Idaho Public Utilities Commission
May 29, 2009
Contact: Gene Fadness (208) 334-0339, 890-2712
Commission approves four rate increases
The Idaho Public Utilities Commission today approved four rate adjustments , which, for most Idaho Power Co. customers, will increase overall rates by an average 13.5 percent. The largest of these is the annual Power Cost Adjustment, which is a 10.2 percent increase over the current overall rate.
The other three adjustments include an increase in the Energy Efficiency Rider (2.25 percent), money for the installation of automated meters (1.8 percent) and the annual Fixed Cost Adjustment (1.3 percent).
The commission is reluctant to approve any rate increases beyond what is necessary, especially during these economic times. However, the commission is convinced the reduced energy use that will result from the Energy Efficiency Rider, the Fixed Cost Adjustment and the installation of automated meters will keep customer rates lower than they otherwise would have been in future years. As it said in today’s order regarding costs associated with the automated meters, “… the commission must also keep an eye toward the future and maintain a proactive approach that will best serve long-term ratepayer interests.”
Power Cost Adjustment
IPC-E-09-11, Order No. 30828
Every year on June 1, customers receive either a one-year surcharge or credit to rates, depending on steamflows and market conditions from the previous year and a forecast of the following year’s conditions.
Idaho Power initially requested an average 11.4 percent increase but revised its request to 10.2 percent after a wet spring. Despite a wetter than normal spring, the overall precipitation for the season is only 81 percent of normal.
The power cost surcharge covers expenses, not already included in base rates, which Idaho Power incurs to provide energy to its customers. These can include expenses related to Idaho Power buying power from the wholesale market or firing up its own natural gas peaker plants during times of high demand. None of the money collected in the surcharge goes to increase company earnings, but can be used only to pay off power supply and related expenses. “We remind customers frustrated by the rate increase that the PCA does not influence Idaho Power’s profits,” the commission said.
This year is the third-largest PCA in its 16-year history. The methodology used last year to forecast this year’s power supply expenses “grossly underestimated” the company’s actual expenses, the commission said. A newer methodology used this year forecasts higher costs that should be closer to the actual costs the company will incur in the next year. Because of that, the commission anticipates a decline in the PCA next year even if projected stream flows are below normal.
Because the PCA is high, both commission staff and the Industrial Customers of Idaho Power requested that some expenses be deferred or spread out over the next three years. Commission staff proposed allowing only half of the forecasted amount this year and including the remainder next year. That would have reduced the increase from 10.2 percent to about 6.1 percent. The Industrial Customers proposed the expenses be recovered over the next three years in equal annual installments.
The commission, expressing concern about unknown future water and market conditions, said it was “reluctant to create a situation where customers are required to continue paying costs from this year on top of whatever increases may be required in future years.”
Further, the commission said, collecting the full amount in one year assures the financial community that the company is able to recover reasonably incurred power supply costs.
The increase in the PCA is from 0.7864 cents per kWh to 1.4 cents per kWh.
Energy Efficiency Rider
IPC-E-09-05, Order No. 30814
The money raised from the 2.5 percent Energy Efficiency Rider is used to fund up to 20 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, saving customers money in the long-run.
On June 1, the rider will increase from 2.5 percent to 4.75 percent of customer bills. The increase in the rider is primary due to a new commercial demand response program and a greater than anticipated participation in the Irrigation Peak Rewards Program, which will be capable of reducing Idaho Power’s peak loads in the summer by 200 megawatts. None of the funding from the rider can increase earnings for Idaho Power, but can be used only to fund energy efficiency and conservation programs.
“Rate increases are never popular and are especially unwelcome in difficult economic times,” the commission said. “However, the information provided shows that energy efficiency programs have been effective in creating more efficient use of electricity by customers, and in reducing the peak demand on Idaho Power’s system. These results mean that higher rates to support construction of new generating facilities have been delayed or avoided altogether.”
The rider was created in 2002, after the Western energy crisis of 2000-01. At that time, 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.)
“By encouraging energy efficiency programs through relatively modest increases in the rider, the commission is delaying, or avoiding altogether, larger rate increases necessitated by Idaho Power’s investment in generation resources,” the commission said.
The Northwest Energy Coalition and the Idaho Irrigation Pumpers Association filed comments in support of the rider, although the coalition said the amount of the rider is “insufficient to capture all the cost-effective energy savings potential in Idaho Power’s service territory and to operate robust demand-response programs to reduce peak generation resource needs.” The coalition noted that “using electricity more efficiently is the quickest and least-cost approach to meeting customers’ power needs” because it reduces customer bills and reduces loads during peak periods when Idaho Power’s system is most stressed.
IPC-E-09-06, Order No. 30827
The Fixed Cost Adjustment was implemented in 2007, the first year of a three-year pilot program. The adjustment allows Idaho Power to recover fixed costs it loses when conservation programs result in lower power sales. Without a mechanism like the FCA, utilities have a financial incentive to promote energy sales and they lose money when efficiency and conservation programs are successful. 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 receive a credit instead of a surcharge, as they did last year.
Idaho Power under-collected $1.3 million in fixed costs from the residential class and $1.4 million from the small-commercial class, necessitating an increase of about 0.0529 cents per kWh, or a 0.82 percent overall increase. However, because last year’s FCA was a credit, the net change is 0.0986 cents per kWh or a 1.3 percent net increase.
Advance Metering Infrastructure
IPC-E-09-07, Order No. 30829
Responding to a directive from the commission, Idaho Power has begun a three-year process to 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. In this application, Idaho Power sought the first installment, or $11.2 million for investments made between June 1, 2009, and May 31, 2010, which would have resulted in a 2.22 percent increase.
However, the commission adopted its staff’s recommendation to include only costs through 2009, as more representative of the company’s actual investment. The resulting increase is 1.8 percent. “We are confident that such an approach will provide the necessary protection to ratepayers and ensure that the company is able to maintain adequate cash flow and access to sufficient capital to maintain a secure financial footing in the midst of the current economic downturn,” the commission said.
The Snake River Alliance filed comments supporting the company’s application, but acknowledged that the meters’ benefits won’t be realized immediately. However, “eventual benefits will lead to real energy savings that will benefit all customers … through reduced energy bills and reduced need for additional investments in generation and transmission.”
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. Idaho Power is pursing federal stimulus dollars to help fund the project, which could eventually reduce ratepayer costs.
The orders in all four of these cases are final, but interested persons may file Petitions for Reconsideration through June 19. Petitions must state specifically why the petitioner contends an 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.