20180511Decision Memo - PacifiCorp.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KIELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
DATE: MAY 11,2018
SUBJECT:PROPOSED SETTLEMENT REGARDING PACIFICORP DBA ROCKY
MOUNTAIN POWER IN THE COMMISSION'S INVESTIGATION INTO
THE IMPACT OF FEDERAL TAX CODE REVISIONS ON UTILITY
COSTS AND RATEMAKING - CASE NO. GNR.U.18.O1.
On May 11, 2018, PacifiCorp dba Rocky Mountain Power (the "Company") filed a
settlement Stipulation. The Stipulation is signed by the Company, Commission Staff, and
intervenors Idaho Irrigation Pumpers Association, PacifiCorp Idaho Industrial Customers, and
Monsanto Company (the only persons or entities who expressed interest in participating as to the
Company).
The Stipulation would return to customers the tax benefits the Company realizes under the
federal Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act"). The Stipulation provides, in
summary:
1. If the Company's costs and ratemaking expenses decrease, then the Company will
defer associated net savings effective January l, 2018, and return all benefits to customers.
a. Effective June 1,2018, Idaho retail revenues will decrease by $8.385 million
(about 3.UVo). The decrease consists of a $6.185 million in current federal and
state income tax savings to be returned to customers through new Electric
Service Schedule No. 197, and a $2.2 million reduction to Electric Service
Schedule No. 94 - Energy Cost Adjustment rate.
b. The Commission's 2017 Energy Cost Adjustment Mechanism ("ECAM") order
authorized the Company to amortize the 2013 depreciation regulatory asset by
$4 million per year (35Vo of the annual $11.5 million ECAM rccovery). See
Order No.33776. On May 3l,zOlJ, the 2013 depreciation regulatory asset
IDECISION MEMORANDUM
account had a $5.7 million balance, with an extra $1.8 million in incremental
depreciation to be deferred each year. On May 31,2018, the 2013 regulatory
asset balance will be about $3.5 million. The Company will offset this amount
with $3.5 million of Idaho's allocation of deferred tax savings, which will
decrease the annual ECAM rate by $2.2 million. Additionally, the final
Schedule 94 ECAM rate will collect $1.8 million more than the approved 2017
ECAM deferral to continue offsetting the $ 1.8 million incremental depreciation
deferral.
The Company will record any under or over allocation of the benefits as a Tax
Reform Act regulatory liability or asset, and will continue to defer any difference
until base rates are reset through a general rate case.
On June 15, 2018, the Company will file a final report on the Tax Reform Act's net
savings. The final report will: (1) include the calculation of excess deferred federal
income taxes associated with both protected and unprotected deferred tax balances;
and (2) reconcile 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 above.
Once the Company files its final report on June 15, 2018, the parties will initiate a
second phase in this proceeding as it relates to Rocky Mountain Power. In this
Phase II, the parties will review the remaining deferred balances, after accounting
for the stipulated rate decrease, and propose ratemaking treatment for them. The
normalization of tax savings subject to the average rate assumption method
("ARAM") will be identified as required by tax normalization provisions in the Tax
Reform Act. The ratemaking treatment of deferred tax savings not subject to
ARAM will be specifically determined in Phase II.
The Company will continue deferring the balance of the Tax Reform Act
regulatory account, including any balance after Phase II, until the Commission
determines its regulatory treatment and no later than in 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 each year until all tax benefits are
included in Commission-approved rates. The Company will return all balances to
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customers through Schedule l9l as reductions or offsets for rate stabilization
purposes in the ECAM.
6. The Company will 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 decrease, $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.
1. The Company will allocate $6.185 million to customer classes using the cost of
service Fl01 - Rate Base factor. The Company will allocate the rate reduction to all retail tariff
customers 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-11-12.
8. The Company will base its per kilowatt-hour energy price for Schedule No. 197 on
the same kilowatt-hour volumes by class that it used in its annual ECAM filing. To determine these
rates, the Company will calculate the price for each rate schedule by dividing the $6.185 million
by the corresponding annual energy for each rate schedule.
9. To avoid affecting demand-side management programs, the Company will apply
Schedule No. 191, Customer Efficiency Services Rate Adjustment, to customers'bills before
applying the proposed Schedule No. 197 sur-credit.
STAFF RECOMMENDATION
Staff recommends the Commission process the Stipulation by Modified Procedure with
Comments due in time for an approving order to issue by June I , 2018. To meet this deadline,
the Staff recommends the Commission set a May 22,2018 comment deadline, with any reply
due two days later, on May 24,2018.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Proposed Settlement and Notice of
Modified Procedure setting a May 22,2018 comment deadline and May 24,2018 reply deadline
relating to the Stipulation?
Karl T. Klein
Deputy Attorney General
l:UrgalMLrLTI-UTIl,ITY\GNR-U- I 8-0 l\lvlemos\GNRU I 801-k l0.docx
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