20151106Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 6864
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PACIFICORP DBA )
ROCKY MOUNTAIN POWER'S APPLICATION ) CASE NO. PAC-E-15-09
TO MODIFY THE ENERGY COST )
ADJUSTMENT MECHANISM AND INCREASE )
RATES.) COTVTMENTS OF THE) corvrMrssloN srAFF
)
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Neil Price, Deputy Attomey General, and in response to the Notice of
Modified Procedure and Notice of Schedule and Settlement Conference in Order No. 33339
issued on July 15,2015, submits the following comments.
BACKGROUND
On May 27,2015, PacifiCorp dba Rocky Mountain Power submiued an Application
seeking a Commission Order authorizing the Company to: (l) increase rates by $10.2 million, or
3.9Yo on average, effective January 7,2016, as summarized in the electric service schedules
attached to the Company's Application; and (2) modify the Energy Cost Adjustment Mechanism
("ECAM"). Rocky Mountain requested that the Commission process its Application through
Modified Procedure.
STAFF COMMENTS NOVEMBER 6, 2015
On June I 8, 2015, the Commission issued a Notice of Application and Notice of
Intervention Deadline and established July 2,2015, as the deadline for interventions. Petitions to
Intervene were filed by Monsanto Company ("Monsanto"), PacifiCorp Idaho Industrial
Customers ("PIIC") and the Idaho Irrigation Pumpers Association, Inc. ("IIPA"). The
Commission granted the Petitions. See Order Nos. 33321 and 33333.
On July 9,2015, the Commission Staff ("Staff'), Rocky Mountain and the
aforementioned Intervening Parties (collectively referred to as "the Parties") engaged in a
teleconference call and agreed upon a schedule for written comments.
On August 11,2015, the parties participated in a settlement conference to address and
resolve issues associated with the Company's request. Settlement was subsequently reached by
all parties on all issues and a Settlement Stipulation was filed with the Commission on October
16,2015. The following Staff comments are f,rled in support of that settlement.
STAFF ANALYSIS
The proposed Settlement addresses a variety of power supply expense issues and how
they are recovered by the Company through rates. It specifically provides a base rate increase of
$ 10.2 million or 3.9o/o with a base rate case "stay out" until June 1, 2017 , with rates effective no
sooner than January 7,2078. However, the Settlement does provide a potential second year base
rate change on January 1,2017 to modifu normalized Net Power Cost (NPC) based on power
supply costs actually incurred in 2015.
The Stipulation also specifies changes in ECAM methodology that include: (l) tracking
with 100% recovery of annual amortization costs associated the Deer Creek Mine closure; (2)
ECAM measurement on a dollar per megawatt-hour (Mwh) basis using load at meter rather than
load at generation with an ECAM Deferral Period based on a calendar year; (3) tracking of actual
Production Tax Credits (PTC) at l00Yo; and (a) removal of SO2 revenue and demand side
management costs from ECAM tracking. Company proposed elimination of the Load Change
Adjustment (LCAR) and ECAM sharing percentages were not accepted nor included in the
Settlement Stipulation.
The expenses addressed in the Settlement are all part of Net Power Supply Expense
(NPSE) subject to either ECAM recovery, base rate recovery or a combination of the two. The
vast majority of the base rate increase proposed in this Settlement is due to shifting NPSE
STAFF COMMENTS NOVEMBER 6, 2015
currently recovered through the ECAM to base rate recovery at l00o/o. As NPSE in base rates
increase, customers will pay more costs upfront and fewer costs through the ECAM later.
Staff has fully reviewed the Company's Application, work papers, results of operations,
Idaho ECAM filings and NPSE adjustment filings in other jurisdictions to establish a position in
this case. Staff believes that the Settlement Stipulation represents a reasonable compromise of
NPSE cost recovery issues resulting in limited customer impact and rate stability through
January 1,2018.
Base Rates
The Stipulation provides a base rate increase of approximately $10.2 million in revenue
or 3.9Yo more than what existing rates at current loads will generate. The increase in NPSEI can
be broken down into two sets of costs: (1) a $3.157 million increase in Net Power Cost QrIPC)
subject to 90/10 customer sharing; and (2) an increase of $7.023 million in NPSE not subject to
sharing.
The $3.157 million NPC base rate increase is actually the net of several different expense
changes, including: (1) a $2.88 million increase in general power supply expenses; (2) shifting
$684,000 in Deer Creek Mine depreciation from base rate recovery to 100% ECAM recovery;
and (3) an additional $965,000 NPC base rate increase in exchange for a two year rate case stay
out. The actual customer impact of the $3.157 million NPC base rate change is approximately
$384,000 per year or the l0% sharing that would have occurred had the $3.84 million ($2.88
million and $965,000) been recovered through the ECAM.
The $7.023 million base NPSE increase not subject to sharing includes: (1) a renewable
energy credit (REC) reduction of approximately $6.5 million (this reduction is currently tracked
through the ECAM at 100%); (2) a $215,000 base rate increase for a PTC decrease (not currently
included in NPSE or tracked through the ECAM); and (3) an additional $289,000 increase in
exchange for the 2-year stay-out.
With respect to changes in REC revenue, there is no customer impact from the NPSE
base rate reduction in RECs because this reduction is currently tracked through the ECAM at
I For purposes of the ECAM and these Comments, Net Power Supply Expense (NPSE) is defined as all costs and
revenues tracked through the ECAM. Net Power Costs (NPC) is a subset of NPSE that specifically include costs
and revenues found in FERC accounts 447,501, 503, 555, and 565.
STAFF COMMENTS NOVEMBER 6,2015
100%. The Commission approved 100% ECAM treatment of REC revenue in OrderNo. 32196
and Staff agrees that base rate treatment is reasonable in this case.
The PTC base rate change of $215,000 reflects a reduction associated with generation at
Company owned renewable facilities. Although this expense change is not currently tracked
through the ECAM, Staff has verified that the PTC reduction has actually occurred on a regular
basis and for the purposes of settlement can be reflected in base rates.
The final base rate increase of $289,000 in non-power supply expense is a compromise as
a cost of the stay-out provision to January 1,2018. This base rate increase does not otherwise
track through the ECAM and is recoverable from customers at 100%.
The combined net customer impact of all base rate changes is approximately $889,000
per year or about 0.34% more than what customers would pay through current base rates and the
ECAM. Staff believes that an Idaho NPC of $94.8 million including changes described above
with metered sales of 3,483,480 MWh represent a reasonable base for the purpose of ECAM
calculation.
ECAM
There are several changes to the ECAM that are supported by Staff and included in the
Stipulation. The first change is ECAM tracking and 100%o recovery of approximately $ I .3
million in annual Deer Creek mine amortization expense. This provision removes $684,000 of
mine depreciation expense currently included in base rate NPSE and combines it with an
additional $617,000 in amortization expense to track through the ECAM until unrecovered Deer
Creek Mine capital costs are fully amortized in2020. Staff agrees that consolidation in the
ECAM of the Deer Creek Mine amorttzation costs makes tracking cost recovery more efficient
and allows the expense to be automatically discontinued in 2020 when unrecovered capital is
fully amortized. The Commission previously approved full amortization of unrecovered Deer
Creek mine capital costs in Order No. 33304 (PAC-E-14-10).
The second ECAM modification addressed in the Stipulation is removal of DSM expense
and SO2 revenue tracking. SO2 revenue has become very small over time and does not change
significantly from year to year. DSM cost recovery issues (system vs situs allocation) that led
the Commission to order tracking through the ECAM have been resolved. In addition, program
restructuring has significantly reduced year-to-year cost volatility. These changes will have no
STAFF COMMENTS NOVEMBER 6, 2015
effect on base rates and will have minimal effect on future ECAM deferral balances.
Consequently, Staff supports elimination of these items from the ECAM.
The third ECAM modification addressed in the Stipulation is inclusion of PTC changes
in actual NPSE tracked at 100%o in the ECAM deferral balance. Staff agrees that PTCs
legitimately affect power supply expense from year to year as energy generated from Company
owned renewable resources change. Analysis shows that while PTC volatility has historically
been low, significant reductions are expected to occur beginning in about 2018 as credits
associated with generation are eliminated. Staff therefore supports this ECAM change for the
purposes of settlement and intends to review base rate PTC in the next general rate case to
identiff actual changes in PTC.
The final ECAM modification addressed in the Stipulation is a change in the way the
ECAM deferral balances are measured. After January 7,2016, the ECAM will be measured on a
dollar per MWh basis using load at meter rather than the current load at generation. Moreover,
the ECAM deferral period will be based on a calendar year from January I through December
31. The February 1st annual ECAM filing date will remain unchanged in2016. Subsequent
calendar year ECAM filings will be made by April I with a rate effective date of June 1. The
Stipulation also specifies use of ECAM related costs embedded in base rates to reflect associated
revenue actually collected from customers during the ECAM period. Lastly, the Stipulation
specifies that the ECAM LCAR will be updated to reflect base load at meter corresponding to the
period used to set base rates.
Staff supports all of these ECAM modifications. The new deferral calculation
methodology eliminates the need for the o'Base-rate Over-Collection Adjustments" that have
been applied to the Company's proposed deferrals and approved by the Commission in the last
two ECAM cases (OrderNo. 33008 in PAC-E-14-01;OrderNo.33265 in PAC-E-I5-01). When
the adjustments approved by the Commission in the prior cases are applied to the Company's
current deferral calculation methodology, it is equivalent to the ECAM methodology changes
proposed in this Stipulation. The proposed changes effectively eliminate line-loss bias identified
as a major source of inaccuracy in determining the over or under recovery of ECAM related cost
embedded in base rates; thus ensuring that customers pay no more and no less than actual cost,
minus sharing. The calendar year ECAM period better aligns ECAM expense deferral with
Company calendar year results of operations.
STAFF COMMENTS NOVEMBER 6,2015
Rate Spread and Stay out Provision
The Stipulation specifies that the base rate increase will be spread to each customer class
through a uniform cents per kWh increase in all energy rate components. While the overall base
revenue increase will be approximately 3.9%o, the revenue impact on each customer class will
vary due to the uniform increase of 0.292 cents/kWh applied to all energy used within the class.
The table below shows the increase in revenue for each class and the corresponding percentage.
(Revenue shown is in $1000)
As previously stated, the base rate increase is almost entirely due to moving NPSE
subject to recovery from customers in the ECAM to recovery from customers in base rates. Of
the $10.2 million increase, $3.84 million in NPC is subject to 90/10 customer sharing effectively
limiting the customer's impact of NPC to $384,000. Of the remaining amount, $6.5 million of
the base rate increase is for REC revenue reduction that is already tracked at 100oh through the
ECAM. While customers will see an increase in base rates on January 1,2016, they will see an
almost equal reduction in the ECAM in20l7. Given that the base rate increase primarily
recovers variable energy costs that would otherwise be recovered through the ECAM on an equal
cents per kWh basis, Staff believes it is reasonable to increase base rates on an equal cents per
kWh basis.
Beyond the base rate increase proposed to take effect on January 1,2076, the Stipulation
provides for a review of actual 2015 power supply expenses and an additional base rate NPC
adjustment effective January 1,2017 , if necessary. Again, any NPC paid by customers through
base rates, will not be subject to recovery through the ECAM. It is also possible that review of
2015 power supply expenses could result in a decrease in base rate NPC. Regardless, Staff
believes it is reasonable for the purposes of settlement in this case to update base rate NPC
during the stay-out period.
Customer Class Present
Revenue
Proposed
Revenue
Change
($)
Change(ol
Total Residential (Sched. I & 36)$70,109 s72,090 s 1.981 2.8%
Large General Service (Sched. 6 &
6A)
$25,308 $26,283 $97s 39%
Irrisation (Sched. 10)$s2.s5s $54,316 sl.76l 3.4%
General Service (Sched. 23 &23A\s17.742 $18,289 $s47 3.1%
Special Contract I $82,747 $86.967 s4.220 5.1%
Special Contract 2 $5,950 $6.264 $3 l4 53%
Total (All Classes)$263.315 s273,496 s10.181 3.g',/.
STAFF COMMENTS NOVEMBER 6,2015
The stay-out period specified in the Stipulation as January 1,2016 to January l, 2018,
prohibits any additional base rate changes. The stay-out also prohibits new deferrals for later
recovery ofany expenses incurred during the period that have not already been approved by the
Commission. Staff fully supports the stay out provision and believes it will result in lower rates
than would otherwise occur and provide relative rate stability for the next two years.
CONCLUSION AND RECOMMENDATIONS
Staff agrees that the Stipulation, agreed to by all parties, represents afair,just and
reasonable compromise of the issues raised in this proceeding and that it is in the public interest.
Staff recommends that the Commission approve the Stipulation, including all of its terms and
conditions.
Respectfully submitted this L 4 day of November 2015.
r!t'-Pr: NeilPrice
Deputy Attorney General
Technical Staff: Randy Lobb
Mike Louis
Terri Carlock
i:/umisc/comments/pacel 5.9nprlmltc comments
STAFF COMMENTS NOVEMBER 6, 2OI5
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 6TH DAY OF NOVEMBER 2015,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-I5-09, BY MAILTNG A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWNG:
TED WESTON
ID REG AFFAIRS MANAGER
ROCKY MOUNTAIN POWER
2OI S MAIN ST STE 23OO
SALT LAKE CITY UT 84I I1
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datarequest@pacifi corp. com
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD
#140
CHESTERFIELD MO 63017
E-MAIL: [e-mail]
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
IO15 W HAYS ST
BOISE TD 83702
E-MAIL: [e-mail]
ELECTRONIC ONLY
JIM DUKE
IDAHOAN FOODS
E-MAIL: [e-mail]
ANTHONY YANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44104
E-MAIL: [e-mail]
WONNE HOGLE
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 23OO
SALT LAKE CITY UT 84I I1
E-MAIL: [e-mail]
RANDALL C BUDGE
RACINE OLSON NYE BUDGE
& BAILEY
PO BOX 1391
POCATELLO ID 83204
E-MAIL: [e-mail]
ELECTRONIC ONLY
JAMES R SMITH
MONSANTO COMPANY
E-MAIL: [e-mail]
ELECTRONIC ONLY
VAL STEINER
AGRIUM US INCAIU-WEST INDUSTRIES
E-MAIL: [e-mail]
ERIC L OLSEN
ECHO HAWK & OLSEN PLLC
PO BOX 6119
POCATELLO ID 83205
E-MAIL: [e-mail]
| // /,
"-b ,'41 'ry'Y-
SECRETARY
CERTIFICATE OF SERVICE