2000517Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KEITH HESSING
BILL EASTLAKE
WORKING FILE

FROM:

DATE: MAY 17, 2000

RE: CASE NO. PAC-E-00-03 (PacifiCorp)
NU WEST SERVICE AGREEMENT (JUNE 8, 1998)

On March 17, 2000, PacifiCorp dba Utah Power and Light Company (Utah Power; Company) filed Tariff Advice 00-03 with the Idaho Public Utilities Commission (Commission) requesting approval of a Special Contract, a Master Electric Service Agreement (Agreement) dated June 8, 1998, with Nu-West Industries, Inc. (Nu-West). At the Commission’s Decision Meeting on April 12, 2000, the Commission directed that the filing be given a case number and noticed for public comment under the Commission’s Rules for Modified Procedure. Reference IDAPA 31.01.01.201-204.
Nu West is a producer of phosphate fertilizer in Soda Springs, Idaho. Nu-West’s electric load exceeds 15 MW, which requires a Special Contract in Idaho. Reference Utah Power Tariff Schedule 9; Schedule 400. Rates in the new Agreement are 3.3 ¢/kWh for all kWh if Nu-West uses a minimum amount of energy. If Nu-West uses less than the minimum, on an annual basis, it pays 3.4339 ¢/kWh for all kWh. The rates remain constant over the contract term. The Agreement rates are based on rates in the previous Nu-West contract. Reference Nu-West special contract August 17, 1987, Amendment 8, July 31, 1995. There is no demand component to the Agreement rates; instead, the demand portion of the revenue requirement has been blended into the energy rate. The Agreement also provides a market-based rate option for Nu-West in the event that the market is opened to customer choice during the contract term. (Section 4.2)
The Agreement, and rates therein, are subject to change and revision by order of the Commission under Title 61, Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
PacifiCorp additionally states a) that its entering into this Agreement will not adversely affect existing customers, b) that approval of the Agreement is in the public interest, and c) that the rates and charges set forth in the Agreement are fair, just and reasonable.
On April 25, 2000, the Commission issued a Notice of Application and Modified Procedure in Case No. PAC-E-00-03. The deadline for filing written comments was May 16, 2000. Timely comments were filed by Commission Staff and Solutia Inc.
As reflected in Staff Comments:
Nu-West is an “Idaho jurisdictional” special contract customer. As an Idaho jurisdictional customer, all costs of providing service to Nu-west are assigned to the Idaho jurisdiction along with all revenue. Rates in this Agreement (as in the previous contract) were based on a cost-of-service study completed as part of Case No. UPL-E-90-1. The rates are consistent with cost-based rates for comparable customers of Utah Power today. Based on its analysis, Staff concludes that the proposed rates cover the Company’s costs and provide the Company with a reasonable return.

The submitted Agreement was negotiated in 1998 for a three and one-half year minimum term that ends December 31, 2001. After the initial term the Agreement “shall automatically be renewed from year to year subject to the same terms and conditions … unless either party submits written termination notice…” (Section 2.1) An oversight on the Company’s part resulted in the Agreement not being filed for Commission approval until this time. The Company in its filing requested an effective date of August 18, 1998. The prior contract by its terms expired August 16, 1998. The proposed Agreement was to be effective July 1, 1998. (Section 2.1) Pursuant to inquiry, the Company now informs Staff that the effective date it requests is July 1, 1998, not August 18, 1998.

Staff has reviewed the proposed Agreement and recommends that it be approved as filed, for an effective date of July 1, 1998. Staff further recommends that in all future contracts with Idaho customers the Company be required to include language that requires Commission approval to make the contract effective. This is common practice and would make it more difficult to over look filing the contract with the Commission. Staff also recommends that upon approval the Commission require the Company to file a schedule summarizing the contact rates.

Solutia, also a special contract customer, files no substantive comments regarding the Application. Solutia accompanies its filing with a Petition to Intervene, however, should the Commission determine that further proceedings are required or necessary.
Commission Decision
Does the Commission continue to find it reasonable to process this case pursuant to Modified Procedure, i.e., by written submission rather than by hearing? Reference IDAPA 31.01.01.204.
Does the Commission find it reasonable to approve the Company’s Application and proposed Nu West Service Agreement (June 8, 1998)? For an effective date of July 1, 1998?
Does the Commission have any comment regarding the Company’s failure to submit the agreement in a timely manner?
Should the Company, as Staff recommends, be required to include language in its special contract that requires Commission approval to make the contract effective?
Should the Company be required to file a schedule summarizing the contract rates?

vld/M:PAC-E-00-03_sw

DECISION MEMORANDUM 3