20120731final_order_no_32607.pdf

Office of the Secretary
Service Date
July 31,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF CAPITOL WATER CORPORATION FOR )CASE NO.CAP-W-12-01
AUTHORITY TO INCREASE ITS )SCHEDULE NO.3 PURCHASE POWER )ORDER NO.32607
ADJUSTMENT RATE )
On June 15,2012,Capitol Water Corporation (“Capitol Water”or “Company”)filed
an Application to increase its Schedule No.3 Purchase Power Adjustment Rate to ‘recover the
Company’s cost of electricity related to Idaho Power Company’s electric rate schedules that have
been approved by the Idaho Public Utilities Commission (‘IPUC’or ‘Commission’).”
Application at 1.Capitol Water requests an August 1,2012 effective date for these changes.Id.
at 3.
On July 10,2012,the Commission issued a Notice of Application and Notice of
Modified Procedure with a 14-day comment period.See Order No.32589.Commission Staff
(“Staff’)was the only party to submit written comments regarding the Company’s Application.
THE APPLICATION
In its Application,Capitol Water states that the proposed “change is necessitated by
Idaho Power Company’s recent changes in the rates and charges for electric service to Capitol
Water Corporation.”Application at 1.The Application references “the effect of Idaho Power
Company’s pending [,now concluded,]Case No.1PC-E-12-14 regarding the Langley Gulch
power plant.”Id.
In its Application,Capitol Water estimates that,once the costs of the Langley power
plant case are included,its rates will rise from its current average rate of 5.580 per kWh to 5.870
per kWh.Id.at 2.The Company believes that its total cost of electric power will increase from
$75,483.41 to $81,136.Id.This amounts to “an increase in annual electric power cost of $5,653
or 7.49%more than included in Applicants base water rates.”Id.Further,“when the estimated
affect of the Langley power plant case are included,Applicants average KWh cost of 5.870 per
KWh results in an annual cost to Applicant of $85,418.”Id.This amounts to an annual increase
in electric power costs of $9,934 or 13.161%from Capitol Water’s current base water rates.Id.
Capitol Water also requests recovery of $1,200 for costs associated with the review of
the Idaho Power Company cases,ascertaining their effect on the Company,preparation and
ORDERNO.32607
filing of this Application,and responding to inquiries regarding this Application.Id.Applicant
proposes an increase of the currently approved Schedule No.3 Purchased Power Cost
Adjustment Rate from .37%with a new Purchased Power Cost Adjustment Rate of 1.71%.Id.
Capitol Water attached Exhibit No.1 to its Application displaying its calculations.
Exhibit No.2 displays the same calculations but incorporates the anticipated effect of the Idaho
Power Langley Gulch power plant on the Company’s rates.Exhibit No.3 is a copy of the
Company’s current approved Schedule No.3 in legislative format that shows the proposed
change to the Purchased Power Cost Adjustment Rate.Id.
The Company’s Application also included a revised Schedule No.3 with an effective
date of August 1,2012.Id.at 3.Capitol Water provided workpapers showing its calculations
for Staff review.Id.
The Company states that it has advised customers of its Application through the
issuance of a customer notice included in customer bills mailed on July 1,2012,and via a news
release to the Idaho Statesman and the Idaho Business Review newspapers contemporaneous
with this filing.Id.,Exhibit Nos.4 and 5.
Capitol Water requests that the Commission process its Application pursuant to
Modified Procedure with a proposed effective date of August 1,2012.Id.
STAFF COMMENTS AND RECOMMENDATION
Staff believes that Capitol Water’s request for an increase in the Purchased Power
Cost Adjustment (“PPCA”)rate is appropriate.Staff Comments at 3.Staff recommended an
increase in the Company’s PPCA from 0.37%to 1.85%.Id.at 7.Staff supports the inclusion of
$1,200,consultant fees,for recovery.Id.Staff supports the Company’s methodology to
calculate the new PPCA rate with only minor changes,more fully described below,in the PPCA
calculations presented in Capitol Water’s Application.Id.at 3.
Revenue Band
Staff noted that in 2009 the Commission ordered Capitol Water to “utilize a 0.25%
revenue band in determining each year whether to file for an adjustment of its total revenue to
recognize changes in power costs.”Id.(citing Order No.30881 at 2-3).Although its
calculations revealed “a slightly different incremental power cost amount than that calculated by
the Company[,]Staff nevertheless agrees that the change in power supply costs meets the
requirement for filing an adjustment under the revenue band.”Id.
ORDERNO.32607 2
Idaho Power Rate Adjustments
Staff asserted that Capitol Water is permitted to “file for an adjustment of its total
revenue to recognize changes in power costs”which may “include changes in Idaho Power’s
PCA costs and all other miscellaneous Idaho Power rate changes.”Id.;Order Nos.30881,
32506,and 32325.Staff referenced the following Idaho Power cases prompting Capitol Water’s
current Application:
-Increased rates due to inclusion of transmission costs (IPC-E-12-06,Order
No.32540);
-Decreased base rates due to removal of depreciation of non-AMI
equipment (IPC-E-12-07,Order No.32541);
-Decreased rates due to revised depreciation rates for electric plant in
service (IPC-E-12-08,Order No.32559);
-Increased rates due to the Boardman Balancing Account (IPC-E-12-09,
Order No.32549);
-Changes to the Fixed Cost Adjustment (FCA)rates (IPC-E-12-12,Order
No.32544);
-Decreased rates due to customer revenue sharing in conformance with
Order Nos.30978 and 32424 (IPC-E-12-13,Order No.32258);
-Changes to the Power Cost Adjustment (PCA)rates (IPC-E-12-17,Order
No.32552);and
-Rate increase due to inclusion of the Langley Gulch power plant (IPC-E
12-14,Order No.32585).
Id.at 3-4.
Commission Approved Methodology in Calculating PPCA
Staff stated that the previously approved methodology to calculate the incremental
power cost increase in Capitol Water’s previous three PPCA cases (CAP-W-09-0 1;CAP-W-10-
01;CAP-W-11-01)includes actual energy consumption and actual energy cost to determine an
actual cost per kWh.Id.at 4.A three-year average consumption level is used to determine
normalized annual energy.Id.“Normalized,base rate power supply costs of $75,483 were then
determined by multiplying normalized energy and the average rate per kWh (1,454,401 X
$0.05 19).”Id.
ORDERNO.32607 3
Utilizing the same methodology approved in the Company’s previous Schedule No.3
cases (i.e.,Order No.30881,Case No.CAP-W-09-0l;Order No.32056,Case No.CAP-W-10-
01;and Order No.32325,CAP-W-1 1-01)and then applying the new Idaho Power rates effective
June 1,2012,presents a restated average cost per kWh of $0.05578.Id.at 4-5.Multiplying this
rate by the normalized energy consumption level (1,454,401 kWh)leads to an expected power
cost of $81,136 (1,454,401 X $0.05578).Id.at 5.Staff noted that $75,483 in electric power
costs are currently embedded in the Company’s base rates.Id.Thus,the incremental power cost
to Capitol Water due to Idaho Power’s rate changes is $5,653 ($81,136-$75,483).Id.
Staffs calculations corrected the Company’s erroneous inputs utilized for Idaho
Power’s PCA (Schedule 55),Small General Service (Schedule 7)and Large General Service-
Secondary (Schedule 9S)rates.Id.Using the correct inputs for those rates leads to a
recalculated average cost per kWh of $0.05 5442.Id.
Effect ofLangley Gulch Power Plant Case
Staff noted that,as of the date of the Company’s filing,the Langley Gulch power
plant case (Case No.IPC-E-12-14)was still being processed by the Commission.Id.Capitol
Water’s Application included “a pro forma adjustment to its annual power cost using the
Commission Staff recommendation in the Langley case to increase all customer classes by
7.05%.”Id.“The Company’s proposed proforma increases power cost by an additional $4,282
above the incremental power cost increase of $5,653 previously calculated by the Company.”Id.
Incorporating the Commission’s decision in the Langley Gulch case,“Staff
recalculated the average cost using the new Idaho Power rates with the corrections discussed
above to produce an average cost of $0.059357 per kWh and an incremental power cost of
$10,846.”Id.;see also Attachment A,line 7.
Case Preparation Costs
Staff stated that Capitol Water responded to its requests for justification for recovery
of $1,200 in “Case Preparation Costs”“with detailed information on the total time the consultant
took to quantify Idaho Power’s Commission-approved rate increases,determine the effect on
Capitol Water,and prepare the filing including new tariffs.”Id.at 6.Capitol Water’s consultant
“anticipated that the application would require 12 hours of work,at the rate of $100 per hour,for
a total charge of $1,200.”Id.Staff believes that “the total time the consultant may bill for this
ORDERNO.32607 4
case will likely exceed the 12 hours.”Id.Therefore,Staff concluded that $1,200 is a reasonable
consultant fee and that Capitol Water should be permitted to recover this expense.Id.
The inclusion of $1,200 for rate case expenses results in a total incremental power
cost of $12,046 ($10,846 +$1,200).Id.“Staff calculated the new PPCA rate to be a billing
surcharge of 1.85%($12,046/$65 1,738).”Id.The Company’s current PPCA rate of 0.37%
allows Capitol Water to recover $2,442 in additional power costs.Id.Thus,the incremental
increase in the Company’s power costs is $9,604 ($12,046 -$2,442),and the percent increase in
the Company’s total revenue requirement amounts to a 1.47%increase ($9,604 incremental
power cost/$654,180 revenue per Order 32325 x 100).Id.
“Staff calculates that increasing the Company’s current PPCA rate from 0.37%to
1.85%will increase a typical customer’s water bill by $3.43 per year.”Id.;Attachment B.
COMMISSION FINDINGS AND DECISION
The Commission has thoroughly reviewed Capitol Water’s Application,including
attachments,and Staff comments.The Commission previously established that “the use of a
0.25%revenue band in determining each year whether to file for a rate adjustment in future years
is a reasonable means to address the issue of annual power rate adjustments.”Order No.30881
at 2.The Commission finds that the Company has adequately demonstrated that the percent
change in its annual power costs exceeds the established 0.25%revenue band and thus the
Company may request a change to its Schedule No.3 surcharge.See Capitol Water Application,
Exhibit No.1.
Therefore,based upon our review of the Company’s filing and written comments
filed by Staff,the Commission finds that it is fair,just and reasonable to authorize Capitol Water
to adjust its Schedule No.3 PPCA surcharge from 0.37%to 1.85%.The Commission also finds
the Company’s request to recover $1,200 to employ a consultant to review the impact of
contemporary Idaho Power rate increases,and embedded within the requested rate adjustment,to
be reasonable.The Commission authorizes Capitol Water to recover a total incremental revenue
requirement increase of $12,046.
CONCLUSIONS OF LAW
The Commission has jurisdiction over Capitol Water,a water corporation operating a
water system in the state of Idaho,and the issues presented in this case pursuant to Title 61 of the
Idaho Code.
ORDER NO.32607 5
ORDER
IT IS HEREBY ORDERED that Capitol Water Corporation’s Application for an
increase in its Schedule No.3 Purchased Power Cost Adjustment rate is approved.The Schedule
No.3 Purchased Power Cost Adjustment rate shall be increased from 0.37%to 1.85%,an
incremental revenue requirement increase of $10,846,in order to recover the Company’s annual
cost of electricity.
IT IS FURTHER ORDERED that Capital Water’s request to recover $1,200 as a
reasonable and necessary expense associated with the preparation and filing of the Company’s
Application,for a total incremental increase of $12,046 to the Company’s annual revenue
requirement,is approved.
IT IS FURTHER ORDERED that the approved increase to Capital Water’s Schedule
No.3 Purchased Power Cost Adjustment rate shall be effective on August 1,2012.
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 §6 1-626.
ORDERNO.32607 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of July 2012.
PAUL KJEL E ,PRESIDENT
MACK A.REDFORD,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
ATTEST:
S —
J1ean D.Jewell
Commission Secretary
O:CAP-W-12-0 Inp2
ORDERNO.32607 7