Commission begins investigating Idaho Power rate request
State regulators are beginning a six-month process to consider Idaho Power’s request for an average 7.8 percent rate increase. If approved, the bill for an average residential customer who uses 1,200 kilowatt-hours per month would increase from $74.23 to $79.18. During the months of June, July and August, when the company’s higher summer rate is in effect, the proposed increase would be from $80.22 per month to $85.38.
The Idaho Public Utilities Commission set a deadline of Dec. 6 for persons or parties who want to intervene in the case for the purpose of presenting evidence or cross-examining witnesses. The commission has already granted intervention status to the Idaho Irrigation Pumpers Association.
The commission will soon establish dates for public hearings and will accept written and oral testimony from customers.
Idaho Power maintains that the overall rate of return and the return on equity established by the commission during the company’s 2003-04 rate case are no longer reasonable given the company’s increased operating costs. In that case, the commission granted Idaho Power an approximate 6 percent increase. The company had requested 17.7 percent and later revised its request to 14.5 percent.
Additional revenue of $44 million per year is needed, Idaho Power asserts, if it is to maintain a stable financial condition and continue to render adequate service to its approximately 450,000 customers. The company estimates its yearly operating costs at $606 million.
Idaho Power also proposes to increase its monthly service charge for residential and small-commercial customers from the current $3.30 per month to $6. For large-commercial and industrial customers, the service charge would increase from $5.60 to $12 per month.
The commission suspended Idaho Power’s requested effective date of Nov. 28 for six months. That allows time for the commission’s staff of auditors, engineers, attorneys and outside intervenors to initiate a thorough investigation of Idaho Power’s application. The commission’s role in the rate case is to determine if the company’s increased operating costs were prudently incurred and necessary to serve customers. The commission also determines if the rate of return and the return on equity established in the 2003 case are still reasonable.
After Idaho Power, commission staff, intervenors and the general public offer their comments, the three commissioners will issue a decision based on the evidence presented. The commission is free to deny, accept or modify Idaho Power’s request. The commission’s decision can be appealed to the state Supreme Court.
Regulated electric, gas and water utilities are not like other businesses. They operate as monopolies and provide a service that is essential to public safety and well-being. Because of their monopoly status, regulated utilities cannot raise rates without commission approval. They must serve only the customers within their assigned territories and they must provide every paying customer with adequate and reliable service. They cannot cease serving customers when operating costs are too high. In return for the regulated utilities’ commitment to serve all customers within their assigned territories, Idaho law requires they be able to recover all their prudently incurred costs of doing businesses plus a rate of return that is reasonable enough to attract investment in generation, transmission and other capital facilities needed to serve customers.
This is Idaho Power’s second request for a general rate increase since 1993. Rate cases are not the same as the annual power cost adjustment (PCA) process, which is a yearly adjustment, subtracted from or added to base rates to reflect changes in stream flow conditions and wholesale market rates. There are two rate components to a customer’s bill, the base rate and the PCA. When streamflow conditions are below normal – as during the past six years of drought – the PCA typically results in a surcharge added to base rates. When streamflows are above normal, customers can receive a credit from their base rate. Unlike a rate case, the yearly power cost adjustment does not increase company earnings. The PCA account is essentially a pass-through, with the money collected going directly from the company to its power suppliers.