20020208Swdesrl.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

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

COMMENTS OF THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on January 17, 2002 submits the following comments.
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 3.3¢ 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 3.4339¢ per kilowatt hour for all kilowatt hours.
Rates for service to Nu-West under the proposed Agreement 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), the Company does not have an electric service schedule applicable for service to Nu-West, thus necessitating a special contract. The Company maintains that the proposed Agreement 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 contract rates will result in an effective contract rate of 3.384¢/kWh.

A separate agreement under electric service Schedule No. 9 has been entered into for service to Nu-West’s Mountain Fuel Substation. In the Prior Agreement all service to Nu-West was rolled together.
SCHEDULE 9 RATES May-
October November-
April Customer Charge $282.89 $282.89 Total Demand/kw month $ 7.40 $ 5.60 Total Energy/mwh $ 28.91 $ 28.91
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. This represents an increase of 5.5% over the prior contract rate.
The Company states that the demand and energy charges identified in the Agreement are to be uniformly adjusted annually effective January 1, 2003 and each January 1 to reflect any change in PacifiCorp’s Idaho base rates for non-special contract customers. Agreement, Section 4.2. This is the “sole and exclusive means of annual adjustment” to the current charges. Adjustment percentages is defined as follows:

“adjustment percentage for following calendar year means the overall annual percent change in PacifiCorp’s Idaho base rates for all non-special contract classes of customers, as approved by the Commission to be effective during the period from July 1 of the previous year to June 30 of the current year, as measured by the percent change, relative to the previous year, in the PacifiCorp revenue requirement attributable to such non-special customer classes in Idaho.”

Agreement, Section 1.1

The Company goes on to explain that the Agreement provides that the Commission has the authority to modify the rates for service under the Agreement under the same standard that applies to tariff customers generally. Agreement, Section 8.3.
Additionally in its Application, the Company points out that the Agreement provides that PacifiCorp may terminate the Agreement if the Order approving the Agreement does not provide for the direct assignment of the revenues and costs from the Agreement to the Idaho Jurisdiction for rate making purposes. Agreement, Section 8.1. The Company in its Application therefore requests that the order approving the Agreement make such a determination.

STAFF ANALYSIS
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 contract customers, treatment of the irrigation interruptability credit and allocators used to assign revenue requirement among the customer classes.
These complex cost of service issues have broad implications for other customers and will be carefully reviewed in Case Nos. PAC-E-01-16 and PAC-E-02-01. Consequently, Staff has not evaluated the reasonableness of specific assumptions used in the study to determine whether the proposed contract rates are appropriate.
Staff’s evaluation of proposed rates in this case has been limited to a general comparison of contract rates previously approved by the Commission for service to Nu-West and a review of cost of service studies used to develop both rates. Staff recognizes that both parties have agreed to the proposed rates which represent a 5.5% increase over rates that expired in December 2001.
With respect to the contract rates going forward, the Company’s Application states that the Agreement is akin to a tariff schedule for a specific customer. Section 8.3 of the Agreement states that the Commission has authority to modify the rates for service under the Agreement under the same standard that applies to tariff customers generally. However, Section 4.2 and the Section 1.1 definition of “adjustment percentage” under the Agreement seem to contradict language regarding Commission authority by including confusing conditions establishing how and when rates can change. Staff believes that under a “tariff standard” contract such as this, the Commission maintains jurisdiction over how and when contract rates will change either independently or in conjunction with changes in other tariff schedules.
Finally, the Company’s Application and the attached Agreement conditions the Agreement on a Commission finding in this case that revenues and costs related to service under the Agreement must be assigned to the state of Idaho for ratemaking purposes. Agreement, Section 8.1. It is Staff’s understanding that Nu-West has historically been included as a situs customer for ratemaking purposes within the state of Idaho. While Staff does not necessarily agree with the costs assigned to Nu-West by the Company in this case, it generally agrees that it is reasonable to continue to include Nu-West as an Idaho jurisdictional customer. To the extent the Commission maintains jurisdiction over contract rates under a “tariff standard” and other Idaho ratepayers are not negatively impacted, both revenues and costs associated with providing service to Nu-West should remain situs.

CONCLUSIONS AND RECOMMENDATIONS
Based on 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, Staff believes the proposed rates are reasonable and recommends approval by the Commission. Staff also recognizes that the proposed rates represent a reasonable 5.5% increase over rates that expired in December 2001 and that the rates proposed are acceptable to both parties.
Staff 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 ultimately establish cost of service that is different than that used by the Company to justify the rates, the Commission can 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 to the contrary. Staff recommends that the Company be directed to clarify in the Agreement exactly what is intended by Section 4.2, explain why it is not contradictory to full Commission jurisdiction over contract rates (Section 8.3) or eliminate the section entirely.

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Scott Woodbury
Deputy Attorney General

Technical Staff: Dave Schunke
Randy Lobb

SW:DES:RL:misc/comments/pace01.17swdesrl

STAFF COMMENTS 5 FEBRUARY 8, 2002