20160523Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF'PACIFICORP DBA
ROCKY MOUNTAIN POWER'S APPLICATION
FOR APPROVAL OF THE 2Ol7INTER.
JURISDICTIONAL COST ALLOCATION
PROTOCOL
i:if;TE'VED
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. PAC.E.15.16
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on PacifiCorp
dba Rocky Mountain Power's Application.
BACKGROUND
On December 31, 2015, PacifiCorp asked the Commission to approve its20l7 Inter-
Jurisdictional Cost Allocation Protocol (2017 Protocol.) If approved , the 2017 Protocol would
replace the 2010 protocol that will expire at the end of 2016. The 2017 Protocol is intended to
equitably allocate PacifiCorp's costs among the jurisdictions it serves (Idaho, Utah, and
Wyoming through its Rocky Mountain Power division; California, Oregon, and Washington
through its Pacific Power division).
On January 29,2076, the Commission issued a Notice of Application and set a deadline
for interested persons to intervene as parties in the case. Order No. 33458. After the
intervention deadline ran, Staff conferred with the PacifiCorp and sole intervenor, Monsanto, and
STAFF COMMENTS MAY 23,2016
proposed the Commission use Modified Procedure to process the case, with initial comments due
by May 23,2016, and the Company's reply (if any) due by June 6, 2016. The Commission
established these dates in Order No. 33485.
STAFF SUMMARY AND REVIEW
PacifiCorp's 2010 Protocol inter-jurisdictional allocation method, the "2010 Protocol" is
the Multi-State Process (MSP) methodology currently used to allocate generation, transmission
and distribution costs to PacifiCorp's six retail state jurisdictions. The proposed amendments to
the 2010 Protocol, hereafter in these comments and commonly referred to as the *2017
Protocol," will be the new allocation methodology if approved by the states of Idaho, Oregon,
Utah and Wyoming. The Multi-State Broad Review Work Group (BRWG) established
principles and criteria to guide the allocation review. The four key criteria to be incorporated in
the allocation method are to:
1. Maintain state sovereignty by not impeding states from pursuing policy directives or
flexibility in establishing class allocation or rate design;
2. Provide an equitable solution for the Company and all states based on principles of
cost causation;
3. Be sustainable by promoting rate stability and avoiding uffeasonable or inappropriate
cost shifts; and
4. Promote administrative ease.
The 2017 Protocol is the result of a general agreement that has been reached between
representatives of PacifiCorp and certain Commission staff members, consumer advocates and
other interested parties from Idaho, Oregon, Utah, and Wyoming, who are signatories to the 2017
Protocol.l Staff, as one of the signatories, believes the2017 Protocol is a satisfactory approach
to provisionally allocate PacifiCorp's costs on an inter-jurisdictional basis.
The 2017 Protocol was largely developed using the 2010 Protocol as the starting point,
refining areas within that methodology to arrive at the new agreement and allocation method.
The methodology continues to use a Rolled-In approach,2 while retaining the hydro endowment
through the Embedded Cost Differential (ECD). This ECD component was adopted in the
I Signatories to the 2017 Protocol include: PacifiCorp, Public Utility Commission of Oregon Staff, the Citizens'
Utilify Board of Oregon, the Idaho Public Utilities Commission Staff, Utah Division of Public Utilities, Utah Office
of Consumer Services, Wyoming Office of Consumer Advocate, Wyoming Industrial Energy Consumers, and the
Wyoming Public Service Commission Staff. Monsanto also participated in the Protocol agreement process.
2 A Rolled-ln Approach allocates I 00% of costs to the various jurisdictions based on the individual share of the
system load.
STAFF COMMENTS MAY 23,2016
Revised Protocol filed in 2002, when ongoing negotiations were made on how to fairly allocate
more expensive thermal resources and less expensive hydro resources across PacifiCorp's entire
system. In tum, the ECD assigns the majority of PacifiCorp's hydro resources, originally owned
by the former Pacific Power and Light territory (i.e. Oregon, Washington, California and part of
Wyoming), to those jurisdictions, while the former Utah Power and Light territory (i.e. Idaho,
Utah and part of Wyoming) would receive a smaller allocation of hydro resources.
In the 2010 Protocol, the scope of the ECD was reduced, using a comparison of
embedded costs based on resources in place on the PacifiCorp's system prior to 2005. Idaho's
fixed and levelized ECD throughout the duration of the 2010 Protocol was $836,000, which
remains the same in the 2017 Protocol. Other jurisdictions adopting the 2010 Protocol
implemented a variable ECD or no ECD. The ECD difference and other allocation differences
between state jurisdictions resulted in an allocation shortfall. A major focus in the 2017 Protocol
was to make progress towards reducing the allocation shortfall. The end result was the
development of an Equalization Adjustment that combines with the ECD to produce the2017
Protocol Adjustment. The 2017 Protocol is effective for rate filings made after December 31,
2016. The ECD is already calculated in Idaho's current rates, so only the Equalization
Adjustment will be added to future annual revenue requirements. Because Idaho has a rate
moratorium effective until January 1,2078, the Equalization Adjustment will not be recovered in
Idaho before January 1,2018. The 2017 Protocol will end December 31, 2078, unless all State
Commissions that approve it have agreed by March 3l,20ll , to extend it to December 31 ,2019.
PacifiCorp's Equalization Adjustment is calculated at slightly more than $9 million on a
system wide basis. The Idaho Equalization Adjustment equates to $150,000, or 1.7 percent of
the total and may be included in base rates through a general rate case effective on or after
January 1,2018. To the extent a base rate increase including the Idaho Equalization Adjustment
is not effective on January 1,2018, PacifiCorp requests authority to defer ($12,500 per month)
until the Idaho Equalization Adjustment is reflected in rates. Staff s calculations show that the
proposed adjustment will increase PacifiCorp's Idaho revenue requirement by roughly 0.052
percent. The average PacifiCorp customer using 837 kwh per month will see an increase in their
bill of approximately $0.05 per month, or $0.64 per year. Staff believes the adjustment is fair
and reasonable, and sufficiently allocates PacifiCorp's costs, provisionally, on an inter-
jurisdictional basis.
STAFF COMMENTS MAY 23,2016
Beyond the Equalization Adjustment and some minor allocation refinements, the 2017
Protocol is nearly unchanged from the 2010 Protocol. Costs associated with transmission assets,
and firm wheeling expenses and revenues, are still classified as 75 percent Demand-Related,25
percent Energy-Related, and allocated based on the System Generation ("SG") Factor. All non-
firm purchases and sales remain classified as 100 percent energy-related. State resources
continue to include Demand-Side Management Programs (including Demand Response),
Portfolio Standards, Qualifying Facility Contracts, and Jurisdiction-Specific Initiatives.
As mentioned above, the 2017 Protocol ends December 31, 2018, unless all State
Commissions agree by March 31,2017, to extend the effective date for another year. The parties
decided the 2017 Protocol should have a short-term duration in light of potential impacts from
the United States Environmental Protection Agency (EPA) rules governing carbon pollution
from existing power plants under section I l1(d) of the Clean Air Act, and PacifiCorp's possible
request to join the California Independent System Operator (CAISO). PacifiCorp states that
during the 2017 Protocol's term, Pacif,rCorp will analyze alternative allocation methods
including, but not limited to: corporate structure alternatives, divisional allocation
methodologies, alternative system allocation methodologies, potential implications of the EPA's
final Rule 111(d), and possibly joining CAISO. PacifiCorp will present its analyses of these
issues to the BRWG and discuss them at upcoming Commissioner Forums. These
Commissioner Forums will begin in January 2017, and will give all seated commissioners from
each jurisdiction the opportunity to discuss and make recommendations regarding extension of
the2017 Protocol and other inter-jurisdictional allocation issues that might arise.
CONCLUSIONS AND RECOMMENDATION
It is Staff s opinion that the 2017 Protocol acceptably allocates PacifiCorp's costs on an
inter-jurisdictional basis until the implications of section 1 1 1(d) of the Clean Air Act and CAISO
impacts, if any, are better understood. Staff maintains that PacifiCorp dispatches resources on a
system-wide basis, and therefore advocates a Rolled-In approach. Regardless, Staff believes the
2017 Protocol is a reasonable way to provisionally allocate PacifiCorp's costs on an inter-
jurisdictional basis. Thus, Staff recommends approving the 2017 Protocol.
STAFF COMMENTS MAY 23,2016
Staffalso recommends apotential defenal be authorized if the Idaho Equalization
Adjustnent is not included in rates on January 1, 2018. The deferral, if approved, would be
$12,500 monthly until the Idaho Equalization Adjustnent is include in rates.
Respecttully submitted tn" ?tUyof May 2016.
Technical Staff: Terri Carlock
Mark Rogers
i:umisc/commcnts/paccl 5. I 6kktomr comments
STAFF COMMENTS MAY 23,2016
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23'd DAY OF MAY 2016,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-I5-16, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL: ted.weston@pacifi corp.com
Daniel. solander@pacifi corp.com
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datareq ue st@paci fi corp. com
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD #140
CHESTERFIELD MO 63017
E-MAIL: [e-mail]
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 320
SALT LAKE CITY UT 84116
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 : j im.r. [e-mail]
CERTIFICATE OF SERVICE