20190305PacifiCorp Phase II Stipulation.pdf

Y ROCKY MOUNTAIN
BSg,E^.n"*,
I'li:0i:i','E D
:I:::it'll -5 Fl'i l0' 57
1407 West North Temple, Suite 330
Salt Lake City, Utah 84116
March 5,2019
VA OVERNIGHT DELIVERY
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise,lD 83702
Re:CASE NO. GNR.U.18-01
INYESTIGATION INTO THE IMPACT OF FEDERAL TAX CODE REVISIONS
ON UTILITY COSTS AIID RATEMAKING
Dear Ms. Hanian:
Please find enclosed an original and seven (7) copies of the fully executed stipulation between all
intervening parties in the above referenced matter.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at (801) 220-
2963.
V truly yours,
Vice President, Regulation
c.^,.'D
CERTIFICATE OF SERYICE
I hereby certify that on this 5ft of March, 2}l9,l caused to be served via e-mail a true and
correct copy of Rocky Mountain Power's Phase II Stipulation in Case No. GNR-U-18-01 to the
following:
Service List
IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.
Eric L. Olsen
ECHO HAWK & OLSEN, PLLC
505 Pershing Ave., Ste. 100
P.O. Box 6119
Pocatello, Idaho 83205
E-mail : elo(Dechohawk.com
Anthony Yankel
12700Lake Avenue, Unit 2505
Lakewood, Ohio 44107
E-mail: [e-mail]
MONSANTO COMPANY
Randall C. Budge
Racine, Olson, Nye & Budge, Chartered
P.O. Box 1391;201E. Center
Pocatello, Idaho 83204- I 39 1
E-mail : [e-mail]
[e-mail]
Brubaker & Associates
16690 Swingley Ridge Rd., #140
Chesterfield, MO 63017
E-mail : [e-mail]
[e-mail]
PIIC
Ronald L. Williams
Williams Bradbury, P.C.
P.O. Box 388
Boise ID, 83701
E-mail : [e-mail]
Jim Duke
Idahoan Foods
E-mail : [e-mail]
Kyle Williams
BYU Idaho
E-mail : [e-mail]
Val Steiner
Nu-West Industries, Inc.
E-mail : [e-mail]
Bradley Mullins
1750 SW Harbor Way, Suite 450
Portland, OR 97201
E-mail : [e-mail]
PACIFICORP, DBA ROCKY MOUNTAIN POWER
Ted Weston
PacifiCorp, dba Rocky Mountain Power
1407 West North Temple
Suite 330
Salt Lake City, UT 84116
E-mail : ted.weston@pacifi corp.com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, OF.97232
E-mail : datarequest@fracifi corp.com
Page I of2
Dated this 5th day of March,2019.
Katie Savarin
Coordinator, Regulatory Operations
Page2 ofZ
Ve,"W
Yvonne R. Hogle (#8930)
1407 West North Temple, Suite 320
Salt Lake Ciry, Utah 84116
Telephone: [phone]
Facsimile : (80 l) 220 -3299
Email : wonne.hosle@pacifi corp.com
Attorney for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
INYESTIGATION INTO THE IMPACT OF
FEDERAL TAX CODE REVISIONS ON
UTILITY COSTS AND RATEMAKING
CASE NO. GNR-U-18-01
PHASE II 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 ("Monsanto"). The
Stipulation refers to the Company, Staff, IIPA, PIIC and Monsanto individually as a "Part5/," and
collectively, as the "Parties."
I.INTRODUCTION
t. 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 in this case, 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 3 1 .0 I .0 | .27 l, 27 2, and 27 4.
II. BACKGROUND
2. On or about December 22, 2017, Congress enacted ooan act to provide for
1
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 based on the December 31,
2016, normalized Results of Operations. These results were updated with 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 3l,2017,normalized Results
of Operations with the Commission. Based on these results the Company provided the final
revenue requirement impacts and a calculation of the other benefits on June 15, 201 8.
6. On May 11,2018, the Parties entered into and filed a stipulation ("Phase I
stipulation") with the Commission to refund $6,185,000 to Idaho retail customers, effective
June I ,2018, as a preliminary portion of the current tax benefits arising from the Tax Reform Act.
The Parties also agreed to a second phase ("Phase II") of this case where Parties would have the
opportunity to review the balances that remain after accounting for the reduction to rates proposed
in Phase [, as well as propose ratemaking treatment for the remaining deferred balances.
2
I Case No. GNR-U-I8-01 OrderNo. 33965
7. With the intent of resolving the issues related to Phase II of this case, the Parties
met on December 20,2018, and January 18,2019, pursuantto IDAPA 31.01.01 .271 and272,for
additional settlement discussions. Based upon the settlement discussions among the Parties, as a
compromise of the positions in Phase II, 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.
III. TERMS OF THE STIPULATION
8. The Parties agree that, under this Stipulation, Idaho customers will receive all net
benefits of the Tax Reform Act, and that the terms of this Stipulation should remain in effect until
the effective date ofthe rates set in the Company's next general rate case, at which time the benefits
will be reflected in base rates approved in that case, or otherwise handled as specifically set forth
below.
9. PacifiCorp represents that it has accurately calculated the benefits of the Tax
Reform Act, including Excess Deferred Income Taxes ("EDIT"), and used an appropriate
methodology to provide these benefits to customers.
10. The Parties agree that the Tax Reform Act results in a reduction in current income
taxes, calculated to be approximately $7,589,000 per year.
I l. The Parties agree that, through Electric Service Schedule 197 - Federal Tax Act
Adjustment ("Schedule 197"), the Company is currently refunding to Idaho retail customers
approximately $6,185,000 in income tax savings annually, consistent with the Phase I stipulation
("Phase I refund").
12. The Parties agree that, effective June 1, 2019, Schedule 197 rates will be revised to
refund to Idaho retail customers approximately $7,589,000 annually, an increase to the Phase I
J
refund of approximately $1,400,000. The Parties agree that Schedule 197 will remain in effect
until the effective date ofthe rates set in the next general rate case.
13. The Parties agree that $1,141,000 is the deferred balance of the current tax savings
for the period of January l, 2018, through May 31, 2019,that has not been returned to customers
through Schedule 197 . The Parties agree that this balance will be tracked and amortized over two
years ($570,500 per year), beginning June 1,2019, through the Energy Cost Adjustment
Mechanism ("ECAM").
14. The Parties agree that the Tax Reform Act results in Idaho-allocated EDIT
composed of the following, grossed-up for taxes:
o Protected property-related EDIT of $105,924,6042, with estimated annual
amortizations through the average rate assumption method ("ARAM") of
52,564,410 in 2018, $2,352,309 in 2019, and $2,306,632in20201; and
o Non-protected property and non-property EDIT of $14,883,505.4
15. The Parties agree that as the EDIT balances amortize in rates, the amounts will
include a rate base carrying charge offset to account for the corresponding increase in rate base
associated with the amortized EDIT until the next Idaho general rate case.
16. The actual annual ARAM amortization of protected property-related EDIT will be
reduced by a rate base offset calculated at the pre-tax weighted average cost of capital of 9.312
percent on the after-tax (i.e. not grossed-up) EDIT amounts until the EDIT rate base balances are
updated and included in the next Idaho general rate case. These balances are illustrated in
Attachment A.
2 The protected property EDIT is $79,881,345, or $105,924,604 grossed up for taxes.
3 The estimated annual amortizations will be updated based on actual tax retum data.
a The non-protected property EDIT is $10,009,386, or $13,272,689 grossed up for taxes, and non-protected non-
property total EDIT is$1,214,771, or $1,610,816 grossed up for taxes.
4
17. The annual straight-line amortization of non-protected property and non-property
EDIT will also be reduced by a rate base offset calculated at the pre-tax weighted average cost of
capital of 9.312 percent on the after-tax (i.e. not grossed-up) EDIT amounts until the EDIT rate
base balances are updated and included in the next Idaho general rate case. These balances are
illustrated in Attachment A.
18. The Parties agree that the actual annual ARAM amortization of protected property
EDIT, less the associated rate base offset, will be refunded to Idaho retail customers in the
subsequent year through the ECAM under Schedule 94 and will not be subject to the sharing band.
To illustrate, the estimated 201 8 amount of $2,564,41 0, less the associated rate base offset, will be
returned to customers through a cents per kilowatt-hour credit applied to Idaho load effective June
1,2019 through May 31, 2020, and the 2019 amounts will likewise be credited using the 2020
ECAM load, on the effective date of such rates, and the 2020 amounts will likewise be credited to
the202l ECAM load, on the effective date of such rates.
19. The Parties agree that the non-protected property and non-property EDIT will be
amortized over seven years ($2,126,215 per year less the rate base offset), beginning June I ,2019,
and be used in part to offset the 2013 incremental depreciation expense deferral approved by
Commission Order 32910 in Case No. PAC-E-I3-04. Both of which will be included in Idaho
retail customer rates in the ECAM untilthe rate effective date in the next general rate case and will
not be subject to the sharing band.
20. The Parties agree that they may propose to change the seven-year amortization
period for the unamortized portion of the non-protected property and non-property EDIT balance
in the next Idaho general rate case.
5
21. The Parties agree that the tax savings listed above to be passed through the ECAM
to customers effective June 1,2019 will be accomplished by multiplying Idaho retail energy for
June l, 2019 through May 31,2020 by $0.957 per megawatt hour ("MWh") as set forth and
summarized in Attachment A.
22. The Parties agree that, effective June l, 2020, the Company will update the tax
amortization rate to include any over or under collection from the prior period along with the 2019
protected property EDIT amount updated based on actual tax return data and reduced for the
corresponding rate base carrying charge offset. The current estimated rate before these true-ups is
$0.853 per MWh, as set forth and summarized in the attached Attachment A.
23. The Parties agree that when the Company files its next Idaho general rate case, the
Company will reflect in its application the following information related to the Tax Reform Act:
o current federal income taxes calculated using the test period data;
o annual amortization and updated balances of protected property EDIT for the test
period;
o annual amortization and updated balances of non-protected property and non-
property EDIT for the test period;
o Schedule 197 rider will end with the rate effective date of the general rate case.
24. The Parties agree that the on-going incremental depreciation expense associated
with the 2013 depreciation study will be included in base rates beginning on the effective date of
the rates set in the next Idaho general rate case. Any deferred balance associated with the 2013
depreciation will be trued-up in the next ECAM following the rate effective date in the next general
rate case.
6
IV. RATE DESIGN
25. The Parties agree that the rate reductions agreed to in this Stipulation will be passed
through to customers under Schedule 197 or Schedule 94, as specifically set forth above.
26. The Parties agree that the $7,589,000 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 class cost of service study as filed in Case
No. PAC-E-ll-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. Attachment B shows the proposed rates by customer class for Schedul e 197 to be effective
June 1, 2019.
27. To avoid impacting demand-side management programs, the Parties agree that
Schedule No. 191, Customer Efficiency Services Rate Adjustment, will be applied to customers'
bills prior to applying the proposed Schedule 197 sur-credit.
V. GENERAL PROVISIONS
28. The Parties agree that this Stipulation represents a compromise of their positions
on all issues in this case. All negotiations relating to this Stipulation will not be admissible as
evidence in this or any other case regarding this subject matter.
29. The Parties submit this Stipulation to the Commission and recommend approval in
its entirety pursuant to IDAPA 31.01.01.274.
30. 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
7
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.
31. 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.
32. 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 case, within 15 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 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.
33 . The Parties agree that this Stipulation is in the public interest and that all of its terms
and conditions are fair, just and reasonable.
34. 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 case 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.
8
35. 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 5th day of March,2019.
9
Rocky Mountain Power Idaho Public Utilities Commission Staff
PacifiCorp Idaho Industrial Customers Monsanto Company
Idaho Irrigation Pumpers Association
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ROCKY MOUNTAIN
POWER
A DIVISIOT{ OF PACIFICORP
First Revision of Sheet No. 197.1
LP.U.C. No.1 Canceline 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
I
6
6A
7
7A
9
10ll
t2
l9
23
234
24
35
35A
36
400
401
-0.309?fP,t, perkWh
-0.218+%i per kWh
-O.re+%( per kWh
-0.415+l8C per kWh
-0.4l53E'*( per kWh
-0.l5gs9p per kWh
-0.ruU20 per kWh
-0.485395( per kWh
-0.12115s1 per kWh
-0.302246( per kWh
-0.ru)48( perkWh
-0.ru+9{.( perkWh
-9.2164?6(, per kWh
-0.118145( per kWh
-0.U8145i per kWh
-0.336?#4li per kWh
-0.1598q per kWh
-0.157128( per kWh
Submitted Under Case No. GNR-U-18-01
ISSUED: @ EFFECTM: June l,2019&
ROCKY MOUNTAIN
POWER
A DMSION OF PACIFICORP
LP.U.C. No.1
First Revision of Sheet No. 197.1
Canceling 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
-0.309i, per kWh
-0.216i, per kWh
-0.216( per kWh
-0.415f, per kWh
-0.415(, per kWh
-0.1581 per kWh
-0.261i, per kWh
-0.485i, per kWh
-0.19U, per kWh
-0.302i, per kWh
-0.243(, per kWh
-0.243(, per kWh
-0.216( per kWh
-0.178(, per kWh
-0.1781, per kWh
-0.336(, per kWh
-0.159(, per kWh
-0.157(, per kWh
I
6
6A
7
7A
9
10
l1
t2
t9
23
234
24
35
3sA
36
400
401
Submitted Under Case No. GNR-U-I8-01
ISSUED: March 5,2019 EFFECTM: June 1,2019