20140820Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
(208) 334-03 l4
BAR NO. 6864
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF THE APPLICATION OF
CAPITOL WATER CORPORATION FOR
AUTHORITY TO INCREASE ITS SCHEDULE
NO.3 PURCHASED POWER ADJUSTMENT
RATE.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. CAP.W.l4-OI
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Neil Price, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 33086, submits the following
comments.
BACKGROUND
On July 11,2014, Capitol Water Corp. ("Capitol'Water," the "Company") filed an
Application seeking authority to change its Schedule No. 3 (power purchase cost adjustment
(PPCA)) rate. See Application at l. Capitol Water seeks to recover its increased power costs
above embedded base power supply costs caused by recently approved changes to Idaho Power
Company's electric rate schedules. Idaho Power is Capitol Water's electric supplier. The
Company asks that the proposed Schedule No. 3 changes take effect on September l, 2014.
Capitol Water says its costs of purchasing electric power have increased due to recent increases
STAFF COMMENTS AUGUST 2O,2OI4
in Idaho Power's rates per Order Nos. 33047 (Case No. IPC-E-14-03) and 33049 (Case No. IPC-
E-14-06).
Capitol Water asks the Commission for permission to replace the Company's current
Schedule No. 3 PPCA of 4.20% (see Case No. CAP-W-13-01) with a new PPCA of 4.53o/othat
incorporates Idaho Power's curent rates and Capitol Water's costs of processing this
Application.
STAFF ANALYSIS
Capitol Water requests an increase in the PPCA rate thai the Commission approved last
year in Order No. 32858 (Case No. CAP-W-13-01). The Company calculates the PPCA using
the same methodology as used in previous PPCA rate adjustments. See Order Nos. 32858,
32607, 32325, 32056, and 3088 I .
Staff comments address two issues: (1) whether the Company's revenue request exceeds
the revenue requirement band; 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 as discussed in greater detail below. When the Staff s proposed
corrections are taken into consideration and the Commission adopted method is applied, the
revenue band requirement is not met. Because the revenue band requirement is not met, Staff
does not agree that an increase in the PPCA rate is appropriate at this time.
Revenue Band
1n2009, Capitol Water filed an Application (Case No. CAP-W-09-01) to initially
establish a tariffschedule to recover its cost ofelectricity 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 at2-3.
Staff demonstrates on Attachment A, line 14 that the current change in power supply costs falls
inside Capitol Water's 0.25% revenue band. Thus, no change in tariff Schedule No. 3 is
warranted at this time.
In calculating the revenue band requirement, the Company used the Total Incremental
Power Revenue included in Current Capitol Water Rates (Application, Exhibit No. l, line 11),
STAFF COMMENTS AUGUST 2O,2OI4
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 1 1. 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 cosV$679,131 current revenue x 100, see Attachment A). The 0.245%
increase (even if rounded) falls inside the 0.25Yo band, or in other words, does not exceed the
0.25% threshold. Therefore, Staff asserts that it is not appropriate for the Company to file for a
rate adjustment, but rather to continue the current PPCA rate of 4.20oh.
Idaho Power Rate Adjustments
When the Company filed its initial PPCA Application (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, the requested Capitol Water rate adjustment includes Idaho Power
rate increases due to the following:
. Updated base rates (IPC-E-I3-20, Order No. 33000);
o Changes to the Fixed Cost Adjustment (FCA) rates (IPC-E-14-03, Order No. 33047); and
o Changes to the PCA rates (IPC-E-14-05, Order No. 33049).
Commission Approved Methodology in Calculating PPCA
The methodology used to calculate the incremental power cost increase in Capitol
Water's previous five PPCA cases starts with actual2005 energy consumption and actual2008
energy cost to determine an actual 2008 cost per kWh ($0.0519 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
STAFF COMMENTS AUGUST 20,2014
kwh), a three-year average was used to calculate normalized annual energy (1,454,401kwh).
Normalized, base rate power supply costs of $75,483 were then determined by multiplying
normalized energy and the average rate per kwh ( I ,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 (1,454,401x $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 proposed costs of
$1,100 to process this Application, brings the overall expense to $29,554 above base rates. The
Company is currently collecting 527,393 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: (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 ldaho Power Schedule 7; (3) an underestimate for the Energy
Service rates under Idaho Power Schedule 9l; 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 $0.071 1. See Staffls Attachment A for a comparison
of calculations between the Company and Staff. Staff notes that these are the same minor
corrections proposed in the prior PPCA case, and were agreed to by the Company and accepted
by the Commission. Order 32858 at2.
Based on an average cost per kWh of $0.0717, Staff s revised expected power cost is
5103,442 (1,454,401x $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.
STAFF COMMENTS AUGUST 2O,2OI4
To recover the additional $1,666, the PPCA would otherwise increase to 4.460/o. 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. Again, Staff s calculations do not support an increase in rates at this time
because the revenue adjustment falls within the 0.25o/o band.
Staff also notes that the $1,100 in consulting costs (10 hours at $110/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
$1,1l6 ($1,666 - $550) or 4.37o/o.
CUSTOMER RELATIONS
The Company included its customer notice with bills mailed on August 1,2014. A press
release was issued 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 email
about this case. See Rule 125.01.d and l25.04,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 recommends that the Company review the updated Rules of Procedure
and include all required information in its customer notices and press releases in the future. As
of August 19, the Commission had not received any comments from customers regarding Capitol
Water's proposed increase.
STAFF COMMENTS AUGUST 20,2014
RECOMMENDATIONS
The increase in Power Cost above Embedded Base Expenses falls inside the O.25o/oband
as set out in Order No. 30881. Therefore, Staff does not recommend an increase in the PPCA at
this time.
Staff recommends that the Company review the updated Rules of Procedure and include
all required information in its customer notices and press releases in the future.
Respecttully submiued this Z0f^ day of August 2014.
fur
Technical Staff: Johanna Bell
Kathy Stockton
i:umisc/comments/capw I 3. I npjkls comments
6
Deputy Attorney
STAFF COMMENTS AUGUST 2O,2OI4
Attachment A: Company and Staff Rate Component Comparison
Line Rate Component Company Staff
1 Base Revenue $651,738 al $651,738 Per Order #30762 in
cAP-W-08-02
2
Normalized 3 Yr Average
Power Consumption
(KWh)
1,454,401 1,454,401 Per Order #30762in
CAP-W-o8-02
3 Average Cost per KWh 0.0519 0.0519 Per Order #30762in
cAP-W-08-02
4 Power Cost Embedded in
Basic Rates $75,483 $75,483 Line3XLine2
5
Restated Average Cost
Per KWh @ New IPC
Rates
0.0715 bt 0.0711 Calculated in
Workpapers
6 Power Cost with New IPC
Rates $103,937 $103,442 Line5XLine2
7
Power Cost above
Embedded Base Power
Supplv Costs
$ 28,454 $27,959 Line6-Line4
8 Rate Case Costs $1 ,1 00 $1 ,1 00
9
Revised Total Expenses
above Embedded Base
Expenses
$29,554 $29,059
10 Total Revenue Required
with New IPC Rates $681,292 $ 680,797 Line9+Line1
11 Existing Expenses above
Embedded Base Rates $26,293 $ 27,393 Per Order #32858 in
CAP-W-13-01
12 Total Current Revenue $678,031 $679,1 31 Line 1 + Line 11
13 lncrease or (Decrease) in
Power Costs $3,261 $1,666 Line9-Line11
14
o/o lncrease or (Decrease)
in Total Revenue 0.480/o cl 0.245o/o (Line 10 - Line 12) lLine
12
15 Exceeds +l- 0.25%
Revenue Band?Yes No
16
Purchased Power Cost
Adjustment (PPCA)
Required
4.53o/o dl 4.460/o Line9/Line1
a/ From Company Application, Exhibit 1.
b/ From Company Worksheets - uncorrected.
c/ Calculated % Revenue Band.
d/ PPCA = lncremental Power Revenue at new IPC rates/Base revenue x 100.
Attachment A
Case No. CAP-W-14-01
StaffComments
08120114
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2OTH DAY oF AUGUST 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. CAP.W-14-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
ROBERT PzuCE
PRESIDENT
CAPITOL WATER CORP
2626 ELDORADO
BOISE ID 83704
E-MAIL: [e-mail]
ROBERT E SMITH
2209 N BRYSON RD
BOISE ID 83713
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE