19990719Order No 28099.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE 1998 COMPLIANCE FILING OF IDAHO POWER COMPANY AS REQUIRED BY ORDER NO. 26216 IN CASE NO. IPC-E-95-11
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CASE NO. IPC-E-99-2

ORDER NO. 28099

In Order No. 26126 issued October 1995 in Case No. IPC-E-95-11, the Commission approved a Settlement Stipulation resolving certain cost and accounting issues for Idaho Power Company. The Stipulation provided in relevant part that, for the years 1995 through 1999, if the Company’s “actual earnings for a preceding year exceed an 11.75% return on year end common equity, the Company shall refund 50% of the excess commencing on May 15 of each year, in conjunction with its PCA rate adjustment.” Order No. 26126 at p. 3.
Pursuant to Order No. 26216, Idaho Power filed its 1998 compliance filing to identify and determine the amount of shared revenue to benefit its customers. Idaho Power’s filing shows a customer share amount of $3,281,878, and the Company proposed to distribute it to customers in the form of direct credits or a one-time rate reduction or, in the alternative, “to defer the balance of $3,281,878 for disposition no later than the time of the May 16, 2000 PCA adjustment.” On June 25, 1999, the Commission issued a Notice of Filing and Notice of Modified Procedure to process Idaho Power’s filing. To expedite the process, the Notice provided for a 14-day comment period that ended July 9, 1999. Comments were filed by the Commission Staff, Idaho Power, the Industrial Customers of Idaho Power, and FMC Corporation. A representative of the class of irrigators sent a letter to the Commission voicing support for Idaho Power’s proposal.
The Commission Staff in its comments noted that the Company proposed to spread the revenue sharing refund to customer classes based on each class’s actual energy consumption in 1998. Special contract customers and Schedule 19 customers would receive a lump sum credit on their July bills, while customers in all other classes would receive the refund on a cents-per-kilowatt basis on their July bills. Staff expressed three concerns with Idaho Power’s proposal. First, Staff noted that even the expedited processing of the filing would make it impossible to implement the refund rates as of July 1. Moving the refund month to August would hurt those in the irrigation class of customers who might have finished irrigating for the season and thus would not receive a credit based on actual summer usage. Second, Staff stated its belief that no single month’s usage pattern is as appropriate as a one-year period for returning revenue sharing amounts accumulated over a one-year period. And third, Staff stated that the proposed rate design is not consistent with the Commission’s instructions in Order No. 26216. That Order directed revenue sharing refunds to “be made on a uniform percentage basis to each customer class.” Staff stated that the proposal does not allocate the revenue sharing amount to customer classes on a uniform percentage of revenue requirement basis but instead allocates the revenue sharing amount to customer classes on an energy basis. Based on its concerns, Staff recommended that the revenue sharing balance be deferred with interest until May 16, 2000, and then be refunded to ratepayers over the one-year period that coincides with the PCA rate adjustment.
In its comments, Idaho Power responded to the issues raised by Staff. Although the Company defended the appropriateness of a lump sum credit for its special contract and Schedule 19 customers and a refund on a cents-per-kilowatt hour basis for the remaining customer classes for a 30-day period, it conceded that the issues raised by Staff have merit. If the 30-day refund period runs from mid-July to mid-August, the Company agreed that this may not be the ideal 30-day period to maximize the benefit for irrigators. The Company also stated that there is some merit in Staff’s concern that a 30-day usage period may not be a good indication of a customer class revenue contribution for an annual period. The Company also conceded that the Company’s proposal “varies from the procedure contemplated at the time of the Commission’s revenue sharing Order, i.e., Order No. 26216 issued in Case No. IPC-E-95-11.” IPC Comments p. 2. Idaho Power in its comments also recommended, if the Commission determines to defer the revenue sharing amount, that the Commission’s Order should clarify several points to remove ambiguities that may arise. For example, the Company recommended that the appropriate rate of interest to accrue on the deferred balance should be 5% pursuant to Commission Order No. 27828 issued in Case No. GNR-U-98-1. Idaho Power’s written comments make it clear that the Company “continues to believe that its proposal for a lump sum credit for special contract customers and Schedule 19 customers and a 30-day refund period for all other classes has merit.”
The comments filed by the Industrial Customers also address the three issues raised by Staff, and argue that those issues are not applicable to the industrial customers. Regarding the refund for irrigators, the Industrial Customers note that a letter was filed on the irrigators’ behalf in support of Idaho Power’s proposal. The Industrial Customers also contend that the proposal to refund on a one-month period is reasonable, and that deferring the refund until next year will mean that “this refund will have been denied to Idaho Power’s customers for over two years.” Finally, the Industrial Customers assert that an interest rate of either 5% or 6% is too low should the revenues be deferred. The Industrial Customers urge the Commission “to approve Idaho Power’s proposed methodology to return the ratepayers’ money to them now.”
In its comments, FMC Corporation also addressed the concerns raised by Staff, and pointed out that Staff’s proposed remedy (deferring the refund until May 2000) may not result in a better solution. FMC also stated “that the Staff’s concerns about the manner of allocating credits within other customer classes cannot be used to justify delaying the FMC refund.” FMC Comments at 3. Accordingly, FMC asked that “even if the Commission decides to delay refunds for some customer classes it should nevertheless approve Idaho Power’s proposal to issue an immediate credit to FMC.” Id. Idaho Power indicated to Staff that it is possible to issue immediate credits to the Schedule 19 and special contract customers and defer the balance of the revenue sharing funds as Staff proposed.
Because Idaho Power’s proposal involves returning to customers a refund to which they are entitled by Order No. 26216, the Commission would like to ensure the maximum benefit for customers is achieved by the revenue sharing funds. It is with that goal that we review the Company’s proposal and the written comments. Thus, we find there is merit to the Staff’s recommendation to defer at least part of the refund until next spring, but also find that the special contract and Schedule 19 customers should now receive a refund as proposed by Idaho Power. The amounts refunded now to the large use customers will enable those customers to apply the refunds to immediate business purposes and perhaps achieve a greater return on their portion of the revenue sharing funds than if the amounts were deferred. Conversely, the customer classes outside of Schedule 19 and special contracts are so large that individual refund amounts are relatively insignificant. If the revenue not refunded to the contract and Schedule 19 customers is deferred, earns interest and then is accounted for next year along with the PCA rate adjustment, the vast majority of Idaho Power’s customers will see fewer rate fluctuations. By deferring disposition of most of the revenue sharing funds, and requiring Idaho Power to accrue interest on the amount deferred, customers will see a greater future benefit than they would by a one-time, small rate refund.
We find that future rate stability for customers and achieving the maximum benefit from the revenue refund are sound reasons to defer most of the revenue refund until next spring. However, we also find that the special contract and Schedule 19 customers will receive the greatest benefit from their revenue share by refunds this year as proposed by Idaho Power. Accordingly, we find that those customers are entitled to receive a refund as proposed by the Company. For purposes of this 1998 revenue sharing distribution, the customers taking power under Schedule 19 as of December 31, 1998 are deemed to be Schedule 19 customers.
We also find as Staff discussed, that Idaho Power’s calculation of the revenue sharing amounts for customer classes is not as required by Order No. 26216. That Order provides for refunds to be made on a uniform percentage basis to each customer class and to “be allocated within each rate schedule that has a separate demand and energy charge, solely on an energy component.” Order No. 26216 at p. 3. Using 1998 normalized numbers, the Staff has determined the amounts of the immediate refunds and the amount to be deferred. Those amounts are as follows:
Schedule 19 customers $ 366,661
FMC 172,393
Micron Technologies 88,805
J.R. Simplot Co. 46,920
U.S. Department of Energy 32,587
Total Refund Amount $ 707,366
Total Deferred Amount $2,574,512
Pursuant to Order No. 27828 issued in Case No. GNR-U-98-1, the amount deferred shall accrue interest at the rate of 5% per annum.

O R D E R
IT IS HEREBY ORDERED that Idaho Power Company shall refund the amounts identified in this Order to the Schedule 19 customers (as of December 31, 1998) and the four special contract customers.
IT IS FURTHER ORDERED that the customer revenue sharing amount of $2,574,512 shall be deferred and included in the 2000 PCA adjustment for customers other than Schedule 19 and special contract customers. Interest shall accrue on the amount deferred at the rate of 5% per annum.
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. 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
day of July 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

bls/O:ipce992_ws2
ORDER NO. 28099 1

Office of the Secretary
Service Date
July 19, 1999