20150527Application.pdf

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Jeffrey K. Larsen
Vice President, Regulation
cc: Service List
Enclosures
-ROCKY
MOUNTAIN(pswEp
\ l orv,sror or RegRconp
May 27,2015
VIA OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472W. Washington
Boise,lD 83702
H,rqY 2-l $.Fi
Re: Case No. PAC-E-15-09
IN THE MATTER OF THE APPLICATION OT'ROCKY MOIINTAIN
POWER TO MODIFY THE ENERGY COST ADJUSTMENT MECHANISM
AND TNCREASE RATES BY $10.2 MILLION, OR APPROXTMATELY 3.9
PERCENT
Dear Ms. Jewell:
Please find enclosed for filing an original and nine copies of Rocky Mountain Power's
Application in the above-referenced matter, along with nine copies of PacifiCorp's direct
testimony and exhibits. Also enclosed is a CD containing the application, workpapers,
testimony and exhibits, customer notice and press release, and a confidential CD containing a
confidential exhibit and workpapers.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at(801)220-
2963.
Very truly yours,
201 South Main, Suite 2300
Salt Lake City, Utah 84111
CERTIT'ICATE OF SERVICE
I hereby certify that on this 27th of May, 2Ol5,I caused to be served, via e-mail, a true
and correct copy of the foregoing document in PAC-E-15-09 to the following:
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chartered
201E. Center
P.O. Box 1391
Pocatello, ID 83204-1391
[e-mail]
Eric Olsen
Racine, Olson, Nye, Budge & Bailey
201 East Center
PO Box l39l
Pocatello,ID 83204
[e-mail]
Val Steiner
Agrium Us IncAlu-West Industries
3010 Conda Rd.
Soda Springs, ID 83276-5301
Val. [e-mail]
James R. Smith (e-mail only)
Monsanto Company
P.O. Box 816
Soda Springs, Idaho 83276
j im.r. [e-mail]
Yvonne Hogle
Rocky Mountain Power
201 S. Main Street, Suite 2400
Salt Lake City, Utah 8411I
Yvonne.ho ele@pacifi corp.com
Ronald L. Williams
Williams Bradbury PC
1015 W. Hays St.
Boise, ID 83702
ron@wiliamsbradbury. com
Christina Zanora
Community Action Partnership Assoc. of
Idaho
3350 W. Americana Terrace, Suite 360
Boise ID. 83706
[e-mail].
Jim Duke
Idahoan Foods
357 Constitution Way
Idaho Falls, lD 83742
[e-mail]
Ted Weston
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, Utah 8411I
Ted.weston@pacifi corp. com
Data Request Response Center
PacifiCorp
825 NE Multnomah Street, Suite 2000
Portland, Oregon 97232
datarequest@pacifi corp. com
Supervisor, Regulatory Operations
Yvonne R. Hogle (ISB No. 8930)
201 South Main Street, Suite 2400
Salt Lake City, Utah 841I I
Telephone No. [phone]
Facsimile No. [phone]
E-mail: [e-mail]
Attorneys for Roclcy Mountain Power
IN THE MATTER OF THE
APPLICATION OF ROCKY MOUNTAIN
POWER TO MODIFY THE ENERGY
COST ADJUSTMENT MECHANISM AI\D
INCREASE RATES BY $10.2 MILLION,
OR APPROXIMATELY 3.9 PERCENT
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Case No. PAC-E-15-09
APPLICATION OF ROCKY
MOUNTAIN POWER
PacifiCorp, d.b.a. Rocky Mountain Power ("Rocky Mountain Power" or "Company")
hereby respectfully applies to the Idaho Public Utilities Commission ("Commission") for an
order authorizing the Company to: l) increase rates by $10.2 million, or 3.9 percent on average,
effective January 1,2016, as summarized in the Electric Service Schedules submitted herewith;
and2) modi$ the Energy Cost Adjustment Mechanism ("ECAM"). In support of its Application,
Rocky Mountain Power represents as follows:
INTRODUCTION
l. Rocky Mountain Power does business in the state of Idaho providing retail
electric service to approximately 75,435 customers and is subject to the jurisdiction of the
Commission.
Communications regarding this Application should be addressed to:
Ted Weston
201 South Main Street, Suite 2300
Salt Lake City, Utah 841I I
Telephone: [phone]
Fax: [phone]
Email : ted.weston@nacifi com.com
Yvonne R. Hogle
201 South Main Street, Suite 2400
Salt Lake city, Utah 84111
Telephone: (801 ) 220-4050
Fax: [phone]
In addition, the Company respectfully requests that all data requests regarding this matter
be addressed to one or more of the following:
By email (preferred):
By regular mail:
datareque st@frac ifi com. com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR97232
BACKGROUND
2. In October 2008, the Company made application to the Commission for approval
of an ECAM. The Company's ECAM was designed to recover the incremental difference
between base and actual for all components of Net Power Costs ("NPC") as traditionally defined
in the Company's general rate cases and modeled in the Company's power supply model GRID.
The Commission approved the ECAM in June 2009, pursuant to settlement. The ECAM allows
the Company to collect or credit the difference between the actual NPC, incurred to serve
customers and the NPC collected from customers through rates set in general rate cases. In
addition, the ECAM includes a symmetrical sharing band of 90 percent (customers)/10 percent
(Company) that shares the NPC differential between Actual NPC and Base NPC.
3. The ECAM has evolved through the years and now, in addition to costs and
revenues in Accounts 447,501, 503, 555 and 565, the ECAM includes additional items
including, without limitation, the Load Change Adjustment Rate ("LCAR"), sulfur dioxide
emission allowance sales ("SO2 sales"), irrigation load control, demand side management
("DSM") costs and Renewable Energy Credit ("REC") revenues.
INCREASE IN BASE RATES
4. Rocky Mountain Power is requesting to update base NPC to $1,514 million and
increase rates by $10.2 million, or 3.9 percent on average, with a proposed effective date of
January 1,2016. This request is based on the NPC and other related costs from its December
2014 Results of Operation report filed with the Commission April 30,2Ol5 ("Annual Results")I.
5. The $10.2 million base rate increase is comprised of: (a) $2.8 million associated
with updating base NPC from $1,385 million to $1,514 million, total Company or $93.8 million
on an Idaho-allocated basis; (b) $6.5 million for renewable energy credits ("RECs"); (c) $0.2
million for renewable energy production tax credits ("PTCs"); and (d) $0.7 million for the
incremental amortization of the Deer Creek Mine unrecovered investment (depreciation and
depletion expense), as requested in the Company's application in Case No. PAC-E-14-10 ("Deer
Creek Mine Case").
6. The Company set base NPC in a general rate case in 2011, based on 2010 loads.
Since then, all of the NPC components have changed increasing NPC by $129 million. Because
these increased NPC are not reflected in base rates a significant portion of Idaho's allocation of
NPC are being recovered through the ECAM. As recently ordered by the Commission in an
ldaho Power case:
"[W]hile the Company currently recovers these ongoing pennanent costs through
the PCA, we never intended the PCA to allow for the long-term recovery of costs
that continue year-to-year. Rather, the PCA was implemented to enable the
' A copy of the Annual Results are provided on the CD as work papers.
Company to recover or return the annual fluctuation in power supply costs and
thus keep its customers from paying too little or too much of those costs."'
The Company believes that it is more appropriate for these ongoing and permanent power costs
to be recovered through base rates rather than through the ECAM. Therefore, the Company
proposes to update the level of base NPC consistent with the level reported in the Annual
Results. The Annual Results demonstrate that base NPC are $1,514 million, or $93.8 million on
an Idaho-allocated basis. This compares to $1,385 million total Company NPC, or $87.6 million
on an ldaho-allocated basis in the 201I general rate case. By updating base NPC and allowing
that level of expense to be included in base rates beginning January 1,2016, the ECAM will be
better aligned to track annual fluctuations in NPC rather than long-teffn recovery of NPC
currently being collected through the annual ECAM surcharges. This update will also avoid the
potential for a larger increase through a general rate case, followed by a decrease over a year
later to reduce ECAM surcharge rates. Additionally, updating base NPC in this way will ensure
customers are receiving correct price signals.
7.
ECAM.
PROPOSED MODIFICATIONS TO CURRENT ECAM
The Company proposes to make the following modifications to the current
The 90/10 percent sharing band should be eliminated, allowing for 100 percent
recovery of prudently incurred NPC;
The calculation method should be based on retail sales at meter, eliminating the
need for Staff s base rate over-collection adjustment;
The LCAR should be eliminated;
2 In the Matter of the Application of ldaho Power Companyfor Authority to Establish a New Base Level of Net
Power Supply Expense, Order No. 33000 (March 21,2014),p.8.
DSM costs and SOz sales should no longer be tracked in the ECAM;
Renewable energy production tax credits ("PTCs") should be included in the
ECAM and treated similar to NPC;
If the amortization of the Deer Creek Mine unrecovered investment (depreciation
and depletion expense) is not included in base rates a temporary adder should be
included in the ECAM until it is included in base rates;
The deferral period should be changed to correspond with the calendar year and
the filing date should be changed to April I with rates effective June l.
JUSTIFICATION FOR MODIFICATIONS
8. The Company proposes to eliminate the 90/10 sharing band in the ECAM because
it already proactively manages NPC. The sharing band is not an appropriate incentive because
the Company has little to no control over the volatility and unpredictable nature of these costs.
The sharing band has historically penalized the Company despite prudent management. Sharing
bands and dead bands have been eliminated in almost all' other states in the country and the
Company proposes that they be eliminated here as well.
9. The Company proposes to add the incremental Deer Creek Mine depreciation
expense that was collected through the ECAM into base rates with no sharing. This proposal is
consistent with the Company's request in the Deer Creek Mine Case, currently before the
Commission for consideration. [t allows the Company to continue to collect depreciation
expense related to the Deer Creek Mine through its remaining depreciable life. Given the
significant benefits to customers resulting from the Mine closure, the Company should be
allowed to continue to collect this depreciation expense.
3Only eight net power cost mechanisms still have sharing bands in the country, five of them are within the
Company's service territory.
10. The Company's resource mix has changed since the approval of the ECAM and
warrants modification to the ECAM. The Company has become increasingly reliant on short
term market purchases due to more intermittent energy from the addition of QFs on the
Company's system and other owned and contracted generation that serve its load. Due to
requirements under the Public Utility Regulatory Policies Act of 1978, the Company has added
additional intermittent energy from the purchase of energy from Qualiffing Facilities. These
factors increasingly expose the Company to the market and increase NPC volatility. Intermittent
energy is highly dependent on the weather, which is entirely out of the Company's control and
causes several issues with respect to forecasting NPC in customers' rates, making NPC more
unpredictable.
ll. The Company's hedging policy also supports modifications to the ECAM.
Through collaboration with stakeholders in Utah, Wyoming, Idaho and Oregon, the Company
updated its hedging policy by incorporating guidelines that allow a reasonable percentage of
natural gas and power requirements to remain open to short-term market price exposure and for
operational fl exibility.
12. The Company proposes to change the ECAM's differential calculation method so
that it is based on retail sales at the meter, eliminating the need for the method developed by
Staff of the Idaho Public Utilities Commission ("Staff'), known as the base rate over-collection
adjustment.
13. The Company also proposes to eliminate tracking the LCAR, SOz sales, irrigation
load control and DSM costs and from the ECAM. The LCAR should be eliminated because it is
asymmetrical in that it only considers changes in loads (or sales going forward) but ignores
changes in the actual underlying costs. Irrigation load control and DSM costs were included in
the ECAM as stipulated in the 201 I GRC due to the uncertainty of the jurisdictional treatment of
the irrigation load control program by the Multi-State Protocol ("MSP") committee. The
uncertainty surrounding the MSP treatment of DSM costs has been resolved. MSP dictates that
DSM costs are Situs assigned, thus eliminating the need to track these cost in the ECAM. In
addition, the Company has modified the DSM program to make it more cost effective and
aligned with the benefits received. The DSM program cost should not be part of the ECAM.
Revenues from SOz sales have become immaterial and irrelevant - for example, in the 2015
ECAM Idaho SOz sales amounted to a $71 credit to customers.
14. Finally, the Company proposes tracking renewable energy production tax credits
in the ECAM. These credits are directly tied to the energy production of the qualiffing
renewable generation facilities, which can vary significantly from year to year.
MODIFICATIONS TO DEFERRAL PERIOD
15. The Company proposes to change the ECAM deferral period to coincide with the
calendar year (January to December) opposed to the current December through November
deferral period. The Company believes this change will make the ECAM easier to audit and
align the deferral period with that used in all the other PacifiCorp jurisdictions. To accommodate
this change, the Company proposes to move the filing date from February I to April l, with rates
effective June I rather than April l.
NOTICE AI\D OTHER REQUIREMENTS
16. Rocky Mountain Power is notiffing its customers of this Application by means of
a press release sent to local media organizations and bill inserts included in customer bills
beginning in June over the course of a billing cycle. Copies of the Application have also been
provided to many of the Company's major customer representatives. In addition, copies of this
Application will be made available for review at the Company's local offices in its Idaho service
territory and at the Commission's office or on its homepage.
17 . [n accordance with Rule 12 I (e), (f), and (g) Rocky Mountain Power represents
that the Application, testimony, exhibits and work papers support the costs the Company seeks to
recover.4 Unless otherwise ordered by the Commission, in accordance with Commission Rule
63, the Company will serve discovery responses on any intervening parties only by electronic
mail.
18. The Company respectfully submits that Commission approval of the Application
is in the public interest.
MODIFIED PROCEDURE
19. Rocky Mountain Power believes that a hearing is not necessary to consider the
issues presented herein and respectfully requests that this Application be processed under
Modified Procedure, i.e., by written submissions rather than by hearing. RP 201 et. seq. In
accordance with RP l2l(d), the Company stands ready to present the Application and direct
testimonies and exhibits of Company witnesses Mr. Michael G. Wilding and Ms. Joelle R.
Steward. Mr. Wilding's testimony describes the Company's proposal in more detail and provides
a comprehensive explanation of the justifications supporting the Company's proposal. Ms.
Steward's testimony presents the Company's proposed rate spread and rate changes for the
affected rate schedules to recover the proposed increase in base NPC and related items to be
recovered through the ECAM, including allocation information.
o Because the Company is not seeking to change cost ofcapital or retum on equity; and not using a test year but
instead is relying on the Annual Results, the Company does not include any exhibits or work papers that include that
information.
REQUEST FOR RELIEF
For the reasons set forth above and in the supporting testimony, Rocky Mountain Power
respectfully requests that the Commission: (1) issue an order authorizing that this matter be
processed by Modified Procedure; (2) approve a price increase of $10.2 million, or 3.9 percent
effective January 1,2016, (3) approve updating base NPC to $1,514 million effective January l,
2U6; () approve the proposed modifications to the ECAM; and (5) approve the Company's
proposed electric service schedules effective January 1, 2016. Rocky Mountain Power
respectfully requests that the Commission issue its order approving the Company's updated NPC
no later than November 20,2015, in order to utilize the new base level NPC as the basis for
quantifuing the 2016 deferral balance in the prospective ECAM filing.
DATED this May 27,2015.
RESPECTFULLY SUBMITTED,
ROCKY MOUNTAIN POWER
W4*
R. JeffRichards
Yvonne R. Hogle
BET'ORE TIIE IDAEO PUBLIC UTILITIES COMITflSSION
IN THE MATTER OF THE APPLICATION
OF ROCKY MOI.JNTAIN POWERTO
MODIF'T THEENERGYCOST
ADruSTMENT MECHANISM A}.ID
INCPJ,ASE RATES BY $I0.2 MILLION, OR
APPROXIMATELY 3.9 PERCBNT
CaseNo. PAC-E-15-09
APPLICATION OT'ROCIil
MOTINTAIN POWER
1.
2.
r, Yvonne .. ."r#;;::: :"'#;J::I,
I am an attomey representing Rocky Mountain Power in the above-captioned proceeding.
Exhibit I to the direct testimony of Michael G. Wilding fild with this Application
contains confideirtial information and trade secrets as dcfined in Idaho Code $ 9-340 et
seq. arrd, $ 48-801 et seq. that may jeopardize the interests of Rocky Mountain Power and
its customers and could saus€ economic harm if it were disclosed.
RockyMormtain Power roquests that the Idaho Public Utilities Commission oonsidcr
these documents confidential and protoct thern from public disclosurc.
Further affiant sayeth not.
State ofUtah )
)ss
Corntt otsJtlake )
On thefl/day of May, 20l5,the above appearod
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