20190507Comments.pdf

EDWARD J. JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-00]4
[phone]
IDAHO BAR NO. 10446
RECEIVED
1019llAY -? Pl{ 2: 03
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER FOR AUTHORITY TO
IMPLEMENT FIXED COST ADJUSTMENT
RATES FOR ELECTRIC SERVICE FROM
JUNE 1,2019, THROUGH MAY 31,2020.
CASE NO. IPC.E-19.10
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Idaho Power
Company' s Application.
BACKGROUND
On March 15,2019,Idaho Power Company ("Idaho Power" or "Company") filed an
Application requesting authorization to implement Fixed Cost Adjustment ("FCA") rates for
electric service from June I , 2019 through May 3 I , 2020, and for approval of the Company' s
corresponding updated Schedule 54.
The FCA is a rate adjustment mechanism. Using traditional rate design, an electric utility
recovers fixed costs through each kilowatt-hour (kwh) sold, and is thus discouraged from
reducing sales volume by investing in energy efficiency and demand-side management. The
FCA 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
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1STAFF COMMENTS MAY 7,2019
energy-as set in its most recent general rate case----even when energy sales and revenues have
decreased.
The Commission approved an FCA pilot for the Company in2007 and approved the
Company's request to convert the FCA to a permanent program for Residential and Small
General Service customers in20l1. Order Nos. 30267 ,32505.
The Company proposes an FCA rate increase of $19,181,565 for Residential and Small
General Service customers. This proposal increases the FCA rates to 0.6598 cents per kWh for
the Residential class and 0.8366 cents per kWh for the Small General Service class. If approved,
the FCA rates would increase by 3.64% from current billed revenue for the affected customer
classes. The Company requests the Commission waive the 3%o cap on annual FCA rate
increases.
STAFF REVIEW
Based on its review, Staff recommends the Commission accept the FCA defenal balance
of $34,788,276,which is composed of $33,522,802 for the Residential class and $1,265,473 for
the Small General Service class.
Staff reviewed the Company's filing and supporting documents, and verified the Fixed
Cost per Customer (FCC) and Fixed Cost per Energy (FCE), the annual sales for the two affected
classes, the customer counts, and all inputs associated with the calculation of the FCA balance.
The Company's use-per-customer for Residential and Small General Service classes were lower
in 2018 than in 2017. As a result, the lower level of sales produced an increase in the FCA rates.
The proposed FCA deferral balance of $34,788,276 exceeds the current FCA deferral
balance of $15,606,711 currently included in customers' rates by $19,181,565. This increase
exceeds the 3o/o cap on annual FCA increases. When the 3o/o threshold is reached, the
Commission may specify that amounts in excess of the cap be carried over to subsequent years.
The Company has requested the cap be waived this year and FCA surcharges for the coming year
be designed to recover the full FCA deferral balance of $34,788,276. Waiving the cap
minimizes the potential for compounding future rate increases, which can happen when a
deferred cost recovery is "pancaked" on top of a subsequent period's rate adjustments.
Furthermore, the FCA rate increase will be offset by rate reductions, also effective
June I ,2019, associated with the 2019-20 Power Cost Adjustment (PCA) including a reduction
due to the Tax Cuts and Jobs Act of 2017, and a proposed 1% reduction to the collection rate for
2STAFF COMMENTS MAY 7 ,2019
the Company's Energy Efficiency Rider. Staff agrees with the Company's proposal to waive the
3o/o cap on annual FCA increases because of this offset impact.
2019 FCA Rate Calculation
Staff verified the Company's FCA calculation for the Residential and Small General
Service classes. Consistent with prior practice, the Company proposes spreading the FCA
surcharge uniformly to both the Residential and Small General Service classes on an equal
percentage basis. Using forecasted sales for June I ,2019 through May 31,2020, a surcharge of
0.6598 cents per kWh for the Residential class and 0.8366 cents per kWh for the Small General
Service class is necessary to provide a sufficient opportunity for the Company to recover the
FCA defenal balance. The surcharges represent an increase of 3.64 percent in base revenue.
Staff verified the FCA forecasted sales are appropriate and align with the forecast used in the
Company's 2019-2020 Power Cost Adjustment (PCA) filing.
Trends in the FCA Balance
The 2018 FCA balance of $34.79 million is $19.18 million more than the existing FCA
currently recovered in rates. See Order No. 34079. This is consistent with the upward trend in
the balance since the FCC and FCE were updated in the Company's last general rate case, Case
No. IPC-E-11-08. Over this period, the FCA deferral balance increased consistently in six years
and only decreased once, last year's 2017 FCA deferral balance. Chart I illustrates the FCA
balances since the FCC and FCE were last updated.
aJSTAFF COMMENTS MAY 7,2019
FCA Balance (in $lvlillions)
s40.00
s3s.00
s30.00
s2s.00
s2o.oo
$1s.00
s10.00
Ss.oo
S-
5ss.or s34.79
s28.05
s16.88
s14.10
s8.eo s 1s.61
2012 2013 201,4 2015 2016 2018
Declining use-per-customer coupled with increasing customer counts caused the FCA
balance to grow ftom2012 through 2016, and again in2018. The Company's 20lT lntegrated
Resource Plan (IRP) forecasts that both of these trends will continue. Staff is concerned that the
FCA is unlikely to produce credits for customers and that FCA deferral balances will increase
over time. If use-per-customer declines and customer counts increase, the FCA defenal balance
will grow unless the FCC and FCE are updated in a general rate case.
Unlike the Company's PCA mechanism, which recovers actual power costs incurred, and
is therefore easily verifiable, the FCC was established in the Company's last general rate case
and have not been verified since. Staff remains concerned that the FCA allows recovery of costs
without verification that the Company incurred those costs.
Impact of Company-Sponsored Energy Efficiency
The Commission adopted the FCA to remove the Company's disincentive to invest in
energy efficiency that reduces energy sales. However, the Company's energy sales can decrease
for many reasons, including, but not limited to, weather, economic cycles, better building codes
and standards, improved appliance standards, fuel switching (e.g., increased electric to gas
conversions), energy efficiency programs, or various behavioral responses ofhouseholds or
business customers to higher electric bills (i.e., elasticity measures). The FCA rate adjustment
4STAFF COMMENTS MAY 7 ,2019
Chart I : FCA Deferral Balances 2012-2018
mechanism provides for fixed cost recovery regardless of the cause for decreased energy sales
and revenues.
Staff notes that only 44,140 MWh (24.1%) of the 183,378 MWh energy savings claimed
by the Company is attributed to its Residential and Small General Service energy effrciency
programs. The majority of the Company's energy efficiency savings are due to its Large General
Service and Large Power Service classes, which are not subject to the Company's Schedule 54
FCA tariff. Company's Response to Staff Production Request No. 3.
In the Company's Residential and Small General Service energy consumption forecast,
the Residential component represents over 97Yo of the forecast, with Small General Service
representing less than3Yo of the forecast. Company's Response to Staff Production Request
No. 2. Staff determined the Company's 2019-2020 Residential energy consumption forecast is
around 500,000 MWh less than what would have occurred if per-customer energy consumption
had remained at the level used to establish base rates in the Company's last rate case.
IPC-E-11-08, Exhibit No. 29. Staff notes that only a fraction of these decreases are attributable
to the Company's energy efficiency programs: 44,140 MWh represents less than l0% of the
estimated decrease in Residential energy sales. The remaining reductions in energy sales are due
to factors unrelated to the Company's energy efficiency programs. The FCA has been justified
as a means to remove a disincentive for energy efficiency. In practice, its impacts go far beyond
this.
Customer Notice, Press Release and Public Comments
The Company's press release and customer notice were included with its Application.
Staff reviewed the documents and determined that both meet the requirements of Rule 125 of the
Commission's Rules of Procedure. The notice was included with bills mailed to customers
beginning March 25 and ending Apri|23,2079, providing customers with a reasonable
opportunity to file timely comments with the Commission by the May 7,2019 deadline.
As of May 6,2019, the Commission had received six comments, which were all opposed
to the proposed rate increase.
5STAFF COMMENTS MAY 7 ,20T9
STAFF RECOMMENDATIONS
Staff recommends the Commission waive the3%o cap and approve the Company's FCA
filing with a net deferral balance of $34,788,276 for 2019. Based on the Company's sales
forecast, the resulting FCA rates for 2019 would be 0.6598 cents per kWh for the Residential
class and 0.8366 cents per kWh for the Small General Service class. Staff believes these rates
provide adequate opportunity for the Company to collect its deferred authorized level of fixed
costs.
Respectfully submitted this 1#day of May 2019
Ed ewell
General
Technical Staff: Johan Kalala-Kasanda
Bentley Erdwurm
Curtis Thaden
i:umisc/comments/ipcel9. l0ejjkjfbe comments
6STAFF COMMENTS MAY 7,2019
CERTIFICATE OF SBRVICE
I HEREBY CERTIFY THAT I HAVE THIS 7th DAY OF MAY 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-I9-10, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWNG:
LISA D NORDSTROM
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-mail: [e-mail]
dockets@ idahopower.com
CONNIE ASCHENBRENNER
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
E-mail: [e-mail]
S Y
CERTIFICATE OF SERVICE