20210511Comments.pdf

i'r _ ' I
DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILTTIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03t2
IDAHO BAR NO. 9917
i i I Pi'i ir: l0
Street Address for Express Mail:
I I331 W CHINDEN BLVD, BLDG 8, SUITE 20I-A
BOISE, TD 83714
Attomey 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 1,2021, THROUGH MAY 31,2022
CASE NO. IPC.E -21-03
COMMENTS OF THE
COMMISSION STAF'F
STAFF OF the Idaho Public Utilities Commission, by and through its Attomey of record,
Dayn Hardie, Deputy Attomey General, submits the following comments.
BACKGROUND
On March 15,2021, ldaho Power Company ("Company") applied to implement new
Fixed Cost Adjustment ("FCA") rates for certain electric service customer classes from June l,
2021through May 31,2022, and a corresponding revised tariff Schedule 54-Fixed Cost
Adjustment-to recover the 2020FCA balance. The FCA is an annual rate adjustment
mechanism that decouples the Company's fixed cost-recovery from its volumetric energy sales.
See Order No. 30267 and 32505. It applies to Residential and Small General Service customers.
Id. lf the Application is approved as filed, a typical Residential customer's average bill would
increase by about $0.37 cents per month.
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1STAFF COMMENTS MAY tt,202t
The Company requests to recover the 2020 FCA balance and approval of proposed rates.
The proposed FCA is $36,706,200 for the Residential class and $l ,609,299 for the Small General
Service class, for a total amount of $38,315,499. The proposed2}2l FCA deferral balance of
$38,315,499 exceeds the FCA deferral balance of $35,498,856 currently in rates by $2,816,643.
The Company requests to increase the Residential class FCA rate to 0.7008 cents per
kilowatt-hour ("kWh") from the current rate of 0.6622 cents per kWh for and the Small General
Service class to 0.8864 cents per kWh from the current rate of 0.8381 cents per kWh. If
approved, the proposed FCA rates would increase current billed base revenue from affected
customer classes by 0.38 percent per year. The Company requested the proposed rates and
updated Schedule 54 take effect on June 1.,2021and remain in effect until May 31,2022.
The Company has also proposed a change to its Power Cost Adjustment ("PCA"), also
effective June 1, 2021.t The proposed PCA's impact on customers' bills substantially exceeds
that of the FCA. The proposed PCA adjustment would increase the typical residential customer's
monthly bill by $2.57. A combination of the proposed PCA and FCA rates result in a monthly
increase of $2.94 for a typical residential customer. [f the proposed PCA and FCA rate changes
are approved as filed, the combined impact would be an overall increase in current billed revenue
of $41.2 million, or 3.55 percent, for June 2021 through May 2022.
Unlike the Company's PCA mechanism, which recovers actual power costs incurred, and
is therefore verifiable, cost data for components of the FCA, the Fixed Cost per Customer
("FCC") and the Fixed Cost per Energy ("FCE"), were established in the Company's last general
rate case IPC-E-l l-08 and base costs have not been verified since. Staff remains concemed that
the FCA allows recovery of costs without verification that the Company actually incurred them.
While Staff recommends approval of the Company's proposed FCA rates in this case, it
believes the current FCA, as structured, requires modification. Alternatives for modification are
described below.
I See Case No. IPC-E-21-10 filed April15,2021
2STAFF COMMENTS MAY 11,2027
STAFF REYIEW
Based on its review, Staff recommends the Commission approve the Company's proposed
Schedule 54 and accept the FCA deferral balance of $38,315,499 which is composed of
$36,706,200 for the Residential class and $1,609,299 for the Small General Service class.
However, Staff also recommends the FCA mechanism be modified going forward.
Staff reviewed the Company's filing and supporting testimony provided by Company
witness Paul Goralski. Staff audited the components used to calculate the FCA balance and
confirmed that it complies with Commission orders. Staff verified the FCC and the 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
("R&SGS") classes was lower in2020 than in 2019. The lower level of sales resulted in an
increase in the FCA rates.
2020 FCA Rate Calculation
Staff verified the Company's FCA calculation for the R&SGS classes. Consistent with
prior practice, the Company proposes spreading the FCA surcharge uniformly to both the R&SGS
classes on an equal percentage basis. Using forecasted sales for June l, 2021 through May 3 I ,
2022, Staff agrees that surcharges of 0.7008 cents per kWh for the Residential class and 0.8864
cents per kWh for the Small General Service class will provide a sufficient opportunity for the
Company to recover the2020 FCA deferral balance. Staff verified the FCA forecasted sales are
appropriate and align with the forecast used in the Company's2021-2022PCA filing.
Trends in the FCA Balance
In this filing, the Company's proposed FCA deferral balance of $38,3 15,499 is above the
FCA defenal balance currently being collected in customers'rates. See Order No. 34685. This is
a surcharge for the Company's customers and demonstrates a consistent upward trend in the FCA
deferral balance since the FCC and FCE were last updated in Case No. IPC-E-11-19.
As illustrated in Chart No. I below, over a period of nine years (2012 - 2020), the FCA
deferral balance consistently increased and has only decreased once, in 2017. The FCA balance
grew from 2012 through20l6, and again from 2018 to 2020. This is mainly attributed to
1JSTAFF COMMENTS MAY 11,2021
decreasing per-customer energy sales caused by Company energy efficiency efforts and other
factors over which the Company has little control.
Chart 1: FCA Deferral Balances 2012-2020
According to the Company's 20l9Integrated Resource Plan ("IRP"; forecast, this trend
will continue for the foreseeable future. Staff is concemed that the FCA is unlikely to operate
symmetrically to produce credits for customers and that the FCA deferral balances will continue
to increase over time. [f use-per-customer declines and customer counts increase, the FCA
deferral balance will grow unless the FCC and FCE are updated. In Order No. 34346, the
Commission acknowledged these concerns. However, in this Application, the Company did not
adequately address those concerns, relying instead on the Commission approved methodology to
recover an additional $38.32 million for the 2021-2022 recovery period.
Impact of Company-Sponsored Enerry 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 effrciency programs, or various consumer responses to higher
4
FCA Balance ( in S vtiltions)
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s-20t2 2AB 201,4 2415 2016
Years
2017 2018 2019 2020
STAFF COMMENTS MAY ll,202l
electric bills (i.e., elasticity measures). The FCA rate adjustment mechanism provides for fixed
cost recovery regardless ofthe cause for decreased energy sales and revenues.
Since approval of the FCA, the Company has stated that the mechanism reduces its
financial disincentive to promote energy efficiency. Cost effective DSM can defer or eliminate
some capital costs needed by the Company to serve load. Staff agrees with the Company that
these benefits have effectively been achieved. Staff believes its proposed modifications would
not adversely affect recovery of actual fixed costs or become a disincentive to cost effective DSM
measures and programs.
Staff notes that only 20o/o of the total energy savings claimed by the Company is attributed
to its R&SGS energy efficiency programs. Most 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 R&SGS energy consumption forecast, the Residential component
represents over 97Yo of the forecast, with Small General Service representing less than3o/o of it.
Staff calculated that the Company's2021-2022 Residential energy consumption forecast is
approximately 803,378 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 36,300 MWh saved by R&SGS customers represent less than 5%
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.
FCA Mechanism Modifications
In Order No. 34685, the Commission encouraged the Company, Staff, and any other
interested persons "to collaborate and develop possible rate designs that provide the opportunity
for the Company to recover its fixed costs arising from the provision of electric service to its
customers, while ensuring only just and reasonable rates are being charged to customers." Order
at 2. Staff and the Company held meetings on January 21,2021and March 1,2021to discuss
issues raised in previous FCA filings.
The Company did not propose any changes to the FCA mechanism at this time. Staff
agrees with the Company that the FCA mechanism is effective. Goralski Direct at 4 and 8. In
5STAFF COMMENTS MAY ll,202t
fact, Staff believes the FCA mechanism is actually overly effective and allows the Company to
recover actual fixed costs above that authorized in the last general rate case. Usage per customer
has changed and is updated annually, but the FCC and FCE have not been updated for ten years.
The Company suggests modifications should be considered in coordination with an
evaluation of rate design. Goralski Direct at 9. This proposal made by the Company includes
leveraging studies from Case No. IPC-E-18-16 and completing new studies before addressing
needed updates. This process and a rate change will not likely be completed before the next
annual FCA filing in2022leaving Staff s concerns being unaddressed for yet another year.
Based on previous FCA case history and the outcome of the January and March meetings,
Staff describes potential modifications to the Company's current FCA mechanism. The
modifications in any of Staff s proposed changes to the FCA mechanism, if approved by the
Commission, should be implemented for deferrals beginning January 1,2021and remain in effect
until the effective date of tariffs following a case modifuing fixed cost recovery through other rate
design options.
StafPs Proposed Modifications to the FCA
The FCA is predicated on the assumption that the average fixed costs of serving new
customers remains relatively constant since Case No. IPC-E-I l-19, when the FCA was approved
as a permanent program. Order No. 32505. This assumption is incorrect, and Staff recommends
that FCC and FCE values used to compute the FCA be adjusted to better align them with the way
the Company incurs fixed costs to serve its new customers.
Since the current FCC and FCE were determined in IPC-E-I1-19, kwh sales to R&SGS
customers have increased about 3.gyo, from 5.16 billion kWh in the test year to 5.36 billion kWh
in2020, and there has been little need for investment in new generation or transmission facilities.
Even without the FCA, the Company is collecting approximately $5.5 million more in Generation
and Transmission fixed costs from its R&SGS customers than it was authorized to collect in its
last rate case. The Company was authorizedto collect $135,255,569 through its volumetric base
rates but collected $140,748,1 52 in2020. Through the FCA, the Company was able to collect an
additional $18,947,701 for generation and transmission. Absent the need for investment in
transmission and generation facilities, Staff believes that the additional revenue derived from the
FCA for generation and transmission facilities is not justif,red.
6STAFF COMMENTS MAY tl,202l
On the other hand, Staff recognizes that each new customer requires an investment in
service drops and distribution facilities that does not vary significantly with customer load. Since
IPC-E- 1 I - I 9, the number of customers served by the Company has increased by about l7Yo, from
425,754 during the test year to 499,757 in2020. Volumetric per-customer sales have decreased
from l2,l l9 kwh to 10,731 kwh (-11.5%) over this same time period. Because the Company
collects most of its customer and distribution costs through its volumetric sales, the Company
would under-collect its distribution and customer classified fixed costs without the
distribution/customer components of the FCA.
To correct the FCA to allow the Company to fully collect its customer and distribution
classified fixed costs, without collecting fixed costs of transmission and generation facilities, Staff
suggests that the FCC and FCE be adjusted to only include distribution/customer classified costs.
Staffs recommended changes in the FCC and FCE are enumerated in Table l:
Table No. 1: Current and New Customer FCC and FCE Rates
Although Staffs Proposed FCC and FCE will better align the FCA with the way the
Company incurs its fixed costs, it will not address a key concern expressed by the Commission in
its previous orders-namely, that although the FCA is intended to encourage cost-effective DSM
and energy efficiency programs, "...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." Order No. 34346 at 4. Given the potential
difficulty of isolating the effects of the Company's Energy Efficiency programs from the effects
of exogenous factors, Staff recommends that this issue be addressed in a separate case.
2 Includes generation, transmission, distribution, and customer costs.
3 Using the latest FCC and FCE rates approved in Case No. IPC-E-l l-19, Staffcalculated distribution and customer
only FCC and FCE rates for Residential and Small General Service classes. See Attachment No. I for a detailed
example.
7
Residential Small General Service
Current Customer Fixed Costs2
FCC $650.53 per customer $360.57 per customer
FCE $0.051602 oer kWh $0.068633 per kWh
Proposed Customer Fixed Costs3
Proposed FCC 5317.72 per customer $256.29 Der customer
Proposed FCE $0.025199 oer kWh $0.048783 per kwh
STAFF COMMENTS MAY tt,202l
Without a correction to the FCA mechanism, the FCA deferral balance, and the portion of
the deferral balance collected for transmission and generation facilities will continue to grow
year-over-year. Staff discusses three possible modifications that could be implemented in next
year's FCA that will either check or reduce this growth. Any approved modifications should be
effective for deferrals on and after January 1,2021. The modifications could be permanent or
considered as interim modifications until a case is completed fully evaluating rate design and
fixed cost recovery.
Proposed ModiJication 1: Calculate the FCA for new customers using only distribution/customer
costs.
This proposal would freeze the FCA deferral balance for that portion that is collected for
transmission and generation facilities, at current levels. Under this proposal, the FCA for the
number of customers connected to the system before January 1,2021would be calculated using
the Current FCC and FCE. However, the Staff Proposed FCC and FCE would be applied to
customers connecting on or after that date. If this modification were implemented this year, this
year's FCA would be identical to the $38,315,499 FCA proposed by the Company; however, we
would expect the deferral balance to grow at a slower rate than is currently occurring under the
existing methodology. This modification should be considered at a minimum.
Proposed ModiJication 2: Calculate the FCA for customers added after the last rate case using
only distribution/customer costs.
This proposal would reduce, but not eliminate, either the FCA deferral balance or that
portion collected for transmission and generation facilities. Under this proposal, the FCA for the
397,403 Residential customers and 28,351 Small General Service customers assumed during the
Company's 20ll rate case test year would be computed using the current FCC and FCE. The
FCA for customers added after IPC-E-11-19 would be calculated using Staffs Proposed FCC and
FCE. If this modification were implemented this year, this year's FCA would be reduced to
$34,832,967, and we would expect growth of the deferral balance to be slowed relative to growth
under the existing methodology.a
a This proposal is like the FCA mechanism authorized by the Commission for Avista Utilities.
8STAFF COMMENTS MAY tt,202l
Proposed ModiJication -1.' Calculate the FCA for all customers using only distribution/customer
costs
This proposal would reduce, but not eliminate, the FCA deferral balance, and it would
eliminate that portion of the FCA collected for transmission and generation facilities. The FCA
for all customers would be computed using Staffs Proposed FCC and FCE. If this modification
were implemented this year, this year's FCA would be reduced to $18,772,975, and Staff would
expect growth of the deferral balance to be slowed relative to growth that would occur under the
existing methodology. As noted earlier, the Company would still collect about $5.5 million more
in base rates than it was authorized to collect for generation and transmission facilities in the last
rate case.
Proposed Modification 3 best aligns the FCA with the way that the Company incurs the
{ixed costs of serving new customers. Staff recommends the Commission order the Company to
apply Staffs Proposed FCC and FCE (Table No. l) to all customers in subsequent FCA filings
effective January 1,2021. If the Commission believes that more investigation is required to
permanently adjust the FCA methodology, Staff recommends that the modification be accepted
on an interim basis and a separate docket be opened. The new docket should develop an
improved methodology that will allow the Company to recover the fixed costs that it is unable to
recover due to decreases in volumetric sales attributable to its R&SGS DSM programs, update the
FCC and FCE with current costs, and eliminate or at least significantly reduce recovery for
decreased energy consumption due to exogenous factors. Staff believes any methodology derived
in a new docket should be applied to202l fixed cost recovery to be filed in2022.
Customer Notice and Press Release
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 26,2021 and ending Aprll24,2021, providing customers with a
reasonable opportunity to file comments with the Commission by the May 11,2021, deadline.
As of May 10,2021, the Commission has received no comments.
9STAFF COMMENTS MAY ll,202l
STAFF RECOMMENDATIONS
Staff recommends the Commission:
l. Approve the Company's FCA filing with a net deferral balance of $38,315,499 for
June l, 2021- May 31, 2022.
2. Approve the Company's proposed Schedule 54 as submitted.
3. Order the Company to apply Staffs Proposed FCC and FCE to all customers effective
January 1,2021in subsequent FCA filings (Proposed Modification 3).
If the Commission does not approve Staffs Proposed Modification 3 on a permanent
basis, Staffrecommends it be approved on an interim basis effective January 1,2021and a docket
opened to develop an improved FCA methodology.
Respecttully submitted this ll4 day of May 2021.
Dayn
Deputy Attorney General
Technical Staff: Kevin Keyt
Johan Kalala-Kasanda
Mike Morrison
Curtis Thaden
STAFF COMMENTS 10 MAY tl,202t
Attachment 1:
FCC and FCE Calculation Example
Residentialo Current FCC: $650.53/Customer (Currently used in FCA)o Current FCE: $0.0516021kwh (Currently used in FCA)o Modified Distribution-only FCC: $317.72lCustomero Modified Distribution-only FCE: $0.0251991kwh
Sample Calculation: Residential Class
Start with current approved values, and then subtract the fixed costs of transmission and
generation.
Current Fixed Costs (System fixed costs less customer fixed charges):
Less Transmission ($40,7 61,768) and Generation ($9 1,537,17 2)r :
s258,561,619
($t32,298,940)
$126,262,679
Average number of Residential Custom ers 397,403
FCC : $126,262,6791397,403 : $317 .72
Residential kWh: 5,010,67 6,610
FCE : $126,262,67 9 I 5,0 I 0,67 6,61 0 : $0.025 I 99lkwh
I Includes a prorated portion of the $8,793,061 revenue shortfall/subsidy from Youngblood Exhibit 2 col. L
Attachment No. I
Case No. IPC-E-21-03
Staff Comments
0s/11121
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I lTH DAY OF MAY 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC.E-21-03, BY E.MAILING A COPY TTMREOF, TO THE FOLLOWING:
NATHAN F GARDINER
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL : [e-mail]
dockets@idahopower. com
PAWEL P GORALSKI
IDAHO POWER COMPANY
PO BOX 70
BOrSE rD 83707-0070
E-MAIL : [e-mail]
Jo,4/,.^
SECRETAP(Y/---/
CERTIFICATE OF SERVICE