20180531final_order_no_34071_idaho_power.pdf

Office of the Secretary
Service Date
May 31,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )CASE NO.GNR-U-18-01INTOTHEIMPACTOFFEDERALTAX)CODE REVISIONS ON UTILITY COSTS AND )RATEMAKING )ORDER NO.34071
)(IDAHO POWER COMPANY)
On April 12,2018,Idaho Power Company filed a Settlement Stipulation and Motion to
Approve Settlement Stipulation.The Settlement Stipulation is signed by the Company,
Commission Staff,and the Industrial Customers of Idaho Power (the sole intervenor in this multi-
utility case as it relates to the Company).If approved,the Settlement Stipulation would return to
customers the tax benefits the Company has realized under new tax laws that decreased the
Company's corporate tax rate and expenses.
Having reviewed the record,the Commission finds the Settlement Stipulation is just,fair,
and reasonable.The Commission thus grants the Motion,and approves the Settlement Stipulation
in the public interest as discussed below.
BACKGROUND
The federal Tax Cuts and Jobs Act of 2017 (the "TCJA")decreased the federal corporate
tax rate from 35%to 21%,effective January 1,2018.After the TCJA passed,the Governor of
Idaho signed House Bill 463 reducing the Idaho State Corporate Income Tax rate from 7.4%to
6.925%.The tax rate reduction materially decreased the current and deferred tax expense included
in customers'rates.
The Commission opened this multi-utilitycase to investigate whether to adjust the rates of
certain utilities that benefit from the reduced tax rates.See Order No.33965.The Commission
directed all affected utilities-including the Company-to immediately account for the tax
benefits as a regulatory liability.The utilities also were to report on how the tax changes affected
them,and how they could pass any resulting benefits to customers.See id.at 1-2.
The Company filed its Report on March 30,2018 (the Company's "Report"),and
summarized the impact of the TCJA and Idaho state tax law changes on the Company as follows:
ORDER NO.34071 1
Tax Reform Impact-2017 Pro Forma Analysis
System Idaho Other
Current Tax Impact (Cash)($15,416,760)($11,178,487)($4,238,273)
Deferred Tax Impact (NonCash)($15,690,259)($14,918,298)($771,961)
Total Tax Reform Impact ($31,107,019)($26,096,785)($5,010,234)
Note:The "Other"category reflects tax benefits apportioned to the Company's other retail and
wholesale jurisdictions.
Report at 3.
After the Company filed its Report,the Company,Commission Staff,and the Industrial
Customers of Idaho Power (collectively,the "Parties")conducted settlement discussions and filed
the Settlement Stipulation now under consideration.Settlement Stipulation at 4.
The Commission issued a Notice of Settlement Stipulation setting deadlines for interested
persons to comment on the Settlement Stipulation.See Order No.34039.Commission Staff and
the Company filed the only comments,and recommended that the Commission approve the
Settlement Stipulation in the public interest.See Comments of the Commission Staff in Support
of Settlement Stipulation Re:Idaho Power Company ("Staff Comments"),and Idaho Power
Company's Comments in Support of Settlement Stipulation.
The Settlement Stipulation,and the Staff's and Company's Comments,are summarized
below.
THE SETTLEMENT STIPULATION AND COMMENTS
The Parties believe the Settlement Stipulation is fair,just,and reasonable,and that the
Commission should approve it in the public interest,because it would return to customers all the
tax benefits the Company has realized under the tax law changes and have limited negative impact
on the Company.See Settlement Stipulation at 2;Staff Comments at 2-3;Company Comments at
6-10.In summary,the Settlement Stipulation,if approved,would:(A)provide customers $33.9
million in cash and non cash benefits associated with the Company's decreased tax burden,and
(B)extend the Company's Accumulated Deferred Income Tax ("ADITC")/Revenue Sharing
Mechanism beyond 2019 and increase customers'share of Company earnings from 75%to 80%
when the Company's year-end return on equity ("ROE")exceeds 10%but is no more than 10.5%.
These customer benefits are further described below.
ORDER NO.34071 2
A.Customers Would Receive $33.9 Million Benefits Related to the Company's
Decreased Tax Burden.
Under the Settlement Stipulation,the Company would provide customers with $33.9
million in benefits related to its decreased tax expenses.This total benefit includes:(1)a $26.5
million rate decrease consisting of an $18.7 million base-rate decrease and a $7.8 million Power
Cost Adjustment ("PCA")decrease,and (2)a $7.4 million non cash annual benefit that would
offset certain deferred costs that customers might otherwise pay through rates.These benefits are
further explained below.
1.$26.5 Million Rate Decrease.
The Settlement Stipulation would directly decrease customer rates by $26,497,560 from
June 1,2018 through May 31,2019.This direct rate decrease consists of:(a)an $18,678,936base-
rate decrease passed to customers through a uniform percentage decrease to all base-rate
components except the service charge,and (2)a $7,818,624 decrease through a rate credit from
the revenue sharing component in the Company's PCA.''The $18.7 million base-rate decrease
would continue until the Company's base rates change through a future general rate case or other
proceeding.The initial $7.8 million PCA credit would continue from June 1,2018 through May
31,2019.The credit would then decrease to $2,680,957on June 1,2019,and reach $0 on June 1,
2020.See Settlement Stipulation at 6-8;Staff Comments at 4-5;Company Comments at 4-5.
2.$7.4 Million Offset to Deferred Costs.
The Settlement Stipulation would provide a non cash annual benefit of about $7.4 million
to offset deferred costs that customers would otherwise have to pay through rates.Items to be
offset include about $1 million of deferred operations and maintenance expenses associated with
the Energy Imbalance Market;$2.8 million associated with Idaho's jurisdictional share of
settlement expenses incurred as part of relicensing the Hells Canyon Complex;and $3.6 million
in nonspecific current and future deferrals as allowed for recovery from customers by the
Commission.Starting on June 1,2019,the entire $7.4 million will accumulate each year as a
regulatory liability,until the Company's next general rate case or when modified by the
Commission.See Settlement Stipulation at 8-9;Staff Comments at 5;Company Comments at 5.
*Order Nos.30978,32424,and 33149 established the ADITC/RevenueSharing Mechanism that enables the Company
to either (1)amortize additional ADITC,or (2)share a portion of its revenues with customers through a credit on their
bills when the Company's return on equity exceeds a certain level.The current ADITC/RevenueSharing Mechanism
would expire on December 31,2019,absent the Settlement Stipulation.See Settlement Stipulation at 10;Staff
Comments at 2,5-6;Company Comments at 5-6.
ORDER NO.34071 3
B.Modified and Extended ADITC/Revenue Sharing Mechanism.
Besides providing customer benefits related to the Company's decreased tax burden,the
Stipulated Settlement would provide additional customer benefits by modifying the Company's
ADITC/Revenue Sharing Mechanism and extending it beyond its December 31,2019 termination
date.Beginning in 2020,customers would share in a higher portion of the Company's revenue if
revenue sharing is achieved.Under the current Mechanism,customers receive 75%of the
Company's earnings when the Company's ROE exceeds 10%but is less than or equal to 10.5%.
The Settlement Stipulation would increase the customers'earnings share to 80%.And if the
Company's Idaho jurisdictional ROE were to fall below 9.4%(vs.9.5%under the current
Mechanism)for any year beginning January 1,2020,the Company could help stabilize its earnings
by amortizing up to another $5 million of state and federal ADITC.See Settlement Stipulation at
10-13;Staff Comments at 5-6;Company Comments at 5-6,9-10.
DISCUSSION AND FINDINGS
The Commission considers settlement stipulations under Rules 271-277.IDAPA
31.01.01.271-277.When a settlement is presented to the Commission,the Commission will
prescribe the procedures appropriate to the nature of the settlement to consider it.IDAPA
31.01.01.274.Further,proponents of a settlement must show that the settlement is reasonable,in
the public interest,or otherwise in accordance with law or regulatory policy.IDAPA
31.01.01.275.Finally,the Commission is not bound by settlement agreements.Instead,the
Commission "will independently review any settlement proposed to it to determine whether the
settlement is just,fair and reasonable,in the public interest,or otherwise in accordance with law
or regulatory policy."IDAPA 31.01.01.276.
We have reviewed the record,including the Company's initial Report,the Settlement
Stipulation,Staff s Comments,and the Company's Comments.We note all Parties have signed
the Settlement Stipulation and support it,and that no one opposes it.Further,the settling Parties
represent that the Settlement Stipulation reasonably resolves the case and that it is in the public
interest for the Commission to approve it.We agree.
The Settlement Stipulation would reasonably return to customers 100%of the financial
benefit the Company realized under the tax law changes.The Settlement Stipulation not only
would provide customers with a $26.5 million rate decrease,it would lessen the impact of potential
ORDER NO.34071 4
future rate increases by creating a $7.4 million regulatory liability to offset regulatory assets.
Moreover,it would modify the ADITC/Revenue Sharing Mechanism to increase customers'share
of revenues,and allow revenue sharing to continue beyond2019.Accordingly,based on the record
before us,and to aid "in securing a just,speedy and economical determination of the issues
presented to the Commission,"we find it reasonable and appropriate to approve the Settlement
Stipulation-including the proposed tariff schedules included as Settlement Stipulation
Attachment 2-in the public interest.IDAPA 31.01.01.273.
ORDER
IT IS HEREBY ORDERED that the Company's Motion is granted,and the associated
Settlement Stipulation-includingthe proposed tariff schedules included as Settlement Stipulation
Attachment 2-is approved.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of May 2018.
PAÙL JELLANDI R,RESIDENT
KR MMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
GNRUl80l IPC SettlementOrderkk
ORDER NO.34071 5