20200513Comments.pdf

STAFF COMMENTS 1 MAY 13, 2020
JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5470

Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION TO
IMPLEMENT FIXED COST ADJUSTMENT
RATES FOR ELECTRIC SERVICE FROM
JUNE 1, 2020, THROUGH MAY 31, 2021
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CASE NO. IPC-E-20-14

COMMENTS OF THE
COMMISSION STAFF

The Staff of the Idaho Public Utilities Commission submits the following comments
regarding the above referenced case.

BACKGROUND
On March 13, 2020, Idaho Power Company (“Company”) applied for authority to
implement Fixed Cost Adjustment (“FCA”) rates for electric service from June 1, 2020 through
May 31, 2021, and for approval of the Company’s corresponding updated Schedule 54. The FCA
is an annual rate adjustment mechanism that decouples the Company’s fixed cost-recovery from
its volumetric energy sales. See Order Nos. 30267 and 32505. This decoupling enables the
Company to recover its fixed costs to deliver energy, as set in its most recent general rate case,
even when energy sales and revenues have decreased.
The Company requested recovery of the 2019 FCA balance and approval of corresponding
rates. The proposed FCA is $34,194,871 for the Residential class and $1,303,985 for the Small
RECEIVED
2020 May 13PM2:12
IDAHO PUBLIC
UTILITIES COMMISSION

STAFF COMMENTS 2 MAY 13, 2020
General Service class, for a total amount of $35,498,856. Application at 4. The Company
represented the proposed FCA deferral balance is slightly above the current FCA deferral
balanced collected in customer rates. Id.
The Company requests to increase the FCA rate to $0.6622 cents per kWh for the
Residential class and $0.8381 cents per kWh for the Small General Service class. Id. If
approved, the proposed FCA rates would increase current billed base revenue from affected
customer classes by 0.02 percent per year. Id. at 4-5.
The Company requested the proposed rates and updated Schedule 54 take effect on
June 1, 2020, and remain in effect until May 31, 2021.1 Id. at 5. The Company’s request that this
case be processed under Modified Procedure was approved by the Commission in Order 34627 on
April 17, 2020.

STAFF REVIEW
Based on its review, Staff recommends the Commission approve the Company’s proposed
Schedule 54 and accept the FCA deferral balance of $35,498,856, which is composed of
$34,194,871 for the Residential class and $1,303.985 for the Small General Service class.
Staff reviewed the Company’s filing and supporting testimony provided by Company
witness Paul Goralski. Staff audited the formula components used to calculate the FCA balance
and confirmed that it complies with Commission orders. Staff verified the Fixed Cost per
Customer (“FCC”) and the Fixed Cost per Energy (“FCE”), the annual sales for the two affected
classes, the customer counts, and all the inputs used to calculate the FCA balance. The
Company’s use-per-customer for Residential and Small General Service classes was lower in
2019 than in 2018. The lower level of sales resulted in an increase in the FCA rates.
The proposed 2019 FCA deferral balance of $35,498,856 exceeds the FCA deferral
balance currently in rates by $710,580. The 2018 FCA deferral balance of $34,788,276 was
approved in Order No. 34346 and is currently included in customers’ rates.
The FCA applies to Residential and Small General Service customers. If the Application
is approved as filed, the monthly bill for a typical residential customer using 950 kWh would
increase by about $0.02 per month, effective June 1, 2020. The Company has also proposed a

1 Idaho Power requests that the FCA rates become effective June 1, 2020, coincident with the Company’s Power Cost
Adjustment and with the commencement of seasonal rates. Id. at 5.

STAFF COMMENTS 3 MAY 13, 2020
change to its Power Cost Adjustment (“PCA”), also effective June 1, 2020. The proposed PCA’s
impact on customers’ bills substantially exceeds that of the FCA. The proposed PCA adjustment
increases the typical customer’s monthly bill by $4.01, resulting in a combined $4.03 monthly
increase.

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 1, 2020 through May 31, 2021, surcharges of
0.6622 cents per kWh for the Residential class and 0.8381 cents per kWh for the Small General
Service class are necessary to provide a sufficient opportunity for the Company to recover the
2019 FCA deferral balance. Staff verified the FCA forecasted sales are appropriate and align with
the forecast used in the Company's 2020-2021 PCA filing.

Trends in the FCA Balance
The 2019 FCA balance of $35.5 million is $710,580 more than the existing FCA currently
recovered in rates. See Order No. 34346. 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 in seven years and has only
decreased once, which occurred two years ago with the 2017 FCA deferral balance. Chart 1
illustrates the FCA balances since the FCC and FCE were last updated.

STAFF COMMENTS 4 MAY 13, 2020
Chart 1: FCA Deferral Balances 2012-2019

Declining use-per-customer coupled with increasing customer counts caused the FCA
balance to grow from 2012 through 2016, and again in 2018 and 2019. The Company's 2019
Integrated 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 deferral balance will grow unless the FCC and FCE are updated in a general rate case. The
Commission acknowledged these concerns in Order No. 34346, stating:
But as we frequently have expressed in prior orders, the FCA is designed to
encourage cost-effective DSM and energy efficiency programs, but in practice the
FCA rewards the Company for all reductions in per customer energy consumption,
whether the reduction results from the Company’s efforts or broader trends the
Company has no control over. These limitations in the FCA’s design, coupled with
trends that are likely to create charges rather than rebates for customers in the
coming years, cause us concern about whether the FCA can remain viable as
structured.
We further note that key components of the FCA calculation have not been
updated since the Company’s last general rate case in 2011. Since then, much has
occurred in the energy industry and in the Company’s service territory to call into
question the continued reasonableness of the numbers established in 2011.

Order No. 34346 at 5. The Company did not address these concerns in its Application, instead
relying on the approved methodology to recover an additional $35.5 million in the 2020-2021

STAFF COMMENTS 5 MAY 13, 2020
recovery period. While Staff recommends approval of the Company’s FCA proposal in this case,
it believes a cap on future recoveries through the FCA may be appropriate. Staff believes the
current FCA as structured is no longer viable, and the Commission should consider capping FCA
recovery in between rate cases beyond the annual 3% cap included in the original FCA design.
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
base costs have not been verified since. Staff remains concerned that the FCA allows recovery of
costs without verification that the Company actually incurred them.

Impact of Company-Sponsored Energy Efficiency
The Commission adopted the FCA in part 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 of
households or business customers to higher electric bills (i.e., elasticity measures). The FCA rate
adjustment mechanism provides for fixed cost recovery regardless of the cause for decreased
energy sales and revenues.
Staff notes that only 22% of the total energy savings claimed by the Company is attributed
to its Residential and Small General Service energy efficiency 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 FCA.
In the Company’s Residential and Small General Service energy consumption forecast,
the Residential component represents over 97% of the forecast, with Small General Service
representing less than 3% of it. Staff calculated that the Company's 2020-2021 Residential energy
consumption forecast is approximately 550,000 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. Staff notes that only a fraction of these decreases are
attributable to the Company's energy efficiency programs: the 40,006 MWh saved by Residential
and Small General Service customers represent less than 8% of the estimated decrease in

STAFF COMMENTS 6 MAY 13, 2020
Residential energy sales. The remaining reductions in energy sales are due to factors unrelated to
the Company's energy efficiency programs.

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 customer notice was included with bills mailed to
customers beginning March 23, 2020 and ending April 20, 2020, providing customers with a
reasonable opportunity to file comments with the Commission by the May 13, 2020, deadline.
As of May 12, 2020, the Commission has received no comments.

STAFF RECOMMENDATIONS
Staff recommends the Commission:
1. approve the Company's FCA filing with a net deferral balance of $35,498,856 for
2020, and,
2. approve the Company’s proposed Schedule 54, included with the Application as
Attachment 1.
Staff believes these proposed rate adjustments provide adequate opportunity for the Company to
collect its deferred authorized level of fixed costs.

Respectfully submitted this 13th day of May 2020.

__________________________________
John R. Hammond, Jr.
Deputy Attorney General

Technical Staff: Bentley Erdwurm
Johan Kalala-Kasanda
Curtis Thaden

i:umisc:comments/ipce20.14jhbejkct comments

CERTIFICATE OF SERVICE
CERTIFICATE OF SERVICE

I HEREBY CERTIFY THAT I HAVE THIS 13th DAY OF MAY 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-20-14, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:

LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
[e-mail]

PAWEL P GORALSKI
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]

/s/ Reyna Quintero __
SECRETARY