20220520Final_Order_No_35410.pdf

ORDER NO. 35410 1

Office of the Secretary
Service Date
May 20, 2022
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, 2022, THROUGH MAY 31, 2023
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CASE NO. IPC-E-22-07

ORDER NO. 35410

On March 15, 2022, Idaho Power Company (“Company” or “Idaho Power”) applied to
implement new Fixed Cost Adjustment (“FCA”) rates for certain electric service customer classes
from June 1, 2022, through May 31, 2023, and a corresponding revised tariff Schedule 54—Fixed
Cost Adjustment. The Company filed the Direct Testimony of Pawel P. Goralski in support of the
Application. The FCA applies to Residential and Small General Service (“R&SGS”) customers.
Id. Under the proposed FCA, a typical Residential customer’s average bill would decrease
approximately 0.81 cents per month.
On April 6, 2022, the Commission issued a Notice of Application and established
public comment and Company reply deadlines. Order No. 35364. Staff filed the only comments.
The Commission now issues this Order approving the Application, effective June 1,
2022.
BACKGROUND
In 2004, the Commission opened an investigation to assess financial disincentives
inherent in Company-sponsored conservation programs; to address possible revenue adjustment
when annual energy consumption is both above and below normal; and to provide the Commission
with proposals that could provide Idaho Power the opportunity to share and retain benefits gained
from efficiencies, especially where efficiencies are derived from innovation and the use of new
technologies. See Order No. 29558. Following the investigation, the Commission approved a
three-year FCA pilot program for the Company’s R&SGS customers. Order No. 30267. The FCA
pilot program was implemented in 2007. In 2010, the Commission extended the pilot program for
an additional two-year period. Order No. 31063. In 2012, the Commission approved the
Company’s application to make the FCA an ongoing program. Order No. 32505.
The FCA is an annual rate adjustment mechanism designed to decouple Idaho Power’s
fixed-cost recovery from its volumetric energy sales. See Order Nos. 30267 and 32505. Under
ORDER NO. 35410 2

traditional rate design, a utility recovers much of its fixed costs through volumetric rates. Fixed
costs are a utility’s costs to provide service that do not vary with fluctuations in energy
consumption. Variable costs vary based on the energy generated and consumed. When a utility’s
customers demand less energy, the utility’s variable costs decline in proportion to the reduced
demand. However, the utility’s fixed costs to meet customer demand stay the same. Therefore,
when fixed costs are recovered through volumetric rates, an economic disincentive exists for the
utility to invest in energy efficiency and demand-side management (“DSM”) programs, which
reduce customer demand. Because the Company and the Commission have long agreed that
promoting cost-effective DSM and energy efficiency is integral to least-cost electric service, the
Commission approved the Company’s use of the FCA for the R&SGS classes. See Order No.
30267 at 13-14 (finding DSM is an integral part of least-cost electric service and approving the
FCA as a three-year pilot program).
The FCA is designed to true-up the difference between the fixed costs the Company
recovered through rates each year and the fixed costs authorized for recovery in the Company’s
most recent general rate case. The fixed-cost portion of the Company’s revenue requirement is
established for each customer class during the Company’s most recent general rate case. The
Commission also establishes a fixed-cost per customer (“FCC”) and a fixed-cost per energy
(“FCE”) as part of the Company’s general rate case, which are used in the calculation of the
Company’s recoverable fixed costs in subsequent years. The FCA is calculated at the end of each
calendar year after the Company knows how many customers it served during the prior year and
how much energy those customers consumed. The Company then recovers the calculated FCA
balance through rates in effect from June 1 through May 31 of the following year. The FCA
provides a customer surcharge when use per customer declines, and a customer credit when use
per customer increases.
In Case No. IPC-E-21-39, the Commission approved a modification to the FCA
mechanism for new R&SGS customers under which “the authorized level of fixed cost recovery
for new customers excludes generation and transmission-related fixed costs but continues to
include distribution and other customer-related fixed costs.” See Order No. 35273. The Company
attested that the modification did not impact the 2021 FCA deferral calculation. Application at 3.

ORDER NO. 35410 3

THE APPLICATION
The 2021 FCA deferral balance was $35,203,247.66—consisting of $33,810,563.43
for the Residential class and $1,392,684.23 for the Small General Service class. Id. at 5.1 The
Company requested to decrease its FCA rates to 0.6153 cents per kilowatt hour (“kWh”) for the
Residential class, and 0.7788 cents per kWh for the Small General Service class. Id. This would
result in an annual decrease of 0.81% for the affected customer classes. Id. The Company stated
that typical residential customers would see a decrease of approximately 0.81 cents on their
monthly bill if the Application was approved as filed. Id. at 1.
The Company requested the proposed rates take effect on June 1, 2022, and for the
proposed rates to remain in effect until May 31, 2023.
STAFF COMMENTS
Staff reviewed the Company’s Application and supporting testimony. Staff audited the
components used to calculate the FCA balance and confirmed they complied with Commission
orders. Staff verified the FCC and the FCE, the annual sales for affected classes, the customer
counts, and all the inputs used to calculate the FCA balance. Based on its review, Staff
recommended the Commission approve the Company’s proposed Schedule 54 as filed, and to
allow the Company to collect the requested FCA deferral balance.
Staff’s comments focused on: (1) the calculation of the 2022-2023 FCA Rate; (2) the
modifications to the FCA; (3) the impact of Company-Sponsored Energy Efficiency programs;
and (4) the Company’s customer notice and press release.
Staff agreed that surcharges of 0.6153 cents per kWh for the Residential class and
0.7788 cents per kWh for the Small General Service class would allow the Company to recover
the 2021 FCA deferral balance. Staff verified that the FCA forecasted sales were appropriate and
aligned with the forecast used in the Company’s 2022-2023 Power Cost Adjustment filing.
Staff stated that the Commission approved a modification in Order No. 35273,
authorizing the Company to modify the FCA mechanism and institute separate, and reduced, fixed
cost tracking for R&SGS customers added to the Company’s system after January 1, 2022. Staff
stated the new FCA calculation would be reflected in the Company’s 2023 FCA deferral filing.
Staff noted that the FCA rate adjustment mechanism provides for fixed cost recovery
regardless of the cause for decreased energy sales and revenues. Staff further noted the Company’s

1 The proposed 2021 FCA deferral balance is $4,890,772 less than the 2020 FCA balance of $38,315,499.
ORDER NO. 35410 4

statement that, since implementation of the FCA, its financial disincentive to promote energy
efficiency programs such as DSM has been reduced. Staff agreed with the Company that cost-
effective DSM and the elimination or reduction of capital costs have been achieved thanks to the
FCA mechanism. Staff believed the modifications approved in Order No. 35273 would not
adversely affect recovery of actual fixed costs or become a disincentive to the implementation of
cost-effective DSM.
Staff highlighted the Company’s assertion that, in 2021, it achieved 143,971 megawatt-
hours (“MWh”) of energy savings system-wide—enough energy to power approximately 12,600
average homes for one year in the Company’s service area.2
Staff reviewed the Company’s press release and customer notice that were included
with its Application and determined that both met the requirements of Rule 125 of the
Commission’s Rules of Procedure, IDAPA 31.01.01.125. However, Staff understood that the
notice was included with bills mailed to customers beginning March 26, 2022, and ending April
23, 2022. Because the Commission set a May 3, 2022, comment deadline, Staff was concerned
that some customers in the last billing cycle may not have received notice or had adequate time to
submit comments before the deadline. Staff recommended the Commission accept late filed
customer comments by customers. No customer comments were filed.
In sum, Staff recommended the Commission approve the Company’s FCA filing with
a net deferral balance of $35,203,247 for June 1, 2022 through May 31, 2023, and the Company’s
proposed Schedule 54 as submitted.
COMMISSION FINDINGS 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.
The Commission has reviewed the record, including the Application, Company
testimony, and Staff comments. Based on our review, we find it reasonable to approve the
Application because it complies with the Commission-approved method for calculating the FCA.

2 The energy savings are described in the 2021 DSM Annual Report filed in Case No. IPC-E-22-08.
ORDER NO. 35410 5

ORDER
IT IS HEREBY ORDERED that the Company’s Application is approved. The
Company shall recover its net FCA deferral balance of $35,203,247 for the 2022-2023 FCA period
through FCA rates equal to 0.6153 cents per kWh for Residential class customers, and 0.7788
cents per kWh for the Small General Service class customers. The Company’s proposed Schedule
54 is approved as filed, with an effective date of June 1, 2022.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 20th day
of May 2022.

__________________________________________
ERIC ANDERSON, PRESIDENT

__________________________________________
JOHN CHATBURN, COMMISSIONER

__________________________________________
JOHN R. HAMMOND, JR., COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-22-07 FCA\orders\IPCE2207_final_rn.docx