20050128Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:KIRA DALE PFISTERER
DATE:JANUARY 27, 2005
RE:CASE NO. PAC-05-
GENERAL RATE CASE
On January 15, 2005, PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with the Idaho Public Utilities Commission (Commission) for
authority to increase the Company s base rates for electric service by an average of 12.5%. If
approved, Company revenues for base rates would increase by $15.million annually. The amount
of net increase would vary by class of customer and actual usage.
THE APPLICATION
The Company s existing base rate structure was set in April 1986. However, since 1986
PacifiCorp has recovered, with Commission approval, an additional $16 million in net revenue
through three temporary surcharges and three temporary surcredits. The last of these surcharges, the
Power Cost/Tax Surcharge reflected in Schedule 93 , is set to expire by its own terms on September
, 2005. PacifiCorp requests that the new base rates become effective that same day in order to
soften the impact of such an increase on its customers' bills.
Pacifi Corp s Application states that a base rate increase is necessary to cover increasing
costs attributed to 1) general inflation, 2) employee pension and health care, and 3) investments in
new generation resources. According to the Application, PacifiCorp is currently earning a return on
equity (ROE) of 5 .8% and the requested increase in rates will allow the Company to earn an ROE of
11.125%. PacifiCorp contends that the higher ROE is necessary to access capital markets to obtain
the funds necessary to maintain its utility infrastructure.
DECISION MEMORANDUM
In the filing PacifiCorp requests an overall increase of 12.5% to its base rates. The chart
below shows an average of all rate components by kilowatt-hour as proposed by PacifiCorp for
certain customer groups. This is not an exhaustive list of the changes in rates and charges proposed
by PacifiCorp and, as in all general rate cases, all ofPacifiCorp s rates are potentially at issue.
Proposed Electric Rate Increase
Current Average Proposed Average Overall
Customer Class Schedule Base Rates Base Rate Percentage of
(cents/kWh)(cents/kWh)Increase
Residential 0786 0903 14.
Optional time of day 0656 0727 10.
General Service
Small Power 0749 0850 13.
23A 0816 0894
Large Power 0571 0626
0648 0711
Irrigation Pumping 0589 0669 13.
PacifiCorp also proposes to increase the rates applicable to special contract customer Nu- West
Industries by 13.8% and the rates applicable to street lighting by 23.3%.
Revised Protocol Cost Allocation Methodology
PacifiCorp states that the Application was developed under the Revised Protocol inter-
jurisdictional cost allocation methodology. This Revised Protocol methodology, proposed in the
Multi-State Process (MSP) stipulation, is currently under Commission review. Case No. P AC-02-
3. Also included in the MSP stipulation and applied in the Application is the Rate Mitigation Cap,
which effectively limits the requested increase by $1.8 million less than the non-mitigated rate
increase calculated by the Revised Protocol alone.
In addition to the Revised Protocol methodology, the PacifiCorp Application also applies
the Modified Accord Allocation Methodology previously adopted by the Commission. PacifiCorp
Application includes a comparison of the revenue requirement using the Modified Accord Allocation
Methodology versus the Revised Protocol methodology.
Parties Seeking Intervention
The Idaho Irrigation Pumpers Association, Inc. and Monsanto Company have filed
petitions to intervene. Additional intervention is anticipated.
DECISION MEMORANDUM
COMMISSION DECISION
Based upon its review of the Application and Idaho law, Staff recommends that the
Commission:
Issue a Notice of Application;
Issue a Notice of Intervention Deadline. Staff recommends a deadline of
February 23, 2005; and
Set a prehearing/scheduling conference to identify intervenors and to
establish hearing dates and deadlines for the filing of testimony. Staff
recommends that such a conference take place on March 10, 2005.
Does the Commission agree with Staff s recommended procedure?
!i~/(tl.
Kim Dale Pfist
M:P ACEO50 1- kdp
DECISION MEMORANDUM