20020125Decision Memo.pdf

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DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
BILL EASTLAKE
TONY A CLARK
DON HOWELL
DAVE SCHUNKE
RANDY LOBB
LYNN ANDERSON
GENE FADNESS
WORKING FILE
FROM:SCOTT WOODBURY
DATE:JANUARY 25, 2002
RE:CASE NO. PAC-02-01 (PacifiCorp)
ELECTRIC SERVICE SCHEDULE NO. 34-BP A EXCHANGE CREDIT
On January 7, 2002, PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with the Idaho Public Utilities Commission (Commission)
requesting approval of the Company s proposed electric service schedules. Included in the
Company s filing is a proposed Schedule 34- BP A Exchange Credit distribution. The BP
Credit is being processed under Modified Procedure, i., by written submission rather than by
hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204. the remainder
of the Company s filing (Cost of Service (COS) study, proposed Power Cost Surcharge ($38
million) and a proposed Rate Mitigation Adjustment (RMA)) is to be processed and handled
separately.
Schedule 34-BP A Exchange Credit
In May 2001 , PacifiCorp reports that it entered into a Settlement Agreement with the
Bonneville Power Administration (BP Settlement) regarding the exchange benefits to be
provided by BP A through September 30, 2006 to qualifying residential and small farm
DECISION MEMORANDUM
customers.The BP A Settlement, the Company contends, will provide approximately $34
million in benefits to Idaho customers in 2002.
The .Company in this case proposes an Increase in the Bonneville Power
Administration credit to the recently settled amount. The Bonneville Power Administration
(BP A) residential and small farm exchange credit is a mechanism to provide benefits to
qualifying customers of investor-owned utilities (like Utah Power) from the Federal Columbia
River Hydroelectric system and satisfaction of BP A's obligations under the Northwest Power
Act of 1980. The credit is available only to residential and small farm customers and is provided
to the Company s customers in Idaho through electric service Schedule No. 34. In recent years
the benefits have been allocated 43% to residential customers and 57% to irrigation customers.
The Company s previous exchange agreement with BPA expired in 2001 , and a new agreement
(the 2001 Settlement) was entered into to provide a continuation of exchange benefits. In its
2001 rate case, the Company reports that BP proposed an alternative to the traditional
exchange. The alternative was to provide investor-owned utilities (IOUs) the option to purchase
actual power or rights to power through a subscription process. IOUs that chose subscription did
so as a settlement of their exchange rights for this period. The subscription was further split
between actual power and a monetary portion that was calculated as a difference between BPA'
price and BPA's forecasted market price. BPA expected that it would be required to purchase
additional resources in order to serve that portion of the subscription that was delivered as actual
power. Faced with the potential of very high costs for these additional resources, PacifiCorp
agreed to forego its right to actual power for an overall financial settlement of its exchange
benefits. The resulting financial BP A Settlement provides $34 million in benefits to qualifying
Idaho customers for the first year and $35.2 million in the second year. This level, the Company
reports, is substantially higher than historical levels. The Company proposes to allocate the
settlement amounts between qualifying residential and small farm (or irrigation) customers in the
same manner as the prior exchange agreement (i., 43% to residential customers and 57% to
irrigation customers).
BPA increased its credit effective October 2001. PacifiCorp contends that it has a
contractual obligation to pass the credit through to its customers in a timely manner.
Consequently, the Company is proposing that the Schedule 34 BP A credit, be approved for a
February 2002 effective date.
DECISION MEMORANDUM
PacifiCorp proposes to have the anticipated four months' worth of accrued credit (for
the period from October 2001 until the new credit level is implemented in rates) for residential
customers included in the first year s credit rate. In other words, the rate for the first year will be
set to distribute 16 months worth of a normal year s amount for residential customers. The total
amount of BP A credit the Company proposes to distribute to qualifying customers in year one is
$40.6 million. At the end of the first year, the rate will be reset to match a normal 12 months
worth of credit. The Company proposes no adjustment for the four-month lag for irrigation
customers. Irrigation usage, the Company contends, is largely completed by October
Irrigation payments, the Company also contends, fluctuate significantly year-to-year due to
differences in irrigation usage during the irrigation season.
On January 16, 2002, the Commission issued Notices of Application and Modified
Procedure in Case No. PAC-02-01 with respect to the proposed Schedule 34-BPA Exchange
Credit. The deadline for filing written comments was Thursday, January 24, 2002. The
Commission Staff was the only party to file comments. Staff recommends that the BP A Credit
be approved for the requested effective date of February 2002. Staff sees the BP A Credit as a
great benefit to residential and irrigation customers.The Credit will reduce residential
customers' rates by an average of 44% and irrigation rates by 63%. Staff submits the following
schedule showing the estimated effect of the proposed BP A Credit on revenues from electric
sales to ultimate consumers by rate schedules in Idaho for year one.
UT AH POWER
ESTIMATED EFFECT OF PROPSED BP A CREDIT
ON REVENUES FROM ELECTRIC SALES TO ULTIMATE CONSUMERS
BY RATE SCHEDULES IN IDAHO - Year
Current Revenues Proposed
Average ($000)Sch. 34LineAcctSch.No. of Base Sch. 34 Net Credit PercentNo.No.Description No.Customers MWh Rev Credit Rev ($000)(I)(2)(3)(4)(5)(6)(7)(8)(19)(20)
(6)+(7)(19)/(6)
Residential
440 Sales
Residential
Service 524 257 880 $ 22 056 ($951)$21 105 ($8 619)39.08%
Residential
Optional TOO li.2ll "1m ~2R $ 20.383 (~I mQ)$19.344 (~IO 1'2):42B.%
DECISION MEMORANDUM
Total
Residential 457 561 408 $ 42 439 ($1 990)$40 449 ($18 751)44.18%442 Commercial
& Industrial
General Svc -
Lrg Power
($93)($929)(R&F)222 149 761 $ 1 668 52.75%
Irrigation Rate 876 615 632 $ 32 327 ($5 578)$26 749 ($20 344)62.93%General Svc
(R&F)23A 310 388 468 ($53)$ 1 415 ($540)36.78%Security Area
Lighting
(~J)('1:5)(R&F)--18l 141 $38 ----.U1 .:..Lll6..%Total Sales to
Ultimate
Consumers 387 152 295 $151 751 ($7 715)$144 036 ($40 569)26.73%
Commission Decision
PacifiCorp requests approval of proposed Schedule 34-BP A Credit Refund for an
effective date of February 1 , 2002. Does the Commission find it reasonable to approve the
Company s request? Ifnot, what is the Commission s preference?
Scott Woodbury
vld/M:PACEO201 sw2
DECISION MEMORANDUM