19990712.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
DON HOWELL
STEPHANIE MILLER
TONYA CLARK
RON LAW
KEITH HESSING
BILL EASTLAKE
TERRI CARLOCK
RANDY LOBB
WORKING FILE

FROM:

DATE: JULY 12, 1999

RE: CASE NO. IPC-E-99-2; IDAHO POWER COMPANY’S 1998 REVENUE SHARING COMPLIANCE FILING

Pursuant to Commission Order No. 26216 issued in Case No. IPC-E-95-11, Idaho Power Company filed a 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. 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 terminated on July 9, 1999. During the comment period, comments were filed by the Commission Staff, Idaho Power, the Industrial Customers of Idaho, 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 proposes 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 irrigators who might be through irrigating for the season and thus would not receive any 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, less intervenor funding, of $3,281,881 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 in its written comments. Although the Company asserted 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 is appropriate, it conceded that the issues raised by Staff have some 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 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. First, the Company recommended that the Commission make it clear that the deferred revenue sharing amount would be added to any additional revenue sharing amount that it might occur for the year 1999. Second, the Company recommended that any rate refund for the one-year period that coincides with the next PCA rate adjustment should be calculated as recommended by the Company witness in Case No. IPC-E-95-11. Third, the Company recommended that the Commission’s Order should provide that the balance would be deferred for disposition no later than the May 16, 2000, PCA rate adjustment, and that the Company should be given until February 15, 2000, to file an alternate proposal if it determines one to be appropriate. Fourth, the Company stated that the actual amount to be deferred is $3,281,878, rather than $3,281,881. Fifth, the Company recommends 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.” However, if the Commission determines that it will defer this disposition of the revenue sharing amount, Idaho Power requests that the Order contain the clarifications it recommends.
The comments filed by the Industrial Customers also address the three issues raised by Staff, and argue that the 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 the 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 a 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. In conversations with Staff, Idaho Power has indicated that it is possible to issue immediate credits to the Schedule 19 and special contract customers and defer the balance of the revenue share funds as Staff proposed.

Commission Decision
Should the filing of Idaho Power and its proposal for refunding the 1998 revenue sharing amount be approved?
Should the recommendation of the Commission Staff be approved, along with the clarifications recommended by Idaho Power Company?
Is some other option appropriate? For example, issue an immediate credit to the contract and Schedule 19 customers, and defer the balance of the funds until next spring?

vld/M:IPC-E-99-2_ws2

DECISION MEMORANDUM 4