20160331final_order_no_33492.pdf

Office of the Secretary
Service Date
March 31,2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PACIFICORP DRA )
ROCKY MOUNTAIN POWER’S )CASE NO.PAC-E-16-05
APPLICATION FOR APPROVAL OF ITS )
$16.7 MILLION DEFERRAL OF NET )
POWER COSTS,AND AUTHORITY TO )ORDER NO.33492
DECREASE RATES BY $9.0 MILLION )
On February 1,2016,PacifiCorp dba Rocky Mountain Power applied to the
Commission for an Order authorizing the Company to adjust its rates under the Energy Cost
Adjustment Mechanism (ECAM).The ECAM allows the Company to adjust its rates each year
to capture the difference between the Company’s actual power supply expenses and the power
expenses embedded 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 ECAM does not affect the Company’s earnings.
The Company’s present ECAM Application,if approved,would decrease rates in all customer
classes,with an average residential customer’s bill decreasing by about 58 per month.The
Company asks that the new rates take effect on April 1,2016.
After the Company filed its Application,the Commission issued a Notice of Modified
Procedure and invited interested persons to comment on the case.See Order No.33467.A
customer,Monsanto Company,also intervened as a party to the case.Monsanto and the
Commission Staff subsequently filed comments and the Company filed a reply.
Having reviewed the record,including the Application,comments,and reply,we
enter this Order approving:(1)the Company’s proposed ECAM rates and tariffs as filed,with
the new rates to take effect on April 1,2016;and (2)an adjusted total deferral amount of
$16,577,736 (without interest)for the period of December 1,2014 through November 30,2015.
Our decision is further discussed below.
THE APPLICATION
In its Application,the Company explains that the Commission first approved an
annual ECAM in 2009,and that the mechanism has been modified several times since then.See
Order Nos.30904,32432,32910,33008,and 33440.In summary,the ECAM allows the
Company to increase or decrease rates each year to reflect changes in the Company’s power
ORDER NO.33492 1
supply costs over the year.These costs vary with changes in the Company’s fuel (gas and coal)
costs,surplus power sales,power purchases,and the market price of power.Each month,the
Company tracks the difference between the actual Net Power Costs (NPC)it incurred to serve
customers,and the embedded (or base)NPC it collected from customers through base rates.The
Company defers the difference between actual NPC and base NPC into a balancing account for
later disposition at the end of the yearly deferral period.At that time,the ECAM allows the
Company to credit or collect the difference between actual NPC and base NPC through a
decrease or increase in customer rates.With this Application,the Company states that for the
12-month period ending November 30,2015,the deferred NPC difference was about $9.3
million.
The Company’s Application notes that besides the NPC difference,this year’s ECAM
includes:(1)a Load Change Adjustment Rate (LCAR);(2)a credit for S02 allowance sales;(3)
an adjustment for load control (DSM);(4)an adjustment for the treatment of coal stripping costs;
(5)a true-up of 100%of the incremental renewable energy credit (REC)revenues;(6)Deer
Creek amortization expense;(7)Lake Side 2 generation resource adder;(8)a back cast
adjustment that accounts for any over/under-collection of NPC,LCAR,DSM costs,Deer Creek
amortization expense,and REC revenues;and (9)a “90/10 sharing band”in which customers
pay/receive 90%of the increase/decrease in the difference between actual NPC and base NPC,
LCAR,S02 sales,DSM costs,and the coal stripping costs,and the Company incurs/retains the
remaining 10%.
With this ECAM Application,the Company ultimately seeks an Order approving the
Company’s:(1)deferral,for later recovery through rates,of $16.7 million in power supply costs
from December 1,2014 through November 3 1,2015;and (2)revised Electric Service Schedule
94,Energy Cost Adjustment,which would reflect the ECAM adjustment and decrease the
Company’s Schedule 94 revenues by $9 million.The Company’s proposal,if approved,would
decrease prices for customer classes as follows:
•Residential Customers —0.6%
•Residential Schedule 35,Optional Time-of-Day Service —0.7 %
•General Service Schedule 5 —0.9%
•General Service Schedule 9 —1.0%
•Irrigation Customers —0.8%
•Commercial or Industrial Heating Schedule 19 —0.8%
•General Service Schedule 23 —0.7%
ORDER NO.33492
•General Service Schedule 35 —1.0%
•Public Street Lighting —0.3%
•Industrial Customer,Schedule 400 7.1%
•Industrial Customer,Schedule 401 7,3%
Source:Application,Exhibit No.2 to Direct Testimony of Joelle R.Steward;See also,
News Release and Customer Notice filed with Application.
THE COMMENTS
Commission Staff and Monsanto filed the only comments in the case,and the
Company filed a reply.All parties support the Company’s proposed rate decrease.Staff does,
however,propose two adjustments related to the Company’s calculation of the back cast
adjustment to the deferral balance.The Company concurs with Staff’s first adjustment,related
to how the Company calculated the deferral amount without interest.The Company opposes
Staff’s second adjustment,related to how the back cast applies to the interest calculation.While
Monsanto does not propose a specific monetary adjustment related to interest,it supports Staff’s
underlying concerns and would support a corrective adjustment,if made.The parties’comments
and the Company’s reply are collectively summarized below.
A.Rates
Both Commission Staff and Monsanto support the Company’s proposed decrease in
ECAM rates,as represented in Exhibit 2 to the Company’s Application (also reproduced as
Attachment A to Staff’s comments).Staff states that the Company’s proposed rate design
complies with the Commission’s prior Orders and that the Company’s calculations are accurate
and reasonable.As noted below,Staff does propose two adjustments to the Company’s proposed
total ECAM deferral balance.But given that Staff’s proposed adjustments are relatively small,if
they are approved the Commission should not change the Company’s proposed rates.Rather,
Staff recommended the Company carry the adjustments forward,with any remaining balances to
be collected in next year’s ECAM.
While Staff recommended the Commission approve the Company’s proposed rates,
Staff nevertheless recommended the Company file conforming tariffs to reflect Commission
approved rates.The Company observes that,due to the minimal impact that Staff’s proposed
adjustments would have on rates,the Commission should simply approve Electric Service
Schedule No.94 as filed in Exhibit 3 to the Company’s Application,effective April 1,2016.
ORDER NO.33492 3
Commission Findings:Based on our review of the record,we find that the
Company’s proposed $9.0 million ECAM rate decrease will enable the Company to recover its
deferred net power costs in accordance with the Commission’s prior Orders.Further,while we
are approving one of Staffs proposed adjustments to the deferral balance,that adjustment will
only minimally impact rates.Accordingly,we find it fair,just and reasonable to approve the
Company’s proposed Schedule 94 as filed,with the new rates effective on April 1,2016.
B.Adjustments to ECAM Deferral Balance
Staff believes the Company’s balancing accounts are,for the most part,accurately
tracking ECAM revenues,deferral amounts,and interest.However,Staff proposes two
relatively small adjustments that,if adopted,would decrease the Company’s proposed
$23,863,325 total ECAM deferral balance by about $59,000,to $23,804,075.Both of Staffs
adjustments relate to the back cast adjustment the Commission adopted in the 2014 ECAM case.
See Order No.33008,Case No.PAC-E-14-Ol (directing the Company to use a back cast
adjustment to ensure the costs the Company recovers through base rates and the ECAM are no
more and no less than actual NPC).’As noted above,Staff recommended these relatively small
adjustments,if approved,not change the currently proposed ECAM rates but instead carry
forward with any remaining balances to be collected in next year’s ECAM.The two adjustments
are discussed below.
1.Adjustment to ECAM Deferral (Before Interest).Staff recommended the
Commission decrease the Company’s proposed $16,629,079 total deferral (i.e.,the proposed
ECAM deferral without interest)by $51,343 to correct errors in how the Company calculated its
proposed back cast adjustment relating to the separation of the Deer Creek mine
depreciationlamortization expense from base NPC beginning January 1,2015.In light of this
adjustment,which the Company states it does not oppose,Staff and the Company recommend
that the Commission approve a total deferral amount of $16,577,736 (without interest)for the
period of December 1,2014 through November 30,2015 for recovery from ratepayers.
Commission Findings:Based on our review of the record,we find that the Company
incorrectly calculated the back cast for the separation of the Deer Creek mine
depreciation/amortization expense from base NPC,and thus overstated the total deferral amount
Staff notes that next year’s ECAM will not include a back cast adjustment because the Company will change its
deferral calculation method to directly calculate the difference between actual cost and the NPC recovered through
base rates.See Order No.33440.
ORDER NO.33492 4
(before interest)by $51,343.We thus find it fair,just,and reasonable to decrease the Company’s
proposed total deferral amount (before interest)to be recovered from ratepayers to $16,577,736
for the period of December 1,2014 through November 30,2015.Further,we find it reasonable
for the Company not to change its proposed ECAM rates in light of this relatively minor
adjustment,and for any remaining balance to be carried forward for collection through next
year’s ECAM filing.
2.Adjustment to Interest.Staff also recommended the Commission decrease the
Company’s proposed $283,958 in interest (i.e.,$97,008 interest on deferral +$186,950 interest
on balancing accounts)by about $7,907,to $276,051,because the Company inaccurately
reflected the back cast adjustment in the deferral by putting the total negative adjustment amount
in the last month (i.e.,as a single annual event occurring in November 2015),which overstates
the amount of interest the Company should earn.According to Staff,the back cast adjustment’s
base rate revenue stream and actual costs are incurred across the 12-month deferral period.Staff
thus believes it is more accurate to calculate the interest against the back cast adjustment amount
across the entire 12 months.
Monsanto shares Staff’s view.Like Staff,Monsanto noted that since revenues and
expenses are incurred throughout the year,the Company’s back cast adjustments should also be
handled on a monthly basis and not as a single event.Monsanto believes calculating the back
cast adjustment on a monthly basis would help alleviate the interest paid by ratepayers for the
deferred balance.And while Monsanto does not propose a specific monetary correction that
would reflect monthly back cast adjustments,it would support such a correction if ordered.
The Company,on the other hand,opposes the $7,907 interest-related adjustment and
suggestion that the back cast adjustment be accounted for on a monthly basis.The Company
argues a monthly approach is inconsistent with the annual back cast adjustment recommended by
Staff and approved by the Commission in the 2014 ECAM.Additionally,the Company notes
that base rates are set in a general rate case using annual NPC and annual billing determinants.
The Company states that Idaho’s base billing determinants were 3,328,058 megawatt hours and
the Company’s billing determinants and collections did not exceed the base NPC and megawatt
hours until November 2015.The Company argues that monthly calculations of NPC over
collection are impossible given that actual megawatt hours did not exceed base level NPC until
November 2015;thus,the proposed monthly back cast adjustment is inappropriate.
ORDER NO.33492 5
Commission Findings:We decline to require the Company to account for its back
cast adjustment on a monthly basis,or to adjust the interest in the balancing accounts by $7,907.
In the Company’s last ECAM case,we approved a back cast adjustment to the annual deferral
amount.We find that the Company’s back cast adjustment in this case is consistent with that
approach.In addition,while spreading the back cast adjustment across the year might improve
its accuracy.the resulting interest-related adjustment in this case would be relatively small.
Further,as the Company’s future ECAM cases will not use a back cast adjustment (see fn.1,
above),there is no need to change the back cast going forward.
FINDINGS AND DISCUSSION
We have reviewed the record,including the Company’s Application,the comments,
and the reply.We find that the Company is an electrical corporation and public utility,and that
we have jurisdiction over the Company and the issues in this case under Idaho Code §61-119,
6 1-129,61-501,and 6 1-502.Based on our review of the record,we find that the Company’s
current ECAM rates are unreasonable and would enable the Company to over-collect its deferred
power costs.Accordingly,we find it fair,just,and reasonable to approve:(1)the Company’s
proposed ECAM rate decrease and Schedule 94 as filed in Exhibit 3 to the Company’s
Application,with the new rates to take effect on April 1,2016;and (2)a total deferral amount of
$16,577,736 (without interest)for the period of December 1,2014 through November 30,2015
for recovery from ratepayers.
ORDER
IT IS HEREBY ORDERED that Electric Service Schedule 94,Energy Cost
Adjustment,is approved as filed.The new rates shall take effect on April 1,2016.
IT IS FURTHER ORDERED that a total deferral amount of $16,577,736 (without
interest)is approved for the period of December 1,2014 through November 30,2015.
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 §61-626.
ORDER NO.33492 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3/
day of March 2016.
ATTEST:
KRIS4JNE RAPER,COMMISSIONER
4
jk D.Jewell ,
Commission Secretary
O:PAC-E-I 6-05kk2
ERIC ANDERSON,COMMISSIONER
ORDER NO.33492 7