19990507.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
DON HOWELL
STEPHANIE MILLER
TONYA CLARK
RON LAW
KEITH HESSING
DAVID SCOTT
WORKING FILE

FROM: BRAD PURDY

DATE: May 7, 1999

RE: CASE NO. UPL-E-99-1—APPLICATION OF PACIFICORP FOR
APPROVAL OF REDUCTIONS IN BPA REGIONAL EXCHANGE CREDITS

On April 30, 1999, PacifiCorp, doing business as Utah Power & Light Company, applied to the Commission for approval of a revised electric service schedule No. 34 reducing the exchange credits provided to customers through the Bonneville Power Administration (BPA) regional exchange program.
PacifiCorp states that in the 1996 BPA rate case, 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. UP&L submitted tariffs for the exchanging customers that reflected the congressional action tariff advice No. 96-09. These tariffs included the 4.8% increase for residential customers and the 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 screen 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 proposes to phase out the remaining exchange benefits with annual reductions over the next three years with the reductions occurring 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.
PacifiCorp contends that, in the absence of a settlement, the residential class would have expected to receive $17.9 from October 1, 1996 through June 30, 2001. The irrigation class would have expected to receive $23.5 over the same period. These figures represent 43% and 57% of the total $41.4, respectively. The proposed phase-out PacifiCorp contends, will result in the residential class receiving $20.6 million and the irrigation class receiving $27.1 million.
PacifiCorp states that 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% irrigation occurred with the expiration of the surcredit that was in place during the 1997 irrigation season. The current filing, the Company contends, is the second step in the phase out. 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.
The total effect of the changes proposed by PacifiCorp in this case result in a net annual increase to qualifying customers of $2,052,000. Of this amount, the increased residential customers is $1,172,000 increasing bills by an average of 3.35%. For irrigation customers, the average bill increase will be 4%.
PacifiCorp requests that the Commission process this filing under Modified Procedure. The proposed tariffs contain an effective date of June 1, 1999. The Commission Staff agrees that modified procedure is appropriate in this case and recommends that the Commission issue a Notice as soon as possible in order to have an Order issued prior to June 1, 1999.
Commission Decision
Does the Commission wish to process PacifiCorp’s Application under modified procedure?

Brad Purdy

vld/M:UPL-E-99-1_bp.doc

DECISION MEMORANDUM 1