20170809Comments.pdf

rr*-:r.rl\/Firl*"'1.."tuu DBRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s1
IDAHO BAR NO. 7956
IN THE MATTER OF THE APPLICATION OF
CAPITOL WATER CORPORATION FOR
AUTHORITY TO INCREASE ITS SCHEDULE
NO.3 PURCHASE POWER ADJUSTMENT
RATE
l.lll *'.il -9 Pl'i l: 30
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. CAP.W-17-01
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission submits the following comments in
support of Capitol Water Corporation's Application to increase its Schedule No. 3 rates.
BACKGROUND
On June 26,2017, Capitol Water Corporation filed an Application to adjust its Schedule
No. 3 Purchased Power Cost Adjustment (PPCA) 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 I 5, 2017 . Id. at 3 . However, the Commission suspended that effective date until
September 15, 2017. Order No. 33812.
Capitol Water states that the increase in Schedule No. 3 rates is driven by a rise in electric
power expenses. Application at2. The Company claims 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 thus requests a new PPCA rate of 3.lYo. Id.
The Company states that its "current base rates were established by Order No. 30762 in
Case No. CAP-W-08-02." Id. at 1. It summarizes that: "the Commission adopted a three (3)
1STAFF COMMENTS AUGUST 9,2017
year average of I ,454,401KWh of electricity consumption at an average cost of 5.19p, to
establish rates for Applicant." Id. This results in a total approved electric power cost recovery
of $75,483.41. Id. The Company claims that its actual costs for electric power in 2016 was
$19,126.83 more than what is embedded in base rates, not including the current purchased power
cost adjustment mechanism. Id. at2. The current PPCA mechanism produced $18,249 in20l6,
based on its current Schedule No. 3 Purchased Power Cost Adjustment rate of 2.8Yo.
The Company estimates its costs associated with the preparation and filing of this
Application to be $1,100. It is seeking the Commission's authorization to recover the
preparation and filing costs, along with the electric power costs described above, by increasing
its current Schedule No. 3 Purchased Power Cost Adjustment rate from 2.8Yo to a revised rate of
3.t%.
The Company also included with its Application, a worksheet detailing its calculations
(Exhibit Nos. l-3), a sample customer notice that was included in the July 2017 billing (Exhibit
No. 4), a copy of the proposed Schedule No. 3 in legislative format (Exhibit No. 5), and a news
release that was printed in the Idaho Statesman and Idaho Business Review. /d. (Exhibit No. 6).
Finally, the Company proposes changing the method of calculating its PPCA rates. It
requests that in future years, the Company compare the most recent year's costs with the costs
embedded in base rates. This method eliminates the use of a computer model, and "can be
completed internally by the Company without the need for outside consultant assistance." Id. at
2-3.
STAFF REVIEW AND ANALYSIS
PPCA ADUSTMENT
Stafffully reviewed the Company's Application requesting authorization to increase the
PPCA. Staff recommends the Commission authorize the proposed 3.1% PPCA rate, which
changes the Company's current adjustment from $ 18,249 to $20,227. See Exhibit No. 3 -
Application.
Staff reviewed the Company's filing, including verifying that the supporting documents
were accurate and correct. Through Audit Request, Staff obtained copies of the power bills for
the months January 2016 through June 2017. Staff then compared the information in the bills
with the information supplied by the Company in the Application and accompanying
STAFF COMMENTS AUGUST 9,20172
workpapers. Staff verified that the calculations made in the Application and the workpapers are
correct. Staff also verified that the actual power costs in calendar year 2016 are $94,610.24.
Based on Staff review, the revisions to the Company's Schedule No. 3 that reflect the
proposed 3.1% PPCA rate are cost-based and appropriate. Therefore, Staff recommends
Commission approval of the Company's proposed Schedule No. 3. The effect of this change on
customers' bills is small. The total annual bill - excluding the City of Boise franchise fee and
Department of Environmental Quality fee - for a customer with flat-rate, one-inch service will
increase from $268.74 to $269.59, an increase of $0.85 (0.3%).
PPCA METHODOLOGY
Previously, the Commission directed the Company 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. In response, the Company
proposed a different methodology to calculate the adjustment. Put simply, it is based on the
difference between actual electricity cost during the previous calendar year and the cost of
electricity embedded in Schedule No. 3 rates instead of past energy use and electricity rates in
the upcoming year. Although this is a significant departure from the current method, Staff
believes the method's simplicity is a good fit for the Company's situation and recommends that
the Commission authorizethe Company's proposed PPCA methodology for use in this year's
adjustment and in future PPCA filings.
Staff identifies four reasons supporting its recommendation for the Commission to
authorize the Company's proposed methodology. First, Staff believes the Company's proposed
method is more simple and straightforward than the current approach and meets the intent of the
PPCA. Second, it will eliminate the need for a consultant and associated fees to perform the
calculations. Third, the Company will have more time to complete the PPCA filing by using the
previous calendar year. Finally, Staff will still be able to determine the prudency of actual
electricity costs by requiring the Company to supplement the f,rling with customer count,
electricity usage, and water consumption information.
In prior years, the PPCA only adjusted for changes in electricity rates. Last year's PPCA
adjusted for energy consumption in addition to changes in electricity rates. The Commission
authorized a change in energy consumption during the previous 12 months due to system
efficiency improvements. See Order No. 33565. This method requires the Company to reconcile
3STAFF COMMENTS AUGUST 9,2017
electricity consumption patterns during a historic time period with differing rate structures
related to electricity demand and time-of-year energy use in the upcoming year. The complexity
of the method requires the Company to hire an outside consultant at significant expense to
perform the analysis and calculations.
By contrast, the Company's proposed method is much less complex. The Company will
use actual energy charges directly from Idaho Power's bills and compare it to energy cost
embedded in base rates to calculate the PPCA. This establishes a PPCA rate that is based on a
historical base-versus-actual time period and will ensure that customers pay no more and no less
than actual cost. The proposed PPCA changes create essentially a deferred cost recovery
mechanism. Staff recommends that the Company be authorized to recover these deferred power
costs as proposed by the Company. Staff agrees with the Company that by using this simpler
approach, future PPCA filings can be completed in-house without the need of a consultant.
Application at3. This will eliminate $1,100 in annual consulting fees to process the PPCA,
which is 560/o of this year's increase.
In addition, the Company proposes to use billing information from the previous calendar
year (2016 in this case) instead of the most recent l2-month period and match this against the
embedded cost of electricity recovered through base rates during the same period. Although this
creates a time lag in the adjustment, Staff recognizes this delay will provide the Company
adequate time in-house to calculate and file the adjustment in future PPCA's filings. Using
actual Company energy billing information based on calendar year 2016, customers will see an
increase to the PPCA of $ I ,978. See Exhibit No. 3.
In future filings, Staff recommends the Company 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). Due to the current customer charge rate structure,
the Company's proposed method can maintain its simplicity and remain accurate without a true-
up as long as the number of customers remains stable over time. Although Staff is not overly
concemed that the Company will grow, having customer count information filed in its yearly
application will allow Staff to monitor the situation. In addition, having electricity usage and
water consumption information will allow Staff to monitor how well the system is being
operated and to perform a rough prudency analysis. For example, in last year's PPCA filing,
Staff recognized a trend of decreasing energy use over time in relation to the amount of water
pumped which resulted in an adjustment in the PPCA rate benefitting customers.
4STAFF COMMENTS AUGUST 9,2017
Finally, Staff recommends that only costs related to the supply of metered energy be used
in the calculation of the PPCA. Costs related to late payment fees or services beyond the
delivery of metered energy should be excluded from the calculation.
CUSTOMER NOTIFICATION
In last year's PPCA filing, the Commission directed the Company to work with
Commission Staff to revise its description of the PPCA in Schedule No. 3 of the Company's
tariff and on its billing statements. Order No. 33565. The Company was also directed to comply
with the Commission's requirements for customer notices and press releases in future PPCA
filings.
At the conclusion of last year's PPCA case, the Company worked with Staff and made
the appropriate changes to its tariff and billing statements. As revised, Schedule No. 3 clearly
describes how the PPCA charges are applied. Staff found that there were some space constraints
on billing statements with respect to the labeling of line items. Due to those constraints, the
PPCA will be identified as "PPCA ADJ" on billing statements. The notice provided to
customers in conjunction with this case explains changes made to billing statements. Staff is
satisfied with the changes to the Company's tariff and billing statements.
With regard to customer notification, the Company filed a copy of its customer notice
and press release along with its Application. Staff reviewed the documents and determined that
both met the requirements of Rule 125 of the Commission's Rules of Procedure. IDAPA
31.01.01. The notice was included in customers' July billing statements. The Company sent a
press release to the Idaho Statesman and the Idaho Business Review.
As of Tuesday, August8,2017, no customer comments have been received.
STAFF RECOMMENDATIONS
Staff recommends the following:
l. The Commission authorize an overall 3.1% PPCA rate effective September 15, 2017.
2. The Commission approve the Company's proposed Schedule No. 3, which reflects the
3.1% PPCA rate.
3. The Commission authorize the $1,100 case preparation fee for recovery recognizing that
this cost will not be incurred in the future.
5STAFF COMMENTS AUGUST 9,2017
4. The Commission authorize the Company to implement the proposed deferred accounting
treatment and approve the Company request to base the PPCA on actual energy billing
for calendar year 2016. Future PPCA filings will use the same approach tied to the
respective prior calendar years' billing information.
5. The Company in future filings provide the total volume of water pumped, the total
amount energy used, and the total average number of customers for the test year.
Respecttully submiued this qY day of August 2017
Deputy Attomey
Technical Staff: Bentley Erdwurm
Chris Hecht
Rick Keller
Kathy Stockton
i : umisc/comments/capw I 7. I bkrkcwhbekls comments
6STAFF COMMENTS AUGUST 9,2017
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9TH DAY oF AUGUST 2017,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. CAP-W-17-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
ROBERT PRICE
PRESIDENT
CAPITOL WATER CORP
2626 ELDORADO
BOISE ID 83704
E-MAIL: [e-mail]
ROBERT E SMITH
2209 N BRYSON RD
BOISE ID 837I3
E-MAIL: [e-mail]
SECRET
CERTIFICATE OF SERVICE