20180330PacifiCorp Company Report.pdf

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Y ROCKY MOUNTAIN
HP,Iy,E^n"-,
March 30,2018
RECEIVED
20lB HAR 3B At{ 9: Ztr
ti-\AI"iS iruELlC
I.JT ll" iTl[$ CCtllt{ ISSION
1407 West North Temple, Suite 330
Salt Lake City, Utah 84116
VIA OWRNIGHT DELIVERY
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise,ID 83702
Re:CASE NO. fAelD=lfilOl kN R.- L^-- ,8- o /
IN THE MATTER OF THE APPLICATION REQUESTING AUTHORITY TO
REDUCE RETAIL RATES BY S2.8 MILLION TO PASS A PORTION OF THE
2017 FEDERAL TAX REFORM ACT COST SAVINGS ONTO CUSTOMERS
Dear Ms. Hanian:
Please find enclosed an original and seven (7) copies of Rocky Mountain Power's Application in
the above referenced matter, along with copies of the press release and customer bill insert.
Enclosed is a CD containing the Application, attachments, and non-confidential work papers.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at [phone].
Very truly yours,
"^"D
Vice President, Regulation
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Yvonne R. Hogle (#8930)
1407 West North Temple, Suite 320
Salt Lake City, Utah 841l6
Telephone: [phone]
Facsimile: [phone]
Email : wonne.hogle@oacifi com.com
Attomey for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
RECEIVED
20lB t{AR A0 At{ 9: Zt+
i-r,\i-rri i;,JBLlC, jT iLl'i tr:s Do[4illssl0N
IN THE MATTER OF THE
APPLICATION REQUESTING
AUTHORITY TO REDUCE RETAIL
RATES BY $2.8 MILLION TO PASS A
PORTION OF THE 2017 FEDERAL TAX
REFORM ACT COST SAVINGS ONTO
CUSTOMERS
CASE NO. PAC.E.18.O1
APPLICATION OF
ROCKY MOUNTAIN POWER
Rocky Mountain Power, a division of PacifiCorp ("Rocky Mountain Power" or "the
Company"), in accordance with Idaho Code $61-502, $61-503, and RP 052, hereby respectfully
submits this application ("Application") to the Idaho Public Utilities Commission ("Commission")
pursuant to Order No. 33965 initiating an investigation into the impact of the federal income tax
legislation enacted December 22, 2017, titled An Act to Provide for Reconciliation Pursuant to
Titles II and V of the Concurrent Resolution of the Budget for Fiscal Year 2018 ("Tax Reform
Act"), and the Company's proposed ratemaking treatment for the associated impacts.
This Application respectfully requests that the Commission issue an order authorizing a
$2.8 million or approximately I percent rate reduction effective June 1,2018, and creation of a
deferred regulatory liability for the incremental income tax benefits arising from the Tax Reform
Act until the effective date of new rates set in future ratemaking proceedings. The deferred
regulatory liability and the Company's proposed ratemaking treatment will provide that customers
obtain the benefits of the Tax Reform Act through lower and more stable rates.
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I. PROCEDURAL BACKGROUND
On or about December 22,2017 , congress enacted the Tax Reform Act effective January l,
2018. On January 17,2}l&,the Commission opened an investigationl into the impact of the federal
tax code revisions on utilities' costs and ratemaking, noting that a main feature of the Tax Reform
Act was to reduce the federal corporate tax rate from 35 percent to 2l percent which could have a
significant tax rate reduction materially decreasing many utilities' current tax expenses. If the new
federal corporate income tax lowers a utility's tax expense, then the Commission would recalculate
the utility's revenue requirement, make customer rates subject to refund, and allow benefits from
the tax rate decrease to flow to the utility's customers.
The Order directed utilities to immediately account for the financial benefits from the tax
rate reduction from 35 percent to 2l percent effective January 1,2018, as a deferred regulatory
liability and by Friday, March 30, 2018, file a report with the Commission identiffing and
quantifying all tax changes individually. The report must disclose: l) the federal income tax
components for the year 2017 as if the utility had been subject to Tax Reform Act's revisions to
the tax code; 2) each utility must include proposed tariff schedules that show the revenue
requirement impacts from the Tax Reform Act, with the differences between the law in effect on
December 31,2017, and the law in effect on and after January l, 2018; 3) utilities may supplement
their reports with further estimates or explanation of taxes under the new and old tax codes under
normalized conditions if those utilities' rates are ordinarily set under normalized conditions; 4)
utilities that operate in Idaho and in other states must separately calculate system-wide and [daho-
specific figures to show how the Tax Reform Act impacts total operations and Idaho operations.
2
I Case No. GNR-U-18-01 Order No. 33965
a
II. OVERVIEW OF THE TAX REFORM ACT
The Tax Reform Act was enacted December 22,2017, with the majority of the provisions
becoming effective January 1,2018. In general, the most notable items affecting the Company's
revenue requirement include:
. A reduction in the federal corporate income tax rate from 35 percent to 2l percent;
. The requirement to normalize excess deferred income taxes associated with public
utility property utilizing the average rate assumption method;
o The elimination of the allowance for bonus depreciation for public utility property;
o The repeal of the domestic production activities deduction; and
o The repeal of the deduction and imposition of certain limitations with respect to
certain expenditures.
Below is a brief description of each of these items:
Reduction in the Federal Corporate Income Tax Rate from 35 Percent to 21 Percent
In regard to the reduction in the federal corporate income tax rate, the Tax Reform Act
eliminates the progressive federal corporate income tax rate of 35 percent and replaces it with a
flat rate of 2l percent, which impacts revenue requirement in two ways. First, it reduces the
Company's income taxes. Second, it results in a reduction to the accumulated deferred income
tax ("ADIT") liability to reflect the lower income tax rate due when the temporary differences
reverse. This reduction ("Excess Deferred Income Taxes") is recorded by measuring the
temporary differences at the new combined federal and state statutory income tax rate and
comparing the result to the ADIT balance existing before the effective date of the income tax
reduction before the rate change. The Excess Deferred Income Taxes are recorded to a regulatory
liability resulting in no immediate net change to the rate base upon which a utility earns a return.
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The treatment of the regulatory liability associated with property-related timing differences is
governed by normalization rules.
Required Normalization of Excess Deferred lncome Taxes
The Tax Reform Act provides that Excess Deferred Income Taxes on public utility property
(e.g., temporary differences that result from different depreciation methods and lives) must be
normalized using the average rate assumption method ("ARAM") of accounting.2 The ARAM
reverses the Excess Deferred Income Tax Expense through regulated operating expense. Under
the ARAM, the public utility identifies the reversal pattern (book depreciation turnaround vs. tax
depreciation turnaround) and reverses the Excess Deferred lncome Taxes beginning when the
turnaround occurs, as illustrated in the following example:
Year
zot6
20L7
zorS
2Ot9
2020
2021
2022
2023
2024
2025
Total
Depreciation
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
lOO,OOO
Tax
Depreciation
2OO,OOO
32O,OOO
192,OOO
115,2OO
115,2OO
57,600
Tax Rate
3so/6
350k
ztoA
zt%o
z196
3o.9186%
3o.9t86%
30.9L86%
3o.91860A
3o.9t86%
Deferred
Tax Expense
35,ooo
77,ooo
19,320
3,t92
3'L92(4,ro9)
(3o,9r9)
(go,grg)
(3o,9r9)
ADIT
G5,ooo)(uz,ooo)
(r3o,4oo)
(rg3,s9z)
(rg6,Z8q)
(rzg,67S)
(gz,zs6)
(6r,837)
(3o,9r8)
Difference
lOO,OOO
22O,OOO
g2,ooo
15,20O
l5,2OO
(4z,4oo)
(roo,ooo)
(roo,ooo)
(roo,ooo)too,ooo (roo,ooo)t,ooo,ooo r,ooo,ooo (o)
trl
t1l
trllrllrl(3o,9r8) o(o) (o)
[r] Under ARAM, at the time of reversal, aggregate book/tax difference is $442,4oo and ADIT is
$86,784. The Average Rate at which the differences were accumulated is $tS6,Z8q/gqq2,4oo ot
3o.gt86oA. This is the rate at which the ADIT are to reverse under ARAM. The difference between the
ARAM deferred tax expense and the tax expense that would have resulted ifthe book/tax difference for
the year was multiplied by the enacted tax rate for the year is a permanent difference in the effective
income tax reconciliation,
As shown above, the ARAM does not begin until the timing difference reverses. Thus,
while an excess ADIT can be calculated at the time of the enactment of the rate change (in the
2 Violations of the income tax normalization provisions associated with public utility property would result in (i) a
prohibition against the public utility's claim to accelerated depreciation with respect to all public utility property, and
(ii) imposition of an additional tax on the public utility wherein the tax for the taxable year will increase by the amount
by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting.
4
[:-xarn c I)l{(.R) N RAM
at
above example, at the beginning of 201 8), that excess would not begin to reverse until 2021 , when
book depreciation exceeds tax depreciation.
The non-property Excess Deferred Income Taxes are not subject to the income tax
normalization rules imposed by the Tax Reform Act and can be used to satisfy other regulatory
assets or deferred and amortized over a period prescribed by the regulatory jurisdiction.
Elimination of Allowance for Bonus Depreciation for Public Utilitv Property
The Tax Reform Act also eliminates the allowance for bonus depreciation on public utility
property3 acquired after September 27,2017, that was not subject to a binding wriffen contract as
ofthat date.
Specifically, the Tax Reform Act eliminates the ability to take the additional first-year
depreciation deduction for public utility property allowed under the former lawa on property
acquired after September 27,2017, and not subject to a binding written contract as of such date
and under the new law5 for property placed-in-service after September 27 ,2017, and before 2023
and related phase-down provisions which was not subject to a binding written contract as of such
date.
This will have the effect of moderating the level of ADIT in the future and reducing near-
term cash flow that would have otherwise been available through immediate expensing of property
placed in service.
Repeal of the Domestic Production Activities Deduction
The Tax Reform Act repeals the domestic production activities deduction (commonly
3 Public utility property is that property that is used in providing electricity if the rates for fumishing those services
are subject to ratemaking by a government entity or instrumentality or by a public utility commission.
a For example, the "former law" allowed for 50 percent for property placed-in-service in2017 ,40 percent for property
placed in-service in 2018, and 30 percent for property placed-in-service in 2019.
s For example, the "new law" allows for 100 percent for property placed-in-service after September 27,2017, and
before 2023 and related phase-down provisions which was not subject to a binding written contract as of such date.
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referred to as the section 199 deduction or the qualified production activities income deduction)
effective January l, 201 8.
The purpose of the deduction was to provide a targeted corporate rate reduction that would
allow U.S. companies to compete against international tax systems, while also drawing
international companies to the United States and its tax structure. This was deemed unwarranted
and repealed due to the significant reduction in the corporate federal income tax rate.
Repeal of the Deduction and Imposition of Limitations on Certain Expenditures
The Tax Reform Act repeals the deduction and imposes additional limitations on certain
expenditures including transportation fringe benefits (except as necessary for ensuring the safety
of an employee to safely commute between the employee's residence and place of employment),
employee achievement awards, meals and entertainment, local lobbying, executive compensation,
fines and penalties, and settlements, effective January 1,2018.
III. ESTIMATED REVENUE REQUIREMENT IMPACTS
In compliance with Order No. 33965, the Company has estimated the revenue requirement
impact of the Tax Reform Act utilizing the December 3l ,2016, normalized Results of Operations
filed with the Commission on April 30, 2017, which are the most current results available. These
results were updated to include the federal income taxes calculated with the tax rate of 2l percent
and compared to the results prior to accounting for the tax reform items identified above. These
results will be updated for the calendar year 2017 Results of Operations, as directed by Order No.
33965, once completed.
The revenue requirement impacts associated with the aspects of the Tax Reform Act
(normalization of excess deferred income tax including the repeal of the domestic production
activities deduction, imposition of limitations on the deductibility of certain expenditures, and the
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impact on wheeling revenues) are not included in this estimate at this time because they are either
more complex in nature or require additional guidance or information. The impacts of these items
will be provided in a later filing, as discussed below. Also, the impacts associated with the
elimination of the allowance of bonus depreciation for public utility property will only impact
future revenue requirement calculations as new property is placed into service.
To calculate the overall estimated revenue requirement a "price change" approach was
utilized in which the Company reduced revenues to reflect the lower revenue requirement while
maintaining the same earned return on equity before accounting for these tax changes. Due to
certain regulatory differences in each jurisdiction in which PacifiCorp operates, the total Company
results are not truly representative as they would only include any Idaho specific regulatory
adjustments. The estimated revenue requirement impacts for total Company and Idaho allocated
are shown in the table below:
The December 31, 2016 Idaho Results of Operations prepared to reflect the Tax Reform
Act, including a summary of results, are provided as Rocky Mountain Power Attachment No. 1.
IV. PROPOSED ACCOUNTING TREATMENT FOR RATE REDUCTION AI\[D
STABILIZATION
This Application requests authorization to defer the benefits of the Tax Reform Act to a
regulatory liability until the effective date of new rates set in future ratemaking proceedings.
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Total Company Idaho
Reduction of Federal Tax Experse
Reduction of State Tax Expense
Reduction ofDeferred Tax Expense
Update of Uncollectab le s
Update ofPUC Fees
Update ofCash Working Capital
-$145,378,894
-$7,213,058
-$33,534,940
-$325,785
-$431,879
-$75,850
-95,792,637
-$391,975
-$4,123,334
-$18,037
-$23,91I
-$1,043
Total Revenue Requircment Impact -$186,960,407 -$10,350,937
Iler enue l{ctluirentcrrt lnrpact
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Although the exact revenue requirement impact of the Tax Reform Act is still unknown, the
Company proposes to implement a rate reduction of $2.8 million (approximately I percent)
effective June I , 201 8, in order to start delivering benefits to customers while the Tax Reform Act
impacts are being finallzed and reviewed by stakeholders. This represents slightly over a quarter
of the estimated impact and aligns the rate change with the effective rates for the Energy Cost
Adjustment Mechanism. This preliminary rate change would lower rates for customers while the
Company evaluates and finalizes the full impacts of the Tax Reform Act, including working with
parties to develop a longer-term strategy to use the regulatory liability balance to help offset future
known cost increase pressures such as; Lake Side II, the 2013 incremental depreciation rates, the
2018 depreciation study, Deer Creek Mine Closure costs, and other regulatory assets. The
proposed strategy would also stabilize rates and allow customers to better predict future costs.
Idaho's December 2017 Normalized Results of Operations will be final by April 30, 2018,
and filed with the Commission at that time. The same price change approach used for the
December 2016 results will be used to determine the impact of the Tax Reform Act on the
December 2017 Normalized Results of Operations. The Company proposes to provide the updated
revenue requirement impacts and a calculation of the other estimated impacts not included in these
comments, 45 days after the April 30, 2018 filing. The Company will true-up any under or over
allocation of benefits in the Tax Reform Act regulatory liability. The Company will continue to
defer the balance of the Tax Reform Act regulatory liability that remains after accounting for the
reduction to rates proposed in this Application and may propose to offset known costs for rate
stabilization purposes. Any offsets to the deferral balance would be subject to Commission
approval. Any remaining amount in the deferral balance would be refunded to customers no later
than the effective date of the Company's next general rate case.
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In addition, Fitch, Standard & Poor's, and Moody's Investor Service ("Moody's") have all
issued reports suggesting that the tax law changes may have the potential to negatively impact
utility company credit metrics. Deferring part of the reduction will allow more time to analyze
these impacts and adjust capital structure levels, as appropriate. At face value it is easy to assume
that the primary impacts on the Company of the Tax Reform Act and its reduction of corporate
rates from 35 percent down to 2l percent are entirely positive, but a closer analysis shows there
are negatives in the case of regulated public utilities. A January 2018 report from The Brattle Group
("Braffle Tax Report") discusses several of these adverse effects.6
The Brattle Tax Report demonstrates that coverage ratios for utilities will tighten as
earnings before interest and taxes ("EBIT") and earnings before interest, taxes, depreciation and
amortization ("EBITDA") decrease, EBIT and EBITDA interest coverage is lowered and EBITDA
to debt is also lowered. These reduced coverage ratios potentially result in ratings downgrades
which may increase utilities' borrowing costs. The report goes on to show that utilities' realized
earnings volatility is increased by a lower tax rate because the "cushion" provided by the impact
of taxes on utility rates becomes smaller. This will make earnings more sensitive to reductions to
EBITDA as the offsetting tax benefit goes from a 35 percent rate to a 21 percent rate. The Brattle
Tax Report also states that cash flows may be deferred due to a lower tax rate on depreciation
timing differences.
The same impacts noted in the Brattle Tax Report led Moody's to lower the outlook for 24
regulated utilities on January 19,2018, based primarily on the Tax Reform Act's impacts on cash
flows. On January 24,2018, just after issuing its revised negative outlooks, Moody's, issued a
6 See The Brattle Group, "Six Implications of the New Tax Law for Regulated Utilities", January 2018 (available at
http://files.brattle.com/files/1301 l_six_implications_of the_new_tax_law_for_regulated_utilities.pdf).
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Sector Comment for regulated utilities in the US entitled "Tax reform is credit negative for sector,
but impacts vary by company." The comment cited many of the same adverse impacts raised in
the Brattle Tax Report, noting that while tax reform is neutral for utility earnings, it is negative for
cash flow and that cash flow to debt ratio could decline by 150-250 basis points.
While the Company has not had its outlook revised to negative, the adverse impacts
discussed by Moody's and The Brattle Group will likely impact the Company if all benefits are
refunded to customers immediately. Deferring part of the reduction to rates to offset future rate
increases will ease some of these negative impacts, and allow more time for the Company, the
Commission, and the other parties to analyze the impacts and reach a solution that keeps the
Company financially healthy. Deferring the remaining balance of the Tax Reform Act into a
regulatory liability and allowing it to offset known cost increases discussed above gives the
Company time to better consider potential adverse impacts from the Tax Reform Act and to adjust
its capital structure as appropriate to account for them.
V. TAX IMPACT ON PRODUCTION TAX CREDITS
Internal Revenue Code ("IRC") provides that a wind facility will generate a production tax
credit ("PTC") equal to an inflation-adjusted 1.5 cents per kilowatt-hour of electricity that is
produced and sold to a third-party for a period of l0 years beginning on the date the facility is
placed in-service for income tax purposes.T The current inflation-adjusted PTC rate for electricity
generated from qualifying wind facilities in 2017 is 2.4 cents per kilowatt-hour.8
The annual amount of PTC passed onto customers is based on three factors: the megawatt-
hours of energy produced at the qualifying wind facilities; the inflation-adjusted Internal Revenue
Service ("IRS") rate; and the Company's tax bump-up rate. The Company's wind facilities were
7 IRC section 45(a).
8 IRS Notice 2017-33.
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placed in-service in 2006 through 2010, so beginning in2016, as the first qualifying wind facilities
reached their lO-year anniversary from their initial in-service date, the energy produced from those
wind facilities no longer qualified for PTC. The number of qualifying wind facilities continues to
decline each year as they reach their 10-year anniversary from their initial in-service date. Due to
both the volatility of megawatt-hours produced from the wind facilities and the approaching end
of the qualification period for each ofthe wind facilities the Commission authorizede tracking PTC
in the Energy Cost Adjustment Mechanism ("ECAM").
The Tax Reform Act reduced the Company's tax bump-up rate applied to PTC from
L61 percent to 1.33 percent, which reduces the value of the PTC. Since the actual value customers
ultimately receive for PTC is not only impacted by the Company's corporate tax rate but also by
the volume of energy produced and the inflation-adjusted cents per kilowatt-hour, rather than
estimate the impact of the tax rate change here and true it up again in the ECAM for volumetric
changes, in this Application the Company proposes excluding PTCs from this calculation and
capturing all PTC components in the monthly ECAM deferral when the actual volume of PTC is
known.
VI. RATE DESIGN
This Application also requests approval of a new Electric Service Schedule No. 197 -
Federal Tax Act Adjustment, to pass the rate reduction associated with the Tax Reform Act back
to customers. This credit would be a separate line item on customers' bills until the next general
rate case. The $2.8 million rate reduction would be allocated to all retail tariff customers taking
service under the Company's electric service schedules based on the rate base allocation to each
customer class from the Company's cost of service study that was filed in Case No. PAC-E-I l-
e Order No. 33440 in Case No. PAC-E- l 5-09 page 6.
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12. This allocation is consistent with how federal income tax expense is allocated to customer
classes on each class' share of rate base in the Company's cost of service study. Page I of
Attachment No. 2 shows the Company's proposed rate spread for the new Electric Service
Schedule No. 197.
The Company proposes per kilowatt-hour energy prices for Schedule No. 197 based upon
the same kilowatt-hour volumes by class that are used in the Company's ECAM filings that are
made each year. To determine these rates, the price for each rate schedule is calculated by dividing
the allocated refund amounts by the corresponding annual energy for each rate schedule. To avoid
impacting demand-side management programs, the Company proposes that Schedule No. 191,
Customer Efficiency Services Rate Adjustment, would be applied to customers' bills prior to
applying the proposed Schedule No. 197 sur-credit. Page I of Attachment No. 2 contains the
calculations for the proposed rates for Schedule No. 197. Page 2 of Attachment No.2 shows the
net impact by rate schedule of the Company's proposed refund.
vII. REQUEST FOR RELTEF
Gradualism and rate stability are longstanding ratemaking principles recognized by this
Commission in setting rates. The Company's proposal to pass approximately 27 percent of the
benefit to customers now and defer the remaining balance of the regulatory liability is intended to
support these same principals. Reducing rates by the full balance of the Tax Reform Act benefits
once the calculation of the impact is finalized would provide interim reductions, only to leave
customers facing upward pressures on rates a short time thereafter. Significant changes in customer
rates downward then upward in a matter of a few years does not meet the principle of gradualism,
and is the opposite of rate stability. The deferred regulatory liability and the Company's proposed
ratemaking treatment will provide that customers obtain the benefits of the Tax Reform Act
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through lower and more stable rates.
WHEREFORE, Rocky Mountain Power respectfully requests that the Commission issue
an order: (l) authorizing that this matter be processed by Modified Procedure; (2) approving a
$2.8million (approximately I percent) rate decrease effective June 1,2018;3) approve Electric
Service Schedule No. 197; and 4) approve a new regulatory liability to defer the remaining impact
of the Tax Reform Act.
DATED this 30th day of March 2018
RESPECTFULLY SUBMITTED,
ROCKY MOUNTAIN POWER
R.
General Counsel
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Proposed Tariff
Schedule l97-Federal Tax Act Adjustment
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ROCKY MOUNTAIN
POWER
A DIVISION OF PACIFICORP
a
I.P.U.C. No.1 Original Sheet No. 197.1
ROCKY MOUNTAIN POWER
ELECTRIC SERVICE SCHEDULE NO. 197
STATE OF IDAHO
Federal Tax Act Adjustment
APPLICATION: This Schedule shall be applicable to all retail tariff Customers taking service
under the Company's electric service schedules.
MONTHLY BILL: In addition to the Monthly Charges contained in the Customer's applicable
schedule, all monthly bills shall have applied the following cents per kilowatt-hour rate.
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
-0.114(, per kWh
-0.0801 per kWh
-0.0801 per kWh
-0.153(, per kWh
-0.153A per kWh
-0.058p per kWh
-0.096i, per kWh
-0.179i, per kWh
-0.0701, per kWh
-0.1111per kWh
-0.090p per kWh
-0.090p per kWh
-0.080p per kWh
-0.066f, per kWh
-0.066(, per kWh
-0.124(, per kWh
-0.059A per kWh
-0.058p per kWh
I
6
6A
7A
9
l0
11
t2
l9
23
23A
24
3s
35A
36
400
401
Submitted Under Case No. PAC-E-18-01
ISSUED: March 30,2018 EFFECTM: June 1,2018
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ROCKY MOUNTAIN
HgIYE*"n",,
For information contact: Media Hotline [phone]
Federal tax chanpes / Annual enersy cost adiustment
Price decrease proposed for ldaho customers
BOISE,Idaho, Aprit 2,2018-Rocky Mountain Power has proposed a 1 percent overall decrease on
bills for Idaho customers, resulting from the recent changes in the federal tax code. Typical
residential customers using 800 kilowatt-hours per month would see a decrease of $11 on their
annual electricity bill. Based on the company's preliminary analysis of the federal tax changes for
Idaho customers, the company proposes a reduction of $2.8 millioru or 1. percent and deferral of the
remaining tax benefits to mitigate future rate impact for customers.
"Our customers already enjoy some of the lowest costs in the country, and we are pleased to be able
to reduce those rates even more," said Cindy A. Crane, CEO and president Rocky Mountain
Power. "We appreciate members of state congressional delegations for their work in making this
reduction from tax rates possible."
In a separate request the utility is proposing no changes to customer bills in the annual energy cost
adjustment and deferral of the $7.8 million balance. The energy cost adjushnent mechanism is
designed to track the difference between the company's actual expenses for fuel and other costs to
provide electricity to customers, against the amount collected from customers through current
rates.
Pending commission approvaf the decrease from federal tax changes would take effect ]une 1,
2018. The proposal reduces rate schedules by L percent with the following impact on each rate
schedule:
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
Schedule
-0.1l4(, per kWh
-0.0801per kWh
-0.0801per kWh
-0.1 531 per kWh
-0.1 531 per kWh
-0.0581per kWh
-0.0961per kWh
-0.179(. per kWh
-0.070(, per kWh
-0.1 I ll per kWh
-0.0901per kWh
-0.0901per kWh
-0.0801per kWh
-0.066(. per kWh
-0.066(. per kWh
-0.124(. per kWh
-0.0591 per kWh
-0.0581per kWh
9
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6
6A
7
7A
23
234
24
35
3sA
36
400
40t
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The public will have an opportunity to comment on the proposal during the coming months as the
commission studies the company's request. The commission must approve the proposed changes
before they can take effect. A copy of the company's application is available for public review on
the commission's website, and at the commission offices. Customers may also subscribe to the
commission's RSS feed to receive periodic updates via email. The request also is available at the
company's offices in Rexburg, Preston, Shelley and Montpelier as noted below:
o
Idaho Public Utilities Commission
www.puc.idaho.gov
472W. Washington
Boise, ID 83702
Rockv Mountain Power offices
o Rexburg - 25 East Main
o Preston - 509 S. 2nd East
. Shelley - 852 E. 1400 North
o Montpelier -24852 U.S. Hwy 89
###
IO
Tax Reform Price Decrease
Rocky Mountain Power reguests price decrease for customers
On March 30, 2018, Rocky Mountain Power asked the Idaho Public Utilities Commission to approve a $2.8 million or
approximately I percent decrease associated with the tax savings from the Tax Reform Act passed by Congress. The application
asked the Commission to authorize a price reduction effective June l, 2018, and create a hacking mechanism for any additional
incremental benefits arising from the Tax Reform Act. The company's proposed treatment will provide that customers obtain the
benefits of the Tax Reform Act through lower and more stable rates. Under Rocky Mountain Power's proposal, all customer
classes will see a reduction to their bills. The proposal for consideration by the Commission would provide customers a 1
percent decrease now and mitigate fufure rate increases.
Typical residential customers using 800 kilowatt-hours per month would see a decrease of approximately $l I on their annual
electricity bill. The following is a summary of the impacts by customer class:
o Residential Schedule I - 1..7% decrease or 4.114c per kWh
. General Service Sdredule 6 - 7.07o decrease or -0.080c per kWh
o General Service Schedule 9 -0.9"/" decrease or -0.058C per kWh
o Irrigation Service Schedule l0 - 7.1"/" decrease or -0.095c per kWh
r Commercial & Lrdustrial Heating Schedule 79 - 7.3o/o decrease or -0.111C per kWh. General Service Schedule 23 -0.9o/" decrease or -0.090c per kWhr General Service Schedule 35 - L.llo decrease or -0.066c per kWh
o Public Street Lighting-0.4% decrease or -0.153c per kWh
o Tariff Contract 400 - 1.0% decrease or -0.059C per kWh
o Tariff Contract 401 - 1.0% decrease or-0.058c per kWh
The public can comment on the proposed rate change as the commission reviews the application. The commission must approve
the proposed changes before they can take effect. A copy ofthe application is available for public review at the commission
offrces in Boise and on the commission's homepage at www.ouc.idaho.sov. Customers may file written comments regarding the
application with the commission or subscribe to the commission's RSS feed to receive periodic updates via email about the case.
Copies ofthe proposal also are available for review at the company's offices in Rexburg, Preston, Shelley and Montpelier.
Idaho Public Uti]-ities Commission
472 W ltashington
Boise, TD 83702
wrr.puc.idaho.gov
Rocky Mountain Power offices
. Rexburg - 25 East Main
. Preston - 509 S. 2nd E.
. Shelley - 852 E. 1400 N.
. Montpelier - 24852U.5. Hwy 89
For more information about your rates and rate schedule, go to roeklmountainpower. net/rates
Attachment I
Revenue Requirement Impact Tax Rate Change
oo
Attachment 1
Rocky Mountain Power
Reyenue Roquirement lmpact - Tax Rato Change
RESULTS OF OPERATIONS SUMMARY
DescriDtion of Account Summary:
DECEMBER 2016
NORMALIZED RESULTS
IDAHO TAX RATE IMPACT
2I% TAX RATE
OECEMBER 20I6
NORMALIZED RESULTS
IDAHO
1
3
4
6
7
I
I
10
11
't2
13
14
16
17
18
19
21
22
23
24
25
26
27
28
29
30
31
32
34
35
36
37
38
39
40
41
42
44
45
46
47
48
49
50
51
53
54
55
5E
59
60
61
62
63
54
65
Operating Revenues
General Business Revenues
lnterdepartmental
Special Sales
Other Operating Revenues
OpeEting Erpenses:
Steam Produclion
Nuclear Prcduction
Hydro Production
Other Porer Supply
Transmission
Distibution
Customer A@unting
Customer Seryi@ & lnfor
Sales
Adminislrativ€ & GeneEl
Depreciation
Amortization
Taxes Ofter Than lncome
ln@me Tuos - Def Net
lnvestmsnt Tax Credit Adj.
Misc Revenue & Expense
OpeEting Revenue for Retum
REte Base:
Eleclric Plant in SeNi@
Plant Held for Future Use
Misc Defered Debits
Elec Plant Acq Adj
Pensions
Prepayments
Fuel Stock
Material & Suppliqs
Wo*ing Capital
Weatherization Losns
Rate Base Dedudions:
A@m Prov Fo. Depr
A@um Prov ForAmort
A@um Def ln@me Taes
Unamortized ITC
Customor Adv for Consl
Cuslomer Seryie Deposits
Misc. Rate Base Deductions
Total Rate Base
275.477,837
22,1U,419
8,786,368
265,526,899
0
22,184,419
8,786,368
(10,350,937)
306,848,624 (10,350,937)296,497,687
72,678,335
0
2,697,442
64,393,644
12,746,654
9,976,592
4,679,026
707,508
0
5,969,892
0
0
0
0
0
0
6,037)
0
0
0
(1
72,678,335
0
2,697,442
64,393,644
12,746,654
9,976,592
4,560,989
707,508
0
5,969,892
173,849,093
39,51 3,171
1,445,699
9,419,087
6,272,212
1,379,845
't'1,709,416
(s14,782].
(1s,666)
(18,037)
0
0
(23,91 1)
(5,792,637)
(391,975)
(4,123,334)
0
0
173,83'1,057
39,51 3,'r71
1,,145,699
9,395,176
479,575
987,670
7,586,083
(514,782\
(19,666)
243,054,075
63,794,549
(1 0,349,894)232,704.181
--------------------------------
1,604,997,849
(0)
24,731,137
1,413,097
0
2,673,038
13,695,755
'13,108,i163
1,054,329
'1,966,213
0
(13,831)1,663,639,880
(516,134,599)
(31,71 3,016)
(257,E64,491)
(81,444)
(1,637,825)
0
(10,534,154)
1,604,997,849
(0)
24,73't,137
1,413,097
0
2,673,038
13,695,755
13,108,463
'1,06E,159
1,966,213
0
0
(13,831)
1,663,653,710
(s16,134,599)
(31,713,016)
(257,864,491)
(81,444\
(1,637,825)
0
(10,534,154)
0
0
0
0
0
0
0
(817,96s,s30)
___-_____-____!1ry
(817,965,530)
645,674,350
1
Retum on Equity
7.544Vo
9.758%
(13,831)
7.U40/o
9.7580/o
0
0
o o
Attachment 1
Description of Account Summary:
Rocky Mountain Power
Reyenue Requircment lmpact - Tax Rate Changs
RESULTS OF OPERATIONS SUMMARY
DECEMBER 2OI6
NORMALIZED RESULTS
TOTAL COMPANY TAX RATE IMPACT
21% TAX RATE
OECEMBER 2016
NORMALIZED RESULTS
TOTAL COMPANY
1
2
3
4
6
7
E
I
't0
11
12
13
't4
15
16
17
18
't9
20
21
22
23
24
25
28
29
30
31
32
33
34
35
36
38
39
40
41
42
43
44
45
il6
47
48
49
5U
51
52
53
54
55
56
57
58
59
60
51
62
63
al
65
OpeEting Revenues
GeneEl Busingss Revenues
lnterdepartmental
Special Sal€s
Other Operating Revenues
Opemling Expenses:
Steam Prcduction
Nuciear Prcduction
Hydro Producton
Other Powr Supply
Transmission
Distribution
Customsr A@unting
Cuslomer Seryi@ & lnfor
Sales
Administrative & General
Oepreciation
Amortization
Taes Other Than ln@me
ln@me Taxes - Federal
ln@me Taxes - State
ln@me Taxes - Def Nel
lnvestment Tax credit Adj.
Misc Revsnuo & Expense
OpeEting Revonus for Retum
4,849,412,100
0
188,543,232
156,890,628
4,662,451,693
0
'188,543,232
156,890,628
(1E6,960,407)
0
0
0
5,194,845,96'l (186,960,407)5,007,885,554
1,097,839,165
0
43,407,663
933,464,356
203,579,752
196,760,209
e3,225,947
147,430,O25
0
129,290,071
(325,78s)
1,097,839,165
0
43,407,663
933,464,355
203,579,752
196,760,209
82,900,161
147,430,025
0
129,290,071
0
0
0
2,E34,997,1E9
685,658,224
43,110,827
189,907,252
2',t7,170,35'l
38,566,895
95,232,305
(4,341,401)
(1,671,184)
(325,785)
0
0
(431,879)
(145,378,894)
(7,213,0s8)
(33,534,940)
0
0
2,434,671,4U
585,65E,224
43,110,827
189,475,374
71,79't,457
31,353,837
61,697,365
(4,34't,40',t)
(1,671,184't
4,098,630,458
1,096,21 5,503
(186,884,s57) 3,91 1,745,901
--------------------------------
Rate Base:
Eleclric Planl in Serui@ 26,629,771,885
22,547,753
865,417,0'15
40,0E0,449
0
50,778,346
211,420,957
229,709,714
31,674,639
12,915,1 18
0
26,629,771,885
22,U7,753
865,41 7,015
40,080,i149
0
50,778,3,15
211,420,957
229,709,714
30,715,315
12,9'15,118
o
Misc Defered Osbits
Elec Planl Acq Adj
Pensions
Prcpayments
Fuel Stock
ilaterial & Suppliss
Working Capital
Mis@llaneous Rate Base
Rate Base Deduclions:
A@m Prcv For Oepr
Total Rate Bas€
Retum on Rale Bale
Retum on Equity
A6um Dof ln@me Taxes
Unamortized ITC
CustomerAdv for Const
Customsr S6Ni@ Deposits
Misc. Rate Base Deductions
28,094,3't5,E77
(E,667,212,954)
(539,932,405)
(4,516,312,709)
(5s0,126)
(32,263,649)
0
(453,s52,927)
28,093,356,553
(8,687,212,954)
(539,932,405)
(4,516,312,709)
(s50,126)
(32,263,649)
0
(453,552.927)
(959,324)
(959,324)
114,229,824,771)
'! 3,864,491,106
(14,229,824,7711
13,E63,53'1,782
2
7.907to
10.465%
(959,324)
7.9070/o
10.465%
0
U
0
U
0
0
0
0
0
0
0
oo
Attachment 2
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