20100604Decision 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 2, 2010

SUBJECT: CASE NO. PAC-E-10-07 (Rocky Mountain Power)
GENERAL RATE CASE

On May 28, 2010, PacifiCorp dba Rocky Mountain Power (RMP; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) for authority to change its
electric service schedules to reflect a proposed revenue increase of $27.7 million, or 13.7%.
RMP serves more than 70,000 customers in southeastern Idaho. The Company
provides electric service to more than 1,000,000 customers in Utah, Wyoming and Idaho. The
Company owns more than 10,000 megawatts of generation from coal, hydro, natural gas-fueled
combustion turbines and renewable wind and geothermal power. The proposed increase is based
upon normalized results of operations for the test period ending December 31, 2009, with known
and measurable changes. Revised tariff schedules reflect a proposed effective date of June 28,
2010, save and except tariff Schedules 400 (Monsanto) and 401 (Nu-West) who will continue
pursuant to special contract with existing service rates through year-end 2010.
RMP contends that it is currently earning a return on equity (ROE) of 5.7%. The
Company requests a return on equity of 10.6%. Without the requested increase in revenues,
RMP contends that it will be increasingly difficult for the Company to maintain its utility
infrastructure and continue to provide adequate, efficient, just and reasonable service to its Idaho
customers. PacifiCorp contends that it is in the midst of a multi-year program of investing in
renewable energy, transmission facilities and environmental controls to serve its customers in
DECISION MEMORANDUM 2
Idaho and across its six state system. At a total Company level, the test period includes over $4
billion of new plant investment and $87 million in increased power costs.
Presented in this case is a class cost of service study that functionalizes, classifies,
and allocates cost to each customer class based on the test year in the Company’s filing. Guided
by its cost of service study the Company proposes to allocate the net price increase for major
customer classes as follows:
▪ Residential Schedule 1: 8.0%
▪ Residential Schedule 36: 15.6%
▪ General Service:
Schedule 23/23A: 10.8%
Schedule 6/6A/35/35A: 14.9%
Schedule 9: 14.6%
Schedule 19: 12.0%
▪ Irrigation Schedule 10: 9.6%
▪ Public Street Lighting: 0%
▪ Industrial Contract Schedule 400 (Monsanto): 19.6%
▪ Industrial Contract Schedule 401 (Nu-West): 15.9%

These changes are intended to bring all customer prices more closely to the actual cost to serve
them.
Schedule 1 – Residential
For Residential Schedule 1 customers, the Company proposes a seasonally
differentiated two-tiered inverted block pricing structure for energy use and a $12 per month
fixed customer service charge. The first energy block in each season will apply to usage for the
first 800 kWh per month. Currently residential customers served on Schedule 1 pay a flat,
seasonally differentiated energy charge applied equally to all kilowatt hours. Under the existing
rate design a monthly minimum charge also applies.
As result of the proposed two block inverted structure the average Idaho residential
customer using 839 kWh year round will see an average rate increase of only $.84 per month, or
1% per month overall. Larger users with more discretionary usage will see substantially larger
increases. The Company believes that this rate design balances cost recovery, fairness, and
provides customers price signals concerning the higher costs of increasing energy usage.
Schedule 36 – Residential (Optional Time of Day)
For time-of-use Residential Schedule 36 customers, the Company proposes to retain
the existing rate structure and to apply increases to both the customer service charge and to the
DECISION MEMORANDUM 3
on-and-off peak energy charges. Even with these changes, the Company maintains that
customers on Schedule 36 will continue to benefit from the time-of-use rate design. If the
Company’s proposed rates are approved as filed, the average rate for a time-of-use customer will
be 1.35¢ per kWh lower than the average rate for Schedule 1 residential customers.
COMMISSION DECISION
Commission Staff recommends that the Company’s Application be noticed, that its
proposed June 28, 2010, effective date be suspended and that the Commission establish an
intervention deadline. Does the Commission agree with the recommended procedure?

Scott Woodbury
Deputy Attorney General

bls/M:PAC-E-10-07_sw