20190503final_order_no_34331_rocky mtn power.pdf

Office of the Secretary
Service Date
May 3,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )CASE NO.GNR-U-18-01
INTO THE IMPACT OF FEDERAL TAX )
CODE REVISIONS ON UTILITY COSTS AND )ORDER NO.34331
RATEMAKING )(ROCKY MOUNTAIN POWER)
On March 5,2019,Rocky Mountain Power,a division of PacifiCorp ("Company"),filed a
Phase II Stipulation ("Phase II Settlement Stipulation")that proposes to settle all remaining issues
as to the Company and return to customers 100%of the benefits that the Company has realized
from recent tax law changes.The Company,the Commission Staff,and intervenors Idaho
Irrigation Pumpers Association,Inc.,PacifiCorp Idaho Industrial Customers,and Monsanto
Company (the sole intervenors in this multi-utilitycase as it relates to the Company),have signed
the Phase II Settlement Stipulation and recommended the Commission approve it in the public
interest.
Having reviewed the record,the Commission finds the Phase II Settlement Stipulation is
just,fair,and reasonable.The Commission thus approves it in the public interest as discussed
below.
BACKGROUND
The federal Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act")decreased the federal
corporate tax rate from 35%to 21%,effective January 1,2018.In response,the Commission
opened this multi-utilitycase to investigate whether to adjust the rates of certain utilities so the
benefits from the reduced tax rate can pass to customers.See Order No.33965.The Commission
directed all affected utilities-including the Company-to immediately account for the tax
benefits as a regulatory liability,and to report on how the tax changes affected them,and how
resulting benefits could be passed on to customers.See id at 1-2.The Company filed its report,
which the Company styled as an application,on March 30,2018.
On May 31,2018,the Commission approvedan initial settlement stipulation signed by the
Company and all parties.The initial settlement stipulation required the Company to use Electric
Service Schedule 197-Federal Tax Act Adjustment,to refund $6,185,000 to Idaho retail
customers effective June 1,2018.This refund was to be a preliminaryportion of the tax benefits
the Company realized from the tax law changes.The initial settlement stipulation also provided
ORDER NO.34331 1
for a Phase II of the case.In Phase II,the parties were to review balances remaining after
accounting for the reduction to rates proposed in the initial settlement stipulation,and propose
ratemaking treatment for the remaining deferred balances.See Order No.34072.
On March 5,2019,the Company filed the Phase II Settlement Stipulation to settle all
remaining issues,and pass back to customers all benefits that the Company realized from the tax
law changes.
The Commission issued a Notice of Settlement Stipulation setting deadlines for interested
persons to comment on the Phase II Settlement Stipulation,and for the Company to file a reply.
See Order No.34272.Commission Staff filed the only comments,and recommended that the
Commission approve the Phase II Settlement Stipulation in the public interest.See Comments of
the Commission Staff on Phase II Settlement Stipulation (PacifiCorp)("Staff Comments").The
Company did not reply.
The Phase II Settlement Stipulation and the Staff's Comments are summarized below.
THE PHASE II SETTLEMENT STIPULATION AND COMMENTS
The parties believe the Phase II Settlement Stipulation is fair,just,and reasonable,and that
the Commission should approve it in the public interest.See Phase II Settlement Stipulation at 1
and 8;Staff Comments at 1 and 6.The Phase II Settlement Stipulation,if approved,would fully
return to customers the tax benefits the Company has realized under the tax law changes.The
Phase II Settlement Stipulation provides,in summary:
1.Effective June 1,2019,Schedule 197 rates would be revised to refimd to Idaho retail
customers about $7,589,000 annually,for an increase to the Phase I refund of about
$1,400,000.The revised Schedule 197 would remain in effect until rates are set in the
Company's next general rate case.
2.Starting June 1,2019,the Company will use the Energy Cost Adjustment Mechanism
("ECAM")to amortize over two years the $1,141,000 deferred balance of the current
tax savings from January 1,2018 through May 31,2019 not yet returned to customers.
3.The Idaho-allocated Excess Deferred Income Taxes ("EDIT")resulting from the new
tax laws include protected property-related EDIT of $105,924,604,with estimated
annual amortizations through the average rate assumption method ("ARAM")of
$2,564,410 in 2018,$2,352,309 in 2019,and $2,306,632 in 2020;and non-protected
and non-property EDIT of $14,883,505.As the EDIT balances amortize in rates,the
ORDER NO.34331 2
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.
4.The actual annual ARAM amortization of protected property-related EDIT,and the
annual straight-line amortization of non-protected property and non-property EDIT,
will be reduced by a rate base offset calculated at the pre-tax weighted average cost of
capital of 9.312%on the after-tax EDIT amounts until the EDIT rate base balances are
updated and included in the next Idaho general rate case.
5.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 ECAM's 90/10
sharing band.Additionally,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 1,2019,and be used in part to offset the 2013 incremental depreciation expense
deferral approved by Commission Order 32910 in Case No.PAC-E-13-04.Both will
be included in Idaho retail customer rates in the ECAM until the rate effective date in
the next general rate case,and will not be subject to the sharing band.The parties 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.
6.The tax savings to be passed through the ECAM to customers effective June 1,2019
will be accomplished by multiplyingIdaho retail energy for June 1,2019 through
May 31,2020 by $0.957 per megawatt hour ("MWh").
7.Effective June 1,2020,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.
8.When the Company files its next Idaho general rate case,the Company's application
will reflect information relating to the tax laws,includingcurrent federal income taxes
calculated using the test period data;annual amortization and updated balances of
ORDER NO.34331 3
protected property EDIT for the test period;annual amortization and updated balances
of non-protectedproperty and non-property EDIT for the test period;and the Schedule
197 rider will end with the rate effective date of the general rate case.
9.The ongoing 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 followingthe rate effective date in the
next general rate case.
10.Regarding rate design,the above-described rate reductions will be passed through to
customers under Schedule 197 or Schedule 94.
11.The $7,589,000 will be allocated to customer classes using the cost of service F101-
Rate Base factor.The rate reduction will be allocatedto 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-11-12.
12.To avoid affecting demand-side management programs,Schedule No.191,Customer
Efficiency Services Rate Adjustment,will be applied to customers'bills before
applying the proposed Schedule 197 sur-credit.
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 Phase II Settlement Stipulation,and Staff's
Comments.We note all parties have signed the Phase II Settlement Stipulation and support it,and
that no one opposes it.Further,the settling parties represent that the Phase II Settlement Stipulation
ORDERNO.34331 4
reasonably resolves the case and that it is in the public interest for the Commission to approve
it.We agree.
We note that,in Phase I,the Commission ordered the Company to decrease its total retail
revenues by about $8.385 million (3%)starting June 1,2018 (i.e.,$6.185 million annual base rates
decrease plus $2.2 million ECAM reduction).With the Phase II Settlement Stipulation,the parties
have now quantified the remaining tax-related benefits and established a reasonable method for
returning them to customers.These benefits include an additional $1.4 million in current tax
savings to be returned to customers each year through Schedule 197,starting June 1,2019 (i.e.,up
from the $6.185 million per year the Company began returning throughthe initial settlement
stipulation,to $7,598,000per year);$105.924million in protected property-related EDIT savings
to be returned to customers each year using the ARAM method through the ECAM;and $14.883
million in non-protected and non-property EDIT to be returned to customers in the ECAM over
seven years starting June 1,2019.We find the Phase II Settlement Stipulation builds on the initial
settlement stipulation to reasonably return to customers 100%of the financial benefit the Company
realized under the tax law changes.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 Phase II Settlement Stipulation-including
the proposed Electric Service Schedule 197 attached thereto-in the public interest.IDAPA
31.01.01.273.
ORDER
IT IS HEREBY ORDERED that the Company's Phase II Settlement Stipulation is
approved.The proposed Electric Service Schedule 197 attached to the Phase II Settlement
Stipulation is approved as filed,effective June 1,2019.
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.
ORDER NO.34331 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this y
day of May 2019.
PAU KJELLA DF ,DENT
KPI ÎÑËkAPÈ CÒMÉÏSSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.H ian '
Commission Secretary
GNRUl801 PAC SettlementOrderkk2
ORDER NO.34331 6