Idaho Public Utilities Commission

April 28, 2010

Case No. IPC-E-10-12, Order No. 31064

Contact: Gene Fadness (208) 334-0339, 890-2712

Customers have until May 18 to comment on PCA rate reduction

Idaho Power customers have until May 18 to comment on an application by Idaho Power Company to reduce the Power Cost Adjustment (PCA) surcharge by about 6.5 percent. For the residential class alone, the proposed reduction is about 3.2 percent.

On or about April 15 of each year, Idaho Power files its annual PCA, which adjusts rates up or down to reflect the company’s annual power supply expenses not already included in base rates and a forecast of next year’s power supply expense. In simple terms, the PCA is the mechanism that allows Idaho Power to pay its “power bill” and related expenses to its power suppliers. Even during those years when the PCA increases rates, the added revenue does not increase the company’s 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.

Idaho Power’s power supply expenses vary from year to year depending on changes in Snake River stream flows and on the market price of power. When Idaho Power has a below-normal water year, it generates less electricity from its lower-cost hydroelectric generators, forcing the utility to either generate or buy from more expensive thermal sources, driving up its power supply expense. This year’s $146.7 million decrease isn’t related as much to hydro or market conditions as it is to a more accurate forecast of future power supply costs as a result of a new forecasting methodology. While this year’s PCA is a reduction, last year’s was one of the highest on record, resulting in an average 10.2 percent increase for customers.

The PCA, if approved by the commission, becomes effective June 1.

Idaho Power has three other applications before the commission that become effective the same day. If approved, those adjustments (for expenses related to automated meters, the annual Fixed Cost Adjustment and pension expense) would result in an average 1.26 percent increase for customers.

The net effect of all these adjustments, PCA included, is a 5.25 percent average decrease for all customers classes combined. For the residential class, the net decrease would be 1.4 percent.

The total decrease in Idaho Power revenue as a result of the proposed PCA is $146.7 million, with customers getting $58 million. Anticipating a significant reduction in the PCA and trying to avoid another base rate increase this year, the company and the commission reached an agreement last January that allocated $88.7 million to permanent base rates. Last January’s agreement also includes a moratorium on base rate increases until Jan. 1, 2012, at the soonest.

The commission plans to handle this request in a modified procedure that uses written comments rather than conducting a hearing, unless customer comments can demonstrate a need for a public hearing. 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 (IPC-E-10-12) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.

A full text of the commission’s order, along with other documents related to this case, is 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 number.