HomeMy WebLinkAbout140912_IPCrevenuesharing.pdf
Case No. IPC-E-14-14, Order No. 33123
Contact: Gene Fadness (208) 334-0339, 890-2712
www.puc.idaho.gov
Parties propose settlement that would continue
Idaho Power revenue sharing mechanism
BOISE (Sept. 12, 2014) – The Idaho Public Utilities Commission will take comments through
Sept. 29 regarding a proposed settlement to an application by Idaho Power Company to extend
a program that ensures the utility will meet at least a 9.5% return on equity while at the same
time sharing with customers any revenues earned beyond a 10% ROE.
The program, which was initiated in 2009 but expires this year, allows Idaho Power to
accelerate some of its investment tax credits in order to shore up its return on equity if it falls
below 9.5%. If the return exceeds 10%, the company shares a portion of those revenues with
customers. The proposed settlement, which would extend the rate mechanism through 2019,
stipulates that the amount of tax credit that can be accelerated or shared with customers
cannot exceed $45 million during the next five years.
Since the revenue sharing program began in 2010, Idaho Power’s return on equity has not
fallen below 9.5% so the tax credits have not been accelerated. However, customers were
provided more than $93 million in benefits under the revenue sharing provision either as a
direct offset to rates or as an offset against future rates.
Idaho Power receives income tax benefits based on the level of its capital investment in
generation plant and other facilities. These accumulated deferred investment tax credits
(ADITC) are typically spread over the book life of the associated plant investment – which can
sometimes be 30 years or longer – and used to reduce income tax expense included in
customer rates during that period. As part of a 2011 moratorium on base rate increases, Idaho
Power and other parties approved a settlement that allowed the utility to shore up its earnings
by accelerating up to $45 million of investment tax credits.
The extension of the mechanism proposes that if Idaho Power’s ROE is between 10% and
10.5%, customers will get 75% of the of the excess amount and the company would get 25%.
The customers’ share would be provided in the form of a rate credit to the Power Cost
Adjustment (PCA) which becomes effective every June 1.
If earnings exceed 10.5%, three-fourths would again be shared with customers and one-fourth
with the company. Fifty percent of the customer share would be applied against the PCA while
the remaining 25% would be an offset to the amount customers contribute to the company’s
pension balancing account.
Up until the revenue sharing mechanism started in 2010, Idaho Power had not been able to
earn its authorized rate of return for the previous decade in both its Idaho and Oregon
jurisdictions. Customers benefit even if there is not a revenue sharing, the company claims,
because an ROE of 9.5% reduces the company’s cost of capital, which affects the rates
customers pay. The positive ROE also improves the company’s access to working capital for
short-term financing needs.
The company agreed to continue to make its year-end earnings results available for audit by the
commission staff.
Parties to the settlement include Idaho Power, commission staff, the Idaho Irrigation Pumpers
Association and the Industrial Customers of Idaho Power.
Comments are accepted via e-mail through Sept. 29, by accessing the commission’s Website at
www.puc.idaho.gov and clicking on "Case Comment Form,” under the “Electric” heading. Fill in
the case number (IPC-E-14-14) and enter your comments. Comments can also be mailed to P.O.
Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
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