20161129Reply Comments.pdf

November 29, 2016
VIA OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
4 72 W. Washington
Boise, ID 83 702
Re: CASE NO. PAC-E-16-12
RECEIVED
rr .. f 'OV 2 • :.. l L .1: • 9 AM 10: 0 7
1407 West North Temple, Suite 310
Salt Lake City, Utah 84116
IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER
TO UPDATE BASE NET POWER COSTS AND IMPLEMENT A RATE
ST ABILITY PLAN
Dear Ms. Jewell:
Please find enclosed seven (7) copies of Rocky Mountain Power's Reply Comments in the above
referenced matter.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at
[phone]. R;;;~
Jeffrey K. Larsen
Vice President, Regulation
Enclosure
CERTIFICATE OF SERVICE
I hereby certify that on this 29th of November, 2016, I caused to be served, via e-mail
and/or overnight delivery a true and correct copy of Rocky Mountain Power's Reply Comments
in PAC-E-16-12 to the following:
Service List
Commission Staff
Camille Christen
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
[e-mail]
PIIC
Ronald L. Williams (C) Val Steiner (e-mail only)
Williams Bradbury. P.C. Agrium US Inc./Nu-West Industries
1015 W. Hays St. [e-mail]
Boise, ID 83 702
[e-mail]
Jim Duke (e-mail only)
Idahoan Foods
[e-mail]
Monsanto Company
Randall C. Budge Brubaker & Associates
Racine, Olson, Nye, Budge & Bailey 16690 Swingley Ridge Rd., #140
201 E. Center Chesterfield, MO 63017
PO Box 1391 [e-mail]
Pocatello, ID 83204-1391
[e-mail]
James R. Smith (e-mail only)
Monsanto Company
[e-mail]
Idaho Irrigation Pumpers Association, Inc.
Eric L. Olsen Anthony Y ankel
Echo Hawk & Olsen PLLC 12700 Blake Avenue, Unit 2505
505 Pershing Ave., Suite 100 Lakewood, OH 44107
PO Box 6119 [e-mail]
Pocatello, ID 83205
[e-mail]
Page 1 of2
PacifiCorp, dba Rockv Mountain Power
Ted Weston Daniel E. Solander
PacifiCorp /dba Rocky Mountain Power PacifiCorp/ dba Rocky Mountain Power
1497 West North Temple, Suite 330 1497 West North Temple, Suite 330
Salt Lake City, UT 84116 Salt Lake City, UT 84116
[e-mail] [e-mail]
Data Request Response Center (e-mail only)
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OR 97232
[e-mail]
~ .. ~
Lauren Haney
Coordinator, Regulatory Operations
Page 2 of2
Daniel E. So lander (ISB No. 8931)
1407 West North Temple, Suite 320
Salt Lake City, Utah 84116
Telephone No. [phone]
Facsimile No. [phone]
E-mail: [e-mail]
Attorney for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF ROCKY MOUNTAIN POWER TO
UPDATE BASE NET POWER COSTS AND
IMPLEMENT A RATE STABILITY PLAN
CASE NO. PAC-E-16-12
REPLY COMMENTS
PacifiCorp, d.b.a. Rocky Mountain Power ("Rocky Mountain Power" or the
"Company") respectfully files reply comments with the Idaho Public Utilities Commission
("Commission") pursuant to Order No. 33618, in response to the comments filed by the
Idaho Public Utilities Commission Staff ("Staff') and Monsanto.
BACKGROUND
On September 1, 2016, the Company filed an Application and supporting testimony
requesting authorization to adjust the level of net power costs ("NPC") in base rates and to
be tracked in the Energy Cost Adjustment Mechanism ("ECAM") to $91.6 million or
$26.90 per megawatt-hour ("MWh"). The Application also requested approval of the 2015
retail load at meter, of3,407,488 MWh, as the new baseline for the load change adjustment
calculation in the ECAM along with an update to the Load Change Adjustment Rate
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("LCAR") pursuant to the Stipulation reached in Case No. PAC-E-15-09 and Order
No. 33440.
REPLY COMMENTS
Reply to Staff's Comments
On November 17, 2016, Staff filed comments recommending that the Commission:
(1) adopt the filed adjustment to base net power costs; (2) not approve the proposed changes
to the rates for the production tax credits ("PTC") or the renewable energy credits ("REC");
and (3) update to the LCAR to the amount approved in Case No. PAC-E-10-07 of $6.07
per MWH. The Company does not object to retaining the current PTC and REC rates,
however, Staff's recommendation on the LCAR is not consistent with the Stipulation
reached among parties in Case No. PAC-E-15-09, and approved by the Commission in
Order No. 33440 and should therefore be denied.
In Case No. PAC-E-15-09 the Company proposed six modifications to the ECAM:
(1) elimination of the 90/10 percent sharing band, allowing for 100 percent recovery of
prudently-incurred net power costs ("NPC"); (2) use of retail sales at the meter in the
ECAM calculation, eliminating the need for Staff's base rate over-collection adjustment;
(3) elimination of the LCAR; ( 4) stop tracking demand-side management costs and sales
of sulfur dioxide emission allowances in the ECAM; (5) start tracking PTC in the ECAM
since they correspond directly to the MWH produced from Company owned wind
facilities; and (6) change the ECAM deferral period to a calendar year with the filing date
on April 1 and rate effective date June 1.
Page2
The direct testimony of Company witness Michael Wilding supported the requested
modifications to the ECAM, including a description of the reasons for eliminating the
LCAR from the calculation of the ECAM. He testified that:
Capital costs and other operation and maintenance costs included in the
LCAR calculation do not have a similar profile to NPC; they are not
highly volatile or largely outside the Company's control and therefore
should not be included in the ECAM. Furthermore, the LCAR is
asymmetrical in the fact that it only considers changes in loads ( or sales
going forward) but ignores changes in the actual underlying energy
component of production costs [ECPC]... The inherent flaw in the
LCAR adjustment is that it assumes the actual ECPC equals the base.
These costs were set at $20.2 million as part of the 2011 GRC. In the
recently-filed Annual Results of Operations, current ECPC are $23.3
million, or $3.1 million (approximately 17 percent) greater than the base
set in the 2011 GRC. However, since the increase in the ECPC is not
accounted for in the LCAR adjustment, the Company has refunded
customers approximately $3.1 million through the LCAR adjustment in
ECAMs filed since 2012.
For example, in the most recent ECAM filing the Company
refunded to customers approximately $0.8 million through the LCAR
adjustment. However, as noted above costs were $3.1 million above
base ECPC. If actual ECPC costs would have been considered it would
have resulted in a recovery of approximately $2.0 million after adjusting
for load growth and sharing bands. Although correcting the LCAR
adjustment would result in cost recovery, the Company is proposing to
eliminate the LCAR adjustment on the basis that the ECAM was not
intended to be a fixed cost adjustment mechanism, ECPC are not highly
volatile or largely outside the Company's control, and the ECAM
calculation already accounts for fluctuations in Idaho load.1
The Company's position on the LCAR has not changed. The ECAM compares base
load and NPC on a dollar per MWh basis to actual load and NPC on a dollar per MWh
basis aligning both sides of the equation. The LCAR is inherently flawed because it only
accounts for half the equation ignoring actual increases or decreases to the ECPC to serve
1 Case No. PAC-E-15-09, Direct Testimony of Michael G. Wilding, page 21-22.
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customers. However, as part of a collaborative effort to resolve issues raised in that case
the parties negotiated a settlement that agreed to the continued inclusion of the LCAR in
the ECAM with an update to the base loads used for calculating the LCAR for both the
January 1, 2016, and January 1, 2017, update to base rates. Paragraph 14 of the Stipulation
in Case No. PAC-E-15-09 states:
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. ( emphasis added)
This section of the Stipulation was to address the Company's concern that the base
load in the LCAR relied on 2009 loads which only magnified the mismatch discussed
above; comparing 2009 load with 2016 or 2017 actual usage while ignoring capital
investment only penalizes the Company for actual investment made since 2009 in
production plant.
Paragraph 14 of the Stipulation contained a table summarizing the LCAR update
agreed by the parties. As demonstrated in the table, fixed costs stayed the same while
updating System and Idaho energy measured at meter. That table has been replicated and
updated to include the base energy proposed in Case No. PAC-E-16-12. Pursuant to the
Stipulation, "the load change adjustment rate ("LCAR") will be updated to reflect base
loads (at sales) corresponding to the period used to set base rates."
Page4
PAC-E-16-12
Load Change Adjustment Rate Calculation
Description
1 Production -Return on Investment
2 Production -Expense
3 Production -NPC Expenses
4 Production Rev Req (Excluding NPC)
5 System Load
6 Production $ per MWH
7 Energy % (Demand & Energy)
8
9
10 Idaho Energy@ Input
11 Idaho Production RR
12 Idaho Energy @ Meter
13 LCAR @ Meter
P AC-E-10-07 P AC-E-15-09
Current Amount
833,083,414
2,173,162,370
(1,748,001,871)
1,258,243,913
57,460,901
21.90
25%
$
5.47
3,691,675
20,193,462
3,328,058
6.07
Updated Amount
833,083,414
2,173,162,370
(1,748,001,871)
1,258,243,913
60,230,153
20.89
25%
$
5.22
3,786,584
19,776,001
3,483,480
5.68
PAC-E-16-12
Updated Amount
$
833,083,414
2,173,162,370
(1,748,001,871)
1,258,243,913
59,297,558
21.22
25%
5.30
3,690,349
19,576,519
3,407,488
5.75
Staff's recommendation to set the LCAR at $6.07 per MWh, from Case
No. PAC-E-10-07, does not conform to the Stipulation in Case No. PAC-E-15-09 nor Order
No. 33440, therefore it should be rejected and the LCAR should be updated to $5.75 per
MWh as summarized in the table above.
Reply to Monsanto's Comments
Monsanto's comments contained the assertion that: "Receiving an actual base rate
reduction from the Company is unprecedented, something that customers have longed
hoped for but never received previously" (emphasis added). For clarification, between
1988 and 2005 Rocky Mountain Power had nine separate rate decreases totaling over 20
percent in reductions to customers' base rates.
Rate Stability Plan
Monsanto also pointed out that the Company stated it would be "indifferent"
whether the rate decrease was returned to customers or used to implement the Rate Stability
Plan. As stated in the Application and accompanying testimony, the purpose of the Rate
Stability Plan was to benefit customers not the Company. Mr. Weston's pre-filed testimony
Page 5
explained that customers would benefit in several ways from the Rate Stability Plan. First,
and maybe most significant, is the mitigation impact it would have on future rate increases.
Customers would benefit by incorporating the incremental increase from the 2013
depreciation study into base rates and paying off its deferred depreciation balance with no
increase to rates. Second, it would have ensured customers pay only what they owe on the
deferred depreciation balance, no more or less. Finally, the plan would have eliminated
long-term intergenerational inequities by ensuring that customers that are benefiting from
the use of assets begin to pay for the increased depreciation since a rate case has not been
held for several years.
When the parties to this case met on October 19th to discuss the Rate Stability Plan
the Company explained that it had no intention of filing a general rate case in 2018, but it
would be filing a new depreciation study. The Company anticipates filing its next rate case
at a time that would allow for the inclusion of the new depreciation study's impacts. Absent
the Rate Stability Plan, the Company anticipates the rate impact from the 2013 and 2018
depreciation rate changes plus amortization of the deferred depreciation balance will have
a significant impact on the next general rate case.
While the Company believes the proposed Rate Stability Plan is in the best interest
of all Idaho customers, it acknowledges the viewpoint of the parties who participated in
this proceeding, and respects their decision not to pursue the plan at this time.
CONCLUSION
As set forth in the Company's Application and described above, Rocky Mountain
Power respectfully requests that the Commission approve: (1) the base NPC of
Page 6
$91,646,156 or $26.90 per MWh; (2) base retail load to be tracked by the load change
adjustment calculation of 3,407,488 MWh; (3) the new LCAR of $5.75 per MWh; and (4)
the tariff revisions filed November 14, 2016, as an update to Attachment A, to be effective
January 1, 2017.
DATED this 29th day of November, 2016.
Page 7
RESPECTFULLY SUBMITTED,
ROCKY MOUNTAIN POWER