20180516Comments.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 7956
IN THE MATTER OF THE APPLICATION OF
ROCKY MOUNTAIN POWER REQUESTING
APPROVAL OF $7.8 MILLION NET POWER
COST DEFERRAL WITH NO CHANGE TO
RATES
R [C I tvto
iiilstiirY l6 Ptt 3: ll+
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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)
)
)
)
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CASE NO. PAC-E-18-01
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Brandon Karpen, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 34038 on April 19,2018,
submits the following comments.
BACKGROUND
On March 30,2018, Rocky Mountain Power applied for approval of $7.8 million in
deferred costs, plus interest, from the deferral period beginning January I,2017, through
December 31,2017. The Application is made pursuant to the Company's approved Energy Cost
Adjustment Mechanism (ECAM). The Company did not seek a change in rates in the
Application.
The ECAM allows the Company to collect or credit the difference between the actual net
power costs (NPC) "incurred to serve customers in Idaho and the NPC collected from Idaho
customers through rates set in general rate cases." Application at2. On a monthly basis, the
Company compares the actual system NPC to the NPC embedded in base rates and "defers the
1STAFF COMMENTS MAY t6,2018
difference into the ECAM balancing account." Id. at2-3. The ECAM also includes Load
Change Adjustment Revenues (LCAR), which accounts for over- or under-collection of the
Company's energy-related production revenue requirement (excluding NPC) due to variations in
Idaho load. Id. at3,5. In addition, it includes an adjustment related to the accounting treatment
of coal-stripping costs as set forth under the Financial Accounting Standards Board (FASB)
Emerging Issues Task Force (EITF) 04-6 pronouncement. Id. at3. Pursuant to the ECAM's
sharing band, 90Yo of the above costs are allocated to customers and lloh are allocated to the
Company. Id. The ECAM also includes Deer Creek Mine amortization expense, a resource
adder for Lake Side 2, a true-up of actual Production Tax Credits (PTC) and Renewable Energy
Credits (REC) revenues included in base rates, and interest. Id. at 3-4, 6.
The deferral amount in the Company's Application, includes the following subject to
sharing with an allocation of 90Yo to customers, and l0o/oto the Company:
- approximately $2.1 million for the difference between actual NPC and that included
in base rates;
- a credit of approximately $1.5 million for LCAR, and
- a credit of $93,048 related to the accounting treatment of coal-stripping costs.
In addition, amounts in the deferral allocated 100% to customers include:
- approximately $1.3 million for the Deer Creek Mine amortization;
- approximately $4.1 million for the Lake Side 2 resource adder;
- approximately $ 1.8 million for the PTC true-up; and
- approximately 50.72 million for the REC true-up.
Id. at 5-6.
In sum, the Company requests approval of a deferral balance of $7.8 million for the
period January 1,2017, through December 31,2017. The Company requests no change in rates
and uses $4 million of current collection amount to reduce a depreciation regulatory asset that
was established in Case No. PAC-E-13-02. Wilding Direct at 5.
STAFF REVIEW
Staff reviewed the Company's Application focusing on four major areas. First, Staff
analyzed whether the costs and revenues in the Company's NPC were reasonable during the
deferral period; second, Staff audited contracts, invoices, and other documents to authenticate
2STAFF COMMENTS MAY 16,2018
and verify the actual costs and revenues reflected in the Company's deferral balance; third, Staff
considered the appropriateness of the Company's proposal; lastly, Staff incorporated the rate
reduction proposed in the Rocky Mountain Power Tax Reform Settlement Stipulation related to
Case No. GNR-U-18-01.
Analysis of Deferral
Staff believes the Company used a methodology that complies with previous
Commission orders. Staff further believes that the Company used accurate actual loads and
prudently incurred actual costs/revenues amounts and applied the proper loads, costs, and
revenues embedded in base rates. Accordingly, Staff believes the Company accurately adjusted
for the difference in prudently incurred actual costs/revenues versus base rate revenue recovery
in its Application.
Summary Table of 2017 ECAM Deferral
NPC Differential for Deferral
EITF 04-6 Adjustment
LCAR
Tota I Deferral Before Sharing
Sharing Band
Custome r Re pons i bi I ity
Lake Side 2 Resource Adder
Production Tax Credits
Deer Creek Amortization Expense
REC Defe rra I
lnterest
Total Company Recovery for NPC Deferral
s
s
ldaho
Customers
s 2,Lt3,470
(93,048)
(7,s43,0641
477,358
90%
429,622
4,112,35t
L,769,672
1,31 1,666
7L,773
703,412
s 7,799,495
Staff reviewed the Company's internal audit work papers, external audit reports, joumal
entries, invoices, and contracts. Staff also reviewed the Company's adjustments to its actual
costs. Staff reconciled the general ledger amounts to the net power costs provided in Company
Exhibit No. l Staff also reviewed the Company's hedge contracts and policies and believes they
reasonably safeguard price stability and fuel stability. In addition, Staff reviewed the entries for
JSTAFF COMMENTS MAY 16,2018
the amortization of the depreciation regulatory asset for Deer Creek mine closure and believes
they comply with Order No. 33304 in Case No. PAC-E-14-10. Staff concluded that the NPC in
Company Exhibit No. 1 is accurate and complies with ECAM policies.
Staff verified that base amounts used in the calculations were consistent with costs,
revenues, and loads that were embedded in base rates during the deferral period. The Company
properly used base figures authorized in Order No. 33668 in Case No. PAC-E-16-12 for the20l7
deferral. Staff analyzed each component in the deferral below.
NPC Difference
Adjusted Actual NPC versus Base NPC
$ (% Chanqe)MWh (% Chanoe)($/MWh) % Chanqe
Wholesale Sales -38o/o -49%21%
Purchased Power 2o/o -2o/o 4o/o
Coal Fuel aot-z to -4o/o 2o/o
NaturalGas -24%-40o/o 260/o
Hydro 2404
The difference between actual Idaho jurisdictional NPC and NPC revenue collected
through base rates results in a $2.1 million NPC differential surcharge. In Rocky Mountain
Power's ECAM, a portion of this amount is due to the amount of actual load being
approximately 5o/o greater than the load included in base rates. The remaining portion is due to
the difference in the cost ofgeneration and purchases, and revenue from sales.
Regarding cost and revenue differences in the NPC differential, the biggest factors
driving this year's deferral is the reduction in wholesale power sales revenue and an increase in
the cost of natural gas generation, compared to those embedded in base rates. Because the unit
cost of natural gas was26%o greater than the NPC in base rates, the Company appropriately
dispatched gas-fired plants about 40% less than expected. However, despite a2lYo increase in
the market price, the Company sold 49Yoless than the amount embedded in base rates. Staff
believes this was due to natural gas generation costs increasing at a higher rate (260/o) lhan
wholesale market prices (21%), and thus the dispatch costs were greater than the market prices,
resulting in the lower wholesale sales.
Staff also believes that the moderate reductions in purchased power and generation from
coal were appropriate. The unit cost of coal increased by 2Yo, which led to a 4%o reduction in
4STAFF COMMENTS MAY 16,2OT8
generation from coal-fired plants. Similarly, the Company purchased less electricity from
wholesale markets due to a slight increase in the market price of electricity. While there was a
24%o increase in hydro generation, it did not have a large impact on NPC since hydro is a
relatively small percentage of the resources in PacifiCorp's system.
EITF 04-6
The EITF 04-6 adjustment reflects the difference between coal stripping costs incurred by
the Company and recorded as stated in the accounting pronouncement EITF 04-6 and the
amortization approved by the Commission in Case No. PAC-E-09-08. The Company uses this
account to "undo" the effects of EITF 04-6 that required the company to expense coal stripping
costs as opposed to amortizing it over the coal produced from that section of the open mine.
This account is a benefit of $93,048 to customers. Staff reviewed this adjustment and believes it
to be accurately calculated.
LCAR
Staff reviewed the LCAR and determined that it accurately adjusted for the over recovery
of fixed energy classified production costs. The Company over-recovered $1.5 million of fixed
energy classified production costs during the deferral period. This was due to higher actual sales
than the amount of sales assumed in the base rates for LCAR-related costs.
Production Tax Credit (PTC) Adjustment
In Case No. PAC-E-I5-09, the Commission approved a settlement that moved PTCs to
the ECAM at $ 1.99 per MWh for a total $7 ,142,429 for 2017 . The Company received an Idaho-
allocated $5,372,751in PTCs, resulting in a $l ,769,672 adjustment in the ECAM.
Lake Side 2 Resource Adder
In Order No. 32910 in Case No. PAC-E-13-04, the Commission approved a Settlement
Stipulation to allow the Company to recover Lake Side 2 generation costs through the ECAM
until included in base rates. The Company has complied with this order by using the authorized
rate of $1.99 per MWh of generation up to a maximum of $5.43 million per year. ln20l7,the
Company generated 2.066 million MWh for a resource adder of $4. 1 12 million.
5STAFF COMMENTS MAY 16,2018
Renewable Enerey Credit (REC) Adjustment
In PAC-E-16-12, the Commission approved $0.09/MWh for Renewable Energy Credits
(REC) to be included in base rates. The difference between that amount and actual REC revenue
is included in the ECAM. In20l7, actual revenues were lower than the revenues in rates by
$71,773.
Analysis of Rate Reduction and Proposed Rates
In its Application, the Company did not propose a reduction in rates. In Case No.
PAC-E-I7-02,the Commission authorized the Company to amortize the depreciation regulatory
asset created in Case No. PAC-E-13-02 by $4.0 million or 35o/o of the ECAM collected. The
Company requested to continue to use the $4 million in excess of the ECAM Defenal to offset
the depreciation regulatory asset that continues to grow by approximately $1.8 million each year.
The Commission required the Company begin accruing a regulatory liability as of
January 1,2018, in Case No. GNR-U-18-01 (Order No. 33965) to record the benefits of tax
reform under the Tax Cuts and Jobs Act of 2017. In that proceeding, all parties signed a
Stipulation on May 10, 2018, that provides for $3.5 million-or the entire current balance of the
depreciation regulatory asset-to be offset by the aforementioned January through May 2018
regulatory liability. The Parties also agreed that the annual amount left to be offset related to the
depreciation regulatory asset is approximately $1.8 million. This results in a $2.2 million ECAM
rate reduction. For additional transparency and clarity, Staff requested the Company include this
deferral offset on a monthly basis on the Company's Idaho ECAM Deferral exhibit, currently
included in this Application as the Company's Exhibit No. 1.
Staff reviewed the rate plan proposed in the Stipulation in the GNR-U- 1 8-01 , and
confirmed that the Company's calculations were accurate, reasonable, and comply with prior
Commission orders. The Stipulation rate proposal decreases Schedule 94 ratesby $2.2 million,
resulting in a0.8o/o ECAM percent decrease, effective on June 1, 2018.
Staff reviewed the proposed rates and found that they were appropriately applied to each
customer class on a line-loss adjusted, equal cents per kilowatt-hour basis. Rate impacts by
customer class are included in Attachment A to these comments.
6STAFF COMMENTS MAY 16,2018
CUSTOMER NOTICE, PRESS RELEASE AND PUBLIC COMMENTS
The Company did not file a customer notice or press release with its Application. The
Company was not required to provide notice to customers or issue a press release because the
Company was not proposing any changes to rates in its Application in this case (PAC-E-18-01).
IDAPA 31.01 .01.125. If approved by the Commission, the Settlement Stipulation filed in
GNR-U-I8-01 affects the ECAM and will result in a rate decrease. Staff recommends that
customers be notified of any resulting decrease in subsequent bills following the issuance of
Commission orders in this case and GNR-U-18-01. As of May 9,2018, the Commission has not
received any customer comments regarding this matter.
STAFF RECOMMENDATIONS
Staff recommends the Commission:
1. Authorize the ECAM deferral amount of $7 ,798,495 for the period of January l,20lJ , to
December 1,2017;
2. Adopt the Rocky Mountain Power Tax Act Stipulation to reduce Schedule 94 rates and
reduce the depreciation regulatory asset once, and if, it is approved by the Commission;
3. Direct the Company to include the depreciation regulatory asset offset in its future Idaho
ECAM Deferral exhibits;
4. Direct the Company to submit tariffs that reflect Commission approved rates; and
5. Direct the Company to notify customers of any resulting decrease in subsequent bills.
7STAFF COMMENTS MAY 16,2018
Respecttully submitted this It Y] day of May 2018
Technical Staff: Brad Iverson-Long
Johnathan Farley
Rachelle Farnsworth
Joe Terry
Yao Yin
i : umisc/comments/pace I 8. 1 ccjtbljfuyrf comments
8STAFF COMMENTS MAY t6,20t8
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Attachment A
Case No. PAC-E- I 8-0 I
Staff Comments
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I6TH DAY OF MAY 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-E-l8-OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
ROCKY MOI'NTAIN POWER
I4O7 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I 16
E-MAIL: ted.weston@pacifi corp.com
YVONNE R HOGLE
ASSIST GENERAL COUNSEL
ROCKY MOUNTAIN POWER
1407 WN TEMPLE STE 320
SALT LAKE CITY UT 84116
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@pacifi corp.com
RANDALL C BUDGE
THOMAS J BUDGE
RACINE OLSON NYE & BUDGE
PO BOX 1391
POCATELLO ID 83204
E-MAIL: rcb@,racinelaw.net
[e-mail]
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD
#140
CHEDTERFIELD MO 63017
E-MAIL: [e-mail]
kiverson@ consultbai. com
SECRETAR
CERTIFICATE OF SERVICE