20200121Comments.pdf

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&OrsEN
MARX A. Ecrlo Hawk
ERrc L. OLSEN
JoSEPH T. PREsroN
AI roRNt,\ s
505 PtiRslIN(i A\ f.. STF.
PO BOX 6l l9
P0('A ,l-r.o- ID 81205-61
208.478.1624
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January 21,2020
Diane Hanian, Commission Seffetary
ldaho Public Utilities Commission
472 W. Washington
Boise, Idaho 83720-007 4
diane-holt(rrn uc.idaho.sov
Re CASE No.: IPC-E-18-16
COMMENTS RE: FIXED COST REPORT BY IDAHO IRRIGATION
PUMPERS ASSOCIATION, INC.
Dear Ms. Hanian:
Enclosed you will find the original and seven (7) copies of the following:
l. Comments RE: Fixed Cost Report by Idaho Irrigation Pumpers Association, Inc.
Electronic copies have been served per the Certificate of Service.
Please file these documents in the case file. Ifyou have any questions, please don't
hesitate to call. Thank you.
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Eric L. Olsen
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Enclosures
HIWDOXCLr ENTS\ I 343\0026\00085066.DOCX
Sincerely,
frlu^-
Eric L. Olsen (ISB# 4811)
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6119
Pocatello, Idaho 83205
Telephone: (208) 47 8 - I 624
Facsimile: (208) 47 8 - I 67 0
Email: clo(a.rer;ltohan'k.ctnr
Attorney for Intemenor ldaho Irrigation Pumpers Association, Inc.
BEFORX THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S PETITION TO STUDY
FIXED COSTS OF PROVIDING
ELECTRIC SERVICE TO CUSTOMERS
CASE NO. IPC.E-18-16
COMMENTS RE: FIXED COST
REPORT BY IDAHO IRRIGATION
PUMPERS ASSOCIATION, INC.
COMES NOW the Idaho Irrigation Pumpers Association, Inc. ("IIPA") and pursuant to
Commission's Order No. 14466 artd provides its comments regarding Idaho Power Company's
("IPC") the Fixed Cost Report ("Report") that has been filed in this case.
I. GENERAL OBSERVATIONS
The Report gives the impression that the information contained therein was the product
of a large effort by a number of parties. In fact, there was a great deal of effort by a number of
parties, but the bottom line is that the Report is simply a reflection of IPC's position and not a
reflection of any joint effort.r From the IIPA's perspective (and presumably other parties), these
workshops had the appearance ofnegotiations, where IPC would file a Report that was reflective
of the entire group. It was not until late in the process that IPC made it clear that the Report was
its responsibility and that it was merely listening to the parties' cornments and it was only going
to incorporate the comments that reflected its position. Yes, IPC seemed to consider the
comments of other parties, but then relatively few of those comments found their way into the
Report.
I The Repofl slates: "Since dre initiation ofthe l8-16 Case, the company has met with Commission Staff
(Staff) and interested parties in five settl€ment workshops and received feedback and input on issues to be addressed
inthecompany,sReport.@fromparties,andincompliancewithorderNo.
34046, the company has prepared the following Report for the Commission's review." Fixed Cost Repon. P. 5
(Emphasis added).
llPA COMM ENTS RE: FIXED COST REFORT - Page I
cAsE NO. |PC-E- t8-t6
IPC reiterated its concerns from Case No. IPC-E-17-13 with respect to fixed cost
recovery for on-site generation customers in its Report:
Because the volumetric rates contained within the company's current retail rate
structure include cost associated with all components of the electric system-from
generation resources to the meters installed on customers' premises-volumetric
rates do not properly assign the costs and benefits of the transaction between
Idaho Power and its customers with on-site generation.2
The IIPA does not take the position that costs and benefits for some rate schedules may not be
"aligned", but IPC's Fixed Cost Report does nothing to address or quantifu the appropriateness
of any alignment. Neither the existing alignment nor IPC's proposal lo have more revenue
collected on the basis offixed charges is measured by any criteria demonstrating that one set of
ratios is any better than the other. The entire premise of the Report is that IPC would like to
have more costs recovered in fixed charges, but the only justification given is that a lot of fixed
costs are recovered in the energy rates.
IPC's Fixed Cost Report goes on to state:
The rate design evaluation presented in this Report includes an assessment ofthe
extent to which each rate design option may provide for recovery offixed costs in
a manner that alisrs with the underlyine cost structure, improved faimess in the
assignment ofcosts to individual customers and appropriately balances a ranse of
policv objectives.3 (Emphasis added)
First, it should be recognized that the "alignment" ofthe its fixed charges (demand and
customer) with its underlying classification ofcosts, may not be a goal that is worth pursuing.
As clearly demonstrated in the Report, all fixed costs are not being recovered in demand and
customer charges at the level which fixed costs are being classified/assigned to customer classes.
This mismatch, as IPC calls it, has existed since the beginning of utility regulation. There is
nothing newly discovered here. IPC merely wants to collect more of its costs within fixed
charges and less through energy charges.
Second, "improved faimess" is only in the eye ofthe beholder. For each rate schedule,
IPC admits that increasing demand and/or customer charges will benefit high load factor
customers, while placing more of a cost burden on lower load factor customers. Under today's
existing rates, high load factor customers already pay less per kWh than lower load factor
2 td. At3
3 td. At3
llPA COMMENTS RE: FIXED COST REFORT - Page 2
cAsE NO. tPC-E-18-16
customers. Other than stating that more ofthe fixed costs classified/assigrred by IPC should be
collected in fixed charges, what is to say that this is appropriate or fairer than rates are today?
What is to say that the fixed charges should be lower than they are today? Fairness is a good
objective, but one needs to ask "faimess" as defined by who and how does this relate to other
policy objectives.
Thus, increasing fixed charges does not "balance a range of policy objectives". The
Report goes on to state:
To create a proper rate design, it is important to distinguish between fixed and
variable mst-barrillg_eftgl_gollideraUo!8, the company endeavors to collect
variable costs (those that can fluctuate with energy consumption) through the
volumetric energy charges and the fixed costs (those driven by customer counts or
demand) through fixed monthly service charges and dernand-related charges. . . .a
"[B]aning other considerations" is a gross understatement of what the Report does. The Report
is single-minded in its attonpt to increase fixed charges (demand and customer) in order to help
stabilize its revenue. To give a false sense ofinclusion ofother raternaking objectives, the
Report lists (but gives little or no weight to) the ratemak'ing principles put forth by Bonbright.s
The first principle listed in its Report is "Effectiveness in yielding total revenue requirements
under the fair retum standard."6 The second principle listed in its Report is "Revenue stability
and predictability." 7 These two principles are exactly what increasing or developing a dernand
charge will do. This is exactly what IPC is proposing. However, IPC gave little or no
consideration to Bonbright's other rate making principles that were implicated by the
participating parties' comments and views that were not ultimately incorporated into or
addressed by the Report.8
II. IRRIGATION COST STRUCTURE
The IIPA will specifically address issues affecting Irrigation customers and will leave it
to others to address how the Report deals with the other customer classes. IPC appropriately
recognizes many unique features about Irrigator usage. IPC recognizes that Irrigators are not
year-round customers, but have a definite in-season (high usage) and an out-of-season. IPC also
4 /d. At 7 (ernphasis added).
5/d At8.
6ld. Figwe 2.
7 Id. Fig:rre 2.
8 Attached hereto as Appendix A is a copy ofrelevant pages from Bonbright, James C. Principles of Public
Utility Rates.
IIPA COMMENTS RE: FIXED COST REPTORT - Psge 3
cAsE NO. tPC-E-t 8-t6
recognizes that lrrigators, unlike any other customer group, have a single danand level-there is
only one piece of equipment tied to its system and that equipment is either "on" and using
electricity or it is "off'and not using electricity. This is completely different than other
customer classes that have a variety of loads/equipment that can be using electricity at any given
time. For all non-lrrigation customers, a demand charge may be useful to keep peak demand
down, but this does not apply to Irrigators who do not have a "peak demand level." The
Irrigators have the same demand level whenever electricity is used. No matter the time of day or
how long an Irrigator takes electricity, the dernand level will be the same.
It is often stated that a higher danand charge will promote conservation as customers try
to lower their energy costs by reducing their peak dernand. With lower peak dernands and the
same energy usage, a customer will have a higher load factor which is considered to be an
efficient use of the electrical system. This works for all customer groups, except the Irrigation
cuslomers that have only one piece of equipment/pump and it is either operating or not. Without
changes to the basic system, the only way an Irrigator can obtain a higher load factor (and thus a
lower overall rate per kWh) is for the Irrigator to increase its usage. This would increase the
Irrigator's bill but decrease the cost per kWh (which could be very beneficial for the Irrigator,
but not for IPC's system).
Why would an Irrigator wish to increase his overall bill in order to lower his cost per
kWh? The answer is quite simple. It lies in the cost of taking a small amount of electricity
compared to taking more energy that would pump more water and be more beneficial for his
crops. For example, if a 100 kW pump is turned on for only one hour during an in-season
month, the Irrigator would use I 00 kWh of energy and would be charged:
$ 22.00 Customer charge
$ 697.00 Dernand charge$ 5.76 Energy charge
$ 724.76 Total or $7.25 per kWhe
9 This is dollars and not cents
IIPA COMMENTS REr FTXED COST REPORT - Pase 4
CASE NO. IPC-E- l8- l6
If this Irrigator increased his operating time to 100 hours, he would be watering his crops lar
more during the month. For the 100 kW motor, he would use 10,000 kWh and be charged:
$ 22.00
$ 697.00
$ s76.3s
$ 1,29s.35
Customer charge
Dernand charge
Energy charge
Total or 12.951 perkwh
llPA COMMENTS RE: FIXED COST REPORT - Pege 5
CASE NO. rPC-E-I8- l6
This is simple economics for the lrrigator. He increases his bill by 78%, but he increases the
water for his crops by a factor of 100. Although saving on his electric bill is important, the
money he makes is tied to his crops. A decrease in yield is usually far more important than a
small increase in the electric bill.
The above example shows what the thought process is in light of the current Irrigator
rates. But what happens if the fixed charges are raised and the energy charges are lowered as
IPC suggests? Very simply, there would be more upfront charges and lower energy prices. The
incentive would be even greater to use more energy because the incremental cost to use more
water would be even less. Higher dernand and customer charges would discourase conservation
during the summer months-at the very time when it would be beneficial to reduce consumption
on the system. By the same token, decreasing the dernand and customer charges would cause an
increase in the energy rates which in tum would promote conservation----€ach unit ofusage
would be more expensive and thus, need to be weighed against the water needed.
Presently, the in-season lrrigators have a demand charge and a two-part energy rate that
is depordent upon load factor. An Irrigation customer, like any other demand metered customer,
is encouraged to increase his load factor by the fact that he gets an overall lower rate per kWh if
he does so. But an Irrigator cannot lower his demand in the short run without equipment
changes, so all he can do to increase his load factor is to increase his energy usage in order to
increase his Load Factor. This is the opposite of what is generally encouraged. Very simply put,
the dernand charge and the higher first block energy charge designed to collect a portion offixed
costs encourages more Irrigation usage on the system. On the other hand, if fixed costs are kept
low, then energy prices would need to be higher in order to collect more of the fixed costs. With
higher energy prices and less being collected up front in fixed charges, then more concentration
would be placed upon saving every possible unit ofelectricity compared to low energy rates with
high upfront cost recovery.
IPC's Report goes on to introduce a Basic Load Charge ("BLC") to the Irrigation rates.
This has the appearance ofadding more granularity to rates, thus attributing the collection of
production and distribution costs in separate rates. In reality, a BLC would only produce a
second component of a demand charge for Irrigators. A BLC for other classes gives the
appearance ofmore appropriately collecting demand charges based on perceived difference in
the timing and use of the Distribution and Generation systems. Be that as it may, with Irrigators
having essentially the same dernand level each montl, each day, and each hour, there is no
benefit to dividing the fixed cost collection over two mechanisms that would collect the same
overall fixed costs as presently collected under a single danand charge.
III. CONCLUSION
IPC's Report is single-minded in its attempt to collect more of its revenue in fixed
charges. This proposed move to higher fixed charges was never critiqued against other standard
regulatory policy considerations. For Irrigation customers, a dernand charge is a disincentive to
conservation and increasing the fixed charges would be even more ofa disincentive.
DATED this 2l st day of J anuary,2020.
ECHO HAWK & OLSEN
/)t
'lhr*--
ERIC L. OLSEN
llPA Coi\ltll.l\Ts Rtj: FIXED COST RUPORT - Page 6
CASE NO. lP('-E- lll- I (,
CERTIFICATE OF SERVICE
Diane M. Hanian, Secretary
Idaho Public Utilities Commission
P.O. Box 83720
I 133 I W. Chinden Blvd.
Building 8, Suite 201-A
Boise, ID 83714
dianc.holt(r!nuc.idalro. gov
Edward Jewell, Deputy Aftomey General
Idaho Public Utilities Commission
P.O. Box 83720
I 1331 W. Chinden Blvd.
Building 8, Suite 201-A
Boise, ID 83714
edward.icwcll nuc.idaho.sov
Lisa D. Nordstrom
Regulatory Dockets
Attorney for Idaho Power Company
P.O. Box 70
Boise, ID 83707
lnordstrom(a)idahonower.com
doc k ets(ir-ri dahoporver.coq
Tim Tatum
V.P. of Regulatory Affairs
Idaho Power Company
P.O. Box 70
Boise, ID 83707
ttat um(r{ri dahoporvcr.com
llPA COMMENTS RE: FIXED COST REPORT - PEge 7
CASE NO. IPC-E.I8.I6
U.S. Mail
Hand Delivered
Ovemight Mail
Telecopy (Fax)
Electronic Mail (Email)
U.S. Mail
Hand Delivered
Ovemight Mail
Telecopy (Fax)
Electronic Mail (Email)
U.S. Mail
Hand Delivered
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I HEREBY CERTIFIY that on this 2lst day of January , 2020, lserved a true, correct and
complete copy of the aforernentioned document to each of the following, via U.S. Mail or private
courier, ernail or hand delivery, as indicated below:
Anthony Yankel
Idaho Irrigation Pumpers Association, Inc.
12700 Lake Avenue, Unit 2505
Lakewood, OH 44107
krnv(nrvankel.net
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U.S. Mail
Hand Delivered
ovemight Mail
Telecopy (Fax)
Electronic Mail (Email)
trntrntr
U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
Russell Schiermeier
29393 Davis Road
Bruneau, Idaho 83604
buyhay(atcmail.com
trtrtrtrx
U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
Zack Waterman and Mike Heckler
Idaho Sierra Club
503 W Franklin St.
Boise, Idaho 83702
trtrtrtrx
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U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)zack.watennan u)sierraclub.org
michael.p.heckler @smail.com
U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
IIPA COMMENTS RX: FIXED COST REPORT - Prge E
cAsE NO. |PC-E-I8- l6
Abigail R. Germaine
Deputy City Attomey
Boise City Attorney's Office
150 N. Capitol Blvd.
P.O. Box 500
Boise, Idaho 83701 -0500
aqcnnaine(iit )cityotboise.org
Preston N. Carter
Givens Pursley LLP
601 West Bannock Sheet
Boise, Idaho 83702
prestoncarter(@ gi vensDurslev.com
kendrah(nt qivenspursley.com
Benjamin J. Otto
Idaho Conservation League
710 N. 6s St.
Boise, Idaho 83702
botto(J)i dahoconsen'ati on.ors
Kelsey Jae Nunez
Kelsey Jae Nunez LLC
920 N Clover Dr.
Boise, Idaho 83703
k e I sey (r_ilkcl sey i a en un ez. com
U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
Briana Kobor
Vote Solar
358 S 700 E Ste 8206
Salt Lake City, UT 84102
briana(nrv0tesolar.ore
David Bender
Earthjustice
3916 Nakoma Rd
Madison, WI 5371 I
dhendcr(ril:e lustlce.org
F Diego Rivas
NW Energr Coalition
1l0l 8th Ave
Helena, MT 59601
die,ro(Zanwen crgy.org
U.S. Mail
Hand Delivered
Ovemight Mail
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Hand Delivered
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Electronic Mail (Email)
U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Elechonic Mail (Email)
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U.S. Mail
Hand Delivered
Ovemight Mail
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U.S. Mail
Hand Delivered
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llPA COMMENTS REr FIXED COST REPORT - Psge 9
cAsE NO. IPC-E-18-t6
C Tom Arkoosh
Arkoosh Law Oflices
Po Box 2900
Boise, ID 83701
[e-mail]
erin.ceci[@arkoosh.com
Ted Weston
Rocky Mountain Power
1407 WN Temple Ste 330
Salt Lake City, UT 841 16
ted. weston(rapaci t'i com.conr
Yvonne R Hogle
Rocky Mountain Power
1407 WN Ternple Ste 320
Salt Lake City, UT 841l6
Yvonnc.hoqle6rpacitlcorp.cotn
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U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
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U.S. Mail
Hand Delivered
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U.S. Mail
Hand Delivered
ovemight Mail
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Elechonic Mail (Email)
Electronic Service Only
Al Luna n U.S. Mail
Hand Delivered
Overnight Mail
Telecopy (Fax)
Electronic Mail (Email)
[e-mail] trtrxNick Thorpe
ntliomeki earthiustice.ors
Ortt'(J/u*-
Eric L. Olsen
Echo Hawk & Olsen
llPA COMMENTS REr FIXED COST REPORT - Page l0
CASE NO, IPC.E-I8-I6
Dr. Don Reading
6070 Hill Road
Boise, ID 83703
dreadinskrrnindspring.com
Peter J Richardson
Richardson Adams PLLC
515 N 27th Street
PO Box 7218
Boise, ID 83702
neter(,i,lrichardsonadaur s. coni
David J. Meyer, Esq.
Patrick D. Ehrbar
Joe Miller
Avista Corporation
POBox3727
Spokane, WA99220-3727
david.mever(davistacom.corn
p"tri "k.htb"@a"irt"*.p""[e-mail] (Electronic Only)