970403.docx

DECISION MEMORANDUM
TO:COMMISSIONER NELSON
COMMISSIONER SMITH
COMMISSIONER HANSEN
MYRNA WALTERS
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
KEITH HESSING
KENT SCHNEIDER
DAVID SCOTT
WORKING FILE
FROM:SCOTT WOODBURY
DATE:APRIL 3, 1997
RE:CASE NO. WWP-E-97-3
On April 1, 1997, The Washington Water Power Company (Water Power; Company) in Case No. WWP-E-97-3 filed an Application with the Idaho Public Utilities Commission (Commission) proposing a revision to the Company’s Electric Tariff Schedule 66—Temporary Power Cost Adjustment—Idaho.  Water Power requests that the Commission approve a $2,639,000, 2.42% rebate to Water Power’s Idaho customers.  The rebate is being requested as a result of the “trigger” being reached and exceeded in Water Power’s Power Cost Adjustment (PCA) balancing account as established in Case No. WWP-E-88-3, Order No. 22816 issued October 31, 1989, extended in Case No. WWP-E-93-3, Order No. 24874, and extended and modified in Case No. WWP-E-94-4, Order No. 25637.  Since the inception of the PCA in October 1989, the Company’s customers in the state of Idaho have received three rebates and three surcharges:
$2,247,000 (2.45%) rebate beginning May 1, 1990
$2,314,000 (2.51%) rebate beginning May 1, 1991
$2,272,000 (2.59%) surcharge beginning November 1, 1992
$2,239,000 (2.54%) surcharge beginning January 1, 1995
$2,258,000 (2.43%) surcharge beginning September 1, 1995
$2,482,000 (2.34%) rebate beginning September 1, 1996
Water Power is proposing that the requested rebate become effective June 1, 1997 and expire May 31, 1998.  
The present PCA rate adjustment mechanism, as more particularly described in Order No. 25637, is designed to recover/rebate variances in net power supply expenses incurred by the Company.  The PCA mechanism tracks changes in the Company’s power supply costs associated with abnormal weather and streamflows.  The weather-related portion of the PCA tracks 100% of the variation in hydro generation from the hydro generation authorized.  It also tracks 80% of the variation in secondary prices from those authorized, and the related variation in thermal generation.  The PCA is also designed to recover contract costs incurred pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA) and the related implementing rules and regulations of the Federal Energy Regulatory Commission (FERC) beyond the level included in the Company’s general revenue requirement.  PURPA contract costs are the result of the Company’s federally mandated obligation to purchase the output of qualifying small power and cogeneration facilities and, therefore, are largely outside the control of Water Power.  The PCA tracks 100% of the changes in costs associated with PURPA contracts.  The Company is allowed to record the difference between actual power supply costs and the level of those costs authorized by the Commission.  When the total difference in costs exceed $2.2 million, the Company may request authority to implement a surcharge or rebate.  As reflected in the Company’s Application, the $2.2 million trigger was reached and exceeded at the end of January 1997.  
As represented by Water Power, the net deferral of $2,639,000 in the Company’s PCA balancing account is the result of the sum of (1) total weather-related deferrals of $2,582,000 in the rebate direction and (2) PURPA tracker deferrals of $101,000 in the rebate direction.  The net deferral amount includes a true-up or correction for prior months of $44,420 in the surcharge direction.  The weather-related and PURPA tracker deferrals are more particularly described as follows:
1.  Weather-related deferrals
As reported by the Company, the weather-related rebate results from above normal streamflow conditions from April 1996 through January 1997.
The Company reports that for the months of April 1996 through January 1997 actual hydro generation averaged 124.5 average megawatts or 23% above anticipated hydro generation.  The Company reports that actual weighted average secondary prices were significantly below those anticipated for the months of April 1996 through October 1996 resulting in lower secondary sales revenues than would otherwise be expected.  This was due to a combination of events:  above normal streamflows throughout the region resulting in an over abundance of hydro generation and low prices for wholesale power transactions.
2.  PURPA tracker deferrals
Workpapers filed by the Company show ($101,000) net deferrals for the PURPA tracker in the rebate direction for the months of April 1996 through January 1996.  Deferrals in the surcharge direction, the Company reports, were due mainly to Water Power’s contract with the City of Spokane for energy purchased from their Upriver Hydro Project located on the Spokane River and for surcharges from WWP’s six small PURPA hydro projects.  The deferrals in the surcharge direction were primarily a result of above normal stream flows which led to increased generation at these projects.
Deferrals in the rebate direction were primarily due to lower cost for the Vaagen Brothers cogeneration project and the Wood Power, Inc., cogeneration project.  The output of the Vaagen Brothers project is valued at secondary prices which leads to costs significantly below authorized costs.  Much of the savings from the Wood Power, Inc. cogeneration project were due to reduced costs on October 1996 through December 1996.  Water Power’s agreement to terminate the power purchase contract with Wood Power, Inc., effective January 1997, contained provisions to lower the rate Water Power paid for the project output for the months October 1996 through December 1996.  Also during that three month period, the Wood Power, Inc. project had reduced output in preparation for a change of ownership of the facility when Water Power’s power purchase contract with Wood Power, Inc. terminated in January 1997.  Effective January 1997, the Wood Power, Inc. cogeneration project is no longer in the authorized PCA costs.
The mechanics of a PCA rate adjustment are well defined in the Commission’s 1989 PCA Order.  The rate change is to take place over a period of 12 months at the end of which time Water Power is to file a report indicating the total amount collected or rebated.  Any existing difference is to be credited or debited to the balancing account.  The rate change is applied to all customer class rates on a uniform percentage basis and recovered on the energy component of each schedule except for lighting schedules where recovery is to be on a flat rate uniform percentage basis.  PCA related rate changes are limited to no more than two consecutive surcharges or rebates during any 12-month period, July 1 to June 30, and the annual rate change during any 12-month period is limited to 5%.
Under the Company’s proposal in this case, the monthly energy charges of the individual rate schedules are to be decreased by the following amounts:
Present
Sch. 66 Rebate
(expires 8/31/97)
(2.34%)
Proposed Sch. 66 Rebate Decrease Per
Kilowatt Hour
(2.42%)
Schedules 1,71 (Residential)
.109¢/kWh
.114¢/kWh
Schedules 11, 12,
72 (2), 73 (3), 77
(General)
.160¢/kWh
.164¢/kWh
Schedules 21, 22,
74 (4), 75 (5), 78
(Large General)
.111¢/kWh
.112¢/kWh
Schedules 25, (8) DAW Forest Products
(Extra Large General)
.068¢/kWh
.073¢/kWh
Schedules 31, 32, 76 (Pumping)
.101¢/kWh
.134¢/kWh
Flat rate charges for Company-owned or customer-owned street lighting and area lighting service are to be decreased 2.42%.   The proposed rebate will result in an overall decrease of 2.42% in the Company’s Idaho customer’s rates or $1.16 in the monthly bill of an average residential customer using 1,020 kilowatt hours.  The combined effect of both the existing and proposed rebates is an overall decrease of 4.77%, or $2.27 in the monthly bill of an average residential customer using 1,020 kilowatt hours.  The existing rebate, however, will expire on August 31, 1997.
Water Power has requested that its rebate be effective June 1, 1997.  The Company, as part of its Application, has filed supporting testimony and exhibits.
Commission Decision
Staff recommends that this matter be processed pursuant to Modified Procedure, i.e., by written submission rather than by hearing.  Does the Commission agree that Modified Procedure is appropriate?  If not, what is the Commission’s preference?

Scott Woodbury
vld/M:WWP-E-97-3.sw