20120330final_order_no_32507.pdf

Office of the Secretary
Service Date
March 30,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF ROCKY MOUNTAIN POWER FOR )CASE NO.PAC-E-12-03
AUTHORITY TO INCREASE RATES )
THROUGH THE ENERGY COST )ORDER NO.32507
ADJUSTMENT MECHANISM (ECAM)
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On February 1,2012.PacifiCorp dba Rocky Mountain Power (“Rocky Mountain”or
“Company”)submitted its annual Energy Cost Adjustment Mechanism (“ECAM”)filing in
accordance with Idaho Code §61-502 and 61-503.and Rule of Procedure 52.On February 15,
2012,the Commission issued a Notice of Application,Notice of Modified Procedure and Notice
of Intervention Deadline.See Order No.32461.The Notice established a comment deadline of
March 13,2012.Monsanto Company filed a Petition to Intervene and it was subsequently
granted by the Commission.Order No.32493.
On March 12.2012,Monsanto filed a Motion to extend the comment deadline until
March 20.2012.The Motion was subsequently granted.Id.Monsanto and Commission Staff
(“Staff’)filed timely comments.’On March 23,2012,Rocky Mountain submitted reply
comments.
THE ECAM APPLICATION
A.Background
On September 29,2009,the Commission issued Order No.30904 approving the
implementation of an annual ECAM .id.at 3.The costs included in the ECAM are net power
costs (“NPC”),as defined in the Company’s general rate cases and modeled by the Company’s
GRID model,Id.Base and actual NPC are booked into specific FERC accounts.Id.at 3-4.
The ECAM process allows the Company to credit or collect the difference between the actual
NPC incurred to serve its Idaho customers and the NPC col]ected through rates.Id.at 4.Rocky
Mountain defers the difference into an ECAM balancing account.Id.
The ECAM includes five additional components:(1)an adjustment calculated using
the load change adjustment rate (“LCAR”);(2)a credit for SO2 allowance sales;(3)an
The Commission received one customer comment objecting to the proposed rate increase.
ORDER NO.32507
adjustment for the accounting treatment of coal stripping costs;(4)a renewable resource “adder”
for the renewable resources that are not yet in rate base;and (5)a true-up of Renewable Energy
Credit (“REC”)revenues,as authorized by the Commission in Order No.32196.Id at 4-5.The
ECAM includes a 90%(customers)/10%(Company)“sharing”arrangement wherein customers
pay/receive the increase/decrease in actual NPC compared to base NPC and the utility
incurs/retains the remaining 10%.Id.at 5,7.
B.The Current Application
Rocky Mountain requested the Commission approve the recovery of power costs
deferred for the period of December 1,2010 through November 30,2011.Application at 1.The
Company is requesting approval to recover an additional $18.1 million in the deferral balancing
account (tariff customers $1 0.425 million;Agrium $511,600;and Monsanto $7.196 million).Id.
To recover its ECAM deferral costs,Rocky Mountain proposes to adjust Schedule 94
(Energy Cost Adjustment rates)to collect approximately $13.0 million over the period beginning
April 1,2012 through March 31,2013.This represents a rate increase of $2.6 million over the
current Schedule 94 rates in effect as approved in Order No.32216 (Case No.PAC-E-11-07).
Id.at 2.Rocky Mountain requested an effective date of April 1,2012,for the proposed Schedule
94 rate changes.Id.
Rocky Mountain noted that “effective January 1,2011,Monsanto and Agrium’s loads
are included in the calculation of the ECAM balances in this ECAM filing.”Application at 5.
Pursuant to a stipulation approved by the Commission in Order No.32432 (Case No.PAC-E-1 1-
12),the Company will amortize and collect Monsanto and Agrium’s share of the Commission-
approved 2011 ECAM balances over a three-year period.Id.
Rocky Mountain did not request a change in the ECAM surcharge rate to recover the
full $24.1 million projected to accumulate in the ECAM deferral balancing account.Id.at 9.
The Company asserted that “approximately $3.0 million of the balance will be recovered through
Schedule 94 rates from December 1,2011 to March 31,2012.”Id.The Company stated that it
intends to address the remaining balance “in future ECAM filings.”Id.Rocky Mountain
projected that “an increase in the collection rate this year would be followed by a decrease in the
rate next year.”Id.
Included in Rocky Mountain’s Application was the direct testimony of Gregory N.
Duvall (Director of Net Power Costs)and William R.Griffith (Director of Pricing,Cost of
ORDER NO.32507 2
Service &Regulatory Operations).The Company requested that its Application be processed
through Modified Procedure.
STAFF COMMENTS
1.Line Loss.Staff asserted the Company incorrectly used a 4.543%transmission
line loss percentage across the entire 12-month deferral period.Staff and the Company agree
that this percentage should have only been used for the first 27 days during December 2010
(which corresponds to the effective period for general rate case PAC-E-08-07)and should have
used 3.605%for the remaining deferral period (which corresponds to the effective period for
general rate case PAC-E-l0-07).The net effect of this adjustment was a $2,004 reduction in the
total deferral balance from the Comparn”s filing.Staff Comments at 6-7.
Staff also asserted that the change in the transmission line loss percentage changes the
allocation of cost in the Company’s Application,increasing the ECAM deferral for Monsanto
and Agrium by $45,536 and $3,776,respectively,while decreasing tariff customers’deferral by
$51,296.The largest effect of the re-allocation was due to the load change adjustment.Id.at 7-
8.Staff estimated that the incorrect transmission line loss percentage used in calculating the
deferral cost would increase the size of Monsanto and Agrium’s rates by approximately 0.001
cents/kWh,if the adjusted deferral balances were used.Staff suggested that the impact is so
small,that the Schedule 94 rates proposed b the company should be implemented because
future deferral balances will be trued up in next year’s ECAM.Id.at 12.
2.Other Comments.Staff calculated that 92%of the total cost deferral (factoring the
90/10 sharing arrangement)was due to the NPC differential.Staff agreed with the Company that
the primary driver was mainly due to lost opportunity sales of wholesale electricity and this was
likely due to a drop in wholesale market prices and a reduction in the amount of electricity the
Company could sell compared to quantities projected in rate cases.Id.at 9.
Staff maintained that the Company’s data used to form the costs embedded in base
rates for the deferral,except for the incorrect line loss percentage,were established through
previous Commission Orders.Staff determined that actual data used to compare against costs
embedded in base rates were accurate.Thus,Staff believed that the calculations used by the
Company were accurately and correctly applied based on previous Commission Orders and all
costs included in the filing were comprehensive and complete.Id.at 6.
ORDER NO.32507 3
Staff observed that Rocky Mountain proposed to establish new schedule 94 rates for
Agrium at 0.164 cents/kWh and Monsanto at 0.175 cents/kWh while maintaining current rates
for all other retail customers.The Company predicted the proposed ECAM rate structure will
generate a combined total of $13 million in revenue from April 1,2012 through March 31,2013.
With the addition of $3 million the Company is predicting to receive in revenue from the
previous ECAM case (PAC-E-l 1-07)and $5.2 million to be collected from contract customer’s
remaining two-year amortization,Staff confirmed that this leaves a net $2.8 million for future
recovery.Staff believed that carrying an unrecovered balance forward to next year’s ECAM
could result in higher ECAM rates than would otherwise occur.However,in an effort to
promote rate stability,the Staff accepted the Company’s proposal to maintain existing ECAM
rates with the expectation that rates will not increase next year.Id.at 12.
In summary,Staff made the following recommendations to the Commission.
1.Accept and approve for recovery Staff’s adjusted Idaho ECAM deferral
balance of $7,241,861 for Monsanto,$515,409 for Agrium,and
$10,374,561 for remaining tariff customers for a grand total of
$18,131,830 for the December 1,2010 through November 30,2011
deferral period (does not include previously approved second year
amortization from last year’s load change adjustment).
2.Approve the transmission loss differentiated energy rate to be included in
Schedule 94 for Schedule 400 of 0.175 0/kWh.
3.Approve the transmission loss differentiated energy rate to be included in
Schedule 94 for Schedule 401 of 0.164 0/kWh.
4.Approve the continuation of tariff customers’current ECAM rates.
MONSANTO COMMENTS
Monsanto proposed several adjustments to Rocky Mountain’s ECAM filing.
Monsanto stated that it is open to reaching a settlement of its issues,but if agreement cannot be
reached,then it respectfully requests that the Commission “set a hearing,take testimony and
decide the issues presented.”Monsanto Comments at 2.
1.Line Loss.Monsanto believed that Rocky Mountain “should continue to use
similar transmission losses for both Actual and Base Loads for the January through December
2010 time period.”Id.“Monsanto proposes a 3.605%transmission loss factor be used to
determine sales at input for both Monsanto and Agrium Base Loads and Actual Loads for the
ORDER NO.32507 4
months of January through November 2011.”Id.at 2-3.Monsanto contends that this was the
loss factor presented by the Company in its 2010 general rate case (Case No.PAC-E-10-07).Id.
at 3.Adjusting for transmission line losses at 3.605%for both base load and actual load would
result in the following adjustments:tariff customers $722,655;Agrium ($49,805);and Monsanto
($659,725).2
2.Losses in Base Load and Actual Load.Monsanto next objected to the
“discrepancy”in the transmission loss factor applied to Monsanto and Agrium’s base load,
9.885%,as compared to the loss factor applied to actual sales at the “meter,”4.543%.Monsanto
believed that this “discrepancy in losses causes the Base Loads to be arbitrarily higher which
unfairly raises the Load Change Adjustment Revenues attributable to Monsanto and Agrium.”
Id.However,Monsanto acknowledged that a review of the Company’s workpapers suggests that
“the extraordinarily high discrepancy between the transmission loss factors for Actual and Base
Loads starting in January 2011 was inadvertent by RMP.”Id.
3.Treatment of Replacement Energy.Next,Monsanto presented its concerns “with
how the Company handles Monsanto ‘replacement energy’in the ECAM calculations.”Id.The
replacement energy or “buy through energy ...is a pass-through directly to Monsanto and is
priced at an independent third-party index market price adjusted by a set of hourly load shaping
scalars which Monsanto pays fully on its monthly invoice.”Id.Monsanto argued that the
“replacement energy should not be subject to the ECAM.”Id.
Monsanto stated that its position is supported by “RMP’s supporting work papers
[that]show the Company removed the replacement energy from Monsanto Base Load,however,
RMP failed to remove replacement energy from Monsanto Actual Load on line 7 in the month of
November 2011.”Id.at 4.Monsanto calculated that the deferral impact of removing
replacement energy from Monsanto’s November 2011 actual sales results in the following
reductions:tariff customers ($647);Agrium ($45);and Monsanto ($l3,821).
4.Wind Integration Costs.Monsanto next asserted that Rocky Mountain “failed to
make an adjustment to remove wind integration costs for wholesale wheeling customers from the
ECAM adjusted actual NPC.”Id.at 4.Monsanto cites Order No.32196 (Case No.PAC-E-10-
07)as support for this assertion.In response to Monsanto and PIIC’s objections to recovery for
2 The Agrium and Monsanto adjustments are calculated prior to the three-year amortization.
Supra n.2.
ORDER NO.32507 5
wholesale wheeling customer wind integration costs.the Commission stated:“We find also that
the responsibility for recovery of wind integration costs from wholesale transmission customers
resides with the Company.”Order No.32196 at 30:Comments at 5.
Monsanto proposes that the Company use the rate of $3.87 per MWh provided by the
Company in response to Monsanto’s data request “in lieu of the $6.50 rate proposed by
PacifiCorp in Case No.PAC-E-10-07.”Comments at 5.Monsanto estimated the deferral impact
of removing wholesale customer wind integration costs using the Company’s latest wind
integration rate of $3.87 per MWh was:tariff customers ($126.785);Agriurn ($6,805);and
Monsanto ($88,772).See footnote 2.
5.Liquidated Damages.Finally.Monsanto argued that payments/settlements to
contractors for performance issues during planned outages should be removed from ECAM
adjusted actual net power costs (NPC).Comments at 5-6.The replacement power costs incurred
as a result of contractor performance issues “are recovered by the Company through the annual
ECAM deferral.”Id.at 6.According to Monsanto,this is problematic because “the payments
received by the Company during the ECAM test year were either credited to plant or O&M
contract costs”but there is no process or “mechanism to pass O&M credits back to customers.”
Id.
Monsanto calculated that “during the ECAM test year the Company received
$945,000 of payments/settlements for contractor performance issues.”Id.The following details
were revealed by the Company in its response to Monsanto Data Request 2:
-$300,000 for Huntington Unit 1 ($150,000 credited to plant in service in
July 2011,$150,000 was used as settlement of a Jim Bridger capital
project payment).
-$345.000 was recorded on July 6.2011 for Wyodak Unit 1 ($276,000 was
credited to capital projects and $69.000 was credited to O&M contract
costs).
-$300,000 for Bridger Unit 3 ($150,000 was recorded to plant in service on
August 18,2011 and the remaining $150,000 will be reflected as a
reduction in prices for the yet to be established 2012 Bridger Unit 4 boiler
overhaul).
ORDER NO.32507 6
Thus,Monsanto estimated the deferral impact of crediting liquidated damage
payments/settlements to ECAM adjusted actual NPC was:tariff customers ($49,482);Agrium
($1,507);and Monsanto ($20,603).See footnote 2.
In summary,the net deferral impact from Monsanto’s proposed corrections is:tariff
customers $544,674;Agrium ($58,089);and Monsanto ($781,206).
ROCKY MOUNTAIN’S REPLY
Rocky Mountain disagreed with Monsanto’s assertion that any disagreement between
parties would necessitate filing testimony and setting hearings to resolve issues disputed in the
case.The Company believes that the comments and its reply provide the Commission with an
adequate record and a hearing is not necessary to decide the disputed issues.Reply at 2-3.
1.Line Loss.Rocky Mountain agrees with Staff and Monsanto that the Company
inadvertently did not update the line loss factor used to adjust Idaho actual loads from sales to
input level and used a line loss factor of 4.543%rather than 3.605%,effective December 28,
2010,to align with the effective date of Case PAC-E-10-07.The Company calculates that
updating actual loads based on a 3.605%line loss factor results in the following adjustments:
tariff customers ($51,734);Agrium $3,807;and Monsanto $45,922.Id.at 3.
2.Base Load Losses.The Company disagreed with Monsanto that different line loss
factors used to determine base loads in Case PAC-E-l0-07,is an error or that any adjustment
should be made to base loads.Rocky Mountain believed all of the base data in the ECAM is
determined as part of a general rate case and that Monsanto,Staff and all other parties to the case
had the opportunity to review and determine the exactness of the base loads,NPC and all other
components.The Company does not believe it is appropriate nor is it a part of the ECAM
review to revise any of the base information that has already been established in a prior case.Id.
at 3-4.
3.Replacement Energy.The Company agreed with Monsanto’s position that
replacement energy consumed by Monsanto when it buys through curtailment events rather than
physically curtail its load should not be part of the ECAM.The Company also concedes that
replacement energy was removed from Monsanto base load but was not removed from Monsanto
and Idaho jurisdictional actual load.A review of Monsanto invoices revealed that it bought,
This assumes no adjustment to base load residual calculation.If base load is corrected,this would decrease to
$404,849.
ORDER NO.32507 7
through curtailment,in October and November 2011.5,293 MWh and 9,021 MWh,during
curtailment events in the respective months.This replacement energy should be removed from
Monsanto actual load as well as actual Idaho jurisdictional load to properly compute the ECAM
deferral.The Company calculates that removing the replacement energy from actual load results
in the following deferral reductions:tariff customers ($797);Agrium ($56);and Monsanto
($18,812),for a total deferral of ($19,666).Id.at 4-5.
4.Wind Integration.The Company disagreed with lvi onsanto’s contention about
wind integration.Rocky Mountain believes that the Commission’s statement:‘we find also that
the responsibility for recovery of wind integration costs from wholesale transmission customers
resides with the Company,not its retail customers”found in Commission Order No.32196 in
rate case No.PAC-E-10-07,does not require the Company to remove non-owned wind
integration costs from the ECAM deferral balance.Instead,the Company believed this language
was intended to prohibit the recovery of prudent power supply costs that were incurred as a result
of its role as a balancing area authority.The Company asserted this quoted sentence indicates
that it has an obligation to ensure that it receives compensation through its Open Access
Transmission Tariff (OATT)rates for all services it provides to its wholesale customers,
including integration.Id.at 5-6.
The Company argued that the ECAM is where the Company must recover its wind
integration costs,based upon the knowledge that a portion of these prudently incurred costs
would be automatically disallowed due to the imposed sharing bands of the ECAM structure.To
further disallow wind integration costs beyond the already imposed 10 percent sharing band
would be unreasonable.Id.at 6-7.
ln addition,the Company insisted that Monsanto’s estimation of non-owned wind
integration cost is incorrect and therefore inappropriately inflates Monsanto’s calculation of the
non-owned wind integration costs that it proposes to remove from actual net power costs.If wind
integration costs are excluded,only the intra-hour cost component,at $2.98/MWh,should be
removed,since non-owned wind facilities interconnected to their system are responsible for
providing their own inter-hour wind integration services.Adjusting for the intra-hour costs,
Rocky Mountain calculates the following reductions:tariff customers ($98,296);Agrium
($5,194);and Monsanto ($67,041).Id.at 7-8.
ORDER NO.32507 8
5.Liquidated Damages.The Company also disagreed with Monsanto that liquidated
damages should be recognized as an offset to NPC rather than the project cost.The Company
maintained that accounting guidelines require that proceeds received for liquidated damages go
to property plant and equipment,not NPC in almost all circumstances (See AICPA Guideline
TPA 2210.28).The underlying principle in the account guidelines is that unless the customer
provides the vendor with an identifiable benefit,the payment received from the vendor is a
reduction of the purchase price of the goods purchased from the vendor and not an offset to net
power costs.None of the Company’s contracts specify NPC as the benefit or determent for a
variance in the delivery schedule of the project.Further,references to NPC in construction
contract language for liquidated damages is not the industry standard and it is very doubtful that
any of the Company’s vendors would allow for the inclusion of such language.Thus,the costs
should be recorded as a reduction in the purchase price of the project.Id.at 8-9.
COMMISSION FINDINGS AND DECISION
The Commission has reviewed the record in this case including the Application and
the comments filed by Monsanto,Staff,Rocky Mountain Power and one member of the public.5
At the outset,the Commission finds that the parties have adequately outlined the issues before
the Commission.Thus,the Commission finds that convening a technical hearing accompanied
by the filing of testimony would be superfluous and unnecessary in this case.The Company’s
Application is comprehensive and generally adheres to our prior Orders approving the
methodology to be utilized for the recovery of deferred net power costs incurred by the
Company.See Order No.32216.Further,we find that the Application is consistent with the
terms of the stipulation and settlement approved by the Commission in the Company’s last
general rate case (PAC-E-1 1-12),wherein Monsanto (Schedule 400)and Agrium (Schedule 401)
agreed to be subject to the ECAM.See Order No.32432.
Given the agreement of the parties,we find it appropriate to adjust the transmission
line loss percentage,thereby reducing the Company’s ECAM deferral balance during the
recovery period by $1,985 and the total ECAM ending deferral balance subject to surcharge
collection by $2,004.However,we decline to accept Monsanto’s proposed adjustment to apply
this line loss adjustment to its base load.The Commission finds that once Monsanto’s base load
On March 30,2012,Monsanto tiled “Reply”to Rocky Mountain’s Reply Comments.Monsanto’s “Reply”was
not considered because it was tiled after our deliberation in this matter.Moreover,our procedural Rules do not
provide for a party to respond to a Reply.See Rule 202.
ORDER NO.32507 9
is established in a general rate case and embedded in base rates.it should not be changed in the
ECAM.
We do find it reasonable to adjust the treatment of replacement energy given the
Company’s agreement with Monsanto’s proposal that “replacement energy consumed by
Monsanto when it buys through curtailment events rather than physically curtail its load should
not be part of the ECAM.”Reply Comments at 4.This amounts to a $19.666 reduction in the
total ECAM ending deferral balance subject to surcharge collection and a $19,653 reduction in
the balance for the deferral period.The Commission finds that this adjustment to the Company’s
ECAM deferral balance is fair,just and reasonable and should be removed from actual Monsanto
and Idaho jurisdictional loads,as well as subsequent Rocky Mountain Power ECAM filings.
The Commission also approves Monsanto’s proposal to remove the costs of
integrating wind resources from the Company’s ECAM filing,but only that portion associated
with intra-hour charges.The Commission’s approval of this adjustment is supported by our
finding in the Company’s last general rate case (PAC-E-11-12).wherein we declared that “the
responsibility for recovery of wind integration costs from wholesale transmission customers
resides with the Company,not its retail customers.”Order No.32196 at 30.We find that the
Company adequately demonstrated that inter-hour wind integration costs were removed from
actual net power costs;therefore,only intra-hour wind integration costs were used to calculate
the adjustment.This adjustment reduces the overall deferral balance subject to surcharge
collection by $170,530 (tariff customer ($98.296);Agrium ($5,194);and Monsanto ($67,041))
and reduces the deferral cost for the recovery period by $169,650.6
Finally,the Commission declines to implement Monsanto’s proposal to offset any
potential amount of liquidation damages paid to Rocky Mountain by its construction contractors
from the Company’s net power costs.We find that the Company’s current approach of
deducting the amount of liquidated damages from its plant-in-service account is a fair and
effective approach to ensure that ratepayers are not subsidizing a potential windfall for the
Company.
The Commission also accepts Rocky Mountain’s proposal to forego an increase to the
current ECAM surcharge rate for all tariff customers,except Monsanto and Agrium,during the
6 These adjustments are slightly lower than those shown in Monsanto’s comments which did not include effects of
the transmission line loss adjustment on loads.
ORDERNO.32507 10
current recovery period.The Commission finds that deferring full recovery of the entire
projected balance in the ECAM balancing account in future years is reasonable and appropriate
given the repeated and frequent rate increases recently experienced by Rocky Mountain’s
customers.
Based upon the Commission-approved adjustments set out above,Rocky Mountain is
authorized to recover $18,131,472 in ECAM costs for the deferral period (tariff customers
$10,429,986;Agrium $512,364;and Monsanto $7,189,122).
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp,d/b/a Rocky
Mountain Power,an electric utility,and the issues presented in this case pursuant to Idaho Code,
Title 61,and the Commission’s Rules of Procedure,IDAPA 31.01.01.000 et seq.
The Commission finds that the existing ECAM rates in tariff Schedule 94 are
insufficient to allow the Company to recover its net power supply costs in the deferral account.
Approving the proposed Schedule 94 will provide Rocky Mountain Power with the opportunity
to recover its ECAM costs.
ORDER
IT IS HEREBY ORDERED that the Commission approves Rocky Mountain Power’s
Energy Cost Adjustment Mechanism (ECAM)Application conditioned upon the adjustments
approved above.
IT IS FURTHER ORDERED that the cost of integrating wind generated by non-
Company owned resources delivered outside of Rocky Mountain’s service territory be
effectively removed from actual net power costs for the purposes of the ECAM.
IT IS FURTHER ORDERED that the Commission approves tariff Schedule 94 as
filed by Rocky Mountain Power in its Application to be effective April 1,2012.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
ORDERNO.32507 11
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 2
day of March 2012.
ATTEST:
MARSHA H.SMITH,COMMISSIONER
71 71
Jean D.Jewelt!
Commission Secretary
O:PAC-E-I 2-03dh4
MACK A.REDFORD,[ISSIONER
ORDER NO.32507 12