20190319final_order_no_34277.pdf

Office of the Secretary
Service Date
March 19,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.IPC-E-19-02
OF IDAHO POWER COMPANY TO )
INCREASE THE SUBSTATION )ALLOWANCE IN SCHEDULE 19,LARGE )ORDER NO.34277
POWER SERVICE )
On or about December 28,2018,Idaho Power Company filed Tariff Advice No.18-
04.The Company's Tariff Advice proposed to increase the substation allowance amount in
Schedule 19,Large Power Service,by 12.7%to $72,559/megawatt (MW),with the proposed
changes to take effect February 1,2019.
At the Commission's January 22,2019 meeting,the Commission's Staff questioned
whether the Tariff Advice proposed only "minor changes to existing schedules,"as allowed by
Commission Rule 134.01 (IDAPA 31.01.01.134.01).Staff recommended the Commission allow
further investigation by treating the Company's Tariff Advice as an Application,suspending the
proposed effective date,and processing the case by Modified Procedure.
On January 24,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure.The Commission deemed the Tariff Advice to be an Application,suspended
the proposed effective date for 30 days and five months per Idaho Code §61-622,and set comment
and reply deadlines.Order No.34236.The Industrial Customers of Idaho Power subsequently
intervened.Commission Staff then filed comments,and the Company filed a reply.No other
comments were received.
Having reviewed the record,including the Application,comments,and reply,the
Commission enters this Order allowingthe Company to increase the substation allowance by 7.8%
to $69,397/MW.
THE APPLICATION
Under Company Schedule 19,if a customer asks for service that requires the Company
to add or upgrade transformer capacity in substation facilities,the customer must initiallypay the
associated costs but is eligible for a one-time substation allowance based on the customer's
subsequent sustained usage of capacity.Commission Order Nos.32893 and 32914 require the
Company to update the substation allowance each year.
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With this Application,the Company asked to update Schedule 19 to set the substation
allowance as required by Order Nos.32893 and 32914.The Company explained the maximum
substation allowance currentlyis determined by multiplying the customer's actual increase in load
by $64,386/MW,with the substation allowance not to exceed the actual cost of the substation
facilities.With its Application,the Company proposes to increase the $/MW multiplierby $8,173
to $72,559,reflecting a 12.7%increase.
The Company primarily attributed the increased substation allowance to increased
material costs,including an 18%increase in the cost of a 30 mega volt amp (MVA)transformer
and a 24%increase of a 4-unit metalclad.The Company noted the overall increase in material
costs was offset by a decrease in the general overhead rate from 11.48%to 9.81%.
STAFF COMMENTS
To assess the reasonableness of the Company's proposed allowance amount,Staff
reviewed:(1)the calculation method;(2)changes in direct material cost;and (3)an audit of the
overhead rate.Based on its review,Staff determined the Company's calculation method complied
with Commission orders and that the overhead rate was accurate.Staff Comments at 2.However,
Staff believed the Company's proposed allowance of $72,559/MW overestimated transformer
costs.In particular,Staff explained that the Company's estimate that a 30MVA transformer would
increase in cost by 18%was unreasonable given the estimation method used.After reviewing the
inflation rate of actual Company purchases of similar transformers,Staff expressed the Company
would more likely pay only 5%more for a 30MVA transformer than the amount the Commission
approved in last year's filing.Staff otherwise noted the other direct material costs in the
Company's proposal either reflected a reasonable rate of inflation or had a sound basis for the
proposed increase.Staff thus recommended the Commission approve a substation allowance
increase of 7.8%to $69,397/MW,instead of 12.7%to $72,559/MW as proposed by the Company.
Id.Staff also recommended that the Company and Staff meet before the next annual filing to
discuss potential changes to the materials used to calculate the substation allowance.Id.at 3.
COMPANY REPLY
In its reply,the Company explained it had not recently purchased a 30MVA
transformer and so relied on a budgetary estimate as a proxy in lieu of a firm quote or recent
purchase price.While the Companybelievesits method of relyingon a budgetaryestimate resulted
in a reasonable proposed allowance that is reasonable,the Company stated it does not oppose the
ORDER NO.34277 2
Staffs recommended allowance of $69,397/MW.Company Reply at 2.The Company also
committed to work with Staff before next year's update to address concerns associated with the
source of cost estimate data.Id.
DISCUSSION AND FINDINGS
The Company is an electrical corporation and public utility as defined in Idaho Code
§§61-119,61-129.The Commission has jurisdiction over the Company and the issues in this case
under Title 61 of the Idaho Code,including Idaho Code §61-501.
The Commission has reviewed the Company's Application,the Staff's comments,and
the Company's reply.Based on our review of the record,we find the Company's method for
calculating the allowance complied with the Commission's prior orders.However,we find it
reasonable and just to base estimated transformer costs on other actual,similar transformer costs
rather than a budgetary proxy.Consequently,we find it reasonable to allow the Company to
increase its Schedule 19 substation allowance by 7.8%to $69,397/MW.
We appreciate the Company's willingness to work with Staff before next year's
substation allowance update to discuss potential changes to the materials used to calculate the
allowance.
ORDER NO.34277 3
ORDER
IT IS HEREBY ORDERED that the Company increase its Schedule 19 substation
allowance to $69,397/MW,with the changes to take effect April 1,2019.The Company shall
promptlyfile conforming tariffs.
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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March,2019.
PAUL KJ A ,PRESIDENT
TINE RAPER,C MISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\IPC-E-19-02\orders\lPCEl902_finalorder_kk.docx
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