20190814Comments.pdf

JOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO, 5470
RECEIVED
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Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER
CORPORATION'S APPLICATION TO
INCREASE ITS SCHEDULE NO.3
PURCHASE POWER ADJUSTMENT RATE
CASE NO. CAP-W.I9-OI
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, submits the following comments
regarding the above referenced case.
BACKGROUND
On June 20,2019, Capitol Water Corporation ("Capitol Water" or the "Company") filed
an Application to increase its Schedule No. 3 Purchased Power Cost Adjustment Rate to "recover
the Company's [increased] 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.
Beginning with Case No. CAP-W-09-01, Capitol Water has submitted an annual filing
requesting Commission approval to raise or lower its Schedule No. 3 Purchased Power Cost
Adjustment Rate (the .'PPCA") to account for increases or decreases in electric power supply
costs the Company incurs for the electric power it uses to operate its water system. In general,
Capitol Water's electric power supply costs increase or decrease annually due to Idaho Power
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ISTAFF COMMENTS AUGUST T4,2OI9
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Company's ("Idaho Power") Power Cost Adjustment mechanism, Fixed Cost Adjustment
mechanism and any other miscellaneous annual Idaho Power rate changes. See Order No. 30881
at3; see also Order No. 33128.
Capitol Water states its "current base rates were established by Order No. 30762 in Case
No. CAP-W-08-02." Id. Capitol Water asserts in Order No. 30762 "the Commission adopted a
three (3) year average of 1,454,401 kwh of electricity consumption [by the Company] at an
average cost of 5.19(,, to establish rates for Applicant." Id. at 1. The Company asserts this results
in a total electric power cost of $75,483 that is incurred by Capitol Water. Id.
Capitol Water asserts in Case No. CAP-W-17-01the Commission adopted, the most
recent twelve months of power costs as a more efficient method for Capitol Water to recover its'
increased electric power costs. Id.; see also Order No. 33876.
Capitol Water requests an increase in its PPCA due to increases in electric power supply
costs it incurred in2018 from Idaho Power. Id. Specifically, Capitol Water claims the actual
electric power supply cost it incurred in 201 8 was $94,571 which is $ 19,088 more than what is
currently embedded in the Company's base rates. Id.; see a/so Exhibit 1 to the Application.
Capitol Water asserts its current 2.61% PPCA' is too low to recover the higher electric
power costs it incurred in2018. Id. Accordingly, Capitol Water requests a new, increased PPCA
of2.93o/o. Id.
STAFF REVIEW AND ANALYSIS
PPCA Adjustment
Staff reviewed the Company's Application and supporting documents, and recommends
the Commission authorizethe proposed 2.93% PPCA rate, which will increase the current PPCA
from $17,034 to $19,088. Staff verified that the calculations made in the Application and the
workpapers are correct, and confirmed actual power costs incurred in 2018 were $94,571, which
is $19,088 higher than the $75,483 embedded in base rates.
I Capitol Water's current PPCA rate was authorized by Commission Order No. 34124
2STAFF COMMENTS AUGUST 14,2OI9
PPCA Methodology
In Order No. 33876, Case No. CAP-W-17-01, the Commission approved changes to the
PPCA methodology. The Company compares its actual charges directly from Idaho Power to the
energy cost embedded in base rates to calculate the PPCA. Staff notes that by using this
approach, PPCA filings are completed in-house without the need for a consultant. Only the costs
related to the supply of metered energy are used in the calculation of the PPCA. Costs related to
late payment fees or services beyond the delivery of metered energy are excluded from the
calculation.
Due to the current customer charge rate structure, the current methodology can maintain
its simplicity and remain accurate without a true-up as long as the number of customers remains
stable over time. Capitol Water experience d a 0.60/o growth in customers in 201 8, with an
increase of I 8 customers. Staff notes that the number of customers continues to be relatively
stable, and that Capitol Water's service territory has little room for growth.
In Order No. 33876, the Commission also stated, "[g]oing 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." Order No. 33876 at 4. Staff notes that the calendar year information on the total average
number of customers and total volume of water pumped has been provided in the Company's
annual report. The Company files its annual reports on time, so the information is available to
Staff and other interested parties. Therefore, Staff recommends this portion of the annual filing
requirement related to number of customers and total volume of water pumped be eliminated,
while retaining the total electric energy portion.
System Efficiency
The PPCA methodology trues up the actual cost of electricity to the cost of electricity
embedded in base rates allowing the Company to recover actual differences in electricity costs.
Because the mechanism essentially passes through the actual cost of electricity to customers,
there is no incentive for the Company to use electricity efficiently. Consequently, Staff
performed an analysis to ensure that the Company incurred electricity costs during the period in a
prudent manner. Through its analysis, Staff believes that pumping efficiency has begun to
JSTAFF COMMENTS AUGUST 14,2OI9
decline in some of the Company's wells which could be a sign that the wells may need added
maintenance to restore pumping efficiency to historically efficient levels.
The Company is asking for an increase of $2,054 in this year's PPCA even though 2018
average cost of electricity on a kilowatt-hour (kwh) basis declin ed 5oh from 7 .47 to 7. l0 cents per
kWh compared to the prior year. Offsetting the reduced unit cost of electricity was an increase in
the total amount electricity used. The amount of electricity needed to serve customers in 201 8
increased 7.3o/o from the prior year, while the amount of water pumped only increased by 0.7%.
All things being equal, an increase in the amount of water pumped should correlate with
approximately the same increase in electricity consumption. The difference in the amount of
electricity used and the amount of water pumped indicates more energy was used to pump each
gallon of water as compared to the previous year.
Staff analyzedwater pumping and energy consumption for each of the Company's wells
provided in responses to Staff s production requests. The increase in energy usage relative to the
amount of water pumped lowered the system average pumping efficiency from 72o/o in the prior
PPCA to 67Yo for the current PPCA as shown in the table below.
Staff discussed various factors that could account for the lower pumping efficiency with
the Company. The Company noted that the two main wells which account for 75o/o of the
system's water production were cleaned approximately 4 to 5 years ago and are due for another
cleaning. Staff believes it's important for the Company to monitor the pumping efficiency and
address well maintenance and cleaning to maintain pumping efficiency to ensure that customers
are paying for prudently incurred electricity cost.
Rate Design
With the proposed change in the PPCA, the monthly bill for an unmetered customer with
% - inch service line would increase by $0.09 - from $29.45 to $29.54 - in May through
4
WELL INFORMATION UNIT 2017 201 8 DIFFERENCE
TOTAL WATER PUMPED gal 873,646,600 879,820,000 0.7%
TOTAL ENERGY USED kwh 1,213,775 1,302,816 7.3o/o
TOTAL COST OF ELECTRIC ENERGY S 90,667 92,482 2.0%
COST OF ELECTRIC ENERGY (UNIT)c/kwh 7.47 7.10 -5.0%
PUMPING EFFICIENCY %72 67 -6.9%
STAFF COMMENTS AUGUST 14,2079
September and by $0.04 - from $12.98 to $13.02 - in all other months. The annual bill for this
customer would increase by $0.73, from $238.11 to $238.84 (0.3loZ increase). The bill for a
metered customer will vary with water usage and the PPCA portion of the bill will increase by
032%. These bill calculations exclude franchise taxes.
CUSTOMER NOTIFICATION
The Company filed its Customer Notice and Press Release with the Company's
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
with customers' July 1,2019 billing statements.
The Company sent a Press Release to the Idaho Statesman and the Idaho Business Review
at the time of the Application's filing on June 20,2019.
As of Wednesday, August 14,2019, no customer comments have been received.
STAFF RECOMMENDATION
Staff recommends that the Commission authorize an overall 2.93% PPCA rate, and
approve the Company's proposed Schedule No. 3. Staff further recommends that the
Commission eliminate the directive to include the average number of customers and the total
volume of water pumped in the annual PPCA filing.
Respectfully submitted this )4Lo^rof August 2019.
Attorney
Technical Staff: Kathy Stockton
Bentley Erdwurm
Rick Keller
Chris Hecht
i :umisc:comments/capw I 9. ljhrkklsbecwh comments
STAFF COMMENTS AUGUST 14,2079
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF AUGUST 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. CAP-W-Ig-OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
ROBERT PRICE
PRESIDENT
CAPITOL WATER CORP
2626 ELDORADO
BOISE ID 83704
E-MAIL: capitolwatercorp@yahoo. com
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sECRtrrA),r1
CERTIFICATE OF SERVICE