2000518_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KEITH HESSING
BILL EASTLAKE
WORKING FILE

FROM:

DATE: MAY 18, 2000

RE: CASE NO. UPL-E-00-01 (PacifiCorp)
BPA REGIONAL EXCHANGE CREDIT—ADJUSTMENT

On May 1, 2000, PacifiCorp, doing business as Utah Power & Light Company (PacifiCorp; Company; UP&L), applied to the Commission for approval of a revised Electric Service Schedule No. 34 reducing the exchange credits provided to UP&L customers through the Bonneville Power Administration (BPA) regional exchange program. This is the third and final step in the phase-out. Residential and irrigation customers will experience an increase in rates of 3.35% and 8.0%, respectively.

BACKGROUND
PacifiCorp states that in 1996, BPA substantially increased the price charged to investor-owned utilities exchanging power under the residential exchange program. The exchange credit provided by BPA to the customers of exchanging utilities is based on the difference between the average system cost of the exchanging utility and BPA’s PF Exchange price. The increase in the PF Exchange price reduced the exchange credit available to exchanging utilities by roughly half. This reduction, PacifiCorp contends, would have resulted in net price increases for UP&L’s exchange customers in Idaho over approximately 10% for residential and 30% for irrigation.
Congress, in Public Law 104-46, directed BPA to increase the credit paid for the BPA fiscal year beginning October 1, 1996, above what it would have paid under the new PF exchange price. Congress also suggested that BPA negotiate with the exchanging utilities to phase out the exchange program over the remainder of the contract period ending June 30, 2001. PacifiCorp submitted tariffs for the exchange customers that reflected the congressional action in Tariff Advice No. 96-09. These tariffs included a 4.8% increase for residential customers and a 14.1% increase for irrigation customers resulting from the decrease in the exchange credit.
During the latter part of 1996 and early 1997, PacifiCorp entered into negotiations with BPA to phase out the exchange in accordance with the congressional directive.
PacifiCorp reached a settlement agreement with BPA in May 1997 providing for a fixed payment stream totaling $47,693,863 for UP&L’s customers. The settlement allows UP&L to distribute the money in accordance with any method approved by this Commission. UP&L ultimately filed for a temporary surcredit for the irrigation customers in Case No. UPL-E-97-2 providing for an 8% reduction for that class in the 1997 irrigation season. The Commission approved the surcredit in Order Nos. 26904 and 26973 and directed UP&L to address the issue of the allocation of benefits between the residential class and the irrigation class before any future surcredit would be considered.
During the latter part of 1997 and early 1998, UP&L representatives met with interested parties to address the allocation of the exchange benefits over the remainder of the exchange contract. As a result of these discussions, UP&L proposed to phase out the remaining exchange benefits with annual reductions over the next three years, with the reductions to occur just prior to the irrigation season in 1998, 1999 and 2000. The reductions will result in 3.35% net price increases for residential customers and 8% net price increases for irrigation customers each year. PacifiCorp contends that these increases would allow UP&L to provide some level of exchange benefits through the end of the exchange contract period for the residential class and through September 2000 for the irrigation class assuming average irrigation water usage.
PacifiCorp contends that, in the absence of a settlement, the residential class would have expected to receive $17.9 million from October 1, 1996 through June 30, 2001. The irrigation class would have expected to receive $23.5 million over the same period. These figures represent 43% and 57% of the total $41.4 million, respectively. The proposed phase-out PacifiCorp contends, will result in the residential class receiving $20.7 million and the irrigation class receiving $27.1 million.
Case No. UPL-E-98-3 was the first step in the phase-out. In that case, the Commission approved a 3.35% increase for residential customers. The 8% increase for irrigation customers occurred with the expiration of the surcredit that was in place during the 1997 irrigation season. Case No. UPL-E-99-1 was the second step in the phase-out. In that case, the Commission approved a 3.35% and 4.0% increase for residential and irrigation customers, respectively. The 1998 irrigation season resulted in less energy consumption than was forecasted due to wetter than average conditions. Consequently, the amount of BPA credit distributed was less than forecast reducing the increase required for irrigators in 1999 to 4% from the 8% originally planned.
This filing is the third and final step in the phase-out. The total effect of the changes proposed by PacifiCorp in this case result in a net annual increase to qualifying customers of $2,997,000. Of this amount, the increase to residential customers is $1,211,000 increasing bills by an average of 3.35%. For irrigation customers, the average bill increase will be 8%. The remaining funds will allow the credit to be provided to the residential customers through the end of the contract period, June 30, 2001. Based on a forecast of average temperatures, irrigation customers will receive the credit through May of 2001, based on average irrigation usage. If usage is higher than forecast termination may occur prior to the dates indicated.

Notices of Application and Modified Procedure in Case No. UPLE00-01 were issued by the Commission on May 9, 2000. The deadline for filing written comments was May 22, 2000. Commission Staff was the only party to file comments (attached). Staff recommends that the Company’s Application be approved for effective date June 1, 2000. Staff notes that this is the third step of a negotiated 1998 Agreement to phase out/eliminate the BPA exchange credit. Pursuant to said Agreement, if the residential and irrigation credits are allowed to expire in 2001, rates for residential and irrigation customers will increase 4% and 24.5% respectively. Staff notes that there are ongoing efforts to prevent the loss of the credit.
Commission Decision
Does the Commission continue to find it reasonable to process this case pursuant to Modified Procedure, i.e. by written submission rather than by hearing? Reference IDAPA 31.01.01.204.
Does the Commission find it reasonable to approve the Company’s Application for effective date June 1, 2000?

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DECISION MEMORANDUM 3