981113vbp.docx

DECISION MEMORANDUM
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
MYRNA WALTERS
TONYA CLARK
BILL EASTLAKE
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KEITH HESSING
DAVID SCOTT
WORKING FILE
FROM:BRAD PURDY
DATE:NOVEMBER 13, 1998
RE:CASE NO. IPC-E-98-13; APPLICATION OF IDAHO POWER COMPANY FOR AUTHORITY TO INCLUDE QUALIFYING FACILITY POWER PURCHASE CONTRACTS IN THE COMPANY’S 1999 PCA FILING
On November 2, 1998, the Idaho Power Company (Idaho Power; Company) filed an Application with the Commission for an Order authorizing the Company to include in its PCA projection method, commencing with the Company’s 1999 PCA filing, recent expenditures for QF power purchase contracts.
Idaho Power states that the PCA projection method currently consists of a natural logarithmic function which estimates annual net power supply expenditures based upon projected April through July Brownlee runoff.  The net power supply expenditures are a combination of fuel and non-firm purchased power expenditures offset by surplus sales revenues which are further adjusted by adding PURPA QF expenditures and subtracting FMC second block revenues.  The PCA  projection method, as currently devised, has only one variable; projected Brownlee runoff.  QF expenditures and FMC second block revenues are constants in the PCA method.
Idaho Power states that in the Company’s last two annual PCA filings, a significant amount of QF expenditures were recovered in the true-up component of the PCA rates rather than in the projected power cost component.  The primary reason for this, Idaho Power states, is that the QF constant in the PCA projection method has not been updated to reflect additional QF projects that have come on line.  Moreover, the anticipated payments for generation for QF projects that are included has also changed slightly based upon escalation provisions in contracts and minor changes in generation levels.
In support of its contention, Idaho Power notes that on December 31, 1993, the normalized generation from QF projects was 574,710 megawatt hours at a cost of $34,114,190.  With the addition of six new projects and other minor changes, the total normalized generation from QF projects has increased from 830,523 megawatt hours with a cost of $51,882,240 at year 1997.  Consequently, Idaho Power requests that in filing the 1999 projected power costs, it be permitted to include QF expenditures at the 1997 normalized level of $51,882,240 in the PCA projection method.
Idaho Power argues that authorizing implementation of this request will not change the amount of revenue received by the Company under the PCA.  The revision will result in the Company’s projected power costs being higher by $17,768,080 resulting in the true-up component in the subsequent year being closer to zero, given an accurate projection of non-QF PCA expenditures.
Idaho Power points out that in the event that the resulting PCA projection results in a large increase in the PCA rate, Commission Order No. 24806 provides for potential mitigation if the PCA rate increase is in excess of 7% from normalized base revenues.
Idaho Power has requested that its Application be processed under Modified Procedure.  The Commission Staff agrees that this is appropriate.
Commission Decision
Does the Commission wish to handle Idaho Power’s Application in this case under Modified Procedure?

Brad Purdy
M:IPC-E-98-13.bp