Idaho Public Utilities Commission
May 30, 2008
Contact: Gene Fadness (208) 334-0339, 890-2712
Commission adopts Idaho Power rate adjustments
State regulators today approved several rate adjustments to Idaho Power Co. customer bills that become effective Sunday.
The largest is an increase in the annual Power Cost Adjustment (PCA), which this year is a surcharge that increases rates for all customer classes by an average 10.7 percent. For residential customers, the increase is 8.45 percent.
The Idaho Public Utilities Commission also approved an increase to base rates of 1.37 percent for $63.4 million in costs for the new Danskin natural gas plant near Mountain Home. There is also a 1 percent increase to the energy efficiency rider to fund an expansion to Idaho Power’s demand-side management (DSM) programs. Finally, rates for residential and small-commercial customers will decrease by eight-tenths of 1 percent as a result of the Fixed Cost Adjustment.
Combining all four adjustments, an average residential customer who uses 1,050 kWh per month will see an increase of about $6.80 per month.
Power Cost Adjustment
IPC-E-08-07, Order No. 30563
Every year on June 1, customer rates are adjusted either up or down to reflect the Idaho Power’s annual power supply costs, which vary from year to year depending on changes in Snake River stream flows and the market price of power. Snow pack and river flows from the winter of 2006-07 were below normal and reservoirs were low. In addition, temperatures broke the 100-degree mark 14 times in July alone. Idaho Power’s record for customer demand was broken five times before setting an all-time high of 3,193 megawatts on July 13, 2007. Due to better snow during the winter of 2007-08, the forecast for next year is normal.
Due to lack of hydroelectric generation, Idaho Power had to go to the wholesale market and buy power. It had to fire up its natural gas peaker plants to meet load during those peak-use days. Consequently, the company spent about $163 million buying power and natural gas to serve its customers.
During some years, the PCA is a credit rather than a surcharge. During 2006, customers got an average 16 percent PCA credit. Unlike a change in base rates, which can increase company profits, the annual PCA surcharge or credit does not affect company profits. Revenues collected from the PCA are kept in a deferred account, audited by the commission, and used only to pay power supply and fuel expenses.
The impact of the PCA was mitigated slightly by a commission decision to apply about $16.5 million in revenue the company earned from its sale of surplus sulfur dioxide emissions credits toward reducing the PCA. Without that, the average PCA increase would have been about 12.8 percent.
The commission declined a request by the Industrial Customers of Idaho Power to spread recovery of this year’s power supply expenses over three years. “As stated by the parties in this case, Idaho has experienced unprecedented drought and forecasts for water are, at best, uncertain. It is simply too risky, and potentially compounds the problem, to seek recovery from ratepayers across three future years,” the commission said.
The commission said it remains concerned about the increased use of natural gas-fired peaking plants. “In previous orders, the commission has noted concerns with the volatility of natural gas prices. We are also increasingly concerned with the persistent high price of natural gas this year,” the commission said. The commission asked the company to provide more information about Idaho Power’s daily decisions on whether to run its gas-fired peaker plants to meet demand or to purchase wholesale power.
Danskin power plant
IPC-E-08-01, Order No. 30559
Danskin, part of the Evander Andrews Power Complex near Mountain Home, is a 170-megawatt natural gas plant scheduled to be in operation next week. Expenses related to plant construction totaled $56.7 million and expenses related to transmission and interconnection upgrades to deliver the power generated from the plant totaled $7.54 million.
A commission staff audit of contract costs and change order costs, as well as transmission and interconnection facilities costs, found them to be reasonably and prudently incurred. About $422,000 in anticipated plant costs were not able to be verified and thus removed from the company’s original request.
Costs in this case do not include two components of anticipated transmission upgrades: a new Hubbard substation and a 230 kV transmission line between Danskin and the new substation. These are estimated to cost $19.5 million and may be included in a future rate case.
Energy efficiency rider
With today’s order, the energy efficiency rider increases from 1.5 percent of base revenue to 2.5 percent. On an average customer bill, the increase is about 78 cents during the non-summer months and about $1 during June, July and August. This will allow Idaho Power to increase funding for conservation and efficiency funding from the current $9 million to $16 million.
The commission approved the rider increase because the company saves more in energy costs than it spends on the programs, benefiting all customers. “We commend the company for increasing its commitment to DSM programs that apparently are actually resulting in energy savings to customers,” the commission said. “Even if the company’s DSM program costs increase, all cost-effective DSM programs will delay the need to construct new, costly generating facilities.”
Demand response programs are designed to reduce the actual megawatts the company needs at specific times of the day and year when electricity is in short supply and at high cost. Through the use of load control devices installed on customer meters, Idaho Power can reduce the amount of power it needs during peak periods when electricity is most expensive. Idaho Power was able to shave 57 megawatts of off peak demand during 2007. One megawatt is enough to power about 700 average-sized homes during the non-summer months and 350 average-sized homes during summer.
The surcharge also funds energy efficiency programs that reduce megawatt-hours consumed. These programs include cash incentives and information and services that aid in the construction of energy-efficient buildings and installation of energy-efficient appliances. During 2007, Idaho Power was able to reduce consumption by 91,145 megawatt-hours through energy efficiency programs.
Several organizations supported an increase in the rider including the Northwest Energy Coalition, the Renewable Northwest Project, the Idaho Conservation League and the Snake River Alliance.
The commission declined to approve Idaho Power’s request to allow rider funds to be used for small-scale renewable projects, such as photovoltaic systems. The commission said it would need more information about the projects and their costs before allowing already limited rider funds to be directed toward them.
Fixed Cost Adjustment
IPC-E-08-04, Order No. 30556
To encourage utility investment in conservation, the commission last year authorized a three-year pilot program called the Fixed Cost Adjustment (FCA). The rationale for the FCA is that utilities aren’t encouraged to promote energy efficiency among its customers when the company recovers its costs primarily though energy sales.
The FCA allows the company to recover costs through a surcharge if it under-collects fixed costs because of reduced electrical use. Conversely, if the company over-collects fixed costs, customers get a credit instead of a surcharge.
During 2007, the company claimed it over-collected $3.5 million from residential customers and under-collected $1.2 million from small-commercial customers. Thus, it proposed a 1.17 percent monthly rate credit for residential customers and a 3 percent monthly surcharge for small-commercial customers. Recovery of the full amount from small-commercial customers would require a 7.3 percent surcharge, but part of the FCA pilot program is a 3 percent cap on any increase.
Commission staff, however, said it could not endorse Idaho Power’s fixed cost assumptions, largely because fixed costs per customer class were not established in the company’s last rate case. Until a future rate case can more firmly verify fixed costs, the commission adopted the commission staff’s proposal to split the net $2.4 million deferral balance (the $3.5 million over-collection for residential customers minus the $1.2 million under-collection for small-commercial) to both customer classes. The result is an approximate 0.8 percent rate decrease for both customer classes.
Commission orders are final, but interested parties may petition the commission for reconsideration on any of the orders by no later than June 20. Petitions must set forth specifically why the petitioner contends the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.
A full text of the all the orders, along with other documents related to each case, are available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to the above case numbers.