20151016Decision Memo.pdf

TO:
FROM:
DATE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER RAPER
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
NEIL PRICE
DEPUTY ATTORNEY GENERAL
ocToBER 16,2015
SUBJECT: ROCKY MOUNTAIN POWER,S APPLICATION TO MODIFY THE
ENERGY COST ADJUSTMENT MECHANISM AND INCREASE RATES,
CASE NO. PAC.E.I5-09
On May 27,2015, PacifiCorp dba Rocky Mountain Power ("Rocky Mountain" or
"Company") submitted an Application seeking a Commission Order authorizing the Company
to: (l) increase rates by $10.2 million, or 3.9Yo on average, effective January l, 2016, as
summarized in the electric service schedules affached to the Application; and (2) modify the
Energy Cost Adjustment Mechanism ("ECAM"). On June 11,2015, the Commission granted
intervention to Monsanto Company ("Monsanto") and PacifiCorp Idaho Industrial Customers
("PIIC"). See Order No. 33321.
On July 15,2015, the Commission issued a Notice of Modified Procedure, Notice of
Schedule and Settlement Conference. See Order No. 33339. On August 11,2015, a settlement
conference, attended by representatives of the Company, Commission Staff ("Staff'), Monsanto
and PIIC, hereafter collectively referred to as "the Parties," was held at the Commission in Boise,
Idaho. Subsequently, the Parties agreed to and signed a Stipulated Settlement Agreement
("Stipulation") resolving all of the outstanding issues in this case.
On October 15,2015, after several months of mutual negotiation between the Parties,
the Company filed a copy of the Stipulation with the Commission. Below is an outline of the
pertinent provisions of the Stipulation which is presented for the Commission's approval:
DECISION MEMORANDUM
STIPULATION
l. The Parties agree that Idaho retail revenues should increase by $10.2 million
(3.9%) effective January l, 2016. The Parties further agree this increase will apply to all rate
schedules as set forth in Exhibits 4 and 6 to the Company's Application and as set forth in the
tariff sheets provided in Exhibit 7 and attached to the Stipulation.
2. The Parties agree that the $10.2 million increase above current base rates using
2014 loads will consist of: (a) a $3.2 million increase after removing Deer Creek
depreciation/depletion expense from NPC currently approved in base rates, increasing total
Company base NPC from $1.385 billion (with Deer Creek depreciation) to $1.529 billion
(without Deer Creek depreciation) or $94.8 million Idaho allocated base NPC with Idaho base
energy at meter of 3,483,480 megawatt hours, or $27.21 per megawatt-hour; (b) a $6.5 million
increase associated with a reduction of the revenue credit from the sale of renewable energy
certificates ("RECs") decreasing the total Company revenue credit from $78 million to $4.4
million which establishes Idaho's allocated RECs base at $0.3 million; (c) a $0.2 million change
in tax affected production tax credits ("PTCs") from a total Company credit of $l13.1 million to
$115.7 million establishing Idaho allocated base of $6.9 million; and (d) $0.3 million
incremental increase in exchange for the Company agreeing not to file a general rate case with
rates effective prior to January l, 2018.
3. The Parties agree that base rates and base NPC should be updated effective
January 1,2017. The updated base NPC will be the amount reported in the 2015 annual results
of operations report, after appropriate pro forma adjustments for weather and abnormal power
supply expenses. For the rate spread and rate design of the update to base rates, the Company
will use an equal cents per kWh approach consistent with this filing. Rocky Mountain Power
agrees to file an application for review by interested parties and for approval by the Commission
no later than September l, 2016, proposing the change to base rates, the NPC from the 2015
annual results of operations report, the associated rate change and spread to customer classes,
and updated electric service schedules.
4. With the exception of the application to change base rates and base NPC as set
forth in the previous paragraph, Rocky Mountain Power agrees that it will not file another
application to increase base rates prior to June l, 2017,with rates effective on or after January l,
2018. The Parties agree that the base rates established by this Stipulation will, in conjunction
DECISION MEMORANDUM
with the ECAM, result in reasonable rates for the period January l, 2016 through December 31,
2017 (the "Stay-out Period"). During the Stay-out Period the Parties will not request the
establishment of new regulatory assets or liabilities, which have not been previously approved by
the Commission, except under unique or unforeseen circumstances. Unforeseen circumstances
include natural disasters or emergencies.
5. The Parties agree to modify the current ECAM for deferrals on and after January
1,2016, to reflect that the ECAM will be measured on a dollar per megawaff-hour basis using
load at the meter rather than the load at the generator and that base rate recovery will be
calculated using annualized NPC embedded in base rates.
6. The Parties agree that 100% of the amortization expense associated with the
unrecovered Deer Creek mine investment will be recovered through the ECAM as a separate line
item, without application of the sharing band until fully amortized. Starting January l, 2015, the
ECAM will separate the $1.385 billion ($87,555,188 Idaho Jurisdiction) base NPC into two
separate amounts: (l) base system NPC of $1,374,697,487 ($86,901,906 Idaho jurisdiction); and
(2) base system Deer Creek depreciation/depletion expense of $10,302,513 ($653,282 ldaho
jurisdiction). This will allow a separate Deer Creek depreciation expense ECAM deferral of
approximately $0.6 million for unrecovered Deer Creek mining investment by subtracting
$653,282 in base Deer Creek depreciation/depletion expense from actual Deer Creek
amortization of approximately $ I .3 million. Beginning January l, 2016, neither base NPC nor
base rates will include Deer Creek depreciation expense and the entire Idaho allocated Deer
Creek amortization expense of approximately $1.3 million will be deferred and recovered
through the ECAM.
7. The Parties agree that PTCs will be tracked and trued-up in the ECAM, without
application of the sharing band, beginning January l, 2016. The base PTCs are set at a tax
affected total Company level of $l15.7 million, $6.9 million Idaho allocated.
8. The Parties agree that the Customer/Company sharing band in the ECAM will
remain at 90110 percent respectively for all ECAM components with the exception of: PTCs,
amortization of the unrecovered Deer Creek mine investment, RECs and the Lake Side 2
resource adder, which are excluded from the sharing band.
DECTSION MEMORANDUM
9. The Parties agree that the load change adjustment rate ("LCAR") will be updated
to reflect base loads (at sales) corresponding to the period used to set base rates. The 2016
LCAR is summarized in the following table:
LOAD CHAI\GE ADJUSTMENT RATE CALCULATION
Descrintion
PAC-E-10-07
Current Amount
PAC-E-15-09
Uodate Amount
l. Production - Return on Investment 833,083,414 833,083,414
2. Production - Exoense 2.173.162.370 2.173.162.370
3. Production - NPC Expenses
Production Revenue fl.748-00t.871)1.748.001.871)
4. Requirement (Excluding NPC)1,258,243,913 1,258,243,913
5. Svstem Load 57.460.901 s7.460.901
6. Production $ per MWH 21.90 20.89
7. Energy % (Demand & Energy)2Sl,h 25o/o
8.5.47 5.22
9.
10. Idaho Enersv @ Input 3.691.675 3,786,584
I l. Idaho Production RR 20.193.462 19.776.001
12. Idaho Energy @Meter 3,328,058 3,483,480
13. LCAR @ Meter 6.07 s.68
10. The Parties agree that effective January 1,2016, SO2 revenues and demand-side
management costs will no longer be tracked in the ECAM.
ll.The Parties agree that the2016 ECAM Deferral Period will include 13 months
(December 1,2015 to December 31,2016), and that all subsequent ECAM filings will be based
on calendar year deferrals.
12. The Parties agree that the Company's ECAM applications will be filed annually
on April l, with a rate effective date of June l, beginning April I ,2017 .
13. The Company and Monsanto agree to extend the current terms of the existing
Electric Service Agreement governing curtailment products and payments through December 31,
2017. An executed copy of the contract will be provided separately to the Commission for
approval.
Finally, the Stipulation acknowledges that the obligations of the Parties are subject to
the Commission's approval of the terms and conditions of the Stipulation and, if any judicial
DECISION MEMORANDUM
review is sought, upon such approval being upheld on appeal by a court of competent
jurisdiction.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Stipulation, Notice of Schedule and
Notice of Public Hearing(s)?
Neil Price
Neil Price
Deputy Attorney General
M:PAC-E-15-09_np2
DECISION MEMORANDI.JM