20170914final_order_no_33876.pdf

Office of the Secretary
Service Date
September 14,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF CAPITOL WATER CORPORATION TO )CASE NO.CAP.W47O1
INCREASE ITS SCHEDULE NO.3 )
PURCHASE POWER ADJUSTMENT RATE )ORDER NO.33876
_________________________________________________________________________________________
)
On June 26,2017,Capitol Water Corporation applied to the Commission for
authority to adjust its Schedule No.3 Purchased 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.”Application at 1.Capitol Water
proposed an effective date of August 15,2017.
On July 13,2017,the Commission issued a Notice of Application,Notice of
Modified Procedure,and Order.Order No.33812.The Company’s proposed effective date of
August 15 was suspended until September 15,2017.Commission Staff reviewed the
Application and filed written comments on August 9,2017.No reply was filed,and no
comments from a Capitol Water customers were filed with the Commission.
BACKGROUND
In 2009,the Commission approved Capitol Water’s request to implement a purchased
power cost adjustment (PPCA)mechanism.Order No.30881.The intent of the PPCA is to
provide the Company with a way to adjust for increased or decreased purchased power costs.
The current mechanism assumes that the amount of electricity consumed by the Company is
stable over time,and that electricity costs are affected only by changes in electricity rates
charged by Idaho Power,the Company’s power supplier.
In approving the PPCA,the Commission adopted an average use of 1,454,401 kWh’
of electricity consumption,at an average cost of 5.190 per kWh,resulting in a total electric
power cost rate of $75,483 to be included in base water rates.Id.The Company’s Schedule No.
3 takes in or offsets the difference between power costs in base rates and actual projected power
costs to be paid by the Company.The Company’s current Schedule No.3 PPCA rate is 2.8%.
Since its implementation in 2009,the PPCA has utilized an electric use value based on a normalized average of the
Company’s 2006-2008 consumption.
ORDER NO.33876 1
THE APPLICATION
Capitol Water requested an increase in Schedule No.3 rates.It stated that the
proposed increase is driven by a rise in electric power expenses.Application at 1.The
Company claimed that its current 2.8%PPCA rate is too low when factoring in the increase in
power rates,and the Company’s costs to file this Application.Id.The Company requested a
new PPCA rate of 3.1%.Id.The Company also requested the Commission approve a change in
the methodology used to calculate the Company’s PPCA.Id.at 2.
The Company summarized the current PPCA methodology:the Commission
adopted a three (3)year average of 1,454.401 KWh sic]of electricity consumption at an average
cost of 5.190.to establish rates for Applicant.”Id.This results in a total electric power cost rate
of $75,483.41.Id.The Company claimed that its actual cost in 2016 was $19,126.83 more than
what is embedded in base rates (a 0.3%difference;or $1,978).Id.at 2.Additionally,Capitol
Water estimated its costs associated with the preparation and filing of this Application to be
$1,100.Id.at 1.The Company is seeking to recover these costs with the electric power costs.
Id.
The Company’s proposal to change the method of calculating the Company’s PPCA
rates consists of comparing the most recent year’s costs with the costs embedded in base rates.
This method eliminates the use of a computer model.Id.at 2.According to the Company,this
approach ‘can be completed internally by the Company without the need for outside consultant
assistance.”Id.at 3.
Capitol Water also included with the Application a worksheet detailing its
calculations (Exhibit Nos.1-3),a sample customer notice that will be included in the July billing
(Exhibit No.3),a copy of the proposed Schedule No.3 in legislative format (Exhibit No.5),and
a news release that will be printed in the Idaho Statesman and Idaho Business Review.Id.
(Exhibit No.6).
STAFF COMMENTS
Staff reviewed the Application and attachments and found that the Company’s
description of increasing power rates is accurate and its case preparation costs are reasonable.
Staff recommended that the Commission approve those requests.Staff also recommended
approval of the proposed change to the PPCA methodology.
ORDER NO.33876 2
In its review,Staff explained that the Company’s Application is appropriate and
accurate,Further,Staff explained that it believes the proposed change in PPCA methodology
will simplify the process for the Company and Staff,and will eliminate the consultant fees from
future PPCA filings.
DISCUSSION AND FINDINGS
The purpose of the PPCA mechanism is to allow the Company a way to adjust its
rates commensurate with changes it experiences when its power supply costs go up or down.See
Order No.30881.The Company’s power costs are determined by two factors:the amount of
power used,and the rate paid for the power.Here,there is no dispute that the rate the Company
is charged for power has gone up.The Company provided data showing an increase in the
amount it pays for power,which was verified by Staff.The proposed 3.1%PPCA rate,from
$18,249 to $20,227,was derived by comparing the Company’s power bills to actual power costs
billed to ratepayers.This review verified that the Company’s actual power costs were higher,as
claimed,
We find the Company’s revised Schedule No.3 reflecting the proposed 3.1%PPCA
rate cost-based and appropriate.Notably,the billing effect on customers will be small.
Specifically,excluding the regulatory and franchise fees,an average customer will experience an
annual increase of $0.85.Thus,we approve the PPCA increase as reasonable.
With regard to the Company’s proposed change in the PPCA methodology,we
appreciate the Company’s effort to comply with our directive to “consider future changes in
consumption and rates going forward to ensure the purpose of the PPCA—to accurately match
the Company’s power supply costs—is fulfilled.”Order No.33565.The proposed change in
how the Company calculates the adjustment going forward can be summarized as the difference
between actual electricity costs the Company paid during the previous calendar year,and the cost
of electricity embedded in Schedule No.3 rates,recovered through customer billing.Currently,
the Company compares past energy use to projected electricity rates in the upcoming year.The
proposed method will simplify the process for the Company,and for Staff review.
In addition to simplifying the process,the new method will also eliminate the need
for a consultant and associated fees ($1,100,or 56%of this year’s increase).The new method
will give the Company more time to complete the PPCA filing,and improve accuracy.Finally,
the proposed method will give Staff improved information included the Company’s PPCA
ORDER NO,33876 3
filings.Accordingly,we find that the proposed method is just and reasonable and responsive to
our prior directives,
Going forward,the Company shall provide calendar year information on total average
number of customers,total volume of water pumped in gallons (gal),and total electric energy
used in kilowatt-hours (kWh)with its PPCA filing.Notably,only costs related to the supply of
metered energy will be used in the calculation of the PPCA.Any fees or charges beyond the
delivery of metered energy shall be excluded.
ORDER
IT IS HEREBY ORDERED that Capitol Water’s Application to change its Schedule
No.3 Purchased Power Cost Adjustment is approved.The Company may increase its PPCA
from 2.8%to 3.1%,with an effective date of September 15,2017.
IT IS FURTHER ORDERED that the Capitol Water’s proposed change in PPCA
calculation methodology is approved,as conditioned in this Order.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within 21 days of the service date of this Order.Within seven days after any
person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §6 1-626.
ORDER NO.33876 4
DONE by Order of the Idaho Public Utilities Commission at Boise.Idaho this t(
day of September 2017.
ATTEST:
Diane M.Hanian
Commission Secretary
C):CAP-W-17-0 lhk2
PRESIDENT
ERIC ANDERSON,COMMISSIONER
ORDER NO.33876 5