reconciliation),this year’s PCA includes a one-time refund of unspent DSM tariff rider revenue
collected by the Company.Earnings were not sufficient to provide customers with a revenue
sharing credit;thus the DSM Rider credit has been discontinued.See Order No.33736.
THE APPLICATION
The Company asked the Commission to approve a $10.6 million PCA increase for
2017-2018.This amount would increase the Company’s total annual billed revenue from
customers by about 0.93%.The major customer classes would be impacted as follows:
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Proposed 2016 Revenue Impact by Class:
Percentage Increase from Current Billed Rates
Small General Large General Large Power Irrigation OverallServiceIService
0.27%1.10%1.75%0.94%0.93%
Source:Application Attach.2,and Customer Notification.
The Company’s billed revenue from its three special contract customers would increase as
follows:Micron—i .95%;Simplot—2.16%;DOE (LNL)—2.03 %.
To recover the new PCA amount,using the three PCA components,the Company has
proposed a 2017-2018 PCA rate surcharge of 0.7361 cents-per-kWh (0.4776 +0.2423 +0.1611).
The Company expects this rate will allow it to recover traditional PCA costs in one year.The
proposed rate is 0.1174 cents-per-kWh higher than current PCA rates.
In this year’s PCA,the annual transfer of DSM funds through the PCA was
eliminated,and a one-time $13 million DSM Rider refund is being issued.The following table
summarizes the Company’s request broken down by PCA rate components:
Idaho Power Proposed Revenue Changes for Idaho Customers
Description Current ($)Proposed ($)Difference ($)%of increase
PCA Future Forecast 47,943,199 66,914,308 18,971,109 179%
PCA True-up (includes 38,738,441 36,210,680 (2,527,761)-24%reconciliation_of true-up)
Associated DSM Rider (3,985,530)-3,985,530 30%Change
Allocated Revenue Sharing (3,155,010)-3,155,010 38%
DSMriderrefund -(13,000,000)13,000,000 -123%
PCA total 79,541,100 90,124,988 10,583,888 100%
Total Billed Revenue 1,541,056,319 1,144,644,933 10,588,614
STAFF COMMENTS
Staffs comments support the Company’s Application,provide recommendations for
future PCA cases,and request additional information.Staff analyzed the traditional PCA
components (forecast,true-up,and reconciliation)along with the additional components
(revenue sharing and DSM Rider credit).Staff verified the Company’s calculations,and agreed
ORDER NO.33775 3
with the Company’s proposed PCA components.Staff concluded that “the Company complied
with past Commission orders and accurately calculated all proposed PCA components.”Staff
Comments at 19.In summary,Staff recommended that the Commission approve the Company’s
proposed revenue sharing amounts,DSM transfer amounts,and Schedule 55 rates as filed.See
Attachment 1 to Application.
Of particular interest to this year’s PCA was the effect of the Langley Gulch outage
from October to December 2016.Staff estimated that the incremental cost of the replacement
power was $733,532.Staff Comments at 11.Staff believed this was an unexpected event,and
that the outage was not preventable.Staff stated that the results of the Company’s root cause
analysis are not yet available.Thus,Staff recommended that the Commission order the
Company to provide the Commission with its root cause analysis in a subsequent filing.
Finally,because of the short timeline in PCA filings,Staff recommended that we
accept and consider any late-filed customer comments.
FINDINGS AND DISCUSSION
After reviewing the record,including the Company’s Application and the comments
filed in this case,we find it fair,just,and reasonable to grant Idaho Power’s Application to
increase its PCA rates for the 2017-2018 PCA year.We find that the combination of the three
PCA components results in a PCA rate of 0.7361 cents-per-kWh.
The largest increase in the PCA is due to increasing PURPA costs.The second
largest increase is attributable to the collapse and abandonment of the Joy Longwall by the
Bridger Coal Company.Idaho Power’s share of abandoned equipment is approximately $6.25
million,with another $3.64 million in recovery costs.Because of the safety concerns outlined by
the Company,its actions certainly appear reasonable.
The outage at Langley Gulch attributed to the Company’s fuel expenses.It appears
that the outage was beyond the Company’s control.We look forward to the Company providing
reports and conclusions regarding the root cause of the failures and why the extended downtime
occurred.
We accept and have considered the late-filed customer comments,along with those
timely filed.This Commission is sensitive to economic conditions affecting ratepayers
throughout Idaho.We strive to balance the ratepayer’s need for affordable energy with the
Company’s mandate to provide reliable electric service.While some commenters believe that
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the Company and its executives are directly profiting from all increasing rates,it is not the case
here.Money collected from the PCA surcharge reflects actual power supply expenses incurred
by the Company.
In conclusion,we find that the Company’s present PCA rates are insufficient to
enable it to recover its projected power costs for the upcoming PCA year.We thus fmd it fair,
just,and reasonable to approve the Company’s proposed PCA rates.See Idaho Code §61-502.
We find that the resulting uniform PCA surcharge rate of 0.736 1 cents-per-kWh fairly and
accurately reflects economic and environmental conditions.We further find it fair,just,and
reasonable to approve Schedule 55 rates as reflected in Attachment 1 to the Application,with the
new rates to take effect June 1,2017.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application is granted and
its proposed PCA rates are approved effective June 1,2017 through May 31,2018.
IT IS FURTHER ORDERED that the new Schedule 55 rates,included in Attachment
1 to the Company’s Application,are 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.
ORDER NO.33775 5
DONE by Order of the Idaho Public Utilities Conuiiission at Boise,Idaho this /
day of May 2017.
PAUL KJEL R,PRESIDENT
FPE’IS STONER
--
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
O:IPC-E-1 7-06bk2
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