20180531final_order_no_34079.pdf

Office of the Secretary
Service Date
May 31,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )CASE NO.IPC-E-18-02
COMPANY'S APPLICATION FOR )AUTHORITY TO IMPLEMENT FIXED )COST ADJUSTMENT RATES FOR )ORDER NO.34079
ELECTRIC SERVICE FROM JUNE 1,2018 )THROUGH MAY 31,2019 )
On March 15,2018,Idaho Power Company applied to implement new Fixed Cost
Adjustment (FCA)rates for electric service from June 1,2018,through May 31,2019,and a
corresponding tariff Schedule 54,Fixed Cost Adjustment.With its Application,Idaho Power
proposes to decrease FCA rates by 3.60 percent from current billed revenue for the affected
customer classes.The average residential customer's bill will decrease by about $3.60 per month.
Idaho Power asks for an effective date of June 1,2018.The Commission issued a Notice of
Application and Notice of Modified Procedure on April 11,2018.Order No.34028.
Staff filed comments in the case on May 10,2018.Idaho Power filed reply comments on
May 16,2018.No parties intervened.
The Commission has reviewed the record.Based on our review,we issue this Order
granting the Company's Application as more fully explained below.
OVERVIEW OF THE FCA
Using traditional rate design,utilities recover fixed costs'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 an annual rate adjustment
mechanism that separates or "decouples"Idaho Power's fixed-cost revenues from its volumetric
energy sales.Id at 3.The FCA enables the Company to recover its fixed costs to deliver energy
-as set in its most recent general rate case -when decreases in energy sales and revenues would
otherwise prevent such recovery.Order Nos.33295 at 1;33302 at 1.However,if the Company's
actual fixed costs exceed the base level of fixed costs,Idaho Power credits customers under the
FCA.Order No.33302 at 1-2.
'"Fixed costs"are a utility's costs to provideservice that do not vary with energy use,output,or production,and
remain relativelystable between rate cases.
ORDER NO.34079 1
The Company calculates the FCA at the end of each calendar year,when it knows how
many customers it had during the year,and how much energy those customers used.Order No.
33302 at 2.Idaho Power recovers the calculated FCA balance through rates that take effect from
June l through May 31 of the followingyear.Id.The Company's FCA rates are specified in tariff
Schedule 54 and apply to the residential and small general service customer classes.Id
Idaho Power's FCA program was first initiated in 2007,as a pilotprogram.Application at
2.In 2012,the Commission approvedthe Company's request to make the FCA permanent.Order
No.32505.In 2015,the Commission approved a settlement stipulation that changed FCA
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.
THE APPLICATION
The Company's Application summarizes how Idaho Power calculates the FCA.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 multiplyingthe 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 "actual fixed costs recovered"-the actual billed sales for each class
multiplied by the fixed-cost per energy rate set in the Company's last general rate case.The
difference between the authorized recovery amount and the actual fixed costs recovered is the
annual adjustment to the FCA rate.Application at 4.
In this case,Idaho Power proposed an FCA of $14,786,500 for the residential class,and
$820,211.46 for the small general service class,for a total of $15,606,711.Id at 4.The proposed
FCA deferral balance is below the current FCA deferral balance collected in customers'rates.Id
at 4.Thus,Idaho Power proposes an FCA rate decrease of 3.62 percent from current billed revenue
for the affected customer classes.Id.This equates to new FCA rates of 0.2923 cents per kWh for
the residential class and 0.3679 cents per kWh for the small general service class.Id
STAFF COMMENTS
Staff recommended that the Commission accept the FCA deferral balance of $15,606,711.
Staff Comments at 3.Staff verified that the Company correctly calculated the proposed FCA
deferral balance and rates according to the proper methodology.Id Staff verified that the FCA
ORDER NO.34079 2
forecasted sales align with the forecast used in the Company's 2018-2019 Power Cost Adjustment
filing.Id
Staff stated that,whereas the FCA is an annual mechanism,the Company also estimates
and records a monthlydeferral balance to comply with Generally Accepted Accounting Principles.
Id at 4.As a result,the Company must perform an annual adjustment to reconcile the total of the
monthly deferral balances to the annual FCA deferral balance.Id The Company found and
corrected a formula error that involved an inadvertent double-counting of the year-end adjustment
in the FCA deferral calculation.Id
Staff expressed concern that,because the monthly deferral balances accrue interest,
customers may be unfairly harmed by a monthly interest accrual based on estimates rather than
the year-end FCA deferral balance.Id Staff proposed discussing the methodology with the
Company prior to the 2019 FCA filing,and providing the Commission with a resolution or
recommendationat that time.
Staff also expressed concern with the trend in the FCA balance.Id Declining use-per-
customer and increasing customer counts caused the FCA balance to grow from 2012 through
2016.Id at 5.The Company's 2017 Integrated Resource Plan forecasts that both trends will
continue.Id Althoughthe 2017 balance declined,Staff is concerned that the FCA is unlikely to
produce credits for customers and that FCA balances will continue to increase over time.Id If
use-per-customer declines and customer counts increase,the FCA balance will grow unless the
fixed-cost per customer rate and fixed-cost per unit of energy rate are updated in a general rate
case.Id
Staff stated that the Commission adopted the FCA to remove the Company's disincentive
to invest in energy efficiency that reduces energy sales.Id at 5.Staff expressed a concern that
the FCA rate adjustment mechanism provides for fixed-cost recovery regardless of the cause for
decreased energy sales and revenues.Id Staff noted that only a fraction of the decreases in
forecasted energy consumption is attributable to the Company's energy efficiencyprograms.Id
at 5-6.While no recommendation was made to resolve the issue in this docket,Staff is concerned
that the FCA allows recovery of costs without verification that the Company incurred those costs.
Id
ORDER NO.34079 3
FINDINGS AND DISCUSSION
The Commission has thoroughlyreviewed the record in this case,includingthe Application
and comments.Based on this record,the Commission finds that the Company's Application
should be approved.The proposed FCA rates are fair,just,and reasonable,and are adequate to
allow the Company an opportunityto 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 $15,606,711
for the 2018-2019 period,and FCA rates equal to 0.2923 cents-per-kWh for residential class
customers and 0.3679 cents-per-kWh for small general service class customers.
We encourage the Company and Staff to collaborate regarding the issues that Staff raised
in its comments,prior to the Company making its 2019 FCA filing.
We recognize that the Company's annual FCA filing must be processed each year on an
expedited timeline.Accordingly,we encourage the Company,in future filings,to provide
electronic,executable files of its exhibits with its application (in addition to hard copies)to ensure
the filings are timely processed.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company's Application is granted.The
Company shall have a net deferral balance of positive $15,606,711 for the 2018-2019 period,and
FCA rates equal to 0.2923 cents-per-kWh for residential class customers and 0.3679 cents-per-
kWh for small general service class customers.The Company's proposed Schedule 54 is approved
as filed,with an effective date of June 1,2018.
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 §61-626.
ORDER NO.34079 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2018.
PAUL KJELI AnbÉR,PRESIDENT
KRISTÍNE RAPEILCÒÏvl $SIONER
ERIC ANDERSÒN,Cõ¾fMÍSSIONER
A
Diane M.Hanian
Commission Secretary
IPCEl802 final ep3
ORDER NO.34079 5