20090714Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
RECEl\'
20M JUL \ 4 PH 3: 34
IDAHO PllBUG .'.l'~ .. ,¡;liC'","Ir;,,1
UT1UTif:S COrMv\;'.)';:;"~""
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
CAPITOL WATER TO ESTABLISH A NEW )
TARIFF RATE TO RECOVER ITS POWER )COSTS. )
)
)
CASE NO. CAP-W-09-1
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staf of the Idaho Public Utilities Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 30850 on June 23,2009, in
Case No. CAP- W -09-1, submits the following comments.
BACKGROUND
On May 8, 2009, Capitol Water Corporation filed an Application for authority to establish
a new tarff rate to recover the Company's increased cost of electricity corresponding to Idaho
Power Company's recently approved Rate Schedule No. 55, "Power Cost Adjustment." Capitol
Water requests that the Application be processed by Modified Procedure.
In April 2009, the Commission issued final Order No. 30762 that established just and
reasonable rates for Capitol Water. In that Order the Commission allowed Capitol Water to
recover its expenses for electricity by utilzing a three-year consumption average. The
STAFF COMMENTS 1 JULY 14,2009
Commission determined the Company's average annua electricity consumption to be 1,454,401
kWh. Order No. 30762 at 3.
Capitol Water requests a new tariff rate to recover its cost of electricity related to the
recent increase in Idaho Power Company's Schedule No. 55, Power Cost Adjustment (PCA)I.
Capitol Water proposes a change to its Schedule NO.3 (Other Recuring and Non..
recuring Charges) for a period of one year to allow it to collect additional revenue (electricity
costs + the cost of filing its Application in this matter). Capitol Water maintains that, in each
subsequent year, it will review Idaho Power's PCA applications and fie with the Commission
appropriate requests to pass through any increases or decreases in electric power costs to its
customers.
INTERIM ORDER
Capitol Water's Application in this case is based entirely on the change in Idaho Power's
PCA rate. Therefore, the Commission found it reasonable to allow Capitol Water Company to
implement an increase (subject to refud) on July 1,2009, consistent with the Commission-
approved Idaho Power PCA rate of 1.4022 cents per kWh. Order No. 30850. The Commission
further found that because the rate increase is subject to refund, ratepayers are protected from an
uneasonable rate increase until the Commission has completed its review of the reasonableness
and prudency of the Company's proposed changes. On June 24, 2009, Capitol Water fied a new
Schedule NO.3 in compliance with Order No. 30850 and the Commission subsequently issued a
Minute Order on June 30, 2009 approving the interim tariff.
STAFF ANALYSIS
Capitol Water requests a new taiff rate to recover its electric costs related to the change in
Idaho Power's Schedule 55, Power Cost Adjustment (PCA). Capitol Water observed that Idaho
Power had requested an increase in its PCA rate from 0.7864 cents per kWh to 1.4717 cents per
kWh to be effective June 1,2009. Based on Capitol Water's average anual electricity
consumption and the Idaho Power's proposed PCA increase, the Company contended that it
would incur additional electricity costs of$9,967.01, or a 13.02% increase in total electric costs.
i On May 29, 2009, the Commission issued Order No. 30828 approving an increase in Idaho Power's PCA rate. The
PCA rate was set at 1.4022 cents per kWh effective June i, 2009.
STAFF COMMENTS 2 JULY 14, 2009
Based on the Commission's determination of the Company's three-year average electrical
consumption used in its 2008 rate case, the total electric cost to Capitol Water using Idaho
Power's Commission approved PCA rate of 1.4022 cents would be $20,393. This results in an
increase of $8,956 in total electric costs. Adding $500 for the requested rate case expenses
(Application, p. 2) results in a total calculated incremental cost to Capitol Water of $9,456. Using
the Company's approved total revenue requirement of$651,738, the percent increase of total
revenue needed to recover the incremental PCA cost is 1.45%.
Staff considers the effect of the recent increase in Idaho Power's PCA to be a burden on
the Company's financial status. Consequently, Staff believes that recovering this incremental
increase in power cost through a rate increase is prudent and reasonable.
The Company states in its Application that it wil review, in each subsequent year, Idaho
Power's PCA applications and make its own appropriate applications to the Commission to pass
through any increases or decreases in electric power cost. Application, p. 2. The Company did
not explain its criteria in determining when to fie an appropriate application for adjustments.
Staff notes that Idaho Power's PCA is adjusted generally once a year with an effective
date usually set in Mayor June. See Attachment i. The anual PCA surcharge or credit is
combined with Idaho Power's "base rates" to produce an overall energy rate. To verify the
impacts of PC A changes to Capital Water's base revenue approved in Order No. 30762, Staf
analyzed several PCA scenarios. The results of Staffs analyses are shown in Attachment II. As
one might expect, the analyses reveal that future Idaho Power PCA adjustments could trigger
either an increase or decrease in Capital Water's electric costs and, thus, its rates if the revenue
impact exceeds Staff s proposed threshold.
Staff believes when a change in Idaho Power's PCA is small, it may not be reasonable for
the Company to change its rates. The extra time, effort and cost involved in preparing, filing and
processing a case before the PUC and the possible confusion caused by a change may not be
justified for recovery of a small change in power costs. There should be a balance between the
benefits of applying for adjustments (added revenue to the Company or reduced rates for the
customers) versus the cost incured by the Company in fiing an application for rate adjustments
(including the associated costs of changing the customer invoices to reflect the change).
Staff recommends that an upper and lower limit of approximately 0.25% increase and
STAFF COMMENTS 3 JUL Y 14, 2009
-0.25% decrease, respectively, of Capital Water's base revenue requirement be used as criteria for
determining when a power cost adjustment should be fied. This is equivalent to a change in
power supply costs of approximately plus or minus $1,629 per year. While the selection of the
trigger limits is somewhat arbitrary, Staff believes the proposed revenue band adequately
compensates Capitol Water when its power costs change significantly. At the same time, it limits
anual rate changes and the additional time, effort and costs to the Company in making the filing
and changing billng documents.
These recommended limits would only be applicable to Capitol Water while the
Commission approved normalized electric consumption of 1,454,401 kWh and base revenue
requirement of$651,738 are in effect. New normalized kWh consumption and any altered
revenue requirement set by the Commission in futue rate cases will trigger a new calculation for
incrementa power cost adjustments.
STAFF AUDIT
Staff conducted an audit of the rate case expenses. Staff is informed by the Company's
consultat that the estimated rate case costs have increased from the initial $500, and that the
curent costs would fuher increase before the case is over. Staff asked the Company to estimate
the additional amount needed to finish processing the case. The Company's consultat estimates
that he will spend another 1.5 hours to complete the final tariffs after the final order has been
issued in this case. To date, the Company has spent $1,147.50 in rate case costs and the estimate
for the total charges for the case is $1,275.
Staff recommends that the increase in rate case expenses not be adjusted. Staff notes that
the curent and estimated rate case costs of$1,275 are 14.24% of the incremental power costs.
Staff notes that the additional rate case expenses of $775 should not be overly burdensome to the
Company, and that there is already an amount built into rates for this type of expense. Therefore,
Staff recommends that the curent surcharge not be increased for rate case expenses in excess of
the original $500 requested in Capitol Water's Application.
STAFF COMMENTS 4 JULY 14, 2009
STAFF RECOMMENDATIONS
Staff recommends the interim increase approved by Order No. 30850 covering the PCA
increased expenses of $8,956 plus $500 in rate case expenses be made permanent. The total
increase of $9,456 results in a 1.45% incrementa increase.
Staff also recommends a band be utilzed to determine when it is appropriate for Capitol
Water to file an Application to recover electric costs based on Idaho Power's PCA adjustments.
The recommended band is plus or minus approximately 0.25% of the Company's base revenue
requirement or $1,629 per year.
Respectfully submitted this , IITff
J ';- day of July 2009.
~u!l.~AK:ef\asser -.
Deputy Attorney General
Technical Staf: Kathy Stockton
Gerr D. Galinato
Chris Hecht
i:umisc:commentscapw09. I ksklsggcwh comments
STAFF COMMENTS 5 JULY 14, 2009
Capitol Water Corporation
Case No. CAP-W-09-01
Historical Idaho Power Company's PCAs (Schedule 9)
Effective Date
6/1/2009
2/1/2009
6/1/2008
3/1/2008
6/1/2007
6/1/2006
6/1/2005
6/1/2004
5/16/2003
5/16/2002
10/1/2001
5/1/2001
5/16/2000
5/16/1999
5/16/1998
5/16/1997
5/16/1996
5/16/1995
2/1/1995
5/16/1994
5/16/1993
PCA (cents/kWh)
1.4022
0.7864
0.7864
0.2419
0.2419
-0.3689
0.6039
0.6039
0.6039
1.937
1.7241
1.3415
0.1371
-0.2143
0.1598
-0.1552
-0.1635
0.0755
0.1449
0.1449
0.0487
Historical Idaho Powerls peA
2.5
..2
Š..1.5..
Q,C.II i..i:
Q,u
i 0.5ctuc.a
-0.5
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Effective Date
Attachment I
Case No. CAP-W-09-1
Staff Comments
07/14/09
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF JULY 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. CAP-W-09-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
ROBERT PRICE
CAPITOL WATER CORP,
2626 ELDORADO
BOISE ID 83704
E-MAIL: capitolwatercorp§yahoo.com
ROBERT E SMITH
2209 N BRYSON RD
BOISE ID 83713
E-MAIL: utilitygroup§yahoo.com
Jo~SECRETAR '-
CERTIFICATE OF SERVICE