20110624Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: KARL T. KLEIN
DEPUTY ATTORNEY GENERAL

DATE: JUNE 21, 2011

SUBJECT: CAPITOL WATER’S APPLICATION TO REVISE ITS PURCHASED
POWER COST ADJUSTMENT RATE, CASE NO. CAP-W-11-01

On June 6, 2011, Capitol Water Corporation applied to the Commission for authority
to change its Schedule No. 3 Purchased Power Cost Adjustment (PPCA). Application at 1.
Capitol Water seeks to recover its increased electrical costs arising from Commission-approved
changes to Idaho Power Company’s electric rate schedules. Id.
Capitol Water asks the Commission to (1) process the Application under Modified
Procedure; (2) approve the proposed Schedule No. 3 change on less than 30 days’ notice on an
interim basis effective July 1, 2011, subject to refund;1 and (3) order that the proposed Schedule
No. 3 changes become permanent, effective August 1, 2011. Id. Only the first two requests are
ripe for decision at this Decision Meeting.
THE APPLICATION
In its Application, Capitol Water notes that since its last case to establish a new tariff
rate to recover its purchased power costs (CAP-W-10-01), “Idaho Power Company has been
granted a number of [rate] changes . . . which increased rates and charges paid by Applicant to
Idaho Power Co. for electric service.” Id.
Capitol Water’s current base rates were established in 2008. In Order No. 30762, the
Commission approved “a three (3) year average of 1,454,401 KWh of electricity consumption at
an average cost of 5.19¢ to establish rates for Applicant.” Id. Capitol Water states that its total

1 Capitol Water’s Application misstates the requested interim effective date as “July 1, 2010.” Application at 2.
Capitol Water’s attached, proposed Schedule No. 3 clarifies that the requested interim effective date is “July 1,
2011.”
DECISION MEMORANDUM 2
cost of electric power is $75,483.41. Id. A recalculation of Capitol Water’s average cost per
kWh at Idaho Power’s current rates for electric power “produces an average cost of 5.77¢ per
KWh.” Id. Capitol Water estimates that this revised average cost per kWh yields an annual cost
for electric power of $83,856 – an increase of $8,372 or 11.1%. Id. at 2.
Capitol Water asks the Commission to permit Capitol Water to replace its “currently
approved Schedule No. 3 Purchased Power Cost Adjustment of 0.81% with a new Purchased
Power Cost Adjustment of 1.44%.” Id. Capitol Water proposes this change for two reasons:
Subsequent to the issuance of the Commission’s Order No. 32056 in Case
No. CAP-W-10-01, an error was discovered in the calculation of
Applicant’s average cost of electric power used in prior cases. That error
understated the average cost of Applicant’s electric power costs reducing
Applicant’s Schedule No. 3 Purchased Power Adjustment approved in
Case No. CAP-W-10-1. Hence, Applicant has under recovered its
purchased power costs over the last twelve months. Correction of that
calculation error together [with] the changes to Idaho Power Company’s
tariff rates . . . produce an increase in the Applicant’s Schedule No. 3
Purchased Power Adjustment.

Id.2 Capitol Water also seeks to recover, as part of the PPCA, $1,000 for its “costs to review the
Idaho Power Company cases, determine their effect on Applicant, prepare and file this
application and respond to questions regarding the Application.” Id.
Capitol Water attaches several exhibits to its Application. In Exhibit No. 1, the
Company presents the calculations underlying its proposed PPCA. In Exhibit No. 2, Capitol
Water attaches its current Schedule No. 3 with corrections reflecting the proposed changes to the
PPCA. Capitol Water also attaches a copy of its proposed Schedule No. 3, effective date July 1,
2011, for the Commission’s approval.
Capitol Water states that it was “unable to file this application in a timely manner to
meet the Commission’s 30-day notice requirement due to the date Commission Order Nos.
32248, 32250 and 32251 were issued.” Id. at 2-3. Consequently, Capitol Water says that it “was
unable to review those orders and the effect on Applicant until after June 1, 2011.” Id. at 3.
2 Capitol Water refers to Idaho Power’s Commission-approved rate changes from Order Nos. 32248 (granting Idaho
Power authority to increase its contribution to its pension plan , resulting in a 1.39% increase for all customer
classes); 32250 (approving Idaho Power’s request to reduce the annual Power Cost Adjustment surcharge an average
4.8%); and 32251 (approving an average 0.74% increase to residential and small-business customers in this fourth
year of Idaho Power’s Fixed Cost Adjustment Program). Idaho Power’s approved rate changes result in an overall,
net average rate decrease of 3% for all customer classes and about 1.45% for residential customers. According to
Capitol Water, Idaho Power’s rate changes combined with Capitol Water’s historic underrecovery of its electric
power costs now require an increase in Capitol Water’s PPCA.
DECISION MEMORANDUM 3
Capitol Water assures the Commission that it will issue a notice advising its
customers of its pending Application before the Commission and that the notice will be
“included with customer bills to be mailed July 1, 2011 and by a news release that is being sent
to the Idaho Statesman and the Idaho Business Review newspapers” in conjunction with the
filling of its Application. Id. at 2-3. A copy of the customer notice and news release were filed
as Exhibit Nos. 3 and 4, respectively. Id. at 3.
STAFF RECOMMENDATION
1. Modified Procedure Should Be Used.
Staff has reviewed Capitol Water’s Application and believes that the issues presented
may be adequately addressed through written submissions rather than a hearing. Accordingly,
Staff concurs with the Company’s request that the Commission process the Application under
Modified Procedure with a 21-day comment period. See RP 201 and 202.
2. The Interim Rate Should Not Be Allowed.
Staff recommends that the Commission not grant Capitol Water’s request for an
“interim” Schedule No. 3 rate to take effect July 1, 2011, subject to refund for three reasons.
First, under Idaho law, no rate change may take effect on less than 30 days’ notice, absent a
showing of good cause. See Idaho Code § 61-307. Thus, the soonest the proposed increase
could become effective is July 6 (absent good cause). Second, if the proposed increase becomes
effective on July 1 as requested by the Company, customers will not have received the required
notice until after the rate is effective (subject to refund). See RP 125. Finally, the Commission
has observed that “interim rate relief is an extraordinary remedy to be granted only in an
emergency or where there is danger that the utility will not be able to render adequate service if
relief is withheld.” Order No. 25683 at 3. Here, Capitol Water asks that its proposed “interim”
rate take effect in less than 30 days. Staff does not believe that Capitol Water’s stated inability
to review the Idaho Power rate change Orders (see fn. 2, above) until after June 1, 2011, is a
sufficient showing of “good cause” to obtain the extraordinary relief requested.
The Company will continue to collect the current PPCA rate until the new rate is
established. The recovery period will be delayed, but reasonable recovery still will occur over a
12-month period. This also will be a better process to allow adequate notice for this year and
future years.

DECISION MEMORANDUM 4
COMMISSION DECISION
Does the Commission wish to process Capitol Water’s Application through Modified
Procedure and issue a Notice of Application and Modified Procedure with a 21-day comment
period?
Does the Commission wish to approve an interim Schedule No. 3 rate effective July
1, 2011 (subject to refund) or suspend the proposed rate pursuant to Idaho Code § 61-622?

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