20200306Final_Order_No_34576.pdf

Office of the Secretary
Service Date
March 6,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )CASE NO.IPC-E-19-40
COMPANY'S APPLICATION TO UPDATE )THE SUBSTATION ALLOWANCE UNDER )ORDER NO.34576
SCHEDULE 19-LARGE POWER SERVICE )
On December 27,2019,Idaho Power Company ("Company")applied for approval to
update the substation allowance outlined in Schedule 19-Large Power Service ("Substation
Allowance").The Company requested a March 15,2020 effective date and that its Application be
processed under Modified Procedure.
On January 31,2020,the Commission issued a Notice of Application and Notice of
Modified Procedure establishingpublic comment and Company reply deadlines.Order No.34540.
Staff filed the only comments and supported the Company's Application.The Company did not
reply.
With this Order,we approve the Company's Application.
BACKGROUND
Substation facilities transform the voltage of energy from a 44 kilovolt or higher rating to
a 34.5 kilovolt or lower rating.If the Company must add or upgrade a substation's transformer
capacity to serve a Schedule 19 customer,then the customer must initially pay for the new or
upgraded facilities.After the customer makes the initial payment,the customer is eligible to
receive a one-time Substation Allowance through which the Company would fund part of the
facilities'costs based on the customer's subsequent sustained capacity usage.See Schedule 19.
THE APPLICATION
With this Application,the Company seeks to decrease its Substation Allowance-i.e.,the
part of the substation facilities'costs funded by the Company-by 29%,from $69,397 per
megawatt ("MW")to $49,253 per MW.!The proposed decrease results from updated material and
labor costs.Material costs increased by about 5%,and labor costs increased by about 16%.
Material costs generally increased because the Company has been installing larger
transformers when upgrading substations.For this Substation Allowance update,the Company
1 The maximum possible allowance will be determined by multiplying the customer's actual increase in load by $49,253 per MW
but will not exceed the actual cost of the substation facilities.
ORDER NO.34576 1
changed the default transformer used to estimate costs from the 30 mega volt amp ("MVA")
transformer it historicallyhas used to the 44.8 MVA transformer it has typically installed in recent
years.The 44.8 MVA transformer increased material costs by 20%.This increase was offset
somewhat by a 6%reduction to the cost of the 4-unit metalclad and a 9.81%to 9.57%decrease in
the general overhead rate.
Increases to labor costs were driven by the nearly 2.75%construction labor rate increase
and because the Company added 80 hours of System Protection Engineering labor.2
COMMENTS
Commission Staff reviewed documents submitted by the Company and workpapers
received through production responses and recommended Commission approval.Staff's review
focused on:1)the calculation methodology of the proposed Substation Allowance;2)changes in
direct Substation Allowance costs;and 3)an audit of the Company's general overhead rate.
Staff explains the reasoning behind the input change was prompted by a meeting between
the Company and Staff.Staff initially recommended the Company update its material costs
because the 44.8 MVA transformer is the most common transformer installed by the Company.
Additionally,Staff recommended the update because the cost of the 44.8 MVA transformer is
based on market costS3 and the Substation Allowance is normalized on a per MW basis.Staff
confirmed the Company's material costs calculations were based on the methodology approvedin
prior Commission orders.Staff noted that although there was no change to the methodology,the
major input change,switching to the 44.8 MVA transformer,is the primary reason the per MW
Substation Allowance decreased from $69,397 to $49,253.
Staff also reviewed the primary drivers of the labor cost increases cited in the Company's
Application.Staff learned that the Company is now including 80 hours of System Protection
Engineering not included in previous filings.This is besides the 2.75%increase in the construction
labor rate.Staff's review also notes that the general overhead rate decreased slightly which helped
offset some of the cost increases.Staff believes the costs included by the Company in its proposed
update are reasonable.
2 System Protection Engineering includes time for project scoping,fault studies,setting and logic development,panel shop
testing,and commission relaying.On average,System Protection Engineering requires between 80 and 120 hours.
3 The cost of the 30 MVA transformer,which is rarely used by the Company,has been based on estimates or budgetary proxies
for past Schedule 19 updates.
ORDER NO.34576 2
COMMISSION DISCUSSION AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§61-502 and 61-
503.The Commission is empowered to investigate rates,charges,rules,regulations,practices,and
contracts of public utilities and to determine whether they are just,reasonable,preferential,
discriminatory,or in violation of any provision of law,and to fix the same by order.Idaho Code
§§61-502 and 61-503.
Having reviewed the record,the Commission finds it reasonable to approve the
Application.In Case No.IPC-E-19-09 we found it "reasonable and just to base estimated
transformer costs on other actual similar transformer costs rather than a budgetary proxy."Order
No.34277.Here,the Company's proposed modifications to material costs are based on the actual
44.8 MVA transformer,which offers an objective,market-based metric for the transformer costs
as approved in Order No.34277.This is an improvement over the budgetary proxy method.In
addition,the Company appropriately included 80 hours of System Protection Engineering in labor
costs.The Company's modifications to material and labor costs for the Substation Allowance more
closely reflect the true cost allocation for the Company and Schedule 19 customers and ensures
that costs will not shift to other classes of customers.
ORDER
IT IS HEREBY ORDERED that the Company's Application to modify Schedule 19 is
approvedas filed,effective as of March 15,2020.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsiderationwithingtwenty-one (21)days of the service date of this Order regarding any matter
decided in 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.34576 3
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this to
day of March 2020.
PAUL KJELL DER,PRESIDENT
KRÈTINE RAPER,COlvÌMISSIONER
ERÌC ANDERSON,Ö¾íMISSIONER
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\lPC-E-19-40\orders\IPCEl940_Finaldh.docx
ORDER NO.34576 4