20140915final_order_no_33128.pdf

Office 01 the Secretary
Service Date
September 15,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMI\IISSION
IN THE MATTER OF THE APPLICATION )OF CAPITOL WATER CORPORATION FOR )CASE NO.CAP-W-14-O1
AUTHORITY TO INCREASE ITS
SCHEDULE NO.3 PURCHASE POWER )ORDER NO.33128
ADJUSTMENT RATE )
On July 11,2014,Capitol Water Corporation (“Capitol Water”or “Company”)filed
an Application to increase its Schedule No.3 Purchased Power Adjustment Rate to “recover the
Company’s cost of electricity related to idaho Power Company’s (“Idaho Power”)electric rate
schedules that have been approved by the Idaho Public Utilities Commission (“IPUC”or
“Commission”).”Application at 1.Capitol Water initially proposed an effective date of
September 1,2014.
On July 30,2014,the Commission issued a Notice of Application and Modified
Procedure establishing a 21 -day comment period.See Order No.33086.Thereafter,
Commission Staff was the only party to submit written comments within the established
comment period.
On August 27,2014,the Commission issued an Order suspending Capitol Water’s
Application until September 15,2014.The Company voluntarily agreed with the suspension of
its Application and filed its reply comments in response to Staff’s comments.
STAFF COMMENTS
Staff reviewed Capitol Water’s initial request to replace the Company’s current
Schedule No.3 PPCA of 4,20%with a new PPCA of 4.53%.Staff determined that the increase
in power cost above embedded base expenses falls inside the 0.25c hand as set out in Order No.
30881.Therefore,Staff did not recommend an increase in the PPCA at this time.Staff also
recommended the Company review the updated Rules of Procedure and include all required
information in its customer notices and press releases in the future.
Staff comments addressed two issues:(1)whether the Companys revenue request
exceeds the revenue requirement hand;and (2)the additional power costs above those currently
embedded in base rates.Staff proposes corrections to both the revenue band calculations and
additional power costs.
ORDER NO.33128 1
Revenue Band
In 2009,Capitol Water filed an application (Case No.CAP-W-09-01)to initially
establish a tariff schedule to recover its cost of electricity related to the annual increase or
decrease in Idaho Power’s Power Cost Adjustment (PCA).In the 2009 case,the Commission
ordered that “in the event that Idaho Power’s PCA adjustment falls inside of Capitol Water’s
0.25%revenue band,the Company will continue to recover this amount of expense in
subsequent years when no application is filed with the Commission.”Order No.30881 at 2-3.
In Attachment A,line 14,of Staff’s comments it is evident that the current change in
power supply costs falls inside Capitol Water’s 0.25%revenue band.In calculating the revenue
band requirement,the Company used the total incremental power revenue included in current
Capitol Water rates (Application,Exhibit No.1,line 11),which does not include the rate filing
costs.Staff observes that in previous cases,the Company’s “Existing Expenses above
Embedded Base Rates”(including both power supply and rate case costs)is compared with the
“Revised Total Expenses above Embedded Base Expenses”(also including both power supply
and rate case costs).See Staff Attachment A,lines 9 and 11.When this comparison is
performed with the correct “Revised Total Expenses above Embedded Base Expenses,”the
percent increase in the Company’s total revenue requirement is 0.245%($1,666 incremental
power cost/$679,131 current revenue x 100,see Attachment A).The 0.245%increase (even if
rounded)falls inside the 0.25%band,or in other words,does not exceed the 0.25%threshold.
Idaho Power Rate Adjustments
When the Company filed its PPCA application in Case No.CAP-W-09-01,it asked
the Commission to approve a new tariff schedule that would enable the Company to recover
purchased power costs directly related to Idaho Power’s PCAs.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 requirement is also incorporated in prior
Commission Orders addressing this issue.See Order Nos.32858,32607,32325,and 32056.
In the current case,Capitol Water’s requested rate adjustment includes Idaho Power
rate increases due to the following:
•Updated base rates (IPC-E-13-20,Order No.33000);
•Changes to the Fixed Cost Adjustment (FCA)rates (IPC-E-14-03,Order
No.33047);and
ORDERNO.33128
Changes to the PCA rates (IPC-E-14-05,Order No.33049).
(‘ornmissioii-Approved Methodology iii (‘alculating PP(’A
The methodology used to calculate the incremental power cost increase in Capitol
Water’s previous five PPCA cases starts 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 2005 test year was used in Capitol Water’s most recent general rate case in 2008.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 using the 2005 actual
energy consumption model.
Using the same methodology as employed in the previous cases and applying the new
Idaho Power rates effective June 1,2014.the Company calculated the average rate of $0.0715
per kwh.This is the restated average cost per kWh.With this adjusted rate,the expected power
cost is $103,937 (1,454,401 x $0.0715).The power cost above what is embedded in rates due to
Idaho Power’s rate changes is $28,454 ($103,937 -$75,483).Including the $1,100 quoted by
Capitol Water as Application processing costs,the overall expense comes to $29,554 above base
rates.The Company is currently collecting $27,393 from the 4.20%PPCA approved last year in
Order No.32858.Because the Company uses $26,293 as its base for 2013,the incremental
revenue increase is $3,261 ($29,554 -$26,293).If the 2013 base is revised to include the
previously approved rate case costs,the Company’s request is for an incremental revenue
increase of $2,161.
In reviewing the Company’s input of current Idaho Power rates to the power cost
model,Commission Staff discovered the following errors:(1)an incorrect power cost adjustment
rate for Idaho Power Schedule 9S —Large General Service-Secondary;(2)an overestimate for
the first 300 kWh for non-summer rates under Idaho Power Schedule 7;(3)an underestimate for
the Energy Service rates under Idaho Power Schedule 91;and (4)an underestimate for the
Franchise Fee rates under Idaho Power Schedule 95.Using the corrected values and formulas,
Staff recalculated the average cost per kWh to be $0.07 11.See Staff’s Attachment A for a
comparison of calculations between the Company and Staff Staff notes that these are the same
ORDERNO.33128 3
minor corrections proposed in the prior PPCA case,agreed to by the Company and accepted by
the Commission.See Order 32858 at 2.
Based on an average cost per kWh of $0.0711,Staff’s revised expected power cost is
$103,442 (1,454,401 x $0.0711)and the power cost above what is embedded in base rates is
$27,959 ($103,442 -$75,483),or $29,059 including rate case costs.The Company is currently
collecting $27,393 from the 4.20%PPCA (see Order No.32858),for a Staff calculated
incremental rate increase of $1,666.
To recover the additional $1,666,the PPCA would otherwise increase to 4.460%.
This increase —which the Staff does not recommend —would be reflected in the Company’s
Schedule 3 (Other Recurring and Non-Recurring Charges)and result in an overall percent impact
to annual non-metered customer bills of 0.245%.Metered commercial customers would
experience the same incremental percentage increase,although the annual dollar impact will vary
based on usage.
Staff also noted that the $1,100 in consulting costs (10 hours at $11 0/hr)to identify
the level of rate change and create the Company filing would not have been incurred if the
incremental increase had been properly calculated.Staff estimates that only 50%of the
consultant costs ($550)should have been incurred to identify the incremental increase.The
resulting change in current rates would only be 0.164%.Consequently,if the Commission
chooses to increase the PPCA,Staff believes it should only be increased to recover an additional
$1,116 ($1,666 -$550)or 4.37%.
The Company included a customer notice with its monthly bills mailed on August 1,
2014,and a press release on July 11,2014.Staff reviewed both documents and found two
deficiencies.Rule 125 of the Commission’s Rules of Procedure requires all utilities to inform
customers that written comments regarding the application may be filed with the Commission,
and that customers may subscribe to the Commission’s RSS feed to receive periodic updates via
e-mail about this case.See Rule 125.01.d and 125.04,IDAPA 31.01,01.125.01.d and -125.04.
The Rules of Procedure were revised recently,with changes becoming effective on
February 15,2014.Staff recommended the Company review the updated Rules of Procedure
and include all required information in its customer notices and press releases in the future.The
Commission has not received any comments from customers regarding Capitol Water’s
Application.
ORDERNO.33128 4
REPLY COMMENTS
Capitol Water stated that it had numerous discussions with Staff subsequent to Staff
filing its comments.According to the Company,both the Company and the Staff have erred in
their calculations.
The confusion appears to be in the proper algebraic formulas used to prorate the
Company’s electric power bills that straddle the effective dates of Idaho Power Company’s
winter and summer rates.Staff and the Company have worked together to develop corrected
formulas that are mutually agreeable.
Capitol Water attached Rebuttal Exhibit No.2 that reflects the corrected results using
the agreed to corrected formulas.As shown on line 14 of the exhibit,the percent increase in total
revenue is 0.249%which is only 1/1000th of a percentage point less than the 0.25%revenue
band previously established by the Commission.
The Company asks the Commission to consider the elimination of the revenue band
test.The Company states that each year it must review all of Idaho Power Company’s approved
tariffs to determine rate changes and/or new tariff schedules that affect Capitol Water
Company’s bills and recalculate bills from the Company’s 2008 test year.Elimination of the
revenue band test will ensure that the Company recovers its increased costs if Idaho Power
Company tariff changes increase the Company’s electric power expenses and passes through to
customers any benefit of an Idaho Power Company rate reduction.
Also attached to the reply comments,for the Commission’s approval should it decide
to eliminate the revenue band test,is a revised Capitol Water Company Tariff Schedule No.3
that reflects the required Purchased Power Cost Adjustment of 4.460%developed on Rebuttal
Exhibit No.2 at line 10.
COMMISSION FINDINGS
The Commission has thoroughly reviewed Capitol Water’s Application,including
attachments.Staff comments,and the Company’s reply comments.The Commission finds that
Capitol Water’s request to increase its Schedule 3 surcharge by 0.249%represents a fair,just and
reasonable increase to recover the increase in its annual power costs.The Commission
acknowledges that Capitol Water’s request falls within the previously established “0.25%
revenue band in determining each year whether to file for a rate adjustment....“See Order No.
30881 at2.
ORDERNO.33128 5
The Commission finds that this 0.25%revenue band hurdle may no longer be needed,
therefore,we discontinue it indefinitely.The Commission appreciates Staffs diligent work in
analyzing the Company’s Application and submitting its recommendations in accordance with
the Commission’s prior mandates.However,the Commission finds that Capitol Water has
adequately demonstrated that it merits an increase to its Schedule 3 Purchased Power Rate in
order to recover its annual power costs in as timely a manner as possible.The Commission also
finds that discontinuing the 0.25%revenue band test will enable this small water system to
remain financially solvent and healthy by permitting it to pass through all of its increased power
costs directly to customers.We can consider re-establishing a revenue band test in the future,if
necessary.
Therefore,based upon our review of the Company’s filing and written comments
filed by Staff and the Company,the Commission finds that it is fair,just and reasonable to
authorize Capitol Water to adjust its Schedule No.3 PPCA surcharge from 4.2%to 4.46%.The
Commission also finds the Company’s request to recover $1,100 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 $29,061.The Company’s revised
Schedule 3 tariff sheet is approved.
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
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 4.2%to 4.46%,a revenue
requirement increase of $27,961,in order to recover the Company’s annual cost of electricity.
IT IS FURTHER ORDERED that Capitol Water Corporation’s request to recover
$1,100 as a reasonable and necessary expense associated with the preparation and filing of the
Company’s Application,for a total incremental increase of $29,061 to the Company’s annual
revenue requirement,is approved.
ORDERNO.33128 6
IT IS FURTHER ORDERED that the approved increase to Capitol Water
Corporation’s Schedule No.3 Purchased Power Cost Adjustment rate shall be effective on
September 15,2014.
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 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise.Idaho this /Z
day of September 2014.
--
PAUL KJELLANDERPRESIDENT
U LI J’
MARSHA H.SMITH,COMMISSIONER
ATTEST:
A,7_4_;_—-
Barbara Barrows
Assistant Commission Secretary
O:CAP-W-14Olnp3
MACK A.REDFORD,COMMISSIONER
ORDERNO.33128 7