20170224final_order_no_33721.pdf

Office of the Secretary
Service Date
February 24,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN )CASE NO.PAC-E-16-13
POWER FOR AUTHORITY TO MODIFY )
ELECTRIC SERVICE REGULATION NO.12 )
RELATED TO LINE EXTENSION )ORDER NO.33721
ALLOWANCES )
On October 3,2016,PacifiCorp dba Rocky Mountain Power filed an Application
requesting that the Commission approve changes to the Company’s Service Regulation No.12,
and its Service Schedule No.300 relating to line extensions.The Company requested permission
to change how allowances are formulated,and to modify and add new transmission facilities
charges.The Company proposed a February 28,2017 effective date.
On October 14,2016,the Commission issued a Notice of Application and set an
intervention deadline of November 4,2016.No parties intervened.On November 22,2016,the
Commission ordered that the case be processed by Modified Procedure and set a January 19,
2017 comment deadline,and a February 2,2017 reply deadline.
BACKGROUND
A line extension is the addition of primary electric facilities to a property,
subdivision,or commercial building.By policy,the Company offers a line extension allowance
that provides a credit to new customers who require a line extension for service to offset some
upfront facility charges.The purpose of the allowance is to provide adequate service to
customers requiring line extensions without increasing rate base for other customers.
The Company’s line extension policy is provided in the Company’s Service
Regulation No.12,and its Service Schedule No.300.The last major change to these protocols
was in 1996.See Case No.UPL-E-96-04.The policy provides a credit to new customers equal
to the actual cost of the transformer,meter,and service (TMS)against the total cost of providing
service for residential customers.Non-residential customer allowances are calculated on a
dollars per kilowatt basis.The policies were last modified in 2008 to change the refund process
for residential customers.See Case No.PAC-E-08-06.
Facilities charges—costs associated with the ownership,operation,and maintenance
of facilities built to provide service to a customer—are in addition to standard rate charges and
ORDERNO.33721 1
are billed to the customer requiring a line extension on a monthly basis.For facilities installed at
the customer’s expense,the Company’s facilities charge includes property taxes;other taxes,
operation,maintenance,administrative and general (OMAG);customer accounts and services;
and a capital replacement annuity.For facilities installed at the Company’s expense,facilities
charge also include return on capital,recovery of capital and income taxes.
THE APPLICATION
Rocky Mountain asked the Commission to approve a change in the calculation
methodology of how residential allowances are formulated.Additionally,the Company
requested permission from the Commission to modify distribution facilities charges,and add
new transmission facilities charges.
For residential customers,the Company proposed moving away from TMS,and
shifting to a standard residential allowance of $1,550 for line extensions.According to the
Company,the method used to calculate the allowances “are designed to be revenue neutral.”
Stewart Direct at 11-12.Within the allowance for residential planned developments,$550 would
be attributed to the service and meter,while the remaining $1,000 would be reserved to offset
costs for the primary distribution,secondary distribution,and transformer components.Id.The
Company explained that it would like to make the change in order to align its practice in Idaho
with its other retail jurisdictions.Id.
Regarding non-residential customers,the Company has requested to move from a
dollars-per-kilowatt basis to an investment-to-revenue ratio to determine each customer’s
allowance.This ratio is intended to provide an allowance amount roughly equal to the embedded
cost of non-residential distribution and TMS facilities.
Concerning facilities charges,the Company has requested a change to lower the
existing line extension distribution charge,and add a transmission line extension charge.The
Company explained that its current facilities charges do not differentiate between distribution
and transmission.The Company claimed that the requested change recognizes that “there is a
significant difference between the facilities charges for distribution voltage facilities and
transmission voltage facilities.”See Company Exhibit 1 at 1.
THE COMMENTS
Commission Staff provided the only comments in this matter and provided the
Commission with a thorough review of the Company’s request.Staff engaged in extensive
ORDERNO,33721 2
discovery and provided a valuable analysis of the Company’s Application.Staff ultimately
recommended that the Commission approve the Company’s Application.
1.Allowance Formula
With regard to residential allowances,Staff commented that the current TMS
approach can actually provide an allowance greater than the cost of TMS facilities embedded in
current base rates due to depreciation and inflation.Staff Comments at 3.Staff provided that an
allowance greater than embedded cost “can put upward pressure on base rates,”and “create the
potential for subsidies that make existing customers pay for new customer growth.”Id.
Staff commented that it supports the Company’s goal “of developing allowances that
are ‘revenue neutral,’and believes that any method that approximates the embedded cost of
residential distribution and TMS facilities in base rates will meet this intent.”Id.at 4.Staff
reviewed the Company’s methods supporting the residential allowance amount and concluded
that while one method produced an over-estimation,and the other method produced an under
estimation,the averaging of the two methods result in a reasonable amount ($1,550)that meets
the “revenue neutral”goal.Id.
With respect to non-residential allowances,Staff explained that the current dollars-
per-kilowatt formula “can create inequities because the amount of revenue the Company must
recoup for the cost of line extension facilities for individual customers varies widely and is not
solely determined on the basis of demand,but is also determined by energy use.”Id.at 5.Staff
supported the reasoning behind the change,but as with the residential methodology,notes the
methods used for calculating the non-residential allowance produce an over-estimation and an
under-estimation.However,because the amount is derived from an averaging of the two
methods,Staff concluded that the resulting $3,536 is reasonable,and “supports the Company’s
approach to the non-residential allowance based on estimated revenue.”Id.at 6.
Staff noted that with both residential and non-residential allowances,the embedded
cost of line extension facilities in base rates is likely to change with every general rate case.Id.
at 4-6.Accordingly,Staff recommended that the Company be required to update allowance
amounts after every general rate case.Id.Additionally,Staff recommended that the Company
be required to validate the allowance amount prior to the filing of its next general rate case.Id.
ORDERNO.33721 3
2.Line Extension Facilities Charges
Staff supported the Company’s proposal to lower distribution charges,and add
transmission charges.’Staff commented that “the Company’s approach is reasonable because it
more accurately recovers operation and maintenance costs for different types of facilities.”Id.at
7.Staff further “examined the Company’s supporting information,verified calculations,and
determined that the proposed Facilities Charge rates are accurate and reasonable.”Id.Staff
further recommended that the Commission order that any future changes to facilities charges be
reviewed and approved by the Commission.Id.
3.TarffLanguage
Staff provided further comments regarding additions it would like to see the
Company incorporate into its tariff.Id.at 7-8.Specifically,Staff commented that a number of
undefined terms in Regulation No.12 should be defined within the tariff,and “recommends that
the Commission direct the Company to work directly with Staff to formulate acceptable
definitions for these terms.”Id.Finally,Staff provided support for the Company’s request to
incorporate in the tariff the Company’s current policy of allowing the original customer who paid
for a line extension the ability to waive any refund that is less than 20%of their fundable
advance.Id.Staff recommended that the waiver penalty provision referred to in the Company’s
comments (Stewart Direct at 9)be incorporated into the tariff.Id.Staff asked that the
Commission “order the Company to work directly with Staff to formulate acceptable language
pertaining to waiver penalties.”Id.
COMMISSION FINDINGS AND DISCUSSION
Rocky Mountain is an electric utility.We have jurisdiction and authority over Rocky
Mountain and the issues raised in this case pursuant to Title 61 of the Idaho Code,and the
Commission’s Rules of Procedure.IDAPA 31.01.01.000,ci seq.Based on our review of the
Company’s Application,supporting documentation,and Staff comments,we find it fair,just,and
reasonable to grant the Company’s request to modify its line extension policy.
We find the requested changes to the line extension allowance for both residential and
non-residential customers reasonable.While we are familiar with the advantages of the current
TMS policy,we also recognize that depreciation and inflation can create a potential situation
where existing customers subsidize new customer growth.We further recognize the benefit of
‘Distribution applies to facilities of less than 46,000 volts,and transmission applies to 46,000 volts and above.
ORDERNO,33721 4
aligning Rocky Mountain’s practice in Idaho with its other retail jurisdictions.We also find that
the methods used by the Company to determine the allowances employ reasonable assumptions,
and agree with the Company’s stated goal of revenue neutrality.Accordingly,we find that the
Company’s request to shift to standard residential and non-residential line extension allowances
is reasonable and in the public interest.
More specifically,we approve the proposed standard residential allowance of $1,550
for line extensions,with $550 attributed to service and meter costs,and $1,000 attributed to
distribution and transformer components.We also approve the proposed $3,536 non-residential
allowance.We expect that going forward,the Company will continually evaluate the allowance
amounts for revenue neutrality and update and adjust that amount after every general rate case or
sooner,if necessary.
We further approve the Company’s proposed changes to its facilities charges,
including the addition of transmission facilities charges.Because the Company currently does
not differentiate between distribution and transmission in this regard,the proposed approach
should more accurately recover operation and maintenance costs.We find that the Company’s
dual approach to facilities charges is fair,just,and reasonable.
Finally,we direct the Company to work with Staff on defining and clarifying the
Company’s regulation and tariff language.Specifically,that the tariff incorporate definitions for
“applicant,”“additional applicant,”“shared facilities,”and “total refundable advance,”as well as
acceptable language regarding refund waivers.
In summary,we find the revisions to the Company’s line extension policies,as more
fully described herein,fair,just,and reasonable.We thus approve the Company’s Application
with a February 28,2017 effective date.
ORDER
IT IS HEREBY ORDERED that the Company’s Application to modify its Service
Regulation No.12 related to line extension allowances,and to amend its facilities charges,is
approved effective February 28,2017.
IT IS FURTHER ORDERED that the Company monitor line extension allowance
amounts,and submit updates for review and approval to the Commission after every general rate
case filing,or sooner if necessary.
ORDERNO.33721 5
IT IS FURTHER ORDERED that the Company work with on revising the tariff
language,and shall file for our approval a revised Service Regulation No.12 that conforms to the
requirements of this Order.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within 21 days of the service date of this Order with regard to any matter decided
in this Order.Within seven days after any person has petitioned for reconsideration,any other
person may cross-petition for reconsideration.See Idaho Code §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2017.
ATTEST:
O:PAC-E-1 6-13bk3
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KRISTINE RAPER,CjM4ISSIONERz//
ERIC ANDERSON,COMMISSIONER
Diane M.
Commission Secretary
ORDER NO.33721 6