20130930Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:CATHLEEN M.MCHUGH,UTILITIES ANALYST
DON HOWELL,DEPUTY ATTORNEY GENERAL
DATE:SEPTEMBER 27,2013
SUBJECT:ADVICE NO.13-01
ROCKY MOUNTAIN POWER’S REVISIONS TO THE BPA
RESIDENTIAL EXCHANGE PROGRAM (REP)CREDIT,SCHEDULE 34.
On August 20,2013,Rocky Mountain Power,a division of PacifiCorp,filed a tariff advice
with the Commission to revise its Electric Service Schedule No.34,Pacific Northwest Electric
Power Planning and Conservation Act Residential and Farm Kilowatt-hour Credit (the “REP
credit”).Rocky Mountain proposes that the rate credit be increased from the existing 0.18390 per
kilowatt-hour (kWh)to 0.30950 per kWh to be effective October 1,2013.
BACKGROUND
The REP rate credit is designed to pass through to qualifying customers the REP benefits
that PacifiCorp receives from the Bonneville Power Administration (BPA).The REP was
designed to allow the residential and small-farm customers of investor-owned utilities (TOSs)in
the Pacific Northwest to share in the benefits of the Federal Columbia River Power System.
PacifiCorp passes these benefits through to its qualifying customers via a rate credit on monthly
electric bills.The rate credit applies to residential and small farm-customers served under
Schedules I,6A,7A,10,23A,35A,36,19 with 6A,19 with 23A,and 19 with 35A.
Historically,the total amount of REP benefits an IOU received was a function of the IOU’s
Average System Cost (ASC),BPA’s Priority Firm (PF)Exchange rate,and the IOU’s qualifying
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load.’Accordingly.PacifiCorp’s REP benefits were calculated as PacifiCorp’s qualifying load
multiplied by the difference between PacifiCorp’s ASC and the applicable PF Exchange rate.This
would then be jurisdictionally allocated between PacifiCorp’s Idaho,Washington,and Oregon
customers.
A.The Ninth Circuit Cases.
In May 2007,the Ninth Circuit overturned BPA’s decision to approve the 2000 and 2001
RPSA Settlement Agreements between BPA and the six regional TOUs.2 The Court found that
BPA provided REP benefits to the six regional utilities in the RPSA Settlement Agreement
without regard to the Section 7(b)(2)protections afforded the consumer-owned utilities (COUs).
Accordingly.BPA calculated an amount (the “Lookback”amount)that each IOU should pay back
to BPA.In the WP-07 Supplemental and the WP-10 rate cases,BPA began deducting the
Lookback amounts from current and future REP benefits paid to the lOUs.
In late 2008,five lOUs and three Slate Commissions3 filed consolidated appeals in the
Ninth Circuit against BPA.Among other issues,the IOU/PUC group argued that the Lookback
mechanism was arbitrary,constituted retroactive ratemaking,not in conformance with the
Northwest Power Act,and contrary to a “saving clause”in the 2000/2001 RPSA Settlement
Agreements.Several COUs also filed appeals asserting that BPA had miscalculated the Lookback
amounts as too small and that the COUs were owed greater amounts.In addition,the Association
of Public Agency Customers (APAC —the industrial customers group of Weyerhauser,Longview
Fiber,Georgia Pacific,Simplot,etc.)argued that its members were entitled to larger and direct
refunds from the lOUs despite being served by the COUs.
B.The Global Settlement.
In July 2011,BPA adopted a new Settlement Agreement that included the six IOUs,the
three state commissions.BPA staff,and nearly all of the COUs.The Settlement Agreement fixed
over a 17-year period the total amount of REP benefits to be paid to all IOUs.4 These fixed REP
benefits are allocated to the different utilities based on each utility’s relative qualifying load as
well as its relative ASC.Holding qualifying load constant,utilities with relatively high ASCs will
receive more REP benefits than utilities with relatively low ASCs.
BPA calculates both the ASC and the PF Exchan2e rate.
2 Avista,Idaho Power,NorthWestern,PacifiCom,PGE,and Puget Sound.
Idaho,Oregon,and Washington.
1 An IOU still has to have an ASC higher than the PF exchange rate in order to receive REP benefits.
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Furthermore,under the new Settlement,the Lookback Adjustment was discontinued.
1-lowever,Section 6 of the Settlement Agreement contains a mechanism for reallocating REP
benefits among the six lOUs.This “reallocation”became necessary so that the benefits of settling
were about equal among the lOUs (except Idaho Power).For example,Idaho Power had paid
none of its Lookback amounts but Puget Sound had paid approximately 55%of its Lookbaek
amounts.The lOUs,the State Commissions,and other signing parties agreed to benchmark the
settlement benefits to Puget Sound’s 55%repayment level for its Lookback.This redistribution of
REP benefits will roughly make all the lOUs proportionally the same (except for the payment to
NorthWestern).See Table 6.2.2 of the Settlement.The Commission approved the Settlement in
April 2011.
THE TARIFF ADVICE
The proposed increase in the residential exchange credit reflects both the FYI 4-FYI 5
benefits and the under-refunded balance relating to the existing rate credit.PacifiCorp’s share of
the FYI4-FY15 REP benefits is $69.482 million or $34741 million per fiscal year.PacifiCorp’s
Tariff Advice 13-01 proposes to allocate Idaho customers $6.376 million or $3.188 million per
fiscal year.The under-refunded balance for Idaho customers from the existing rate credit is
$0168 million.This results in a total of$6.544 million to be disbursed to Idaho customers over
the next two fiscal years (October 1,2013 through September 30,2015).The projected usage
during that time period is 2,114,100 MWh which leads to a projected rate credit of 0.30950 per
kWh.
STAFF ANALYSIS
During Staffs review of the proposed Tariff Advice,it entered into discussions with
PacifiCorp concerning jurisdictional treatment of the “reallocation adjustments”found in Section
6 of the 2012 REP Settlement Agreement.In its proposal,PacifiCorp treats reallocation payments
made by PacifiCorp differently than reallocation payments made to PacifiCorp,Table I
summarizes PacifiCorp’s proposed jurisdictional treatment of the reallocation adjustments.
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Table 1:PacifiCorp’s proposed jurisdictional treatment of reallocation adjustments
Section 6 reallocation Annual Basis for Idaho share Idaho
adjustments adjustment jurisdictional annual
FY14-FY15 treatment adjustment
Paid by PaciHCorp (S 8,442,636)Split based on each 28.5%($2,406,151)
state’s share of
Lookback
adjustments
Paid to PacifiCorp $496,213 Split based on each 12.95%$64,279
state’s share of
qualifying_load
Staff believes that all Section 6 reallocation adjustments should receive consistent and
equal jurisdictional treatment.If Idaho customers are responsible for 28.5 percent of reallocation
adjustments paid by PacifiCorp,then Idaho customers should receive 28.5 percent of reallocation
adjustments paid to PaciflCorp.Conversely,if Idaho customers only receive 12.95 percent of
reallocation adjustments paid to PacifiCorp,then Idaho customers should only be responsible for
12.95 percent of reallocation adjustments paid by PacifiCorp.PacifiCorp generally maintains that
Section 6 allocations should receive disparate jurisdictional treatment.Staff and PacifiCorp could
not agree on this issue.
Section 6 reallocations will likely exist in every year throughout the life of the Final
Settlement (the Final Settlement extends through FY2028).Thus,the jurisdictional treatment of
these reallocations will likely affect the level of REP credits received by Idaho customers through
FY2028.With the exception of the reallocation issue,Staff believes that the proposed credit of
0.3095g per kWh has been correctly computed.The proposed rate credit is almost 70 percent
higher than the existing rate credit of 0.18390 per kWh.The dramatic increase in the rate credit
reflects both an increase in the REP benefits received from BPA and an increase in Idaho’s
balancing account.The REP benefits allocated to Idaho increased almost 9%from the last filing.
More importantly,Idaho’s balancing account vent from a negative balance of 51.676 million to a
positive balance of 50.168 million.
Staff also found outdated language in the tariff submitted by PacifiCorp and recommended
changes.PaciflCorp is reviewing these changes and Staff expects them to submit an updated tariff
sheet on Monday.
DECISION MEMORANDUM 4 SEPTEMBER 27,2013
STAFF RECOMMENDATIONS
Staff recommends that the proposed credit of $0.3095Ø per kWh,because it is so much
higher than the existing credit,be approved on an interim basis with an October 1,2013 effective
date.Staff further recommends that a docket be opened to investigate how to properly allocate
these Section 6 reallocation adjustments between the different jurisdictions.The Commission
should specifically reserve the disputed portion of the reallocation issue for future resolution in a
new docket and direct the parties to see if they can reach settlement on the disputed differential.
Once the reallocation issue is resolved,the REP credit can be adjusted for any resulting difference.
Staff recommends that the language changes to the tariff be approved.
COMMISSION DECISION
Does the Commission wish to:
I.Approve the language changes and that portion of PacifiCorp’s proposed change in
its BPA residential and small farm energy rate adjustment credit from the existing
0.18390 per kWh to 0.30950 per kWh on an interim basis effective October 1,
2013?
2.Approve the opening of a new docket to investigate jurisdictional treatment of
Section 6 reallocation adjustments?
3.Specifically reserve resolution of the disputed allocation differential for the new
case and direct the parties to see if they can reach settlement?
4.If settlement is not possible,the Staff will advise the Commission at which time the
Commission can issue a Notice of Modified Procedure to process the dispute?
Cathleen M.McHugh
ludmemosDecision Mcmo/13-DI flnaldoc
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