28984.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF PacifiCorp DBA UTAH POWER & LIGHT COMPANY FOR APPROVAL OF AN ELECTRIC SERVICE AGREEMENT WITH NU-WEST INDUSTRIES. )
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CASE NO. PAC-E-01-17

ORDER NO. 28984

On December 26, 2001, PacifiCorp dba Utah Power & Light Company (PacifiCorp; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting approval of an Electric Service Agreement (Agreement) with Nu-West Industries (Nu-West) dated December 10, 2001. The Agreement, along with a separate agreement, entered into under Electric Service Schedule No. 9, replaces an electric service agreement (prior Agreement) dated June 9, 1998, approved by the Commission in Case No. PAC-E-00-3.
Nu-West is engaged in the production of phosphate fertilizer at facilities located in Soda Springs, Idaho.
The Prior Agreement governing electric service to Nu-West terminated on December 31, 2001. Rates under the Prior Agreement were 03.3¢ per kilowatt-hour for all kilowatt-hours if Nu-West used a specific minimum amount of energy. However, if Nu-West used less than the minimum amount on an annual basis, it paid 03.4339¢ per kilowatt hour for all kilowatt hours.
Rates for service to Nu-West under the Agreement submitted are based, the Company contends, on the cost of serving Nu-West. Accompanying the Company’s Application is a summary of the cost-of-service study results for service to Nu-West. Due to the size of its load (approximately 20,000 kW), a special agreement applies instead of an electric service schedule. The Agreement, the Company contends, is effectively a customer-specific tariff schedule. By its terms the Agreement is effective January 1, 2002, subject to approval by the Commission, and will terminate on December 31, 2004, unless renewed in accordance with the Agreement’s terms.
As reflected in Section 4 of the Agreement, the following monthly charges will apply to Nu-West:
May-October November-April Customer Charge $$ Per Month $282.89 $282.89 Demand Charge $$ Per kW-Month $ 11.00 $ 8.89 Energy Charge
Heavy Load Hours
(HLH) $$ Per MWh
Monday – Friday
HE0800–HE2300 MPT $ 22.71 $ 18.92 Light Load Hours
(LLH) All other hours and holidays $ 17.03 $ 17.03
These Agreement changes will result in an effective rate of 3.384¢/kWh.

The demand and energy charges identified in the Agreement are to be uniformly adjusted annually effective January 1, 2003 and each January 1 thereafter in accordance with the formula set out in the Agreement. Agreement Section 4.2.
A separate agreement under electric service Schedule No. 9 has been entered into for service to Nu-West’s Mountain Fuel Substation. The effective rate for that part of Nu-West’s service under Schedule 9 will be 4.232¢/kWh. The overall effective rate for all of Nu-West’s service (Agreement and Schedule 9) is 3.48¢/kWh.
Regarding jurisdiction of regulatory authorities, Section 8 of the Agreement includes the following language:
8.1

This Agreement is subject to approval of the Commission. In the event the Commission Order approving this Agreement either requires imputation of revenue to PacifiCorp, or provides for possible future imputation of revenues to PacifiCorp, PacifiCorp may terminate this Agreement by providing Nu-West notice within 30 days of entry of the Commission’s Order. In the event the Commission Order approving this Agreement does not provide for the direct assignment of the revenues and costs of this Agreement to the Idaho jurisdiction for ratemaking purposes, PacifiCorp may terminate this Agreement by providing Nu-West notice within 30 days of the entry of the Commission’s Order. In the event that the Commission Order approving this Agreement contains any condition that is materially adverse to either party, the party adversely impacted by the condition may terminate this Agreement by providing the other party notice within 30 days of the entry of the Commission’s Order.

8.3

The parties agree that the Commission has the authority to modify the rates for service under this Agreement under the same standard that applies to tariff customers generally. Accordingly, surcharges or credits that apply to service to tariff customers generally will also apply to service under this Agreement.

Commission Notices of Application and Modified Procedure in Case No. PACE0117 were issued on January 17, 2002. The deadline for filing written comments was February 8, 2002. The Commission Staff was the only party to file comments. Reply comments were filed by PacifiCorp on February 27, 2002. The comments can be summarized as follows:
Staff Comments
The proposed agreement between PacifiCorp and Nu-West contains rates based upon a cost of service study provided by the Company in conjunction with its filing. The study submitted is based on an unaudited 1999 test year and incorporates critical assumptions such as situs/system treatment of large special Agreement customers, treatment of the irrigation interruptability credit and allocators used to assign revenue requirement among the customer classes.
A general comparison of contract rates previously approved by the Commission for service to Nu-West and a comparison of cost of service studies used to generally develop both rates leads the Staff to conclude that the proposed rates are reasonable. Staff recognizes that the proposed rates represent a reasonable 5.5% increase over the previous rates that expired in December 2001 and that the rates proposed are acceptable to both parties.
While Staff recommends approval of the changes proposed, it does not recommend approval at this time of the specific assumptions used by the Company in its cost of service study filed in this case. Staff maintains that cost of service issues will be fully addressed in other cases currently pending before the Commission and need not be decided in order to approve the proposed Nu-West rates. Should the Commission, Staff contends, ultimately establish cost of service that is different than that used by the Company to justify these rates, the Commission may modify contract rates under its continuing authority. Staff does not oppose a Commission finding that allocated costs and revenues subsequently established for service to Nu-West be assigned to Idaho for ratemaking purposes.
Staff believes that the Commission retains full jurisdiction over contract rates despite Agreement language in Section 4.2 to the contrary. Staff recommends that the Company be directed to either eliminate the section or clarify in the Agreement exactly what is intended by Section 4.2 and explain why it is not contradictory to full Commission jurisdiction over contract rates as provided for in Section 8.3.

Company Reply
PacifiCorp replied that Section 8.3 of the submitted Agreement controls. If the Commission were to find that some particular rate is the just and reasonable rate to be charged Nu-West, that determination would apply notwithstanding the rate calculated under the other terms of the Agreement. If however, there were not a specific Commission determination of the rates for Nu-West (for instance, if a general rate increase were spread by stipulation), the Company contends that the rates for Nu-West would be established pursuant to Section 4.2.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record and comments in Case No. PAC-E-01-17. The submitted PacifiCorp/Nu-West Agreement provides for adjustment of rates under the tariff standard with an affirmative Commission Order. The Company has supported the reasonableness of the Nu-West contract rates with a cost-of-service study that incorporates critical assumptions and is based on a non-audited 1999 test year. We make no findings in this Order regarding the cost-of-service study and related assumptions. We find it more appropriate for these matters to be considered in other cases currently pending before this Commission. We note, however, that the present Agreement, as did the prior Nu-West contract, treats Nu-West as an Idaho situs customer, allocating costs and revenues to the Idaho jurisdiction for ratemaking purposes. To the extent that the submitted Agreement is contingent on our approval of this ratemaking treatment, we continue to find this treatment acceptable. We find the rates set forth in the Agreement, based on information available today, to be fair, just and reasonable. We also find the remaining contract terms, as clarified, to be acceptable.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah Power & Light Company, an electric utility, and the issues presented in Case No. PAC-E-01-17 pursuant to the authority granted in Idaho Code Title 61 and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing and as more particularly described and qualified above, IT IS HEREBY ORDERED and the Commission does hereby approve the Electric Service Agreement between PacifiCorp and Nu-West Industries, Inc., dated December 10, 2001 for an effective date of January 1, 2002.
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 with regard to 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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of March 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:PACE0117-sw

ORDER NO. 28984 1

Office of the Secretary
Service Date
March 27, 2002