20180511PacifiCorp Stipulation.pdf

Yvonne R. Hogle (#8930)
1407 West North Temple, Suite 320
Salt Lake City, Utah 84116
Telephone: [phone]
Facsimile: (801 ) 220-3299
Email : yvonne.ho gle@pacifi corp.com
RECEIVED
2BIB HAY I I Al{ l0: tr I
li-i ',1 "'-: i.ijBLlC.,'.i i'i r:' ;lCF,iMlSSlON
Attorney for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
INVESTIGATION INTO THE IMPACT OF
FEDERAL TAX CODE REVISIONS ON
UTILITY COSTS AND RATEMAKING
CASE NO. GNR.U.18.O1
STIPULATION
This stipulation ("Stipulation") is entered into by and among Rocky Mountain Power, a
division of PacifiCorp ("Rocky Mountain Power" or "the Company") and the Staff of the Idaho
Public Utilities Commission ("Staff'), the Idaho Irrigation Pumpers Association Inc. ("IIPA"),
PacifiCorp Idaho Industrial Customers ("PIIC") and Monsanto Company ('oMonsanto"). The
Stipulation refers to the Company, Stafl IIPA, PIIC and Monsanto individually as a "Party," and
collectively, as the "Parties."
I. INTRODUCTION
1. The terms and conditions of this Stipulation are set forth below. The Parties agree
that this Stipulation represents a fair,just and reasonable compromise of all issues raised in this
proceeding, and that this Stipulation is in the public interest. The Parties, therefore, recommend
that the Idaho Public Utilities Commission ("Commission") approve the Stipulation and all of its
terms and conditions. See IDAPA 31.01.01 .271,272,and274.
II. BACKGROUND
2. On or about December 22, 2017, Congress enacted "an act to provide for
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reconciliation pursuant to titles II and V of the concurrent resolution of the budget for fiscal year
2018 (the "Tax Reform Act") effective January 1,2018. On January 17,2018, the Commission
opened an investigationl into the impact of the Tax Reform Act 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 to 2l percent which could have a material decrease to many utilities' current tax expenses.
3. The Order directed utilities whose tax expense is lowered from the reduced federal
corporate income tax rate, to recalculate their revenue requirement and make customers' rates
subject to refund to allow the benefits from the tax rate decrease to flow to their customers.
4. On March 30,2018, in compliance with Order No. 33965, the Company filed an
estimate of the revenue requirement impact of the Tax Reform Act using the December 3l ,2016,
normalized Results of Operations filed with the Commission. These results were updated based on
a 2l percent federal income tax rate and compared to the results with the 35 percent tax rate.
5. On April 30,2018, the Company filed its December 31,2017 , normalized Results
of Operations with the Commission. Based on these results the Company will provide the final
revenue requirement impacts and a calculation of the other estimated impacts on June 15, 2018.
6. With the intent of resolving the issues raised in the Company's application filed in
this proceeding on March 30,2018, the Parties met on April 30, 2018, pursuant to IDAPA
31.01.01 .271 and 272, for settlement discussions. Based upon the settlement discussions among
the Parties, as a compromise of the positions in this proceeding, and for other consideration as set
forth below, the Parties stipulate and agree as follows, subject to Commission approval of the terms
and conditions of this Stipulation.
rCase No. GNR-U-18-01 OrderNo. 33965.
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III. TERMS OF THE STIPULATION
7. The Parties agree that, to the extent the federal tax code revisions from the Tax
Reform Act decrease the Company's costs and ratemaking expenses, the net savings associated
with the Tax Reform Act will be defened effective January 1,2018, and all benefits will be
returned to customers.
8. The Parties agree that, effective June 1,2018, Idaho retail revenues will decrease
overall by $8.385 million (approximately 3.0 percent) through the two components described in
Paragraphs 9-12 below.
9. The Parties agree that $6.185 million of the decrease reflects the current federal and
state income tax savings, as shown in the Revenue Requirement Impact table in the Application,
and will be returned to customers through a new adjustment rate schedule, Electric Service
Schedule No. 197, described in Paragraphs l6-19. The remaining$2.2 million will be a reduction
to Electric Service Schedule No. 94 - Energy Cost Adjustment rate.
10. In Order No. 33776 issued in the Company's 2017 energy cost adjustment
mechanism ("ECAM') application, the Commission authorized the Company to begin
amortization of the 2013 depreciation regulatory asset by an annual amount of $4 million or 35
percent of the total $11.5 million annual ECAM recovery. As of May 31,2017, the balance was
approximately $5.7 million with an annual incremental deferral of approximately $1.8 million.
The balance as of May 31,2018, is estimated to be approximately $3.5 million.
11. The Parties agree that approximately $3.5 million of Idaho's allocation of tax
savings deferred from January 1,2018, through May 31,2018, will be used to offset the ending
balance of the 20 1 3 depreciation regulatory asset as of May 3 I , 20 I 8.
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12. The Parties agree that by using the deferred benefits from January through May
2018 to offset the depreciation regulatory asset, the annual ECAM rate will be reduced by $2.2
million and that the final Schedule 94 rate will be designed to collect an additional $1.8 million
above the approved20lT ECAM deferral to continue to offset the incremental 2013 depreciation
deferral.
13. The Parties agree that any under or over allocation of the ongoing benefits will be
recorded to a Tax Reform Act regulatory liability or asset. The Company will continue to defer
any difference until base rates are reset through a general rate case.
14. The Parties agree that on June 15,2018, the Company will provide a final report of
the Tax Reform Act's net savings, including the calculation of excess deferred federal income
taxes associated with both protected and unprotected deferred tax balances. The Company's filing
will provide a reconciliation of the accounting for the benefits from the Tax Reform Act, including
a true-up of any under or over-allocation of the customer credits described in paragraphs 9 and 10.
In Phase II of this proceeding Parties will have the opportunity to review the balances that remain
after accounting for the reduction to rates proposed in this Stipulation, as well as propose
ratemaking treatment for the remaining deferred balances. The normalization of tax savings that
will be subject to the average rate assumption method ("ARAM") will be identified as required by
tax normalizationprovisions in the Tax Reform Act. The ratemaking treatment of all deferred tax
savings (those that are subject to ARAM, as well as those that are not subject to ARAM) will be
specifically determined in Phase II. Phase II of this proceeding will be initiated following the
Company's June 15,2018 filing.
15. The Parties agree that the Company will continue to defer the balance of the Tax
Reform Act regulatory account described in paragraph 14, including any balance after Phase II,
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until the regulatory treatment is determined by the Commission but no later than in the next general
rate case. During Phase II, the Parties will identify how the Company will report and describe the
remaining deferral balances on June 15 of each year until all tax benefits are included in rates as
approved by the Commission. All balances will be retumed to customers through Schedule 197,
as reductions or as offsets for rate stabilization purposes in the ECAM.
IV. RATE DESIGN
16. The Parties agree to create a new Electric Service Schedule No. 197 - Federal Tax
Act Adjustment, to pass a rate reduction associated with the Tax Reform Act back to customers.
This schedule will be billed under a separate line item on customers' bills until the next general
rate case. Of the $8.385 million reduction, $6.185 million will be returned to customers on
Schedule No. 197 and $2.2 million will be returned through a reduction to Schedule No. 94 -
Energy Cost Adjustment.
17 . The Parties agree that the $6.185 million will be allocated to customer classes using
the cost of service Fl0l - Rate Base factor. The rate reduction will 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 as filed in Case No.
PAC-E-I1-12. This allocation is consistent with how federal income tax expense is allocated to
customer classes on each class's share of rate base in the Company's class cost of service
study. Page I of Attachment No. I shows the proposed rate spread for Electric Service Schedule
No. 197.
18. The Parties agree to a per kilowatGhour energy price for Schedule No. 197 based
upon the same kilowatt hour volumes by class that are used in the Company's annual ECAM
filing. To determine these rates, the price for each rate schedule will be calculated by dividing the
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$6.185 million by the corresponding annual energy for each rate schedule.
19. To avoid impacting demand-side management programs, the Parties agree that
Schedule No. l9l, Customer Efficiency Services Rate Adjustment, will be applied to customers'
bills prior to applying the proposed Schedule No. 197 sur-credit.
V. GENERAL PROVISIONS
20. The Parties agree that this Stipulation represents a compromise of their positions
on all issues in this proceeding. All negotiations relating to this Stipulation will not be admissible
as evidence in this or any other proceeding regarding this subject matter.
21. The Parties submit this Stipulation to the Commission and recommend approval in
its entirety pursuant to IDAPA 31.01.01.274.
22. The Parties hereby waive any right they may have to appeal any portion of this
Stipulation or the Order approving the same. If this Stipulation is challenged by any person not a
party to the Stipulation, the Parties to this Stipulation reserve the right to file reply comments as
they deem appropriate to respond fully to the issues presented, including the right to raise issues
that are incorporated in the settlement embodied in this Stipulation.
23. Notwithstanding this reservation of rights, the Parties to this Stipulation agree that
they will continue to support the Commission's adoption of the terms of this Stipulation.
24. In the event the Commission rejects or modifies any part or all of this Stipulation,
or imposes any additional material conditions on approval of this Stipulation, each Party reserves
the right, upon written notice to the Commission and the other Parties to this proceeding, within
l5 days of the date of such action by the Commission, to withdraw from this Stipulation. In such
case, no Party will be bound or prejudiced by the terms of this Stipulation, and each Party will be
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entitled to seek reconsideration of the Commission's order, file testimony as it chooses, and do all
other things necessary to put on such case as it deems appropriate.
25. The Parties agree that this Stipulation is in the public interest and that all of its terms
and conditions are fair, just and reasonable.
26. No Party is bound, benefited or prejudiced by any position asserted in the
negotiation of this Stipulation, except to the extent expressly stated herein, nor will this Stipulation
be construed as a waiver of the rights of any Party unless such rights are expressly waived herein.
Execution of this Stipulation is not, and will not be construed as, an acknowledgment by any Party
of the validity or invalidity of any particular method, theory or principle of regulation or cost
recovery. No Party will be deemed to have agreed that any method, theory or principle of
regulation or cost recovery employed in arriving at this Stipulation is appropriate for resolving any
issues in any other proceeding in the future. No findings of fact or conclusions of law other than
those explicitly stated herein may be implied or inferred from this Stipulation.
27 . The obligations of the Parties under this Stipulation are subject to the Commission's
approval hereof in accordance with its terms and conditions and, ifjudicial review is sought, upon
such approval being upheld on appeal by a court of competent jurisdiction.
Respectfully submitted this 1Oth day of May,20l8
7
Rocky Mountain Power Idaho Public Utilities Commission Staff
LBy
PacifiCorp Industrial Customers Monsanto Company
B
Idaho Irrigation Pumpers Association
Inc.
8
Rocky Mountain Power Idaho Public Utilities Commission Staff
B
PacifiCorp Idaho Industrial Customers Monsanto Company
?rt tt/.t,|-B
Idaho Irrigation Pumpers Association
Inc.
B
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