20230531Final_Order_No_35804.pdf

ORDER NO. 35804 1
Office of the Secretary
Service Date
May 31, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
AUTHORITY TO IMPLEMENT POWER
COST ADJUSTMENT (PCA) RATES FOR
ELECTRIC SERVICE FROM JUNE 1, 2023
THROUGH MAY 31, 2024
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CASE NO. IPC-E-23-12

ORDER NO. 35804

On April 14, 2023, Idaho Power Company (“Idaho Power” or “Company”) applied for
Commission authorization to implement its Power Cost Adjustment (“PCA”) rates in Schedule
55—Power Cost Adjustment (“Schedule 55”) effective June 1, 2023, through May 31, 2024.
Application at 1. The Company requested its Application be processed by Modified Procedure. Id.
at 1 & 11. If approved, the Company’s PCA would increase rates for all customer classes via an
overall revenue increase of approximately $200.2 million, or 14.68 percent. Id. at 1-2. The
proposed PCA does not increase the Company’s earnings. Under the Company’s proposed PCA
rates, an average residential customer using 950 kilowatt-hours (“kWh”) of electricity would see
their monthly bill increase by $12.72. Id. at Attachment 2.
On April 27, 2023, the Commission issued a Notice of Application and Notice of Modified
Procedure establishing May 11, 2023, as the comment deadline and May 18, 2023, as the deadline
for the Company’s reply.
On May 11, 2023, Commission Staff (“Staff’) and the Industrial Customers of Idaho Power
(“ICIP”) filed comments. On May 18, 2023, the Company filed reply comments.
Having reviewed the record in this case, we now issue this final Order approving the
Application with modifications.
THE PCA MECHANISM
The PCA mechanism permits the Company to increase or decrease its PCA rates to reflect
the Company’s annual “power supply costs.” Due to its diverse generation portfolio, the
Company’s actual cost of providing electricity (its power supply cost) varies from year to year
depending on changes in such things as the river streamflow, the amount of purchased power, fuel
costs, the market price of power, and other factors. The annual PCA surcharge or credit is
combined with the Company’s “base rates” to produce a customer’s overall energy rate. The
ORDER NO. 35804 2
Company states that neither it nor its shareholders receive any financial return from the PCA –
money collected from the surcharge can be used only to pay power supply expenses. Id. at 3.
The PCA quantifies and tracks annual differences between actual Net Power Supply
Expenses (“NPSE”) and the normalized or “base level” of NPSE recovered in the Company’s base
rates, resulting in a credit or surcharge that is updated annually on June 1. The PCA mechanism
uses a 12-month test period of April through March (“PCA Year”) and includes a forecast
component and a Balancing Adjustment.1 The forecast component represents the difference
between the Company’s NPSE forecast from the March Operating Plan and base level NPSE
recovered in the Company’s base rates. The Balancing Adjustment includes a backward-looking
tracking of differences between the prior PCA Year’s forecast and actual NPSE incurred by the
Company, and also tracks the collection of the prior year’s Balancing Adjustment. The Balancing
Adjustment also incorporates the costs and benefits for the Company’s participation in the Western
Energy Imbalance Market (“EIM”) for April 2022 through March 2023. Id. at 9.
Except for Public Utility Regulatory Policies Act of 1978 (“PURPA”) expenses and
demand response incentive payments, the PCA allows the Company to pass through to customers
95 percent of the annual differences in actual NPSE as compared with base level NPSE, whether
positive or negative. With respect to PURPA expenses and demand response incentive payments,
when actual annual expenses deviate from base level NPSE, the Company is allowed to pass 100
percent of the difference for recovery or credit through the PCA. The PCA is also the rate
mechanism used by the Company to provide customer benefits resulting from the revenue sharing
mechanism approved by the Commission in Order No. 34071.
THE APPLICATION
This year’s PCA Application requests to increase revenue through Schedule 55 by $200.2
million for the 2023-2024 PCA year. Application at 1-2.
The Company’s system-level forecast for NPSE is approximately $235 million higher in
the 2023-2024 PCA year than 2022-2023 PCA year base level NPSE. Id. at 8. The forecast is
primarily driven by higher forecast market energy and natural gas prices, combined with a limited
coal supply. Id. at 9.

1 In Order No. 35290, the Commission approved a modification to the PCA filing to replace the “true-up” and “true-
up of the true-up” with a single balancing account. The two “true-up” rates previously included in PCA filings are
now combined into one “Balancing Adjustment” rate. The Balancing Adjustment modification solely impacts the
presentment of the PCA but has no material impact on the rates charged to customers.
ORDER NO. 35804 3
The Balancing Adjustment at the end of March 2023, including interest, was approximately
$190 million and was primarily driven by “high natural gas and market energy prices during the
2022-2023 PCA Year, combined with a limited coal supply” and 9 percent lower hydro generation
than forecast. Id. at 9-10.
Per Order No. 34071, the Commission requires the Company to share revenue with its
customers if its Idaho jurisdictional year-end return on equity (“ROE”) is 10.0 percent or greater.
Id. at 10. The Company asserts its Idaho jurisdictional year-end ROE in 2022 was 9.8, which is
below the 10.0 percent ROE threshold for revenue sharing. Id.
The Company’s uniform PCA rate for the 2023-2024 PCA Year is comprised of (1) the
1.4572 cents per kilowatt-hours (“kWh”) adjustment for the 2023-2024 forecasted power cost of
serving firm loads under the current PCA methodology and 95 percent sharing; and (2) 1.2714
cents per kWh for the 2022-2023 Balancing Adjustment. Id. Together, these components total
approximately 2.7286 cents per kWh charge for all rate classes. Id.
On March 15, 2023, the Company filed its annual Fixed Cost Adjustment (“FCA”) in Case
No. IPC-E-23-09. Id. The Company’s 2023 FCA filing proposes a $10.0 million decrease in
current billed revenue, or a 1.56 percent decrease for Idaho Residential and Small General Service
customers, effective June 1, 2023, through May 31, 2024. Id. at 11.
Here, the Company’s proposed PCA does not increase the Company’s earnings. Under the
Company’s proposed PCA rates, an average residential customer using 950 kWh of electricity
would see their monthly bill increase by $12.72. Id. at Attachment 2. If the PCA and FCA
Applications are approved as filed, the combined impact is an overall increase in current billed
revenue of $190.2 million, or 13.94 percent. Id. If this occurs the average residential customer’s
monthly bill would increase by $11.06. Id.
Proposed 2023-2024 Revenue Impact by Class:
Percentage Increase from Current Billed Rates by Proposed Change

Power Cost Adjustment

Residential
Small
General
Service
Large
General
Service

Large Power

Irrigation

11.90% 9.70% 16.19% 20.26% 15.01%

ORDER NO. 35804 4
Fixed Cost Adjustment

Residential
Small
General
Service
Large
General
Service

Large Power

Irrigation
-1.56% -1.632% N/A N/A N/A

Total Combined Impact

Residential
Small
General
Service

Large
General
Service

Large Power

Irrigation
10.34% 8.08% 16.19% 20.26% 15.01%

See Application at Attachment 2; April 20, 2023 Errata to Case No. IPC-E-23-09 Application.
COMMENTS
I. Staff
Staff reviewed the Company’s Application, direct testimony and workpapers of Company
witness Jessica G. Brady, audit of sampled transactions and responses to production requests. Staff
Comments at 3. Staff examined sales and expenses for the 2022-2023 PCA year, forecasting
methods, projected revenues, and upcoming 2023-2024 PCA year expenses. Id. Staff
recommended the Commission approve the Application with modifications. Id. at 3-4.
First, Staff believed that the Company’s forecast for the upcoming PCA year (2023-2024)
of electricity sales, loads, fuel consumption, fuel costs, and purchased power costs were
reasonable. Id. at 3. Second, Staff requested that the Company notify the Commission if the
forecast materially deviates; and, if so, recommended the Company make an off-cycle filing. Id.
Third, Staff believed that last year’s PCA balancing adjustment was reasonable but had concerns
with the NPSE prudency. Id. Fourth, Staff requested the opportunity to investigate the NPSE’s
prudency, specifically the reasons for the coal supply shortage, and to provide the Commission
with a report within six months of the Commission’s final order. Id. at 4. Staff suggested the
Company’s actual NPSE be used to calculate the PCA deferral and Schedule 55 rates, pending the

2 In Case No. IPC-E-23-09 (FCA), the Company’s April 20, 2023, Errata to Application and Direct Testimony of
Pawel P. Goralski, explained the minor variance between its FCA and PCA was due to the “incorrect assignment of
sales between the Idaho and Oregon jurisdictions. Errata to Application and Direct testimony of Pawel P. Goralski,
filed April 20, 2023, Case No. IPC-E-23-09. For clarity, the Company filed revised versions of Exhibits Nos. 5 and 6
filed with the Goralski Testimony for Case No. IPC-E-23-09.
ORDER NO. 35804 5
prudency determination. Id. Fifth, following the NPSE prudency investigation, Staff asked the
Commission to reserve the right to adjust the NPSE recovery if the Company’s coal supply
management was not prudent. Id. Sixth, Staff requested notification of any outcome on the Hells
Canyon Unit No. 3 damage claim. Id. Seventh, Staff requested the Commission accept late-filed
comments by customers. Id.
Staff’s Forecast Analysis
Staff believed the 2023-2024 forecast was “reasonable and any over- or under-collected
amounts due to forecast variance will be trued-up in the following year.” Id. at 5.
Balancing Account
The Company’s Balancing Account Summary includes (1) the Beginning Balance; (2)
2022-2023 Incremental Deferral; (3) 2022-2023 Forecast Revenues Collections; (4) Revenue
Sharing; and (5) Current Month Interest. Id. at 6. The Company’s incremental deferral balance of
$343 million includes “(1) the expense difference between the actual NPSE from April 1, 2022, to
March 31, 2023, and NPSE recovered through base rates; and (2) other PCA expenses.” Id. Staff
analyzed the deferral components, and agreed the Company’s calculations were accurate and
consistent with Commission precedent. Id.
NPSE
The Company’s NPSE was “extraordinarily high” due to a “lack of coal supply needed to
run the Company’s coal plants[.]” Id. Due to concerns over whether the Company promptly and
appropriately to mitigate these high costs, Staff requested the Commission allow an investigation
of the NPSE prudency, and recommended a report be provided to the Commission within six
months of the Commission’s final order. Id. at 7; 9-10. In the interim, Staff proposed the
Commission use the Company’s actual NPSE to calculate the PCA deferral and Schedule 55 rates
while the prudency investigation is pending; the Commission could reserve the right to adjust the
NPSE recovery if the Commission finds the Company’s coal supply management was not prudent.
Id.
Hells Canyon Unit No. 3 Downtime
The Company’s Hells Canyon Unit No. 3 required repairs, and the Company is pursuing a
claim against the repair contractor. Id. at 11. Staff thought the Company acted prudently in
managing the repairs to Hells Canyon Unit No. 3, and Staff requested an update from the Company
when its claim against the contractor is resolved. Id.
ORDER NO. 35804 6
Other PCA Expenses
Staff reviewed the “(1) Idaho Jurisdictional Qualifying Facility (“QF”) and PURPA
Expense Deferral; (2) the Idaho Revenue Adjustment from the Sales Based Adjustment (“SBA”)
Rate; (3) the difference between actual DR incentive payments and amounts recovered in base
rates; (4) the Actual Renewable Energy Credit (“REC”) revenues; and (5) Idaho Power Energy
Imbalance market (“EIM”) Participation Costs. Id. Staff agreed with the Company’s calculation
of these other PCA expenses.” Id. at 11.
Overall Impact of Filings Effective June 1, 2023
Staff stated that “if the PCA and FCA applications are approved as filed, the combined
impact is an overall increase in current billed revenue of $190.2 million, or 13.94 percent.” Id. at
14.
II. Public Comments
Most customers submitted comments objecting to the PCA due to personal, financial
constraints such as living on a fixed income. Some customers argued the request had not been
justified and the Company should focus on hydroelectric power and plan on purchasing larger
quantities of coal and natural gas when those resources are at lower prices.
III. ICIP Public Comments
On May 11, 2023, ICIP filed public comments through its counsel, Peter J. Richardson.
ICIP opposed the PCA as unprecedented, excessive, and disproportionately burdensome for
industrial and special contract customers. ICIP May 11, 2023, Comments at 2-4. ICIP argued the
PCA “will punish the industrial and special contract customers with a proposed twenty-plus
percentage rate increase while poor load factor customers are rewarded with lower-than-average
percentage increases of less than the overall average of fourteen percent.” Id. at 3-4. If the PCA is
accepted, ICIP urged the Commission to implement rate mitigation measures and disagreed with
the Commission’s consistent rejection of the same. Id. at 4-6. ICIP requested the PCA be
“recovered over three years with an equal annual percentage increase or even over two years with
an equal annual percentage increase” and asserted its customers would benefit from mitigating the
PCA’s impact. Id. at 7.
IV. Company’s Reply
The Company submitted its reply with confidential attachment 1 and attachments 2-5. The
Company agreed with Staff’s conclusions on the calculation of the PCA components and its use
ORDER NO. 35804 7
of current approved methodology. Company Reply at 3. The Company agreed to share the outcome
of its claim for liquidated damages for Hells Canyon Unit No. 3. Id.
The Company disputed the claim that it waited until September 2022 to take proactive
measures, and asserted it prudently managed the coal supply issues by taking immediate steps to
procure additional coal in April 2022 when it became aware of the situation. Id. at 5. Second, while
the Company’s efforts were unsuccessful, the Company needed to exhaust reasonable efforts to
procure additional coal before taking the hedging transactions suggested by Staff. Id. The
Company argued price escalation and volatility in the natural gas and energy markets, global
natural gas supply and demand disruption, poor hydrological conditions, and ramped down coal
production all contributed to the coal supply issues. Id. at 5-6. The Company described efforts to
secure additional coal at Bridger in April of 2022 and its negotiations with Black Butte Coal
Company in May of 2022, and stated it followed risk guidelines in the Company’s Energy Risk
Management Standards on hedging transactions. Id. at 6-7. The Company asserted the record
supports it acted prudently under the circumstances but did not oppose Staff’s recommendation to
continue to investigate the factors leading to the Company’s limited coal supply. Id. at 3 & 8.
The Company disagreed with ICIP’s comments and argued that the PCA mechanism and
its costs are “appropriately assigned based on kWh usage, reflecting the fair assignment of costs
rather than a ‘punishment’ of high load factor customers.” Id. at 8. The Company was also not
opposed to rate mitigation measures and shared concerns about compounding the impact to
customers. Id. at 8-9.
COMMISSION FINDINGS AND DISCUSSION
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. After reviewing the record, including the Company’s Application, the public
comments, which included ICIP public comments, comments of Staff, and the Company’s reply,
we find it fair, just, and reasonable to grant the Company’s Application with the modifications
discussed below.
After reviewing the record in this case we find it fair just and reasonable to grant Idaho
Power’s Application to increase its PCA rates for the 2023-2024 PCA year as modified by this
ORDER NO. 35804 8
Order. The Commission also finds the PCA balancing adjustment is reasonable. The Commission
also finds that the Company shall notify the Commission of any outcome of its Hells Canyon Unit
No. 3 damage claim.
Because this year’s PCA was significantly affected by coal supply issues and the limited
time available to perform a full review of the prudency of the NPSE, the Commission finds it
reasonable to further investigate. The Commission directs Staff to investigate the NPSE prudency
and report its assessment to the Commission within six months of the Commission’s final order.
Pending this investigation, the Commission approves the use of the Company’s actual NPSE to
calculate the PCA deferral and Schedule 55 rates. The Commission reserves the right to adjust the
NPSE recovery, if the Commission determines the Company’s coal supply management was not
prudent.
ICIP has requested that the Commission adopt a two- or three-year deferral of recovery of
this PCA year’s high balance. Rate mitigation is an option to shield customers from a large rate
increase. Generally, the Commission strives to match costs to the period of time when they were
incurred. Further, deferring recovery of PCA costs can cause “rate pancaking” where deferring the
costs for this year’s PCA results in an even larger subsequent increase. It cannot be known with
absolute certainty what factors may, and to what extent, these factors impact the next year’s PCA.
However, due to a variety of factors, including but not limited to, general rate cases that have been
filed by this and other utilities, higher electricity, natural gas and water costs and inflation, utility
customers in Idaho have recently seen their bills for all utility services increase. Due to these
factors and others, we find it fair, just and reasonable to spread the cost recovery of this year’s
PCA balance equally over a two-year period to mitigate rate impacts on the Company’s customers.
As noted, this approach is not without risk and as a result the Commission directs the Company to
keep it informed about any large changes to the PCA deferral balance.
We accept and have considered the late-filed customer comments, along with those timely
filed. This Commission is sensitive to economic conditions affecting ratepayers throughout Idaho.
We strive to balance the ratepayer’s need for affordable energy with the Company’s mandate to
provide reliable electric service. While some commenters believe that the Company is directly
profiting from all increasing rates, it is not the case here. Money collected from the PCA surcharge
reflects actual power supply expenses incurred by the Company.
ORDER NO. 35804 9
In conclusion, the Commission finds that the rates proposed by the Company are sufficient
to recover the deferred net power costs during the 2022-2023 deferral year. However, due to
extraordinary circumstances leading to high net power costs, we find it fair, just, and reasonable
to approve the Company’s Application but with modifications so that the PCA deferral balance is
recovered equally over two years. We find that the two-year rate plan fairly mitigates the
conditions present during the deferral year. We direct the Company to file a new Schedule 55 in
conformance with the Commission’s findings herein, with the new rates to take effect June 1,
2023.
O R D E R
IT IS HEREBY ORDERED that the Company’s Application is approved with
modifications. The Commission finds it reasonable to spread the cost recovery of this PCA year’s
deferral balance equally over a two-year period beginning from June 1, 2023.
IT IS FURTHER ORDERED that the Company shall provide conforming Schedule 55
tariffs reflecting the two-year rate plan for rates to become effective on June 1, 2023.
IT IS FURTHER ORDERED that the Company is directed to notify the Commission of
any outcome on the Hells Canyon Unit No. 3 damage claim.
IT IS FURTHER ORDERED that the Commission finds the Company’s PCA balancing
adjustment was reasonable. The Commission orders an investigation of the prudence of the NPSE
and Staff will report its assessment to the Commission within six months of the Commission’s
final order. The Commission approves the use of the Company’s actual NPSE to calculate the PCA
deferral and Schedule 55 rates and reserves the right to adjust the NPSE recovery if the
Commission determines the Company’s coal supply management was not prudent.
IT IS FURTHER ORDERED that the Commission will accept late-filed comments.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon 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. 35804 10

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 31st day of
May 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-23-12 (PCA)\Orders\IPCE2312_final_cs.docx