20080926Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
CO MMISSI 0 NER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
DATE:SEPTEMBER 24, 2008
SUBJECT:CASE NO. P AC-08-07 (Rocky Mountain Power)
GENERAL RATE CASE
On September 19, 2008, PacifiCorp dba Rocky Mountain Power (Rocky Mountain Power;
Company) filed an Application with the Idaho Public Utilities Commission (Commission) for authority to
increase the Company s base rates for electric service by $5.9 million annually, or 4.0%. The increase in
base rates would vary by class of customer and actual usage. The rate increase does not apply to Agrium
or Monsanto, whose rates are controlled by a separate Commission-approved Stipulation.
Rocky Mountain Power provides electric service to over 69 000 customers in eastern Idaho.
As reflected in the Company s filing and supporting testimony, the proposed rate increase is designed to
recover the dramatically increasing costs of serving residential, commercial and irrigation customers. As
the demand for electricity has grown, the Company has made investments in new infrastructure and
facilities. In addition, the costs for fuel and purchased power to serve customers have increased. The
Company contends that without the requested increase in revenues, it will be increasingly difficult to
maintain its utility infrastructure and continue to provide adequate, efficient, just and reasonable service
to its Idaho customers.
Rocky Mountain Power claims that it is currently earning a normalized return on equity
(ROE) of 6.5% in its Idaho jurisdiction. This current ROE, it states, is far below the Company
authorized Idaho return (10.25%), the returns recently authorized for other Idaho investor-owned utilities
and the 10.75% ROE requested by the Company in this case. The Company contends that an overall
price increase of $19.4 million would be required to produce the 10.75% ROE requested by the Company
in this proceeding. The amount requested in this case is constrained and limited by the Revised Protocol
rate mitigation cap approved by the Commission in Case No. PAC-02-, reducing the request by $3.
DECISION MEMORANDUM
million. The Revised Protocol is the allocation method utilized to allocate and assIgn generation
transmission and distribution costs to PacifiCorp s six retail state jurisdictions. Reference Case No. P AC-
02-3 (Inter-Jurisdictional Cost Allocation), Order No. 29708. The amount requested in this case is also
limited by the Stipulation approved in Case No. PAC-07-05 for tariff Schedules 400 (Monsanto
Company) and 401 (Agrium , Inc.). That Stipulation regulates the rates of Monsanto and Agrium through
December 20 10 and reduces the Company s rate request by $10.4 million.
The proposed average increase in base rates by kilowatt hour will result in the following
allocation of the net price increase for major customer classes:
Residential: 4.73%
Irrigation: 2.31 %
General Service
Schedule 23/23A: 0%
Schedule 6/6A/8/35: 7.96%
Schedule 9: 7.96%
Schedule 19: 2.31 %
Public Street Lighting
Schedules 717A , 12: 0%
The ultimate prices customers will see are determined by the Company s rate spread and rate design
proposals. For an average residential home using 850 kWh per month, customers will realize an increase
of$3.55 per month.
The revised tariff scbedules proposed by the Company reflect a proposed effective date of
October 19, 2008.
COMMISSION DECISION
Based on its review of the Company s Application and Idaho law, Staff at this time
recommends that the Commission issue a Notice of Application and Notice of Intervention Deadline, and
suspend the proposed rates for a period of 30 days plus 5 months from the proposed October 19, 2008
effective date. Idaho Code 99 61-622
, -
623. Does the Commission agree with Staffs recommended
procedure?
~-=
Scott Woodbury
Deputy Attorney General
bls/M:PAC-O8-07 sw
DECISION MEMORANDUM