20120724Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 6864
RECEIVED
2012JUL 24 AMIO56
[DAHO PUBU'
LJTUJTIES Ci 0110iksr::
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
CAPITOL WATER CORPORATION FOR )
AUTHORITY TO INCREASE ITS SCHEDULE )
NO.3 PURCHASE POWER ADJUSTMENT )
RATE. )
)
CASE NO. CAP-W-12-01
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
Record, Neil Price, Deputy Attorney General, in response to the Notice of Application and Notice
of Modified Procedure issued on July 10, 2012 in Order No. 32589, submits the following
comments.
BACKGROUND
On June 15, 2012, Capitol Water Corporation ("Capitol Water" or "Company") filed an
Application to increase the Purchased Power Cost Adjustment (PPCA) portion of its Schedule 3,
Other Recurring and Non-Recurring Charges. Capitol Water seeks to increase its PPCA rate from
0.37% to 1.71% with an effective date of August 1, 2012.
Capitol Water asks to increase its PPCA rate for several reasons. First, the Company now
pays more for power than it did when its base rates were established. The Commission approved
Capitol Water's current base rates in 2008 in Order No. 30762, which authorized an average cost
STAFF COMMENTS 1 JULY 24, 2012
of 5.1 90 per kWh based on a three-year average of 1,454,401 kWh for electricity consumption.
Thus, Capitol Water's total electric power cost included in base rates was $75,483 (i.e., 5.190 per
kWh x 1,454,401 kWh x $1.00/1000). According to Capitol Water's Application, recent
Commission-approved changes to Idaho Power's rates have affected the amount Capitol Water
pays to Idaho Power for electric service.' Capitol Water states that its average cost per kWh
using current Idaho Power rates increases the average power cost to the Company to 5.580 per
kWh. This correspondingly increases Capitol Water's total annual electric power cost to $81,136,
an increase of $5,653 or 7.49% more than is currently included in the Company's base water
rates. Application at 2.
Second, the Company proposes in its Application to incorporate the estimated rate effect
of the Idaho Power's pending Langley Gulch power plant case.3 The Company proposes to
include the Commission Staff proposed increase for Idaho Power Company of 7.05% to all
customer classes. When the estimated rate effect of the Langley power plant is included, the
Company's average power cost increases from $75,483 to $85,418, an increase in annual electric
power cost of $9,934 or 13.16% more than is currently included in the Applicant's base water
rates. Application at 2.
Third, the Company states that its new PPCA should include $1,200 to offset the
Company's costs to review the recent Idaho Power cases, determine their effect on Capitol Water,
prepare and file the Application, and respond to any questions about the Application.
STAFF ANALYSIS
Capitol Water requests an increase in the PPCA rate that the Commission most recently
approved in Order No. 32325 (Case No. CAP-W-11-01). The Company states that the proposed
increase will allow it to recover its increased purchased power costs arising from recently
approved changes to Idaho Power's electric rate schedules. The Company calculates the PPCA
'Capitol Water refers to Idaho Power's Commission-approved rate changes from Order Nos. 32540 (Case No. IPC-
E-12-06), 32541 (Case No. IPC-E-12-07), 32559 (Case No. IPC-E-12-08), 32549 (Case No. IPC-E-12-09), 32544
(Case No. IPC-E-12-12), 32258 (Case No. IPC-E-12-l3), and 32552 (Case No. IPC-E-12-17).
2 Capitol Water refers to the current Idaho Power rates in effect on June 1, 2012.
Capitol Water refers to Case No. IPC-E- 12-14 (Application to Increase Rates Due to Inclusion of Langley Gulch
Power Plant) which was recently concluded with Commission Order No. 32585 approving an average rate increase of
6.83% for all customer classes.
STAFF COMMENTS 2 JULY 24, 2012
using the same methodology as used in previous PPCA rate adjustments (i.e., Order No. 30881,
Case No. CAP-W-09-01; Order No. 32056, Case No. CAP-W-10-01; and Order No. 32325,
CAP-W-1 1-01).
As discussed below, Staff agrees that the PPCA rate change is appropriate. Staff also
agrees with the Company in using the same methodology to calculate the new PPCA rate.
However, Staff proposes minor changes in the PPCA calculations as discussed below.
Revenue Band
In 2009 Capitol Water filed a case (Case No. CAP-W-09-01) to initially establish a tariff
to recover its cost of electricity related to the increase in Idaho Power Company's Schedule 55,
Power Cost Adjustment. In the 2009 case, Order No. 30881, 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." When Staff reviewed the Company's
current Application, Staff calculated 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. The difference is
discussed in greater detail on page 6, below.
Idaho Power Rate Adjustments
Staff notes that when the Company filed Case No. CAP-W-09-01, Capitol Water sought
approval from the Commission to establish a new tariff rate to recover purchased power costs
directly related to Idaho Power's Power Cost Adjustment (PCA) (Case No. IPC-E-09-1 1). Staff
interprets Commission Order No. 30881, specifically the directive to "file for an adjustment of its
total revenue to recognize changes in power costs," to include changes in Idaho Power's PCA
costs and all other miscellaneous Idaho Power rate changes. This interpretation is also
incorporated in Commission decisions in Order Nos. 32056 and 32325. In the current case, the
rate adjustment includes the Idaho Power rate increase due to the following:
. 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. 3 254 1)
"Case Nos. CAP-W-1O-01 and CAP-W-1 1-01, respectively.
STAFF COMMENTS 3 JULY 24, 2012
• 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
& 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).
Commission Approved Methodology in Calculating PPCA
The methodology used to calculate the incremental power cost increase in Capitol Water's
previous three PPCA cases (i.e., Order No. 30881, Case No. CAP-W-09-01; Order No. 32056,
Case No. CAP-W- 10-01; and Order No. 32325, CAP-W- 11-0 1) started with actual 2005 energy
consumption and actual 2008 energy cost to determine an actual 2008 cost per kWh ($0.05 19 per
kWh from Order No. 30762). A test year of 2005 was used in Capitol Water's most recent
general rate case. Because actual energy consumption in 2005 was determined to be significantly
above normal (1,940,746 kWh), a three year average was used to calculate normalized annual
energy (1,454,401 kWh). 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).
The average cost per kWh for Capitol Water under Idaho Power's new rates was then
calculated by using the 2005 actual energy consumption model. The average rate in 2009, 2010,
and 201 lwas calculated to be $0.0580 per kWh, $0.0552 per kWh, and $0.052891 per kWh,
respectively. These rates were then multiplied by the normalized energy (1,454,401 kWh) to
determine the expected annual power cost each year. The difference between the expected power
cost under new rates and power costs already collected through base rates ($75,483) was collected
from customers through Schedule 3.
Using the same methodology used in the previous cases, and applying the new Idaho
Power rates effective June 1, 2012, the Company calculated the average rate of $0.05578 per
kWh. This is the restated average cost per kWh. With this new rate, the expected power cost is
STAFF COMMENTS 4 JULY 24, 2012
$81,136 (1,454,401 X $0.05578). Given that $75,483 in electric power cost are currently
embedded in the base rates, the incremental power cost to Capitol Water due to Idaho Power's
rate changes is $5,653 ($81,136-$75,483).
However, in reviewing the Company's input of current Idaho Power rates to the power
cost model, Staff discovered that incorrect Idaho Power PCA rates (Schedule 55) for Schedule 7-
Small General Service and Schedule 9S-Large General Service-Secondary were used. Capitol
Water used a PCA rate of $0.003273 per kWh for Schedule 7 Service and $0.001875 per kWh for
Schedule 9S Service. The correct Idaho Power PCA rate should be $0.000094 per kWh for
Schedule 7 Service and $0.001492 per kWh for Schedule 9S Service. Using the corrected PCA
rates, Staff recalculated the average cost per kWh to be $0.055442.
Effect of Langley Gulch Power Plant Case
When the Company filed its Application, the Langley Gulch Power Plant case (Case No.
IPC-E-12-14) was still being processed by the Commission. The Company believed that the
outcome of the case would impact the annual power cost of Capitol Water. Consequently, the
Company made 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%. 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.
Case No. IPC-E-12-14 was recently decided and Order No. 32585 was issued by the
Commission on June 29, 2012 approving an overall revenue requirement increase of 6.87% for
Schedules 7 and 9. However, energy rates actually increased by approximately 8% and 7.3% for
Schedule 7 and 9, respectively. A new Idaho Power tariff was filed and approved shortly after the
Order was issued with an effective date of July 1, 2012. Therefore, Staff believes it is more
appropriate to use the new rates in the PPCA calculation rather than make a separate adjustment
for Case No, IPC-E-12-14 as in the Company filing. 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. See Attachment A, line 7, Staff
Proposal column.
STAFF COMMENTS 5 JULY 24, 2012
Case Preparation Costs
The Company also requests $1,200 to cover its costs to have a consultant review Idaho
Power's rate increases, determine the effect on Company power costs, and prepare and file the
Application. In prior cases, the Commission has allowed the Company to recover $500 for
consultant expenses in Order No. 30881 (Case No. CAP-W-09-01), Order No. 32056 (Case No.
CAP-W-10-01), and $1,000 in Order No. 32325 (CAP-W-1 1-01). Staff does not oppose the
Company's request to recover the $1,200 consultant fee. As part of its review, Staff asked the
Company to justify the $1,200 amount. The Company responded 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. The
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. Staff notes, based on the review of the consultant's work to
date, that the total time the consultant may bill for this case will likely exceed the 12 hours. Staff
concludes that $1,200 is a reasonable consultant fee and that the Commission should allow the
Company to recover this expense. The larger number of Idaho Power cases impacting the PPCA
case justifies the increase in the consultant fee. It is expected the fee may be lower in the next
PPCA filing if the number of Idaho Power cases is more representative of a typical year. Staff
also expects that the annual adjustment becomes more routine each year which would require less
time in preparing a case.
Adding $1,200 for rate case expenses results in a total incremental power cost of $12,046
($10,846 + $1,200). This is the amount the Company should be allowed to collect from Schedule
3. Using the incremental power cost of $12,046, Staff calculated the new PPCA rate to be a
billing surcharge of 1.85% ($12,046/$651,738). This compares to the Company's current PPCA
rate of 0.37% to recover $2,442 in additional power costs.
As part of Commission Order No. 30881, the Commission directed the Company to utilize
a 0.25% revenue band when determining each year whether to ask the Commission to adjust the
Company's total revenue to account for power cost changes. In this case, Staff calculates the
incremental increase in the Company's power costs to be $9,604 ($12,046 - $2,442), and the
percent increase in the Company's total revenue requirement to be 1.47% ($9,604 incremental
power cost/$654, 180 revenue per Order 32325 x 100). The 1.47% increase exceeds the 0.25%
band as required by Order No. 30881. Therefore, it is appropriate for the Company to file for rate
adjustments. Attachment A shows the Company and Staff proposals for the PPCA.
STAFF COMMENTS 6 JULY 24, 2012
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. See detailed calculations in
Attachment B.
Staff notes that as of the filing date for these comments, there have been no comments
from the public.
STAFF RECOMMENDATION
Staff recommends an increase in the Company's PPCA from 0.37% to 1.85%. The new
rate should include recovery of $1,200 for consultant fees. The 1.85% PPCA should be reflected
in the Company's Schedule 3, Other Recurring and Non-Recurring Charges.
Respectfully submitted this day of July 2012.
Neil Price
Deputy Attorney General
Technical Staff: Kathy Stockton
Gerry D. Galinato
i:umisc:comments/capwl 2.1 npklsgdg comments
STAFF COMMENTS 7 JULY 24, 2012
Capitol Water Purchased Power Cost Adjustment - Case No. CAP-W-12-01
Calculation of Purchased Power Cost Adjustments (PPCA) and +1- 0.25% Revenue Band
Line Company Staff
No. Description Proposal a! Proposal - Explanation
1 Base Revenue $ 651,738 $ 651,738 Per Order No.30762 in CAP-W-08-02
2 Normalized 3-yr Average Power Consumption (kwh) 1,454,401 1,454,401 Per Order No.30762 in CAP-W-08-02
3 Average Cost (S//kWh) $ 0.0519 $ 0.0519 Per Order No.30762 in CAP-W-08-02
4 Power Costs Embedded in Basic Rates $ 75,483.41 $ 75,483.41 Line 3 x Line 2
F Calculated in Workpapers
6 Power Costs Calculated with New IPC Rates $ 81,135.98 - $ 86,329.22 - Line 5 x Line 2
7 Incremental Power Costs at New Rates $ 5,652.57 $ 10,845.81 Line 6-Line 4
8 Rate Case Cost $ 1,200.00 $ 1,200.00
9 Proforma Effect of Langley Case $ 4,281.86
I
$ - c/
I
11 Revenue Required at New IPC Rates $
-
662,872.43 - $ 663,783.81 - Line 10+Line 1
12 Incremental Power Revenue at Old Rates $ 2,442.00 $ 2,442.00 Per Order No.32325 in CAP-W-11-01
13 Total Current Revenue $ 654,180.00 - $ 654,180.00 Line 12+Line 1
14 Increase or (Decrease) in Incremental Power Costs $ 8,692.43 $ 9,603.81 Line 10-Line 12
UI I (Line 11 Line 13)/Line 13 x 100
16 Exceeds +1- 0.25 % Revenue Band? Yes Yes
Line 10/1-ine 1
Notes:
a/From Company Application, Exhibit 2.
b/From Company worksheets with Idaho Power's PCA rates data entry in error (uncorrected).
c/No pro forma adjustment needed because the new IPC rates effective July 1, 2012 already includes the effect of Langley Gulch case (Order No. 32585).
d/This is the calculated % Revenue Band = proposed revenue with new IPC rates-current revenue at current IPC rates)/current revenue at
current IPC rates x 100. This is also the % change in revenue rate or customer rate due to proposed change in Company's PPCA.
e/PPCA=Incremental Power Revenue at new IPC rates/Base revenue x 100.
9 CD
H
Winter 7 $
Summer 5 $
Total per Year

16.90 $ 118.30 $

16.05 $ 164.75 a/ $

$ 283.05 $
118.74 $ 120.49 $
165.36 $ 167.80 $
284.10 $ 288.29 $
1.47%
1.47%
1.47%
1.75
2.44
4.19
Capitol Purchased Power Cost Adjustment - Case No. CAP-W-12-01
Effects on Customer Bills - Residential, Flat Rate, Various Sizes of Service Lines
Total Bill Current Staff Duff, in % Increase
Size of No. of Rates in Per Cust. Cust. Bill @ Proposal @ Customer of Customer
Service Line Months Effect-Sch.1 per Sch. 1 0.37% PPCA 1.85% PPCA Bill per Yr Bill per Yr
3/4-inch
Winter 7 $ 12.65 $ 88.55 $ 88.88 $ 90.19 $ 1.31 1.47%
Summer 5 $ 16.05 $ 143.50 a/ $ 144.03 $ 146.15 $ 2.12 1.47%
AM
1-inch
Winter 7 $
Summer 5 $
Total per Year

15.10 $ 105.70 $

16.05 $ 155.75 a/ $

$ 261.45 $
106.09 $ 107.66 $ 1.56 1.47%
156.33 $ 158.63 $ 2.31 1.47%
262.42 $ 266.29 $ 3.87 1.47%
a! Total summer bilI=(monthly base rate+summer rate) X No. of months.
b/ Majority of Capitol Waters residential customers have 314-inch service lines.
P
CD
CZ oo CD
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF JULY 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. CAP-W-12-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
ROBERT PRICE
CAPITOL WATER CORP
2626 EL DORADO
BOISE ID 83704
e-mail: [e-mail]
ROBERT E SMITH
2209 N BRYSON RD
BOISE ID 83713
e-mail: [e-mail]
OE V.MK CA
SECRETARY/
CERTIFICATE OF SERVICE