20161117Comments.pdf

CAMILLE CHRISTEN
R'=('CI /CO ''-V L.. L
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
t0.6i0V l7 PMl2:L,2
BOISE, IDAHO 83720-0074
[phone]
BARNO. 10177
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
' i_; ; r'· ~ · G LI C
; ' "'' 1"1SS!ON • , I t. J \...., _J1i,l\•11
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
PACIFICORP OBA ROCKY MOUNTAIN )
POWER TO UPDATE BASE NET POWER )
COSTS AND IMPLEMENT A RA TE ST ABILITY)
PLAN. )
) ___________________ )
CASE NO. PAC-E-16-12
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Camille Christen, Deputy Attorney General, and in response to the Notice of
Modified Procedure issued in Order No. 33618 on October 4, 2016, in Case No. PAC-E-16-12,
submits the following comments.
BACKGROUND
On September 1, 2016, PacifiCorp dba Rocky Mountain Power applied to the Commission
for an Order authorizing the Company to adjust the base level of net power costs (NPC) in base
rates and the NPC to be tracked in the Energy Cost Adjustment Mechanism (ECAM). The
Company indicates that this request is consistent with the requirements of Commission Order No.
33440, in Case No. PAC-E-15-09. The Company also asks the Commission to approve a new
level of base retail load and authorize the Company to adjust the Load Change Adjustment Rate
(LCAR), Production Tax Credit (PTC) and Renewable Energy Credit (REC) rates.
STAFF COMMENTS 1 NOVEMBER 17, 2016
The Company's Application, if approved, would decrease rates by an average of
approximately 0.4 percent. The Company asks that the case be processed by Modified Procedure
and that the Commission approve the new base NPC, new base retail load, and the new LCAR,
PTC and REC rates. As an alternative to reducing rates, the Company proposes a Rate Stability
Plan under which rates would remain unchanged and the Company would apply the incremental
revenues that result from the reduction in base NPC to the depreciation deferral from the 2013
depreciation study. The Company indicates that it intends to engage parties in a discussion of the
Plan. If the parties cannot reach agreement on the alternative Rate Stability Plan, the Company
requests approval of the changes to the rates shown in the tariff revisions included in Attachment
A to its Application to be effective January 1, 2017.
The Commission issued an Order providing Notice of Application, setting a deadline for
interventions, and directing the parties to confer about a proposed schedule and report their
proposal to the Commission. Order No. 33597. The Commission received and granted petitions
for intervention from PacifiCorp Idaho Industrial Customers; Monsanto Company; and Idaho
Irrigation Pumpers Association, Inc. Order Nos. 33599, 33600, and 33601.
STAFF REVIEW
Staff has thoroughly reviewed the Company's Application focusing on five different areas
of the filing. First, Staff analyzed whether the Company's adjustment to NPC was reasonable and
to further see if the filing was consistent with Commission Order No. 33440. Second, Staff
reviewed the Company's methodology to ensure the new rates properly reflect the NPC
adjustment. Third, Staff considered the Company's request to recalculate the LCAR, PTC, and
REC rates based on the new Idaho load at meter. Fourth, Staff assessed the merits of the
proposed Rate Stability Plan. Finally, Staff considered whether the Company had provided
customer notice of its Application. Given this review, Staff concludes the following:
1. The Company's adjustment to net power cost is reasonable. Staff recommends the
Commission accept the proposed NPC adjustment resulting in a 0.4 percent base
rate decrease to be effective January 1, 2017.
2. The PTC and REC rates, for purposes of the ECAM, should not be changed.
Furthermore, the LCAR should be reset to $6.07 per MWh to reflect the revenue
being recovered for LCAR-related costs embedded in base rates.
STAFF COMMENTS 2 NOVEMBER 17, 2016
3. The Rate Stability Plan was not accepted by intervening customer groups and for
this reason is not recommended for further consideration.
4. The Company failed to provide customer notification of the proposed rate change,
which is a violation of Rule 125 of the Commission's Rules of Procedure.
Details of these findings are discussed in the sections below.
Net Power Cost Adjustment
The stipulation approved by the Commission in Order No. 33440 in Case No. PAC-E-15-
09 requires the Company to make a filing updating base rates to reflect the NPC from the 2015
Results of Operation (ROO). According to the Company, NPC from the 2015 ROO was derived
using weather normalized loads and 2016 pro forma adjustments to fuel costs, market prices for
electricity, and signed contracts (Wilding Direct at 2). In order to determine if the proposed rate
is reasonable, Staff ( 1) evaluated loads used to derive net power costs, (2) compared proposed
system NPC to fuel cost and market prices, and (3) verified the calculation of the NPC base rate.
Based on its analysis, Staff believes the NPC rate is reasonable.
To evaluate the loads used to derive NPC, Staff compared proposed system loads at
generation to the loads used to derive NPC in the PAC-E-15-09 case and to actual loads during
the 2015 time period.1 Normalization of2015 actual loads resulted in a slight increase of 0.5%
which Staff believes is reasonable considering near normal conditions across PacifiCorp's entire
system. This results in a proposed system load that is about 1.5% less than loads used to derive
currently authorized NPC.
Staff analyzed the reasonableness of the Company's proposed NPC by analyzing the
trends in average fuel prices and purchases and sales of electricity relative to the Company's 2014
ROO. In this comparison, coal generation cost increased while the cost of natural gas generation
decreased reflecting overall commodity price trends. This correlates to changes in the Company's
NPC by showing an increase in generation from natural gas plants versus a reduction in coal fired
generation. Additionally, continued reduction in outside sales are a reflection of lower overall
market prices for electricity caused by lower gas prices. Although there were lower sales, the
reduction in natural gas prices and increased gas generation supported the Company's reduction
in NPC.
1 Actual system loads were for the December 2014 through November 2015 time period.
STAFF COMMENTS 3 NOVEMBER 17, 2016
Staff then compared the proposed system NPC of $25.05/MWh to the $26.07/MWh Mid­
Columbia 2015 weighted average price. The lower overall cost compared to wholesale market
prices and the expectation that PacifiCorp should be able to dispatch its own fleet at a cost lower
than market supports a lower NPC. Given its analysis, Staff concludes that the Company's
proposed NPC is reasonable.
Finally, Staff verified the calculation of the proposed NPC base rate by first ensuring that
the Idaho jurisdictional NPC reflected the correct allocation of system costs. Then Staff verified
that the Company proposed $0.319 rate reduction accurately reflected the new NPC rate as
illustrated in the table below.
Current Rates with Proposed Rates with
2015 Loads 2015 Loads Difference
Rates ($/MWh) 27.215 26.896 (0.319)
Load at Meter (MWh) 3,407,488 3,407,488 -
Revenue($) 92,733,539 91,646,156 (1,087,383)
Rate Design
Commission Order No . 33440 specifies that any change in NPC be recovered on a
uniform change to the energy rate component. While the overall base revenue decrease is near
0.4 percent, the revenue impact to each customer class on a percentage basis will differ due to the
variance in the ratios of customer charge, demand charge, and the energy component. While the
$0.319 per MWh energy rate decrease was correctly documented in the Company's testimony,
Staff found that the rate spread and tariffs included with the Application used an incorrect rate.
Upon notification, the Company submitted an updated rate spread and tariff sheets which Staff
verified as correct. These were submitted on November 14, 2016. The corrected rate spread is
provided as Attachment A to these comments. Based on discussion with the Company, Staff
understands the updated tariff sheets are intended to replace the ones originally provided by the
Company in Attachment A to its Application.
PTC and REC Updates
The Company is proposing to update PTC and REC rates for purposes of the ECAM
without actually changing PTC and REC revenue recovery embedded in base rates. Authorizing
the proposal will overstate PTC and REC base rate revenues in the ECAM resulting in an
STAFF COMMENTS 4 NOVEMBER 17, 2016
inaccurate adjustment and over-recovery by the Company. Staff disagrees with the Company's
proposal and believes that the $1.99 per MWh PTC rate and the $0.09 per MWh REC rate
currently embedded in base rates and authorized in PAC-E-15-09 should continue to be used for
calculating base rate revenue recovery in the ECAM.
In the PAC-E-15-09 case, base rates were adjusted by reductions in PTC and REC revenue
(numerator of the rate calculation) using updated per MWh billing determinants (denominator).
Because both the numerator and the denominator changed, it is appropriate to use these rates for
purposes of the ECAM because they match PTC and REC revenue recovery embedded in base
rates. However, in this case, the Company is proposing to only change the billing determinants or
denominator without changing the revenue requirement or numerator. (Wilding, Direct at 4).
This would create a mismatch between the PTC and REC base rates used in the ECAM and the
amounts actually embedded in base rates. For this reason, Staff believes that the Company's
proposal to change the PTC and REC base rates for purposes of the ECAM is improper and
should not be authorized.
LCAR Update
Similar to the proposal for PTC and REC rates used in the ECAM, the Company is
proposing to update the LCAR rate in the ECAM without changing the LCAR-related costs
embedded in base rates. In PacifiCorp's ECAM methodology, the LCAR is the embedded dollar
per MWh rate for non-NPC energy-classified production cost. It is used to determine the amount
of these costs recovered through base rates so that any over or under recovery can be credited to
or surcharged from customers through the ECAM. The Company is proposing to change the
LCAR using new billing determinants even though the revenue requirement in base rates for
LCAR-related costs are not being changed. 2
2 Net Power Costs are the only costs proposed to be updated in base rates in this case.
STAFF COMMENTS 5 NOVEMBER 17, 2016
Case No. PAC-E-10-07 was the last case that adjusted LCAR-related expense in base
rates. It resulted in an LCAR that was effectively $6.07 per MWh. 3 It was changed to $5.68 per
MWh in the PAC-E-15-09 case; and the Company is proposing to change it in this case to $5.80
per MWh. In both recent cases, the Company calculated new LCARs using updated per MWh
billing determinants without changing LCAR-related expenses reflected in base rates. This
results in a mismatch between the LCAR used in the ECAM and the LCAR-related expenses
embedded in base rates. Depending on actual loads, using the proposed $5 .80 per MWh LCAR
will produce a smaller credit to customers or surcharge to the Company than each party is entitled
to receive through the ECAM.
Staff believes that the $6.07 per MWh LCAR established in PAC-10-07 represents LCAR­
related expenses currently embedded in base rates and is unchanged by new base rates proposed
by the Company in this case.4 It is Staffs position that the $6.07 per MWh rate be used for
LCAR adjustments in the ECAM covering the deferral period from January 1 through December
31, 2017, and for subsequent ECAMs, until the LCAR is changed in the next general rate case.
Rate Stability Plan
Staff reviewed and audited the Company's proposed Rate Stability Plan to keep rates
constant and use incremental revenue from the proposed NPC reduction and potential future
reductions in the ECAM to offset the depreciation deferral created by the 2013 depreciation case.
Revised depreciation rates were approved in Order No. 32926 increasing total Idaho depreciation
expense to $4,614,970 annually effective January 1, 2014. The increased depreciation expense of
$1.8 million was not reflected in base rates but was allowed to be deferred as a regulatory asset
for later recovery. The deferral will continue until the new depreciation expenses and
amortization of the deferral are included in base rates.
Staff participated in a workshop involving the Company and case intervenors to discuss
and consider various aspects of the Company proposed Rate Stability Plan. At completion of the
3 Prior to Case No. PAC-E-15-09, the Load Change Adjustment calculation methodology was based on jurisdictional
loads at generation. For example, the LCAR authorized in Case No. PAC-E-10-07 was $5.47 per MWh using Idaho
load at generation of3,691,675 MWh. In Case No. PAC-E-15-09, the method for calculating the LCAR and the
Load Change Adjustment in the ECAM was changed to be calculated using jurisdictional loads at customer meter.
Given this approach the equivalent LCAR using, as the numerator, the LCAR-related expense that is currently in base
rates; and as the denominator, an Idaho load at customer meter of 3,328,058 MWh would be $6.07 per MWh.
4 See Supra n.3.
STAFF COMMENTS 6 NOVEMBER 17, 2016
workshop no consensus had been reached by the parties to move forward with the plan. As a
result of this workshop, Staff believes a reduction in rates resulting from reduced NPC should be
reflected in base rates effective January 1, 2017. While a base rate reduction is reasonable at this
time, Staff encourages all parties to consider the impact on rates from the continued deferral of
depreciation expense if there are one-time reductions in upcoming ECAM cases. The
depreciation deferral balance is $4.4 million as of August 2016 and projected to increase to
approximately $8.5 million by December 2018 if no offsets are implemented.
Customer Notice and Press Release
The Company did not file a press release and customer notice with its Application. Per
Rule 125 of the Commission's Rules of Procedure, IDAPA 31.01.01.125 , utilities are required to
notify customers and issue a press release when a change in rates is proposed. Since the
Company did not comply with the rule, Staff considered the available options. Staff contacted the
Company and the Company agreed to provide notice to customers. The Company filed a press
release and customer notification on November 14, 2016. The customer notice will be included
with bills mailed beginning November 21 and ending December 12. Although the Commission's
deadline for filing comments is November 17, 2016, Staff recommends that the Commission
accept late filed comments from the public due to the notification delay.
Customer Comments
As of November 17, 2016, the Commission has received no comments from customers.
STAFF RECOMMENDATIONS
Staff recommends the following with an effective date of January 1, 2017:
1. The Commission authorize a $0.319 per MWh reduction to base rates.
2. The Commission authorize a $26.90 per MWh NPC base rate and a $6.07 per
MWh LCAR for purposes of the ECAM.
3. The Commission accept late filed comments from the public due to the delay in
notification of the proposed rate decrease.
STAFF COMMENTS 7 NOVEMBER 17, 2016
{v-
Respectfully submitted this \ 'f day of November 2016.
Technical Staff: Richard Keller
Mike Louis
Daniel Klein
Terri Carlock
i:umisc:comments/pace 16.12rkmrjttcdk comments
STAFF COMMENTS
Camille Christen
Deputy Attorney General
8 NOVEMBER 17, 2016
TABLE I -RATE DESIGN
ROCKY MOUNTAIN POWER
PROPOSED ENERGY RA TE CHANGE AND ESTIMATED REVENUE IMP ACT
FROM ELECTRIC SALES TO ULTIMATE CONSUMERS
DISTRIBUTED BY RA TE SCHEDULES IN IDAHO
HISTORIC 12 MONTHS ENDED DECEMBER 2015
Line Average Revenue ($000)
No. Descrietion Sch. Customers MWH Present Proeosed Change Change
(I) (2) (3) (4) (5) (6) (7) (8)
Residential Sales
Residential Service I 47,570 449,642 $50,381 $50,238 ($143) -0.3%
2 Residential Optional TOD 36 12,985 218,726 $21,124 $21,055 ($69) -0.3%
3 AGA Revenue (2,042) ($105) ($105)
4 Total Residential 60,556 666,326 $71,400 $71,187 ($212) -0.3%
5 Commercial & Industrial
6 General Service -Large Power 6 1,089 318,051 $24,723 $24,622 ($ IOI) -0.4%
7 General Svc. -Lg. Power (R&F) 6A 202 27,870 $2,391 $2,382 ($9) -0.4%
8 Subtotal-Schedule 6 1,291 345,921 $27,114 $27,004 ($110) -0.4%
9 General Service -High Voltage 9 18 123,898 $7,666 $7,627 ($39) -0.5%
10 Irrigation IO 5,001 552,441 $5 1,560 $5 1,384 ($175) -0.3%
II Comm. & Ind. Space Heating 19 99 4,814 $412 $410 ($2) -0.4%
12 General Service 23 6,821 155,208 $15,063 $15,014 ($49) -0.3%
13 General Service (R&F) 23A 2,356 34,221 $3,462 $3,451 ($11) -0.3%
14 Subtotal-Schedule 23 9,177 189,429 18,525 18,465 (60) -0.3%
15 General Service Optional TOD 35 3 1,911 $123 $123 ($1) -0.5%
16 Special Contract I 400 1 1,417,775 $84,740 $84,290 ($450) -0.5%
17 Special Contract 2 401 I 115,727 $6,681 $6,644 ($37) -0.6%
18 AGA Revenue (13,666) {$573) ($573)
19 Total Commercial & Industrial 15,591 2,738,251 $196,248 $195,374 ($874) -0.4%
20 Public Street Lighting
21 Security Area Lighting 7 192 285 $110 $110 ($0) -0.1%
22 Security Area Lighting (R&F) 7A 132 106 $43 $43 ($0) -0.1%
(/.l n :i> 23 Street Lighting -Company II 44 101 $47 $47 ($0) -0.1% .-+ Ill .-+ Ill C/l .-+ 24 Street Lighting -Customer 12 234 2,423 $435 $435 ($1) -0.2% ~ ~ ~ nzs 25 AGA Revenue {3) ($1) ($1)
0 0 26 Total Public Street Lighting 603 2,912 $635 $634 ($1) -0.1% § ~ g 27 Total Sales to Ultimate Customers 76,749 3,407,488 $268,283 $267,195 ($1,087) -0.4% ~ ;J> ;:
::l n Proposed revenue change $K ($1,087) .-+ I
Cf) m Proposed energy rate change (excluding AGA kWh): cents/kWh (0.0318)
I Average change for all kWh: cents/kWh (0.0319) ...... ...... °' _. I ----...... ::; N
----......
°'
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17th DAY OF NOVEMBER 2016,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-16-12, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
ID REG AFFAIRS MANAGER
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL: [e-mail]
DAT A REQUEST RESPONSE CENTER
E-MAIL ONLY:
[e-mail]
ELECTRONIC ONLY
VAL STEINER
AGRIUM US INC/NU-WEST
INDUSTRIES
E-MAIL: [e-mail]
RANDALL C BUDGE
RACINE OLSON NYE BUDGE
&BAILEY
PO BOX 1391
POCATELLO ID 83204
ELECTRONIC ONLY
JAMES R SMITH
MONSANTO COMPANY
E-MAIL: [e-mail]
ANTHONY Y ANKEL
12700 LAKE A VE
UNIT 2505
LAKEWOOD OH 44107
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 320
SALT LAKE CITY UT 84116
E-MAIL: [e-mail]
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
1015 W HAYS ST
BOISE ID 83702
ELECTRONIC ONLY
JIM DUKE
IDAHOAN FOODS
E-MAIL: [e-mail]
BRUBAKER & AS SOCIA TES
16690 SWINGLEY RIDGE RD
#140
CHESTERFIELD MO 63017
ERIC L OLSEN
ECOH HA WK & OLSEN
PO BOX 6119
POCA TELLO ID 83205
CERTIFICATE OF SERVICE