20070208Comments.pdf

CECELIA A. GASSNER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6977
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Street Address for Express Mail:
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BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PACIFICORP DBA
ROCKY MOUNTAIN POWER'S APPLICATION)
FOR APPROVAL OF REDUCTIONS IN
BONNEVILLE POWER ADMINISTRATION
REGIONAL EXCHANGE CREDITS
CASE NO. PAC-O7-
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
record, Cecelia A. Gassner, Deputy Attorney General, in response to the Notice of Application
and Notice of Modified Procedure in Order No. 30222 issued on January 18, 2007 , submits the
following comments.
BACKGROUND
On January 4, 2007, PacifiCorp dba Rocky Mountain Power (RMP or "Company ) filed
an Application with the Commission for approval of a revised Electric Service Schedule No. 34
which would reflect a reduction in Bonneville Power Administration (BP A) regional exchange
credits. This Commission has jurisdiction over such request pursuant to Idaho Code 99 61-301
61-307 61-622 and 61-623.
STAFF COMMENTS FEBRUARY 8 , 2007
According to the Application, RMP participates in the Residential Exchange Program
(REP) administered by the BP A. As a regional utility, Rocky Mountain Power is entitled to
participate in the REP, which extends the benefits oflow-cost Federal power to residential and
small farm consumers served by investor-owned utilities in the region. The benefits provided by
BP A under the REP Settlement Agreement (Agreement) with RMP are to be passed through and
shared by the residential and small farm customers ofRMP. The Agreement between BPA and
RMP settles the parties' rights and obligations for the REP provided for by the Northwest
Regional Power Act. As required by the Agreement, RMP maintains accounts to monitor the
differences in the program credits provided to the Company s customers and the payments
received from BP A. The Company states that at the end of the last Agreement period, October
2006, its Idaho balancing account showed a surplus of $7.2 million; that is, over a five-year
period RMP paid out $7.2 million less in benefits to its Idaho residential and small farm
customers than it had received from the BP A.
RMP has completed negotiations with BP A for a new five-year Agreement that includes
the calculation ofREP credits effective October 1 , 2006 through September 30 2011. Through
these negotiations, the REP benefits passed on to RMP customers are 40% less than benefits
received under the parties' prior five-year Agreement. The REP benefits the Company is
proposing in Schedule 34 credit reflect the change in the net credit received from BP A to pass on
to RMP customers. Further, RMP proposes to apply $1 million from the existing Idaho
balancing account toward the change in the 2007 BP A credit to help moderate the reduction.
The Company also proposes that certain long-term care facilities served by RMP be
eligible to receive REP benefits. Facilities where the average patient stay is longer than 30 days
and where full medical care (similar to hospitals or medical clinics) is not provided would be
eligible for the REP.
STAFF ANALYSIS
RMP is requesting Commission approval to reduce the allocation of credits on Schedule
, Residential and Farm Kilowatt-Hour Credit, to qualifying customers under the REP. The
reduction in BP A credits proposed by RMP in this case reflects a reduction of payments received
by RMP from BP A for the 2006-2011 Agreement. For the first five years of the Agreement
RMP received approximately $35 million annually from BP A to be passed through to qualified
STAFF COMMENTS FEBRUARY 8, 2007
residential and small farm customers. For the term of the 2006-2011 the Agreement amount
passed through to qualified customers ofRMP decreased to approximately $21 million annually.
In addition to specifying the credit amounts, the Agreements required RMP to establish a
balancing account to track the differences in the program credits provided to the Company
customers and the monetary payments received from BP A. As of September 2004 the Idaho
balancing account showed a deficit of$6.8 million because RMP had paid out $6.8 million more
in benefits to Idaho residential and small farm customers than it had received from BP A. In Case
No. PAC-04-, RMP proposed to reduce the BPA credit by $6.8 million to achieve the
targeted zero balance in the Idaho balancing account by September 30 2006. The Commission
approved the reduction ofBP A credits in Order No. 29697. In that case, Staff verified that the
Company had paid $6.8 million more in credits to customers than was received by RMP from
BP A. Staff stated that the balance in the Idaho account was highly dependent upon actual energy
consumption by customers. Staff also recognized the potential for creating a surplus in the
balancing account over the remaining term of the Agreement. Staff further noted that any
resulting surplus could be applied to mitigate both planned and unplanned future reductions in
BP A REP credits. As of October 2006, the beginning of the new 2006-2011 Agreement, a
surplus of approximately $7.2 million existed in the Idaho balancing account.
The Company proposes to reduce the amount in the balancing account by applying $1
million of the existing surplus annually toward the proposed credit payments. The Company
believes this will moderate the price change in 2007 and allow the balance to remain positive for
subsequent years. The Company s analysis, based on normalized annual energy consumption
levels, demonstrated that the surplus in the Idaho balancing account would be reduced from $7.
million as of September 2006 to about $3 million at the end of 20 11.
Consequently, the Company is proposing an overall reduction in REP credits to reflect
the decrease in RMP benefits received from BP A and reduction of the surplus in the Idaho
balancing account. Therefore, proposed credits will decrease from $0.019216 to $0.016757 per
kilowatt-hour for non-irrigation customers under Schedule Nos. 1 , 6A, 7 A, 23A, 35A, 36, 19
with 6A, 19 with 23A, and 19 with 35A. As proposed, credits to irrigation customers under
Schedule 10 would be reduced from $0.031546 to $0.026415 per kilowatt-hour.
Staff notes however, that the determination of the exact annual payout of credits to
customers is not a precise science because the credits passed through to customers are a function
of actual energy consumed. Factors such as weather conditions can contribute to a high degree
STAFF COMMENTS FEBRUARY 8, 2007
of variance in the payment of the BPA credits due to changes in energy consumed. For example
the difference in energy consumption between 2004 and 2005 was nearly 53 million kWh, while
the difference in energy consumption between 2005 and 2006 was about 121 million kWh. The
balancing account allows the Company to more effectively manage the volatility associated with
consumption levels.
Staff also notes that RMP assumed no customer growth or load growth in its analysis.
Staff believes it is reasonable to assume some growth in RMP's Idaho service territory; therefore
Staff applied historical and forecasted growth rates to the Company s expected payout of BP A
benefits for non-irrigation customers. Staff did not escalate loads or number of customers for the
irrigation class because significant changes are not anticipated. Staff used rates for customer
growth and load growth based on the Company s 2004 Integrated Resource Plan. Using a
growth rate of 1 %, Staff s analysis shows the surplus in the Idaho balancing account will likely
be reduced to just over $1 million at the expiration of the Agreement in 2011 at normalized
consumption levels.
Staff believes that the REP rates proposed by the Company for qualified non-irrigation
and irrigation customers are reasonable. Staff anticipates that the surplus existing in the Idaho
balancing account will be appropriately reduced, approaching zero, over the term ofthe
Agreement. Staff further believes that an attempt to accelerate reduction in the surplus balance
could actually cause balancing account deficits requiring offsetting credit reductions. Should the
balance grow larger during the five-year period or fail to decline as quickly as anticipated, the
Company should recommend modification of the REP to better assure that all appropriate
benefits are received by customers in a timely manner.
The second matter Staff reviewed is the inclusion of certain long-term care facilities for
REP credits. According to BPA's Customer Load Eligibility Guidelines, the loads associated
with nursing homes are eligible to receive the REP credit. Long-term care facilities such as
nursing homes are eligible for REP credits when the average length of stay is 30 days or longer
and the facility does not provide full medical care similar to the medical facilities, equipment
and staff normally provided by hospitals, clinics, or similar institutions. The loads associated
with hospitals are ineligible to receive REP credits.
The Company has identified 17 long-term facilities that qualify for REP credits. The
overall impact of including these facilities in the allocation of REP benefits to all other
STAFF COMMENTS FEBRUARY 8 , 2007
customers is minimal. Staff recommends the Company include pass through ofREP benefits to
qualifying long-term facilities in accordance with BP A's Customer Load Eligibility Guidelines.
Overall, RMP's proposal will reduce benefits to the Company s customers in Idaho.
Non-irrigation customers will experience a credit decrease of approximately 13% per kWh, and
irrigation customers will see a credit decrease of about 16% per kWh. However, Staff believes
the Company s proposed rates for allocating REP benefits are reasonable and will reduce the
surplus in the Idaho balancing account to a reasonable level by the end of the Agreement while
lessening the potential for balancing account deficits. Additionally, Staff believes it is
appropriate to include certain long-term facilities that qualify under BP A's Customer Load
Eligibility Guidelines to receive REP credit.
STAFF RECOMMENDATION
Staff recommends the Commission approve the reduction in BP A credits provided
to qualifying customers of Rocky Mountain Power through the 2007-2011
Residential Exchange Program Agreement as proposed.
Staff recommends the Commission direct the Company to provide the
Commission with monthly payments and Idaho account balances on an annual
basis.
Staff recommends the Commission approve the Company s request to include
qualifying long-term care facilities in the allocation ofREP benefits.
Respectfully submitted this ~day of February 2007.
ceCe1
Deputy Attorney General
Technical Staff: Michael Darrington
i:umisc:comments/paceO7 ,1 cgmd
STAFF COMMENTS FEBRUARY 8 , 2007
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF FEBRUARY 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
DEAN BROCKBANK ESQ
ACIFICORP
DBA ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
BRIAN DICKMAN
ACIFICORP
DBA ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
DATA REQUEST RESPONSE CENTER
ACIFICORP
825 NE MULTNOMAH STE 2000
PORTLAND OR 97232
SECRETARY
CERTIFICATE OF SERVICE