150422_IPCPCA.pdf

Case No. IPC-E-15-14, Order No. 33285
Contact: Gene Fadness [phone], 890-2712
www.puc.idaho.gov

Idaho Power proposes reduction to annual PCA surcharge

BOISE (April 23, 2015) – The Idaho Public Utilities Commission is taking public comment through May 15
on an Idaho Power Company proposal to reduce the annual Power Cost Adjustment surcharge by about
1 percent.

It is the first time since 2011 that the annual PCA has been a reduction in the size of the surcharge.
Idaho Power claims that power costs have decreased below the amount now collected in the PCA
account. If approved by the commission, Idaho customers will pay about $10.1 million less. For a
residential customer who uses the company’s average of 1,050 kilowatt-hours per month, the reduction
is about 47 cents per month effective June 1. Idaho Power also has an application before the
commission to increase the annual Fixed Cost Adjustment by 0.35%, which, if approved, would also be
effective June 1.
Since 1993, the PCA mechanism allows Idaho Power to adjust rates up or down to reflect that portion of
costs that change every year due to factors largely beyond the company’s control. Because about half of
Idaho Power’s generation is from hydroelectric facilities, Idaho Power’s actual cost of providing
electricity varies depending on changes in Snake River streamflows. Other costs that vary each year are
the market price of power, fuel costs, transmission costs for purchased power and the revenue it earns
from selling surplus power. Money collected in the surcharge can never be used to increase company
earnings. It can be used only to pay down power supply expenses needed to serve customers that are
not already included in base rates.

Idaho Power’s forecasted net power supply expense is $384.4 million, $42.7 million higher than the
$305.7 million of power supply expense already included in base rates. Because last year’s power supply
expense and next year’s anticipated expense are higher than what is collected in base rates, the
company proposes a PCA surcharge of 0.44 cents per kWh. However, that surcharge is lower than the
0.485-cent per kWh current surcharge now collected from residential customers. (The approximate one-
half cent per kWh PCA rate is a relatively small component of overall rates. A customer who uses the
company’s average of 1050 kWh per month now pays an energy rate of about 8.2 cents per kWh during
the non-summer months and 9 cents during the summer months.)

To mitigate the surcharge, Idaho Power is proposing to apply $8 million in revenue sharing to customers
and to credit customers $4 million in additional energy efficiency rider funds collected last year.

As part of a settlement to a 2011 base rate case, the company agreed to share revenue with customers
if it exceeded a 10 percent Return on Equity. Any earnings greater than 10 percent ROE up to and
including 10.5 percent would be split 50-50 with customers to be applied against the PCA. Earnings
above 10.5 percent will be shared 75 percent with customers and 25 percent for the company. Those
earnings are applied against what customers would otherwise be paying to fund the company’s pension
balancing account.

Idaho Power’s 2014 year-end ROE was 11.19 percent, meaning customers will receive a benefit of $24.7
million. About $8 million of that is proposed to be applied as a rate credit passed through the PCA, while
the remaining $16.7 million will be used to offset the pension balancing account.
Actual hydro generation (3.4 million acre-feet) is about 7 percent lower than forecast (3.6 million acre-
feet.)
Sales of surplus power on the market continue to decline, the company reports. About $51.7 million in
off-system market sales is included in base rates, but Idaho Power is forecasting only $39 million in sales
due to lower market energy prices. The loss in market sales, the company reports, is offset by reductions
in coal and gas production costs and lower-priced purchases from the market. The company further
states that the combination of anticipated additional hydro generation and reduced surplus sales is
expected to reduce coal generation by 39 percent.
Comments are accepted via e-mail through May 15, 2015, by accessing the commission’s Website at
www.puc.idaho.gov and clicking on "Case Comment Form,” under the “Consumers” heading. Fill in the
case number (IPC-E-15-14) and enter your comments. Comments can also be mailed to P.O. Box 83720,
Boise, ID 83720-0074 or faxed to [phone].
The commission’s order and other documents related to this case are available on the commission’s
website. Click on “Open Cases” under the “Electric” heading and scroll down to the case number above.

###

Idaho Power PCA Over the Years
2015 – 0.91 percent decrease. $63.1 million. (IPC-E-15-14) Includes $8 million in revenue sharing credit
and $4 million in DSM rider adjustment.
2014 – 1.04 percent increase. $85 million. Includes $7.6 million in revenue sharing credit and
transferring $16 million of surplus energy efficiency rider funds to the PCA account. (IPC-E-14-05)
2013 – 15.3 percent increase. $140 million. (IPC-E-13-10)
2012 – 5.1 percent increase, $43 million, but that is offset from a revenue sharing agreement for a net
increase to customers of 1.7 percent. (IPC-E-12-17)
2011 – 4.8 percent decrease. $50.4 million. (IPC-E-11-06)
2010 – 6.5 percent decrease. $41.9 million. (IPC-E-10-12)
2009 – 10.2 percent increase. $194 million. (IPC-E-09-11)
2008 – 10.7 percent increase. $106 million. (IPC-E-08-07)
2007 – 14.5 percent increase. $30.7 million. (IPC-E-07-10)
2006 – 19.4 percent decrease. $-46.8 million credit. (IPC-E-06-07)
2005 – No change. $73.1 million. (IPC-E-05-15)
2004 – No change. $70.8 million. (IPC-E-04-09)
2003 – 18.9 percent decrease. $81.3 million. (IPC-E-13-05)