20160607final_order_no_33533.pdf

Office of the Secretary
Service Date
June 7.2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN )CASE NO.PAC-E-16-06
POWER FOR AUTHORITY TO MODIFY )
REGULATION NO.9 DEPOSITS AND )ORDER NO.33533
ADVANCE PAYMENTS )
On February 16,2016,PacifiCorp dba Rocky Mountain Power (“Rocky Mountain”or
“Company”)submitted an Application seeking an Order authorizing the Company to modify its
Electric Service Regulation No.9 —Deposits and Advance Payments (“Regulation No.9”).As
explained in greater detail below,the Company desires to implement additional credit risk
measures for certain irrigation customers to begin in 2017,based upon their credit/payment
histories in the current 2016 irrigation season.In other words,the Company seeks to have the
risk mitigation measures in effect before the 2017 irrigation season.
On March 15,2016,the Commission issued a Notice of Application and Modified
Procedure.The Notice set an April 15,2016 deadline for submitting written comments
regarding the Application,and an April 21,2016 deadline for the Company to submit reply
comments.The Commission received written comments from Commission Staff and two Rocky
Mountain customers within the established comment period.The Company submitted its reply
comments on April 22,2016.
APPLICATION
In its Application,Rocky Mountain explained that Regulation 9 governs the
circumstances under which the Company can require a customer to:(a)pay in advance before
receiving service,with the Company to credit the payment to the customer’s account at a later
date;or (b)make a reimbursable deposit to secure a future payment or performance.Regulation
9 currently applies different rules to three distinct customer groups:a residential group;a small
commercial group;and a group combining the large commercial,industrial,and irrigation
customer classes.
The Company’s Application noted that,as of December 15,2015,58 irrigation
customers taking service under Schedule 10 (Irrigation and Soil Drainage Pumping Power
Service)had a total billing balance in arrears of about $1.6 million.The Company is seeking
authority to create a fourth irrigation-specific group under Regulation 9.The Company stated
ORDER NO.33533 1
that the fourth group would contain specific rules for irrigation customers that will help to further
reduce risk and mitigate bad debt expense for the Company and its customers.
If approved,Rocky Mountain would be authorized to require advances from current,
previous,or prospective customers prior to the Company providing service if the customer:(1)
had a cumulative past due balance equal to or greater than 25,000 on December 31 of the prior
year;(2)had service disconnected for non-payment during the last four years;(3)sought,at any
time,any form of relief under the Federal Bankruptcy Laws,or has been discharged from
bankruptcy,or whose receivership proceeding has been terminated,or whose bankruptcy
proceedings have been dismissed;or (4)is requesting electric service under Schedule 10 for the
first time.
The Company proposed that applicable customers provide an upfront payment,
guarantee of payment from a bank or financial institution acceptable to the Company,or a
guarantor acceptable to the Company.The Company said that it worked with representatives of
the Idaho Irrigation Pumpers Association (“IIPA”)to include the third option,“guarantor
acceptable to the Company.”The Company stated that a guarantor must:(1)be an active Rocky
Mountain Power customer;(2)be currently taking Schedule 10 service that is larger or
comparable in size;and (3)have no more than one late notice in the previous twelve months.
The Company requested that it be allowed to require a deposit in the form of an
upfront payment;a guarantee of payment from a bank or financial institution;or a guarantor
acceptable to the Company for current or previous irrigation customers prior to service in certain
circumstances.These circumstances include:(1)when the irrigation customer has received two
or more past due notices for non-payment during the most recent irrigation season or,in the case
of a previous customer,the last 12-month period during which service was received;or (2)when
the irrigator was required to pay an advance prior to the previous irrigation season and the
irrigator’s account balance on December31 was less than $25,000 for that year.
An irrigation customer with more than one Schedule 10 account may be required to
pay a deposit on all Schedule 10 accounts for which the irrigation customer is financially
responsible and requesting service.The Company noted that the deposit for each metered
service will be equal to the estimated monthly bill for the two highest months of usage within the
last two irrigation seasons.Payment of the deposit would be required prior to service for that
irrigation season.
ORDER NO.33533 2
The Company stated that it will promptly return deposit(s),with accrued interest,
once an irrigation customer has paid all undisputed bills and has had no more than one past due
notice during the past 12 months.Interest on deposits held by the Company will be accrued at
the annual rate established by Commission Order and computed from the time the deposit is
made until it is returned or applied to the customer’s bill.See IDAPA 31.21.01.106.No interest
will accrue on a deposit if service is terminated temporarily at the request of a customer who
leaves the deposit with the Company for future use as a deposit or if service has been
permanently terminated and the Company has been unsuccessful in its attempt to refund the
deposit.Id.
If the proposed modifications are approved by the Commission,the Company intends
to send an informational letter to customers who received a past due notice during the 2015
irrigation season or had an outstanding balance of $25,000 or more as of December 31,2015.
The letter will inform these customers that a deposit or customer advance may be required before
the Company will provide service for the 2017 irrigation season if a customer receives two or
more notices during the 2016 irrigation season or has a past due balance of $25,000 or greater as
of December 31,2016.Additionally,if a first time customer receives a past due notice during
2016,the Company will send a letter explaining the amended Regulation 9 and informing the
customer that a second past due notice may result in a required deposit before electric service is
provided the following year.
STAFF COMMENTS
Staff reviewed the Company’s Application,including information supplied through
Rocky Mountain’s discovery responses.Accordingly,Staff made the following
recommendations regarding the Application:
1.The Company’s proposal to require an advance payment for first time
applicants should be denied and the Commission should retain the current
deposit requirement;
2.The Commission should order the Company to clarify Regulation No.9 to
include additional criteria for the calculation of advance payments and
determining the acceptable qualifications of a guarantor;
3.The Commission should approve a modification to Regulation No.9 so as
to require a deposit for customers who paid an advance in the preceding
season and have an outstanding balance of more than $1,000 but less than
$25,000 on December 31;and
ORDER NO.33533 3
4.The Commission should approve the foregoing modifications to
Regulation No.9 with an effective date of May 16,2016.
According to Staff,a relatively small contingent of Rocky Mountain customers
present an elevated credit risk to the Company.As of December 31,2015,58 customers owe a
cumulative balance of $1.6 million.Within that group,15 customers have accumulated an
arrearage balance of at least $25,000.Staff pointed to an upward trend in accounts receivable
from $1,261,400 in 2013 to $1,714,129 in 2015.Staff noted significant growth in the number of
customers with two or more past due notices.The number of customers with two or more past
due notices has increased from 878 in 2012 to 1,207 customers in 2015.
New Customers
Staff objected to the Company’s proposal to collect an advance payment from all new
applicants.According to Staff,there are relatively few new customers establishing service each
year.In 2015,there were just 62 new Schedule No.10 customers.The Company has not
provided any evidence demonstrating that new customers pose a credit risk commensurate with
existing customers who have a history of late payments or accumulating large arrearages.The
Company’s proposal would require the new customer to pay for its estimated usage during the
forthcoming irrigation season in advance.A deposit simply requires the customer to pay two
months of estimated usage prior to the start of the irrigation season.A deposit is less
burdensome for new customers,limits the risk assumed by the Company,and allows new
customers the opportunity to demonstrate their creditworthiness to the Company.Currently,the
Company is permitted to collect a deposit from new applicants.Staff recommended that the
current policy continue.
Company Reply Comments:According to the Company,Regulation No.9 already
authorizes the Company to require an advance for first time irrigation customers.The Company
stated that it has not requested Commission approval to require an advance payment from new
customers because Regulation 9 already allows it.
The Company cited subpart (c)of Section 1,which states:“The Company may require
a deposit or an advance payment from current and prospective industrial or large commercial
customers or may require an advance payment from irrigation customers for the reasons stated in
(b)above.”The Company went on to mention that subpart (b)specifies that an advance may be
required “when the applicant is applying for service for the first time from the Company.”Thus,
ORDER NO.33533 4
the Company believes that Staffs request to eliminate customer advances for new customers
should be rejected.
Clarification of Regulation No.9
Staff recommended the revision of Regulation No.9 to include additional information
that specifically addresses how the Company calculates an advance.Responses to Staff
Production Request Nos.4 and 5 revealed that the Company bases the calculation upon the
customer’s usage from the preceding season.New customers with no usage history pay an
advance based upon the usage of the previous customer at the new customer’s location.Staff
believes that further clarification is needed.
Staff expressed additional concern regarding the Company’s guarantor policy.Staff
stated that Regulation No.9 mentions the option to use a guarantor but does not describe the
criteria that will be used to determine if a guarantor “is acceptable to the Company.”In the
Company’s Application,a guarantor is described as an active Rocky Mountain Power customer
who’s currently taking Schedule No.10 service that is larger or comparable in size and with no
more than one late notice in the previous 12 months.Staff queried how the Company determines
if a guarantor is “larger or comparable in size.”The Company’s response to Staffs Production
Request No.8 indicated that the size of a guarantor is based upon the guarantor’s usage during
the preceding year for all active metered services.Staff recommended that Regulation No.9 be
revised to include additional criteria for guarantors acceptable to the Company.
Finally,Staff remarked that the Company should be ordered to elaborate further
regarding the Schedule No.10 deposit requirement.The Company’s Application proposed that a
Schedule No.10 customer that was required to pay an advance in the preceding irrigation season,
and had a balance on December 31 of less than $25,000,may be required to pay a deposit prior
to receiving electric service for the upcoming irrigation season.In response to Staffs Production
Request No.9,the Company stated that customers with an arrearage of more than $50,but less
than $25,000,may be required to pay a deposit.Staff believed that the Company should be
required to provide a reasonable justification for settling upon this particular range of arrearages
amounts.
In contrast,Staff recommended the lower limit be raised from $50 to $1,000,noting
that the Commission previously approved Sl,000 as the threshold for requiring a deposit from
Idaho Power customers.See Order No.29639 (Case No.IPC-E-04-20).
ORDER NO.33533 5
Company Reply Comments:Responding to Staff’s recommendation for clarification
regarding criteria for the calculation of advance payments,the Company proposed the inclusion
of additional language in Regulation 9 under the “Irrigation Advances Subpart D’section:
The advance will be equal to the estimated monthly billings for the upcoming
irrigation season,based upon the previous 12 months of metered usage at each
service point.If the previous 12 months includes inactivity the estimate may
include earlier periods.
In response to Staff’s recommendation that Regulation 9 specify the qualifications of
a guarantor,the Company proposed the inclusion of additional language in the “Irrigation
Advances and Irrigation Deposits,Subpart B.2”section:
A guarantor must be:(i)an active Rocky Mountain Power Schedule 10
customer;(ii)larger or comparable in size based on previous year’s metered
services;and (iii)current on all accounts at the time of the application with no
more than one past due notice in the previous twelve months.
Rocky Mountain also responded to Staff’s concern regarding the Schedule No.10
deposit requirement.The Company reiterated that irrigation customers may be required to pay a
deposit before service is provided if:(1)the customer received two or more past due notices for
non-payment of Schedule 10 service during the most recent irrigation season or the last 12-
month period during which service was received;or (2)the Schedule 10 customer was required
to pay an advance for the previous irrigation season and the balance on December 31 was less
than $525,000.
The Company believes that all customers required to pay an advance should be
required to pay a deposit the following year to help establish payment history and demonstrate
credit worthiness.Thus,the Company argued that Staff’s proposal to raise the lower limit for
customer deposits from $50 to $1,000 should be deemed unnecessary.
Customer Relations and Customer Notice
Staff contacted Rocky Mountain and discussed the necessity to notify customers of its
various proposals.The Company agreed to contact existing customers.On March 25,2016,the
Company mailed a letter to current Schedule No.10 customers detailing the proposed changes to
its advance and deposit policies.Upon approval of its Application,the Company stated that it
will send letters to Schedule No.10 customers most likely to be affected by the foregoing policy
modifications.
ORDER NO.33533 6
PUBLIC COMMENTS
The Commission received separate comments from two individuals.The first
commenter opposed the deposit requirement for customers with two or more late fees.The
second commenter opposed advance payments for first time customers.This latter commenter
stated that the advance payment requirement would make a young farmer take a big risk in an
industry with tight margins.He stated that this is the case with his son,who is attempting to
work his way into farming operations in eastern Idaho.He suggested a deposit is reasonable
only for new customers and the advance is reasonable for existing customers that have been
shown to be unreliable.
ROCKY MOUNTAIN REPLY COMMENTS
As mentioned above in the “Staff Comments”section,Rocky Mountain attempted to
clarify how it would calculate a customer advance and describe additional criteria to determine if
a guarantor is acceptable to the Company.The Company stated that Staff’s remaining
recommendations should be rejected.The Company included revised tariff sheets,incorporating
the clarifications and requests made in its reply comments.The Company requested that the
Commission approve the revised tariff sheets as filed.
COMMISSION FINDINGS
The Commission reviewed and carefully considered Rocky Mountain’s request,
including the Application,Staff comments,public comments,and the reply comments.The
Commission finds that the Company’s request to authorize certain modifications to its Electric
Service Regulation No.9 is warranted.However,the Commission finds that the breadth and
reach of Rocky Mountain’s proposed modifications to Regulation No.9 go too far and exceed
the limits of what the Commission has previously allowed for other electric utilities in Idaho,
e.g.,Idaho Power.Thus,the Commission finds that Rocky Mountain’s Application shall be
granted in part and denied in part as set out below.
Reasonable Modifications to Regulation No.9
The Commission finds that Rocky Mountain’s desire to update its Regulation No.9
pertaining to irrigation customers is fair,just and reasonable.In particular,we find that requiring
advances from current,previous,or prospective customers prior to the commencement of electric
service if the customer:(1)had a cumulative past due balance equal to or greater than S25,000 on
December 31 of the prior year;(2)had service disconnected for non-payment during the last four
ORDER NO.33533 7
years;or (3)sought,at any time,any form of relief under the Federal Bankruptcy Laws,or has
been discharged from bankruptcy,or whose receivership proceeding has been terminated,or
whose bankruptcy proceedings have been dismissed,is reasonable and appropriate.
Additionally,the Commission finds that Rocky Mountain’s proposal to modify
Regulation No.9 in a manner so that the aforementioned group of Schedule 10 irrigation
customers must provide an upfront payment,guarantee of payment from a bank or financial
institution acceptable to the Company,or guarantor acceptable to the Company is a rational and
reasonable business practice.Customers qualifying under the foregoing criteria often present a
clear and identifiable credit risk for companies.Viewed in that light,we find Rocky Mountain’s
proposed modifications to Regulation No.9 are a reasonable attempt by the Company to mitigate
its risk that these irrigation customers could default on their payment obligations.
Advance Payment by New Schedule 10 Customers
The Commission finds that Rocky Mountain has not provided adequate justification
for its proposed modification requiring all new Schedule 10 irrigation customers to submit an
advance payment for an entire irrigation season.Rocky Mountain’s proposal to demand advance
payment or a guarantee/guarantor from new customers who are requesting Schedule 10 service
for the first time appears unreasonable.The Commission finds that singling out new customers
for the imposition of additional securitization requirements is,absent additional facts
demonstrating a likelihood or history of financial irresponsibility,wholly unjustified and overly
burdensome.Therefore,the Commission declines to authorize the Company to modify
Regulation No.9 to require new Schedule 10 customers to provide an advance payment for the
entire irrigation season.
Although we deny that part of the Application regarding new irrigation customers
paying for an entire season,we have,in another case,found it reasonable for Idaho Power to
require new customers taking service under its Schedule 24 Agricultural Irrigation Service to pay
a deposit equal to the customers’two highest months of estimated usage.Accordingly,the
Commission finds it fair and just that new customers under Rocky Mountain’s Schedule 10 be
subject to the same deposit requirements.Consequently,Rocky Mountain is directed to amend
its revised tariff to incorporate this change for new Schedule 10 customers.
ORDER NO.33533 8
clarification of Regulation No.9
The Commission acknowledges that the Company agreed with Staff’s
recommendation,and included additional language clarifying the criteria for the calculation of
advance payments.See Rocky Mountain Reply comments at 3.The Commission approves the
additional language included by the Company and orders its incorporation and inclusion as part
of Regulation No.9.Additionally,the Commission directs the Company to continue to work in
a cooperative and transparent manner with Staff to develop further language,as deemed
necessary by the parties,clarifying the exact method for the calculation of advance payments.
Finally,the Commission directs Rocky Mountain to provide notice of these
modifications to ALL Schedule 10 customers—not merely the customers that Rocky Mountain
deems “most likely to be affected.”
ORDER
IT IS HEREBY ORDERED that Rocky Mountain Power’s Application seeking
Commission authorization to modify its Electric Service Regulation No.9,Deposits and
Advance Payments,is approved in part and denied in part,as more fully detailed above.The
modifications to Regulation No.9 approved and ordered herein shall become effective for the
2017 irrigation season.
IT IS FURTHER ORDERED that,inasmuch as the Company’s revised tariff sheets,
included in its reply comments,do not conform exactly to the Commission’s directives in this
Order as more fully detailed above,the Company shall,within 14 days of the service date of this
Order,file revised tariff sheets conforming to the Commission’s Order.
IT IS FURTHER ORDERED that the additional language,included in the Company’s
reply comments,clarifying the method for the calculation of advance payments is approved.
Furthermore,the Company shall work cooperatively with Staff to develop and include additional
language in Regulation No.9 to clarify how advance payments shall be calculated by the
Company.
IT IS FURTHER ORDERED that the Company provide notice of these changes to all
Schedule 10 customers.
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)
ORDER NO.33533 9
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of June 2016.
ATTEST:
PAUL KJELL NDE ,PRESIDENT
%iJ k.
KR.STINE RAPER,COMMISSIONER
N7I7
lean D.Jewell /f
Commission Secretary
0:PAC-E-I 6-O6np2
ANDERSON,COMMISSIONER
ORDER NO.33533 10