Idaho Public Utilities Commission
April 16, 2009
Contact: Gene Fadness (208) 334-0339, 890-2712
Commission taking comment on four proposed Idaho Power rate adjustments
Idaho Power Company is asking the Idaho Public Utilities Commission to approve four rate adjustments that, if all approved in their entirety, could raise the average residential rate by about 15.4 percent.
On or about April 15 of every year, Idaho Power files its annual Power Cost Adjustment (PCA), a request to adjust rates up or down to reflect the company’s annual power supply expenses not already included in base rates. The annual PCA adjustment does not increase company earnings. Revenues from the surcharge are kept in a deferred account, audited by the Public Utilities Commission, and must go directly toward paying down the utility’s power supply costs.
Power supply costs vary from year to year depending on changes in Snake River stream flows and the market price of power. Idaho Power said it expects to generate between 6.5 and 8.5 million megawatt-hours from its hydroelectric dams. A normal water year is 8.5 million MWh. When Idaho Power has a below-normal water year, it cannot generate enough from its low-cost hydroelectric generators so it must either generate or buy from more expensive thermal sources, driving up its power supply expense.
Rates are typically adjusted on June 1 for the PCA. Last year, the surcharge was a 10.7 percent increase and in 2007, after a wet 2006, customers received an average 16 percent reduction.
This year’s PCA is a proposed 11.4 percent increase overall. For residential customers, the proposed PCA increase is 9.3 percent. For a residential customer who uses the company’s average of 1,050 kilowatt-hours per month, the monthly increase would be about $7.20 if the application were approved in full.
The commission will shortly open a comment period on Idaho Power’s proposal.
In March, Idaho Power asked for three other adjustments, all of which would be effective June 1. While the adjustments increase rates, all are designed to increase efficiency and reduce costs to customers.
The adjustments include an increase in the Energy Efficiency Rider (2 percent for residential customers), the Fixed Cost Adjustment (1.3 percent residential) and an application to include costs associated with the installation of automated meters (3 percent residential).
Energy Efficiency Rider
The money raised from this rider, currently 2.5 percent of customer bills, is used to fund programs that reduce customer demand on Idaho Power’s electric system. That demand reduction reduces the amount of electricity Idaho Power has to buy or generate.
The rider was created in 2002. After the Western energy crisis of 2000-01, the commission directed Idaho Power to develop comprehensive demand-side management (DSM) and energy efficiency programs to help customers reduce bills and lessen Idaho Power’s dependency on the volatile wholesale market for electric supply.
Energy efficiency programs in 2008 resulted in 107,484 megawatt-hours of energy savings, a 72 percent increase over the 2007 total of 62,544 MWh. DSM programs that reduce demand on Idaho Power’s system provided 58 megawatts of demand reduction in 2008, compared to 48 MW in 2007. (One megawatt is one million watts, enough electricity to power about 650 average homes and light 10,000 100-watt light bulbs.)
Idaho Power believes additional energy savings and demand reduction can be achieved through new or enhanced programs funded by an increase in the rider from the current 2.5 percent of customer bills to 4.75 percent, which would raise an additional $15.6 million annually. The current rider collects $17.4 million and the rider account currently has a deficit of $3.9 million. None of the funding from the rider can increase earnings for Idaho Power, but can be used only to fund energy efficiency programs designed to save customers money in the long-run.
The commission is taking comments on this proposal through May 1.
The Fixed Cost Adjustment was implemented in 2007, the first year of a three-year pilot program. The adjustment allows the utility to recover fixed costs it loses when conservation programs result in lower power sales. Without a mechanism like the FCA, utilities don’t have incentive to promote energy efficiency and demand-side management because they lose money when those programs result in less use of energy.
The FCA allows Idaho Power to recover its already established fixed costs through a surcharge when 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.
Idaho Power is claiming it under-collected $1.3 million in fixed costs from the residential class and $1.4 million from the small-commercial class, necessitating an increase.
The commission is taking comments on this proposal through May 8.
Advance Metering Infrastructure
Responding to an urgent directive from the commission, Idaho Power will replace its existing meters with advanced metering infrastructure (AMI) that will eventually allow customers to monitor electric prices and adjust their use to take advantage of lower price-periods.
Idaho Power estimates the project will cost $71 million over its three year phase-in process. This application seeks the first installment, or $11.2 million for investment made in AMI between June 1, 2009 through May 31, 2010.
If the commission were to approve the total amount requested, customer rates would increase by 1.6 percent, according to Idaho Power’s application.
The commission is urging Idaho Power to "move forward with all deliberate speed" with installation beginning this year in the Boise area, then in 2010 in the Canyon and Payette regions and, finally, in 2011 in the Magic Valley, Pocatello and Salmon areas.
The advanced meters can be read from a remote location, negating the need for an Idaho Power representative to access customer properties. They can provide the company and individual customers with hourly meter readings and inform customers of current electric prices, potentially allowing them to manage their use and reduce their bills.
Other benefits to customers and the company will include reduced operational costs associated with meter reading and improved meter reading accuracy, outage monitoring and theft detection. Customers can also be disconnected and reconnected from a remote location saving time and labor. There are also billing advantages such as fewer estimated bills, less re-billing and more flexible billing schedules.
The commission is taking comments on this proposal through May 18.
Comments are accepted via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on "Comments & Questions." Fill in the case number and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
The case numbers are as follows: Power Cost Adjustment, IPC-E-09-11; Energy Efficiency Rider, IPC-E-09-05; Fixed Cost Adjustment, IPC-E-09-06; and Advanced Metering Infrastructure, IPC-E-09-07.