20150401final_order_no_33265.pdf

Office of the Secretary
Service Date
April 1,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF ROCKY MOUNTAIN POWER FOR )CASE NO.PAC-E-15-01
AUTHORITY TO INCREASE RATES BY )
$10.7 MILLION TO RECOVER DEFERRED )
NET POWER COSTS THROUGH THE )ORDER NO.33265
ENERGY COST ADJUSTMENT )
MECHANISM (ECAM))
On February 2,2015,PacifiCorp dba Rocky Mountain Power (“Rocky Mountain”or
“Company”)submitted its annual Energy Cost Adjustment Mechanism (“ECAM”)Application.
The ECAM allows Rocky Mountain to make an annual adjustment every April to capture the
difference between actual power supply expense and those power expenses included in base
rates.The adjustment is a separate line-item on customer bills that increases if power supply
costs are higher than the amount already included in base rates,or decreases if power supply
costs are lower.The Company’s earnings are not impacted by the ECAM.
Rocky Mountain is requesting that ECAM rates be increased by an average of 1.8%
for the annual adjustment,including a larger increase for its two large industrial customers.
The Company requested an effective date of April 1,2015,and that the Application
be processed through Modified Procedure.The Application included the direct testimony of
Company witnesses Michael Wilding and Joelle Steward.Id.Mr.Wilding’s testimony details
the Company’s back-cast calculation.Ms.Steward’s testimony describes the calculation of the
proposed Schedule 94 ECAM rates.
On February 12,2015,the Commission issued a Notice of Application and
Intervention Deadline.Order No.33228.On February 25,2015,the Commission issued a
Notice of Modified Procedure.Order No.33235.The Commission granted Petitions to
Intervene by Monsanto Company (“Monsanto”)and PacifiCorp Idaho Industrial Customers
(“PIIC”).Comments were due no later than March 13,2015,with reply comments due no later
than March 20,2015.
ORDER NO.33265 1
THE ECAM APPLICATION
A.Background
The Commission established an annual ECAM in Order No.30904 issued in 2009.
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 outlined in the Application.Id.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 collected through rates.Id.Rocky Mountain defers
the difference into an ECAM balancing account for later disposition.Id.at 4.
The ECAM includes five additional components:(1)the Load Growth Adjustment
Rate (“LGAR”)or Load Change Adjustment Rate (“LCAR”);(2)a credit for S02 allowance
sales;(3)an adjustment for the 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.The ECAM
includes a “90/10 sharing band”wherein customers pay/receive 90%of the increase/decrease in
actual NPC compared to base NPC and Rocky Mountain incurs/retains the remaining 10%.Id.
B.The Present Application
Rocky Mountain is requesting a Commission Order approving the recovery of total
deferred net power costs of $16.6 million for the period beginning December 1,2013 through
November 30,2014 (“Deferral Period”).Application at 1.Rocky Mountain also seeks to revise
its tariff Schedule 94 (Energy Cost Adjustment)to recover approximately $23.3 million in total
deferred net power costs over the collection period beginning April 1,2015 through March 31,
2016.Id.The proposed $23.3 million recovery represents an annual increase of approximately
$10.7 million from current Schedule 94 rates,as approved in Order No.33008.Id.(Case No.
PAC-E-14-01).The Company states further that the $23.3 million recovery amount includes an
amortization of Monsanto’s and Agrium Inc.’s (“Agrium”)share of 2012-2014 deferrals.Id.
The combined amortization of the amounts for the three ECAM deferral periods
results in tariff surcharge rates in this case of approximately $12.7 million and $1.0 million for
Monsanto and Agrium,respectively,as their share in the Deferral Period.Id.at 5.The other
components are discussed below.
ORDER NO.33265 2
1.NPC.The Company notes that the base NPC originated from the 2011 Stipulation
approved by the Commission.Id.at 5.The base NPC was $1.385 billion for the Deferral
Period.Id.at 6.The NPC deferral amount is calculated on a monthly basis by subtracting the
monthly base NPC rate from the actual NPC rate.Id.The NPC rate is calculated by dividing
monthly NPC by the corresponding monthly load to express the costs on a dollar-per-megawatt-
hour (MWh)basis.Id.According to the Company,the average base NPC was $23.73 per MWh
and the actual NPC averaged $27.05 per MWh,a difference of $3.32 MWh.Id.The monthly
incremental difference is then multiplied by Idaho’s actual load during the Deferral Period.Id.
For the 12-month period ending November 30,2014,the NPC differential for deferral was
approximately $12.7 million before application of the 90/10 sharing band.Id.The LCAR
decreased the deferral balance by $619,086,before sharing,due to higher usage during the
Deferral Period.Id.
2.S02 Credits.Credits for S02 allowance sales revenues received by the Company
were also included as an offset to the NPC deferral ($71 before sharing).Id.
3.Load Control Costs.Idaho’s share of incremental load control costs,pursuant to
Commission Order No.32432,is tracked in the ECAM and resulted in an adjustment increasing
the deferral by approximately $1.0 million before sharing.Id.
4.Coal Costs.The next component of the ECAM,the difference between including
coal stripping costs incurred by the Company and recorded on the Company’s books pursuant to
accounting pronouncement EITF 04-6,and the amortization of the coal stripping costs when the
coal was excavated,decreased the deferral by $66,928 before sharing.Id.at 7.
The total NPC deferral adjusted for the aforementioned LCAR,S02 revenue,load
control,and EITF 04-6 is $13.0 million before the 90/10 sharing band and $11.7 million after its
application.Id.
5.RECs.The deferral balance also reflects the difference between actual REC
revenues during the Deferral Period and the amount of REC revenues included in base rates.Id.
The REC revenue true-up included in the ECAM is symmetrical but no sharing band is applied.
Id.During the Deferral Period actual REC revenue was approximately $6.0 million lower than
the amount in base rates on an Idaho-allocated basis.Id.Pursuant to Order No.33008,the
Company implemented a back-cast calculation to perform a check for over/under-collection of
NPC,load control costs,and RECs reducing the deferral approximately $1.2 million making the
ORDER NO.33265 3
net deferral $16.5 million before interest.Id.Approximately $0.1 million of interest was
accrued on this balance for a final deferral of $16.6 million.Id.Rocky Mountain explained that
the deferred ECAM balance of $27.0 million as of November 30,2014,is derived from $10.4
million in uncollected deferrals from prior ECAM filings plus the components described above.
Id.at 8.Interest of 1%annually and totaling $0.3 million was added to the uncollected balances
Id.Exhibit 1 of the Application illustrates the detailed calculations for tariff customers,with an
ending balance of $1.8 million;Monsanto,with an ending balance of $8.0 million;and Agrium,
with an ending balance of $0.6 million.Id.
STAFF COMMENTS
Staff audited the Company’s books and reviewed internal audit workpapers,control
processes,as well as journal entries,invoices,and contracts.The audit also included a review of
the adjustments made to actual costs the Company incurred.Staff reconciled the general ledger
amounts to the net power costs as provided for in the Company’s Exhibit No.1.In all material
aspects,Staff believes that the NPC provided in Exhibit No.1 are accurate and comply with
established ECAM policies.
A.Summary
Based upon its review,Staff recommended approval of a total deferral amount of
$16,287,703 ($16,393,738 with interest included)for the Deferral Period for recovery from
ratepayers.
Staff made the following recommendations:
1.Modify the Company’s ECAM deferral calculation methodology so that it
is consistent with Staff’s “base rate over-collection adjustment”method as
demonstrated in Attachment C to Staff Comments;
2.Separate balancing accounts for Monsanto,Agrium,and tariff customers
for amortized amounts from 2012 through 2014 ECAM deferrals until the
amounts are fully collected;
3.Approve tariff Schedule 94 ECAM rates,see Staff Attachment D,with an
effective date of April 1,2015;and
4.The Company should file tariffs reflecting Commission-approved rates.
If the Commission accepts Staff’s adjustments for the over-collection of LCAR
related expenses and Staff’s method for calculating rates,customers will see a 1.8%overall
ORDER NO.33265 4
increase in rates rather than the 1.9%overall increase proposed by the Company.In turn,the
Company will accrue approximately $230,000 less in revenues over the collection period
beginning April 1,2015 through March 31,2016.Staff’s rate design including the adjustment for
the over-collection of LCAR-related expenses is shown in Staff Attachment D.
Staff’s recommended adjustments are based upon two primary observations’:
First,the Company adjusted for $1.25 million in over-recovery using Staff’s “back
cast method”per Commission Order No.33008,but failed to adjust for the over-recovery of
LCAR-related costs resulting in a proposed adjustment that would further reduce the Company’s
deferral by $240,725.Second,the Company’s method did not properly allocate costs and
revenues between Monsanto,Agrium,and remaining tariff customers when designing ECAM
rates resulting in less than a 0.1%change in revenue impact to any one customer class.
Next,Staff provided additional details of the Company’s proposed deferral,balancing
accounts tracking ECAM deferrals,collections,interest,and proposed ECAM rates.
B.Analysis of Cost/Revenue Differences
The two largest components of the Company’s ECAM deferral are adjustments due to
variances between the amounts of NPC and REC revenue included in base rates versus actual
amounts incurred during the Deferral Period ($10 million and $6.4 million,respectively).
Regarding NPC differences,Staff performed an analysis of the costs contained in the
Company’s filing as reflected in the table below.Staff remarked that although the NPC figures
do not precisely match those included in the settlement in Case No.PAC-E-11-12,they do
provide a rough comparison of individual cost categories.
Staff stated that the largest contributing factors to the difference between base and
actual NPC continues to be decreased revenue from wholesale sales and coal fuel expense.
There was a 33%difference in the amount of energy the Company was able to sell compared to
the amount used to determine base rates,even though unit prices averaged 2%higher.The
ability to sell is dependent on prices the Company can obtain on the open market as compared to
the cost to produce electricity.In addition,as indicated by the Company,several long-term
contracts previously included in base NPC have since expired.
The next largest factor is the 16%increase in total coal fuel expense,over what was
included in base rates,which appeared to be driven by higher coal mining costs and coal
Staff also included several Confidential Attachments illustrating its findings.
ORDER NO.33265 5
purchase prices as indicated by a 15%overall increase in the unit cost.Total purchased power
expense also increased 7%and the total amount purchased decreased 42%from amounts
included in base rates.Staff believes this is reasonable given higher unit prices than those
assumed in base rates.Lower natural gas prices,which have driven significantly higher levels of
natural gas generation,continue to moderate higher costs in other categories.Overall,Staff
believes the NPC reflected in the Company’s filing were reasonably incurred.
Net Power Cost Analysis %in NPC Base-to-Actual
NPC($)Energy (MWh)Unit Cost ($/MWh)
Wholesale Sales Revenue -32%-33%2%
Purchased Power Expense 7%-42%85%
Coal Fuel Expense 16%1%15%
Natural Gas Expense 2%77%43%
Wheeling,Hydro and Other Expense 5%-6%12%
NetTotal 25%13%11%
Regarding the $6.4 million adjustment for REC revenue,$6.5 million was assumed in
base rates and less than $0.5 million in RECs were actually sold.Staff believes this is reasonable
given the collapse in open market REC purchase prices since base rates were established.
C.Deferral Calculation Methodology
The Company’s proposed $16.5 million (minus interest)deferral amount includes
$1.25 million in adjustments from a “back-cast”verification step ordered by the Commission
(Order No.33008)in Case No.PAC-E-14-01.Staff stated that this step is performed as a check
to ensure that the amount of revenue the Company recovers through base rates and the ECAM is
no more or no less than actual NPC.
Staff asserts that the Company failed to include an adjustment for the over-recovery
of LCAR related costs (Energy-Classified Production Cost minus NPC)that was included in the
adjustments ordered by the Commission in last year’s ECAM.See Order No.33008 at 14-15.
Staff proposes an adjustment to the Company’s filing that reduces the deferral amount by an
additional $240,725 for LCAR-related costs.This would reduce the overall deferral amount to
$16,287,703 (minus interest).
Staff believes the Company’s calculation method demonstrates inherent flaws as
demonstrated by the apparent inaccuracy of approximately $1.5 million ($1.25 million “back
cast”adjustment included in the Company’s filing plus Staffs $240,725 adjustment)in this
year’s ECAM and the approximate $600,000 inaccuracy reflected as the “base rate over-
ORDER NO.33265 6
collection adjustment”in last year’s ECAM.Analyzing the difference between the two methods,
Staff believes that the inaccuracy is attributable to three causes,two of which are inherent in the
Company’s methodology and outlined below:
1.The Company’s method of using loads at generation instead of using loads
at the point of sale creates an error caused by base-to-actual line loss
differences.The source of this error was fully detailed in Staffs comments
in Case No.PAC-E-14-01.
2.The recovery of costs embedded in base rates employed in Staffs
adjustments are calculated using embedded rates that are the same for each
month unless base rates change during the Deferral Period.This
realistically reflects revenue the Company receives through base rates for
recovery of NPC.The Company’s method calculates the deferral using
the difference between actual unit costs and base unit costs which vary
each month.The Company’s method and Staff’s method are not
mathematically equivalent.Furthermore,Staff believes the Company’s
method does not accurately represent how revenue through base rates is
actually realized since base rates do not change from month to month
unless there is a general rate case.
The source of the third error can be found in the inclusion of loads that are not
consistent with loads used to determine base rates.In the stipulation approved by the
Commission in the Company’s general rate case PAC-E-1 1-12,the Company was ordered to
“use 2011 actual loads reported in the Annual Results of Operations Report for the 2013 ECAM
deferral calculation”as base loads for the purpose of calculating the deferral for the Load
Change Adjustment without changing the LCAR.Order No.32432 at 4.Staff believes that
because the LCAR is used to calculate over/under recovery of costs embedded in base rates,use
of loads other than those used to calculate base rates are inherently inaccurate.
Staff noted that the Commission has the option to either continue using the
Company’s method and employ Staffs “base rate over-collection adjustment”method to verify
and correct inaccuracies in future ECAM filings or change the Company’s ECAM calculation
i-nethod to reflect Staffs adjustment methodology so that adjustments for this type of error are no
longer required.
Staff believes that continuing to use the Company’s current method with the
correction adjustment is inefficient and adds a layer of complexity that makes it difficult for
intervening parties to follow.Staff recommended the Company change its method to calculate
ORDER NO.33265 7
the deferral in next year’s ECAM consistent with Staff’s adjustment methodology.Confidential
Attachment C shows Staff’s proposed deferral calculation without the use of adjustments.
D.Analysis of Balancing Accounts and Proposed Rate Design
Staff reported that beginning with this past Deferral Period,Agrium and Monsanto’s
deferral amounts were combined with remaining customer classes per Commission Order No.
32910.Staff believes that monthly deferral amounts plus interest were accurately tracked for
allocation and collection through the rate design.Staff also believes the Company properly and
accurately maintained separate amortized balances for Monsanto,Agrium,and tariff customers.
Staff also reviewed the Company’s proposed rate design and believes that past
balances of amortization amounts for Agrium,Monsanto,and tariff customers were not properly
separated from current deferral amounts when designing rates.Staff believes that a separate rate
should have been calculated for the three groups of customers for past amortization amounts
(plus interest)plus estimated collections occurring from December 1,2014 through March 31,
2015,based on current ECAM rates.These rates should have been added to another set of rates
calculated for deferral amounts (plus interest)during the Deferral Period for every customer
class allocated on a line loss differentiated equal cents-per-kilowatt-hour basis in accordance
with Commission Order No.32910.
E.Customer Relations
Finally,Staff reviewed the Company’s press release and customer notice and found
several deficiencies.The press release and customer notice did not include information required
by the Commission’s Rules of Procedure (IDAPA 3 1.01.01).In particular,Rocky Mountain’s
notice and press release did not inform customers that they may subscribe to the Commission’s
RSS feed to receive periodic updates via e-mail about the case,as required by Rule 125.01.d.
The customer notice and press release also did not indicate that the filing could be viewed on the
Commission’s web site,as required by Rule 125.01.c.The customer notice also did not inform
customers of the overall percentage change from current rates as required by Rule 125.0l.a.
Staff recommended the Company review the updated Rules of Procedure and include all required
information in its customer notices and press releases in the future.
MONSANTO COMMENTS
Monsanto requests the Commission and Company consider an alternative structure
for the payment of Monsanto’s prior deferral balance.The Company proposes to recover this
ORDER NO.33265 8
amount as a 0.441 cents/kWh charge over the next 12 months.The Company further proposes
that Monsanto pay the 2014 deferral rate of 0.467 cents/kWh,for a combined total rate of 0.908
cents/kWh.Monsanto states that it has two primary concerns:(1)ensuring that it neither
overpays nor underpays its actual prior deferral balance,and (2)ensuring that it does not pay the
portion of the 2014 deferral related to the under-collection from the standard tariff customers.
A.Paying Its Prior Deferral Balance
Monsanto noted that Rocky Mountain estimated Monsanto’s prior deferral balance,
$6,175,247,based on forecasted information for the months of January,February and March
2015.Monsanto recommended using updated billing information that has become available
since the Company filed its Application.Monsanto claims that when using actual ECAM
revenues for January,February and March 2015,its deferral balance is actually $6,106,392.See
Monsanto Comments,Atch.A.
Monsanto also expressed concern that the utility neither over-collects or under-
collects the prior deferral balance.Monsanto believes that recovering its prior deferral balance
on a cents/kWh basis as Rocky Mountain proposes may either over-collect or under-collect
depending on Monsanto’s loads and depending on the proportionate tracking of the collections.
Monsanto stated that the Company’s proposal to track the recovery of the prior
deferral balance by proportioning Monsanto’s monthly collections as 46.0%applied against the
balance for the 2014 Deferral,and 54.0%applied against the prior deferral balance,could result
in an over-collection by as much as $678,000 above the $6,175,247 estimated balance.2
Monsanto questions whether the 54.0%allocator is the proper percentage to apply.As explained
in the testimony of Rocky Mountain’s witness,the 54.0%is premised on the assumption that
10.5%,or $1.7 million,of the 2014 Deferral is related to the outstanding balance from standard
tariff customers.A closer inspection of the workpapers,however,reveals that of the $16,703,740
to be recovered for the 2014 Deferral,the outstanding balance from standard tariff customers
appears to be $69,178 after the forecasted Schedule 94 collections for December 2014 through
March 2015 are included.3 Hence,Monsanto asserts the 54.0%allocator may over-recover its
prior deferral balance,and simultaneously under-recover the 2014 Deferral shared by all
customers.
2 Assuming Monsanto’s loads are the same as last year’s loads.
See the Excel file entitled “ID 2015 ECAM Rate Design Workpaper,”sheet “NPC -Exhibit 1,”cell U74.
ORDER NO.33265 9
Monsanto suggests that it should instead make equal monthly payments in order to
pay down its $6,106,392 balance to $0,as well as pay the monthly interest.A monthly payment
of $511,413.50 will pay back the prior deferral balance at the annual interest rate of 1%.
Monsanto Comments,Atch.B.
B.Not Payingfor the Standard Tariff Under-Collection
Monsanto remarked that Rocky Mountain proposes to correspondingly reduce the
percentage of collections allocated to the 2014 Deferral for Tariff Contract 400 and 401 and
increase the percentage of collections allocated to the prior deferral balance.Monsanto believes
that the Company has not provided any explanation of how that percentage reduction will result
in any lower cost to tariff contract customers since the proposed rate of 0.467 cents/kWh
includes recovery of the standard tariff under-collection.
Monsanto suggests two possible resolutions in order to place the cost of the standard
tariff under-collection back onto the appropriate class of customers.The utility could be ordered
to design the ECAM rate for tariff contract customers without the standard tariff under-
collection,and likewise design the ECAM rate for standard tariff customers wii1 the standard
tariff under-collection.
Monsanto’s alternative proposal would require that Monsanto pay the 0.468
cents/kWh Schedule 94 ECAM rate,and provide a monthly credit to Monsanto for its share of
the $69,178 standard tariff customers’under-collections.Attachment B of Monsanto’s
comments displays a calculation of Monsanto’s proposed monthly credit for its share of the
under-collection from the standard tariff customers,$3,500 ($42,000 year),for a net fixed
monthly amount of $507,913 to pay off its prior deferral balance,while paying the same ECAM
rate as all transmission customers,0.468 cents/kWh,over the next 12 months.
PUBLIC COMMENTS
The Commission received three public comments from Rocky Mountain customers.
One customer questioned why Rocky Mountain would “want a rate increase”while asking its
customers to conserve energy while the Company is requesting “more money to help pay for
something else.”Another customer commented that they had incurred a considerable expense in
purchasing more efficient appliances,windows and doors and that their “power usage over the
last two years has gone down”only to see their power bill remain roughly the same.This
ORDER NO.33265 10
customer queried whether the Company should “start conserving,instead of consuming.”The
customer asked whether the Commission had audited the Company.
Lastly,a customer commented regarding the apparent incongruity of warmer winter
weather and Rocky Mountain’s request for an increase “to make up for residents having lower
heating bills.”This customer also objected to the amount of time customers received in order to
comment on the Company’s proposal for a rate increase.The customer claimed that the
Company’s “notice that came in the last bill was not received until the end of Feb which only
gives at most 2 weeks comment time on their rate increase.”
The customer noted that “fuel prices have come down,should they be asking for
another rate increase for increased fuel costs?”The customer also believes “they give away too
much money in grants.”The customer wondered “why should we have to get a rate increase
when money from Rocky Mountain goes to pay for color brochures every month and give aways
for different grants?”
ROCKY MOUNTAIN REPLY COMMENTS
Rocky Mountain filed reply comments in response to Staff and Monsanto’s concerns.
Rocky Mountain agreed to adopt the equal monthly payment approach presented by Monsanto.
Alternatively,Rocky Mountain does not object to Staffs rate design approach.
However,Rocky Mountain believes that the LCAR decreases the ECAM deferral
balance by $619,086,before sharing,due to higher loads during the Deferral Period but argues
that Staffs proposed LCAR adjustment is overstated.The Company argues that Staffs
proposed LCAR back-cast adjustment was incorrect because it included the load from the base
established in Case No.PAC-E-11-12,Rocky Mountain’s last general rate case.
In support of its view,Rocky Mountain cites the Commission’s Final Order in PAC
E-11-12 wherein the 2011 actual load as reported in the Annual Results of Operations Report
was recognized as the base for the LCAR calculation beginning in 2013.See Order No.32432 at
4.The stipulation approved by the Commission in PAC-E-11-l2 states that “the LCAR unit
value would be frozen over the rate plan period at the current rate of $5.47 per MWh.”Id.
According to Rocky Mountain,utilizing the LCAR base load approved by the Commission in
Order No.32432 would yield an LCAR under-collection of $108,358 rather than the purported
$240,725 over-collection proposed by Staff.
ORDERNO.33265 11
Rocky Mountain opposes any changes to the structure of the ECAM in this case.The
Company believes that several other changes to the ECAM are warranted and is considering a
separate application in the future to address modifications to the ECAM.
COMMISSION FINDINGS AND DECISION
The Commission has conducted a thorough review of Rocky Mountain’s Application,
the exhibits,and the comments filed in this case.Pursuant to our authority under Idaho Code §
61-502 to determine “just,reasonable,or sufficient rates,”the Commission finds that Rocky
Mountain’s ECAM Application for the recovery of deferred net power costs incurred by the
Company during the Deferral Period shall be granted as adjusted below.The Commission finds
that the increase in Schedule 94 rates is primarily caused by a decrease in wholesale market
revenues (significantly lower than the assumed revenue amounts utilized by the Commission to
determine the Company’s base rates),and increased coal expenses.We further find that these
factors are compelling and persuasive in light of current market conditions.
Nevertheless,the Commission finds that a slight adjustment to the Company’s
proposed deferral balance during the Deferral Period,as more fully detailed below,is warranted.
The Commission approves a total deferral balance,after application of the 90/10 sharing band,of
$16,287,703,plus interest,for recovery from Idaho customers during the Deferral Period through
the implementation of the Electric Schedule 94 rates as filed by the Company.The Commission
accepts the Company’s proposal to record the aforementioned adjustment in its ECAM balancing
account and include the residual balance in its next annual ECAM filing rate design.
The approved adjustment will result in a 1.8%overall increase as opposed to the
1.9%overall increase proposed by the Company during the next collection period:April 1,2015
through March 31,2016.New Schedule 94 ECAM surcharge rates and ECAM deferral balances
shall be effective April 1,2015.
The Commission acknowledges the active participation of multiple interested parties
in this proceeding through the submission of pertinent and insightful comments.Such
participation is absolutely critical to a robust analysis of Rocky Mountain’s filing and
undoubtedly provides the Company with “an incentive to actively control its net power costs.”
Order No.30904 at 13.The following is a discussion of the three main issues/proposed
adjustments to the Company’s ECAM Application.
ORDER NO.33265 12
1.ECAM Rate Design.Monsanto proposes,and Rocky Mountain agreed to adopt,
an equal monthly payment approach until their ECAM balance is retired.See Rocky Mountain
Reply Comments at 2.Alternatively,if the Commission does not approve Monsanto’s equal
payment approach,Rocky Mountain remarks that it will accept the rate design approach
presented in Staff’s comments.Id.at 3.
Staff believes that the Company’s proposed rate design did not properly separate the
various deferral balances accrued by Agrium,Monsanto and tariff customers prior to December
1,2013,when the ECAM would then be calculated on a “total Idaho basis”and “not deferred
separately”as per Commission Order No.32190.See Staff Comments at 9.
Commission Findings:The Commission finds that Monsanto’s request for an equal
payment approach is fair,just and reasonable.Accordingly,Tariff Contract 400 (Monsanto)
shall make monthly payments of $518,361 through March 2016 in order to pay its prior period
balance,including interest.Id.Similarly,Tariff Contract 401(Agrium)shall pay $38,510 per
month through March 2016 in order to pay its prior period balance,including interest.Id.
Additionally,Rocky Mountain shall continue to maintain separate balancing accounts for
Monsanto,Agrium and tariff customers for the amortized amounts accrued during the 2012
through 2014 ECAM Deferral Periods and until those amounts are fully satisfied.
2.Staff’s LCAR Adjustment.Staff agrees that the LCAR decreases the ECAM
deferral balance by $619,086,before sharing,due to higher loads during the Deferral Period.
However,Staff must then verify the Company’s calculation of $1.25 million in back-cast over-
recovery using the methodology approved by the Commission in the Company’s last ECAM
Application (PAC-E-14-01).Order No.33008 at 15.Upon verification,Staff asserts that the
Company’s calculation does not include an adjustment for over-recovery of LCAR related costs
which would further decrease the ECAM deferral balance by $240,725.
Staff referenced the Commission-approved stipulation in Case PAC-E-11-12 (Rocky
Mountain’s last general rate case)in which the Company agreed to “use 2011 actual loads
reported in the Annual Results of Operations Report for the 2013 ECAM deferral calculation”as
base loads for the purpose of calculating the deferral for the Load Change Adjustment without
changing the LCAR rate.Order No.32432 at 4.Staff believes that because the LCAR is used to
calculate over/under recovery of costs embedded in base rates,use of loads in the back-cast other
ORDER NO.33265 13
than those used to calculate base rates are inherently inaccurate.An illustration of Staffs LCAR
back-cast calculation is shown in Confidential Attachment B of Staffs comments.
According to Rocky Mountain,Staffs proposed adjustment overstates the LCAR
amount in this case.Rocky Mountain believes that the LCAR decreases the ECAM deferral
balance by $619,086 before sharing due to higher loads during the Deferral Period.The
Company avers that its LCAR calculation does include loads from its 2013 Annual Results of
Operations Report.The Company argues in its reply comments that Staffs proposed LCAR
back-cast adjustment was incorrect because it included the load from the base established in Case
No.PAC-E-11-12,Rocky Mountain’s last general rate case.
In support of its view,Rocky Mountain cites the Commission’s Final Order in PAC
E-11-12 wherein the 2011 actual load,as reported in the Annual Results of Operations Report,
was recognized as the base for the LCAR calculation beginning in 2013.See Order No.32432 at
4.The stipulation approved by the Commission in PAC-E-1 1-12 states that “the LCAR unit
value would be frozen over the rate plan period at the current rate of $5.47 per MWh.”Id.
According to Rocky Mountain,utilizing the LCAR base load approved by the Commission in
Order No.32432 would yield an LCAR under-collection of $108,358 rather than the purported
$240,725 over-collection proposed by Staff.Rocky Mountain’s Reply Comments at 5,Table 1.
Commission Findings:The Commission notes that both the Company and Staff
agree on an LCAR amount reducing the total ECAM deferral balance by $619,086 due to higher
loads.The parties also agree that the Company used the 2011 actual load reported in the Annual
Results of Operations Report in its calculation of the balance.Accordingly,the issue for the
Commission to resolve is whether the 2011 actual load reported in the Annual Results of
Operations Report should be used in the LCAR back-cast calculation.Based upon our review of
the record,we do not believe that the 2011 actual load should be used in the LCAR back-cast
calculation.
Rocky Mountain acknowledged that the Commission mandated the utilization of an
LCAR rate of $5.47 per MWh in the LCAR calculation over the rate plan period.Rocky
Mountain Reply Comments at 4.This LCAR rate was endorsed by the parties and approved by
the Commission in PAC-E-11-12,and is based upon an authorized level of fixed generation costs
and Idaho normalized base loads.See Order No.32432 at 4,21.This cost component is
embedded in rates and the LCAR back-cast is designed to determine if Commission-authorized
ORDER NO.33265 14
costs are recovered through actual sales.The recovery of any amount greater than that
previously authorized by the Commission shall be deemed an over-recovery.
The Commission reiterates its finding in the Company’s last ECAM filing,PAC-E
14-01,that Staffs LCAR back-cast calculation is fair,just and reasonable and merely “a routine
verification of the balances proposed in the Company’s annual ECAM filing.”See Order No.
33008 at 15.Staffs proposed LCAR adjustment in this case tracks with the historic and
Commission-approved Energy Classified Production Cost (ECPC)minus the NPC calculation,
and is consistent with the methodology approved by the Commission in last year’s ECAM (PAC
E-l4-Ol).Id.Therefore,the Commission approves Staffs proposed $240,725 LCAR back-cast
adjustment to the ECAM deferral balance.
3.Changes to ECAM Calculation Methodology.Staff recommended the
Commission direct Rocky Mountain to “change its ECAM deferral calculation methodology so
that it is consistent with Staffs ‘base rate over-collection adjustment method,”as more fully
detailed in Staffs comments above.Staff Comments at 10.Staff suggests that the Commission
may choose to allow the Company to continue to use its current methodology with Staff
employing its “base rate over-collection adjustment”to correct any inaccuracies in Rocky
Mountain’s future ECAM Applications.Id.at 8.
Rocky Mountain “opposes making changes to the structure of the ECAM in this
case.”Rocky Mountain Reply Comments at 6.The Company believes that several other changes
to the ECAM are warranted and is considering a “separate future application to address
modifications to the ECAM.”Id.
Commission Findings:We decline Staffs recommendation and find that a
substantive change in the ECAM calculation methodology is not prudent at this time.Rocky
Mountain is permitted to continue its current methodology,with the understanding that its
ECAM filing will continue to be subject to Staff’s verification approach.Inasmuch as Staff can
present a credible basis for proposed adjustments,future ECAM filings will be modified
accordingly.
Concerning the Company’s stated intent to submit a separate filing to modify its
ECAM,the Commission will address the merits of a formal request to implement substantive
changes to the ECAM when it is presented.
ORDER NO.33265 15
ORDER
IT IS HEREBY ORDERED that the Commission hereby approves,effective April 1,
2015,Rocky Mountain Power’s Energy Cost Adjustment Mechanism (ECAM)Application
subject to the adjustments set forth above.
IT IS FURTHER ORDERED that Rocky Mountain shall submit new tariffs in
compliance with the Schedule 94 rates approved by the Commission in this Order within seven
days of the date of this Order.
IT IS FURTHER ORDERED that Rocky Mountain shall review the updated Rules of
Procedure and include all required information in future customer notices and press releases.
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.
DONE by Order of the Idaho Piblic Utilities Commission at Boise,Idaho this
day of March 2015.
PAUL KJELL N E RESIDENT
MACK A.REDFORD,COMMISSIONER
K STINE RAPER,COMMISSIONER
ATTEST:
ommission Secretary
O:PAC-E-1 5-Olnp3
ORDER NO.33265 16