Idaho Public Utilities Commission

Case No. IPC-E-11-08, Order No. 32272

June 27, 2011

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

Commission begins processing Idaho Power rate case

Intervention deadline is Friday

The Idaho Public Utilities Commission has suspended for up to six months an application made June 1 by Idaho Power Company to increase customer rates by an average 10 percent. Idaho Power serves nearly 500,000 customers in southern Idaho and eastern Oregon.

The six-month suspension will allow time for the commission’s staff of auditors, engineers and attorneys to thoroughly review the company’s application.

The commission has set an intervention deadline of July 1 for parties seeking “intervenor” status. Parties, typically representing large customers or groups of customers, intervene to present evidence, cross-examine witnesses, participate in settlement conferences and make and argue motions. Parties seeking intervenor status to date include the Idaho Irrigation Pumpers Association, the Industrial Customers of Idaho Power, the Department of Energy, Micron and the Community Action Partnership Association of Idaho, which represents primarily customers on low- and fixed-incomes.

As the case develops, members of the general public, who do not have intervenor status, will have the opportunity to submit written comments for the case record, participate in public workshops and testify at hearings to be scheduled later.

The commission cannot, by state law, arbitrarily refuse to consider utility rate increase requests without first considering the evidence presented by the utility, intervening parties and customers. The burden of proof is on the utility to justify the expenses it seeks to recover through rates as 1) necessary to serve customers and 2) prudently incurred. The commission may accept, reject or modify the company’s request. All commission decisions can be appealed to the state Supreme Court by the utility, intervenors or customers.

Idaho Power claims the revenue requirement needed to serve Idaho is $917.6 million, which is about $82.6 million more than what the company currently collects from customers.

Continued growth in demand for electricity, aging infrastructure and higher compliance and reliability requirements are the driving factors behind the rate increase request, according to the company’s application.

Idaho Power claims it has made significant investment in pollution control equipment in four units and upgraded a turbine in one unit of the Jim Bridger power plant, a coal-fired facility in southwest Wyoming. The company plans additional investment at its Valmy coal plant in Nevada this year. Idaho Power also completed construction of a new 500-kilovot Hemingway transmission station and the associated Hemingway to Bowmont 230-kV transmission line at a total cost of $54 million. The company also completed construction of the Long Valley Operations Center in Lake Ford to replace the existing McCall Operations Center.

The company’s application further states that the cost of building materials has increased dramatically since the last time the company was granted a general rate increase in 2009. In that two-year period, the company claims aluminum costs have increased 59 percent; copper, 104 percent and standard plate steel, 83 percent.

The company is seeking an 8.17 percent rate of return and a 10.5 percent return on equity. Idaho Power has not earned its authorized rate of return in any of the last five years and does not anticipate doing so in 2011.

Darrell Anderson, the company’s chief financial officer, claims current rates do not provide the company a “sufficient opportunity to earn the rate of return necessary to assure access to the capital markets to finance needed investments under reasonable terms.”

To mitigate the size of the increase, Idaho Power says it is not including nearly $32 million in power supply expenses and also is not asking for construction expenses related to the Hells Canyon relicensing project. While not collecting the expenses now will impact cash flow, it will not affect the company’s earnings or perception of the company’s financial health in the markets, according to Greg Said, vice president for regulatory affairs.

Proposed increases for customer classes vary according to the cost the company incurs to serve each customer class. The company’s proposed increase for residential customers is 8.8 percent. That includes a proposed increase in the monthly service charge from $4 to $5 per month. The proposed increase for small-commercial, industrial and irrigation customers is 14.8 percent and 7.3 percent for large-commercial customers.

Idaho Power seeks to have the Fixed Cost Adjustment, now a pilot program, to be made permanent. It also wants to shift the incentives it pays to those who participate in demand reduction programs from the Energy Efficiency Rider, now at 4.7 percent, to base rates.

Customers can track the case on the commission’s Web site where the company’s application, including testimony from company officials and customer comments are posted. As the case progresses, testimony from commission staff and intervenors will be added. The Web site is www.puc.idaho.gov. Click on the electric icon, then on “Open Electric Cases,” and scroll down to Case No. IPC-E-11-08.

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