HomeMy WebLinkAbout20190405Comments - PacifiCorp.pdfKARL KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-0320
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
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-18.01
COMMENTS OF THE
COMMISSION STAFF ON
PHASE II SETTLEMENT
STIPULATION (PACIFICORP)
The Staff of the Idaho Public Utilities Commission comments as follows on the Phase II
Stipulation (the "Phase II Settlement Stipulation") that Rocky Mountain Power, a division of
PacifiCorp ("Company") has filed in this case. If approved, the Phase II Settlement Stipulation
would 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. As explained below, Staff
believes the Phase II Settlement Stipulation is just, fair, and reasonable. Staff thus recommends
the Commission approve it in the public interest.
BACKGROUND
The federal Tax Cuts and Jobs Act of 2017 ("TCJA") decreased the federal corporate tax
rate from 35o/o to 2lYo, effective January 1,2078. In response, the Commission opened this
multi-utility case 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
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1STAFF COMMENTS APRIL 5,2019
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 l-2. The Company filed its report, which
the Company styled as an application, on March 30, 2018.
On May 31,2018, the Commission entered an order approving an 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 ldaho retail customers effective June 1,2018. This refund was to be a preliminary
portion of the tax benefits the Company realized from the tax law changes. The initial settlement
stipulation also provided 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, which
proposes to settle all remaining issues as to the Company and retum 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-utility case as it
relates to the Company), have signed the Phase II Settlement Stipulation and recommended the
Commission approve it in the public interest.
SUMMARY OF PHASE II SETTLEMENT STIPULATION
The Phase II Settlement Stipulation, if approved, would return to customers the tax
benefits the Company has realized under the tax law changes. The Phase II Settlement
Stipulation provides, in summary:
I . Effective June I ,2019, Schedule 197 rates would be revised to refund 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
2STAFF COMMENTS APRIL 5,2019
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 in2019, and $2,306,632 in2020; and non-protected
and non-property EDIT of $14,883,505. 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.
4. The actual annual ARAM amortization of protected property-related EDIT, and the
annual straight-line arnortization 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 9.3l2Yo 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 No. 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 l, 2019
will be accomplished by multiplying Idaho retail energy for June 1,2019 through
May 3 7,2020 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.
aJSTAFF COMMENTS APRIL 5,2019
8. When the Company files its next Idaho general rate case, the Company's application
will reflect information relating to the tax laws, including: current federal income
taxes calculated using the test period data; annual amortization and updated balances
of protected property EDIT for the test period; annual amortization and updated
balances of non-protected property 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 following the 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.
I I . The $7,5 89,000 will be allocated to customer classes using the cost of service F 1 0 I -
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-11-12.
12.To avoid affecting demand-side management programs, Schedule No. l9l, Customer
Efficiency Services Rate Adjustment will be applied to customers' bills before
applying the proposed Schedule 197 sur-credit.
13. The parties recommend the Commission approve the Phase II Settlement Stipulation
in the public interest, and state that its terms are fair, just, and reasonable.
STAFF REVIEW
Staff has reviewed the Phase II Settlement Stipulation and believes it is just, fair,
reasonable, and in the public interest. Staff thus recommends the Commission approve it as
filed. If approved, the Phase II Settlement Stipulation will return to customers the remaining
savings that resulted from the TCJA. These savings include current tax savings, protected EDIT
savings, and non-protected EDIT savings, and are described below.
4STAFF COMMENTS APRIL 5,2019
Curuent Tax Savings
The Phase II Settlement Stipulation states that the current tax savings are $7.589 million
per year. Staff has audited this figure and conf,rrmed it is accurate. In the Phase I settlement
stipulation approved in Order No. 34072, the Company began returning $6.185 million to
customers annually. The Phase II Settlement Stipulation increases that amount to $7.589 million
beginning June 1, 2019. The signing parties agree to maintain the rate design for Schedule No.
797 as established in the previous stipulation.
In Order No. 33965, the Commission directed the Company to record the benefits of the
TCJA beginning January 1,2018. During Phase I of the case, the Company returned to
customers $3.425 million of the current tax benefits that accrued after January l, 2018 . The
signing parties agree that $1.141 million in current tax benefits remains as a deferred liability for
the period of January I , 2018 through May 3 7 , 2019, and that this amount will be tracked and
returned to customers through the ECAM over two years beginning June 1,2019.
Protected EDIT Savings
The Phase II Settlement Stipulation quantifies $105.924 million as the Idaho-allocated
protected EDIT benefits from the TCJA. Staff audited the protected EDIT and confirmed this
amount is correct. To avoid a normalization violation, this benefit will be returned annually
using the ARAM method. Because the ARAM amount changes annually, the annual figures
could not be audited. However, the benefits from the protected EDIT will be returned annually
in the ECAM, where there will be opportunities to audit this amount each year.
Non-Protected EDIT Savings
The Phase II Settlement Stipulation also quantifies $14.883 million as the Idaho-allocated
non-protected EDIT benefits from the TCJA. Staff audited the non-protected EDIT and
confirmed that the amount in the Phase II Settlement Stipulation is correct. This amount will be
returned to customers in the ECAM over a seven-year period beginning June 1, 2019.
In Order No. 32910, the Commission approved a settlement stipulation that allowed the
Company to defer, on a monthly basis, the aggregate net increase in depreciation expense from
January 1,2014 until new depreciation rates are reflected in customer rates. The Phase II
Settlement Stipulation provides that the Company must first use the non-protected EDIT to be
returned to customers to offset the incremental depreciation expense deferral. The Company will
5STAFF COMMENTS APRIL 5,2019
include the net increase in depreciation expense and any remaining non-protected EDIT in rates
through the ECAM until the effective date set in the next general rate case.
EDIT reduces rate base. When EDIT balances are amortized and returned to customers,
the Company's rate base will increase. The amortization will include a rate base carrying charge
offset to account for the corresponding increase in rate base. The rate base carrying charge offset
reflects the most recently approved weighted average cost of capital, which when grossed up for
tax effects is 9.312Yo. This amount will reduce the EDIT amortization returned to the customers.
STAFF RECOMMENDATION
The Phase II Settlement Stipulation is an equitable compromise that returns all benefits
from the TCJA to customers. Staff believes the Phase II Settlement Stipulation is just, fair, and
reasonable and in the public interest, and thus recommends the Commission approve it.
Respectfully submitted this ' V, day of April2}lg
Il 7/-
Karl Klein
Deputy Attorney General
Technical Staff: Joseph Terry
Brad Iverson-Long
i:umisc/comments/gnrul 8. lkkjtl settlement comments
6STAFF COMMENTS APRIL 5,2019
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 5TH DAY OF APRIL 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF
ON PHASE II SETTLEMENT STIPULATION (PACIFICORP), IN CASE NO.
GNR-U-I8-OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
TED WESTON
ROCKY MOL]NTAIN POWER
I4O7 W N TEMPLE STE 330
SALT LAKE CITY UT 84116
E-mail: ted.weston@pacificorp.com
RONALD L. WILLIAMS
WILLIAMS BRADBURY PC
PO BOX 388
BOISE ID 8370I
E-mail : ron@williamsbradbury.com
ERIC L OLSEN
ECHO HAWK & OLSEN PLLC
505 PERSHING AVE STE IOO
PO BOX 61 19
POCATELLO ID 83205
E-mail : elo@"echohawk.com
YVONNE R. HOGLE
ROCKY MOUNTAIN POWER
I4O7 W N TEMPLE STE 320
SALT LAKE CITY UT 84116
Email : Yvonne. ho gel@p acif\corp-qenn
RANDALL C BUDGE
RACINE OLSON NYE & BUDGE
PO BOX 1391
2OI E CENTER
POCATELLO ID 83204-1391
E-mail : rcb@racinelaw.net
-1, //0^r'
SECRETARY
CERTIFICATE OF SERVICE