Idaho Public Utilities Commission
Case No. IPC-E-09-30, Order No. 30949
November 25, 2009
Contact: Gene Fadness (208) 334-0339, 890-2712
Idaho Power, customer groups propose rate moratorium in exchange for improved return
Idaho Power and a number of customer groups are proposing an agreement that would place a moratorium on general rate case increases until January 2012 and give the company a better opportunity to earn its allowed rate of return.
The agreement, which must be approved by the Idaho Public Utilities Commission, would allow Idaho Power to use some of the reduction in the Power Cost Adjustment (PCA) surcharge that customers are expected to get next June to cover increased power supply expense in base rates. The agreement would also allow the company to accelerate the use of the customer share of tax credits the company receives on its capital investments. Typically, the customer portion of the tax benefit is credited over the lifetime of the investment. Under this proposed agreement, Idaho Power would use the out years of the investment credit to buttress its earnings rather than asking for a general rate increase. The agreement limits the amount of the investment tax credit that can be accelerated to $45 million over three years.
The moratorium affects only changes in base rates. It does not include increases or decreases to the annual PCA, the annual Fixed Cost Adjustment or energy efficiency riders.
The commission has set a Dec. 7 deadline for parties who want to intervene in the case for the purpose of presenting testimony or cross-examining witnesses. The commission will later open a public comment period. Parties to the settlement include Idaho Power, the Industrial Customers of Idaho Power, the Community Action Partnership Association of Idaho, the Idaho Irrigation Pumpers Association, Micron Technology Inc., the U.S. Department of Energy and the Kroger Company. Commission staff is also a party to the agreement. The staff operates independently of the three commissioners who will decide the case.
Idaho Power was preparing to file a rate case in late October when the company and the customer groups reached the proposed agreement. In testimony filed with the commission, Idaho Power Vice President of Regulatory Affairs John Gale said the utility’s electricity sales are down, while maintenance and operation expenses continue to increase. “Idaho Power continues to be under pressure to operate reliably without some additional rate relief,” Gale said. “At the same time, the company is well aware of the current effects of the recession on its service area,” so the company looked for ways “to mitigate its revenue requirement wherever it could,” he said.
Gale estimates that without the mitigation efforts proposed by the company, Idaho Power would have been asking for about a 20 percent increase.
The agreement would allow the company to convert up to $25 million of the first $50 million of anticipated PCA rate reduction to base rates. Customers are expected to benefit next June with a signification reduction, now estimated to be about $160 million, in the annual Power Cost Adjustment. The PCA is a one-year surcharge or a one-year credit depending on the previous year’s water levels and market conditions. The PCA was a significant increase to customers in 2007 and 2008. The last year customers got a PCA credit was in 2006.
The portion of the agreement that allows Idaho Power to amortize Accumulated Deferred Investment Tax Credits (ADITC) would help the company earn up to a 9.5 percent return on equity over the years of the agreement. Without accelerated use of ADITC the company maintains customer rates would increase significantly to bring the company up to its allowed return on equity (ROE) of 10.5 percent. Increasing the ROE adds millions to a general rate case request and is one of the more significant rate case expenses.
Idaho Power proposes to share earnings with customers through rate reductions if the company’s ROE is higher than 10.5 percent. When the ROE is less than 9.5 percent, the company would be able to amortize the investment tax credits, but not to exceed $45 million. Idaho Power has not able to earn its authorized rate of return throughout this decade in either Idaho or Oregon jurisdictions.
Documents related to this case, including the proposed settlement and accompanying testimony, 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 Case No. IPC-E-09-30.