20050302Press Release.pdf

IDAHO PUBLIC UTILITIES COMMISSION
Case No. PAC-02-, Order No. 29708
March 2005
Contact: Gene Fadness [phone]
Website: www.puc.state.id.
Commission adopts PacifiCorp cost method
Boise - The Idaho Public Utilities Commission is approving a new method to be used by
PacifiCorp in determining how the utility s costs to serve customers are allocated in each of the
six Western states in which the utility provides electric service.
After years of negotiations, interested parties in all the affected states have submitted a uniform
method or "protocol" to address the cost allocation issues. The protocol must gain approval from
the state public utility commissions of each state involved.
In 1989, Pacific Power & Light merged with Utah Power & Light to create PacifiCorp. That
merger brought Idaho s customers of Utah Power & Light into PacifiCorp.
Since the merger, each of the six state commissions in PacifiCorp s territory has apportioned
costs to customers using differing methods. Cost recovery problems today are the result of states
adopting varYing methodologies that, according to PacifiCorp, result in the utility no longer
being able to fully recover its costs. That leads to uncertainty in financial markets about whether
the company will be able to recover the costs of investment in capital improvements and
additions. Absent resolution of these issues, it is difficult for the company to make adequate
investment in new resources given concerns about the risk of cost recovery. The need for
agreement has become more critical in recent years with the rapid growth in customer demand in
PacifiCorp s service territory.
In what has come to be known as the Multi-State Process, staffs from state commissions
including Idaho, as well as industrial customers and consumer organizations, such as Monsanto
and the AARP, have been negotiating for s~veral years toward a more uniform method of cost
allocation
Ratification of this agreement provides the company assurance that it will have a reasonable
opportunity to recover prudent investments in new generation and transmission facilities and
required improvements to existing facilities.
A significant challenge in the negotiations has been how to fairly allocate more expensive
thermal resources and less expensive hydro resources across PacifiCorp s entire system. Most of
the generating resources in PacifiCorp s western region of Washington, Oregon and California
are hydroelectric dams while the eastern region of Idaho, Utah and Wyoming is more dependent
on thermal resources, such as coal and natural gas.
Part of the proposed agreement is a "hydro endowment " that reflects the differences in cost
attributed to the former Pacific Power & Light states of Oregon, Washington, California and part
of Wyoming.
In the near term, through 2008 , the proposed cost allocation methodology results in a 2 percent
higher revenue requirement for Idaho. However, the agreement caps the increase in revenue
requirement to 1.67 perc~nt in Idaho through March 31 2009. The results beyond 2009 are more
favorable to Idaho because future hydro relicensing costs would be assigned to Washington and
Oregon.
The agreement also assigns all revenues and costs from PacifiCorp s special contract customers
in Idaho, including Monsanto in Soda Springs, to the utility s Idaho territory. Up until now, costs
associated with Monsanto have been allocated throughout PacifiCorp s entire system.
A full text of the commission s order, along with other documents related to this case, are
available on the commission s Web site at www.puc.idaho.gov. Click on "File Room" and then
on "Electric Cases" and scroll down to Case No. P AC-02-
Interested parties may petition the commission for reconsideration by no later than March 21.
Petitions for reconsideration must set forth specifically why the petitioner contends that the order
is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and
quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.
Box 83720, Boise, ill, 83720-0074, or faxed to 208-334-3762.