20090702Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL

DATE: JUNE 30, 2009

SUBJECT: CASE NO. PAC-E-08-08 (Rocky Mountain Power)
APPLICATION FOR APPROVAL OF ENERGY COST
ADJUSTMENT MECHANISM (ECAM) – SETTLEMENT STIPULATION

CASE NO. PAC-E-09-03
GENERAL RATE CASE (NOTICE OF WITHDRAWAL OF INTENT TO
FILE) – ECAM STIPULATION ¶ 13

On October 23, 2008, PacifiCorp dba Rocky Mountain Power (Rocky Mountain
Power; Company) filed an Application with the Idaho Public Utilities Commission
(Commission) requesting approval of an energy cost adjustment mechanism (ECAM). On
November 5, 2008, the Commission issued a Notice of Application and established a November
28, 2008, intervention deadline. As reflected in a Notice of Parties issued on December 4, 2008,
the parties to this proceeding are: PacifiCorp; Commission Staff; Monsanto Company; and
Idaho Irrigation Pumpers Association, Inc. (IIPA), (collectively Parties).
On June 29, 2009, the Company, Staff, IIPA and Monsanto filed an ECAM
Stipulation with the Commission as a proposed settlement of the case. IDAPA 31.01.01.272-
276. The Parties contend that the Stipulation terms and conditions represent a fair, just and
reasonable compromise of the issues raised in this proceeding and that the Stipulation is in the
public interest. The Parties recommend that the Commission approve the Stipulation and all of
its terms and conditions.
As reflected in the Stipulation and by way of background, the parties recite the
following:
DECISION MEMORANDUM 2
On October 23, 2008, Rocky Mountain Power filed an Application
(“Application”) seeking approval of an Energy Cost Adjustment Mechanism
(“ECAM”). Rocky Mountain Power’s proposed ECAM is designed to defer
the difference between base net power costs set during a general rate case and
collected from customers in their retail rates and actual net power costs
incurred by the Company to serve retail customers. The calculation of the
deferral would be on a monthly basis by comparing the monthly base net
power cost (“NPC”) rate in dollars per megawatt-hour to the actual NPC rate
also in dollars per megawatt-hour. The resulting monthly NPC differential
rate would be applied to actual Idaho retail load to calculate the NPC
differential for deferral. The net power costs of $982 million, as stipulated
and approved in Rocky Mountain Power’s general rate Case No. PAC-E-08-
07, Order No. 30783, will be the base NPC for the ECAM until re-set in the
next general rate case.

The germane terms of the Stipulation are as follows:
4. Parties agree that the design, format and accounts of the ECAM shall be as
set forth in the Company’s Application in Case No. PAC-E-08-08 and as
to be described in more detail by the Company in its Stipulation
supporting testimony. The Parties further agree that the ECAM is to be
effective July 1, 2009, provided the Commission has issued an order
approving the ECAM consistent with the terms in the Stipulation.

5. Parties agree that the ECAM will include a symmetrical sharing band
wherein when there is a difference between actual NPC and base NPC,
customers pay (if there is an increase in NPC) or receive (if there is a
decrease in NPC) 90 percent of the difference, and the Company is
responsible for the remaining 10 percent.

6. Parties agree that the annual deferral period to be used in the ECAM will
be December 1 to November 30, and that annually, on February 1, the
Company will file an application with the Commission to adjust the
surcharge or surcredit (“ECAM Rate”) effective April 1 each year,
refunding or collecting the ECAM deferred balance from the prior deferral
period.

7. Parties agree that a symmetrical load growth adjustment rate (LGAR) of
$17.48 per MWh will be applied to the incremental load from the base
load established in Case No. PAC-E-08-07, and that the LGAR and base
load will be updated each time base net power costs are updated in a
general rate case.

8. Parties recognize that the Company has made significant investments in
renewable generation projects that are not yet being recovered in Idaho
rates and that these projects provide significant benefits to customers
DECISION MEMORANDUM 3
through the ECAM. Therefore from the effective date of the ECAM to the
effective date of rates in the next rate case, the Parties agree that the
ECAM will include a renewable generation investment offset adjustment.
The adjustment recognizes that actual power costs have been reduced by
power generated from these renewable generation projects, but that the
costs of these projects are not yet being recovered in Idaho rates. The
adjustment will be based on $55.00 per MWh, as calculated in [Settlement
Stipulation] Attachment 1, multiplied by the actual MWh output generated
by the renewable resources that were not included in rate base in Rocky
Mountain Power’s Case No. PAC-E-08-07.

9. Parties further agree that a carrying charge equal to the Commission-
approved customer deposit rate will be applied symmetrically to the
monthly ECAM deferred balance.

10. In the event the Company intends to seek an increase to the ECAM rate
exceeding seven (7) percent, the Company agrees to meet with the Staff
and interested parties to discuss the underlying drivers of such a change at
least 30 days prior to filing an application with the Commission for
approval of the change to the ECAM rate.

11. The Company agrees to work with the Parties to develop rates that reflect
line losses and that distinguish transmission, primary and secondary
voltage delivery service in the implementation of the ECAM rates. A
technical conference will be convened by August 15, 2009 to begin
discussions on a methodology and will use line loss information from the
2008 general rate case (PAC-E-08-07) as a starting point for the
discussions. In the event an agreement on rate design for the ECAM rate
is not reached by April 1, 2010, the ECAM rate will be applied to all
schedules and customers on a flat kWh usage basis until an agreement is
reached or a method is ordered by the Commission.

12. The Company agrees to hold a risk management hedging seminar to
educate Parties about the Company’s risk management practices and
hedging strategies.

13. In recognition for and as a result of the implementation of the ECAM with
an adjustment for renewable generation projects not yet in rate base as
specified in [Stipulation] Paragraph 8 above, the Company agrees not to
file a general rate case prior to May 1, 2010.

14. The Parties agree that SO2 sales made after June 30, 2009 will be included
as an offset to the ECAM deferral with the same 90%/10% sharing band
explained above in [Stipulation] Paragraph 5. The Parties further agree
that sales made prior to such date will continue to be amortized over
DECISION MEMORANDUM 4
fifteen years consistent with current practice as reflected in Case No.
PAC-E-06-04 (Larson Direct Testimony, Exh. 1, pp. 3.6 and 3.6.1.).

15. The Company’s filed Case No. PAC-E-08-07 included an annual level of
amortization of three regulatory liabilities for West Valley lease,
administrative and general expense merger commitment, and the gain on
the sale of the Goose Creek transmission line which reduced the revenue
requirement used in establishing the current base rates. The current rates
will continue until new rates are set at the end of 2010 or later and, as a
result, customers continue to receive the benefit of the amortization in
rates until that time. As of December 31, 2010, an unamortized balance of
$156,434 for the Goose Creek sale will remain on the Company’s books
and records. The Parties stipulate and agree that upon Commission
approval of this Stipulation the Company will credit the ECAM deferral
for the Goose Creek sale in the amount of $156,434. Accordingly, the
Parties agree that the Company can write-off the remaining balances of the
regulatory liabilities after this transfer and upon Commission approval of
the Stipulation.

COMMISSION DECISION
Staff recommends that the Commission issue a Notice of the ECAM Stipulation and
proposed settlement. As reflected in the cover letter filed by the Company with the Stipulation,
testimony supporting the Stipulation will be filed with the Commission no later than Friday, July
31, 2009. Staff recommends that a public comment deadline of Friday, August 14, 2009, also be
scheduled. Does the Commission agree with the proposed procedure and scheduling?

Scott Woodbury
Deputy Attorney General

bls/M:PAC-E-08-08_sw4