Idaho Public Utilities Commission

Case No. IPC-E-11-08, Order No. 32380

October 14, 2011

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

Settlement would increase Idaho Power rates by 4 percent

Rate case hearings set in American Falls, Gooding and Boise

Parties to an Idaho Power Company rate case have reached a settlement that, if approved, would increase rates an average 4 percent, down from the nearly 10 percent requested by the company when it filed its application June 1.

The proposed settlement must be approved by the Idaho Public Utilities Commission, which has scheduled public hearings in American Falls on Nov. 3, in Gooding on Nov. 9 and in Boise on Dec. 5.

The proposed settlement would allow Idaho Power an annual revenue requirement increase of $34 million. The utility originally sought $83 million, or an average overall rate increase of 9.9 percent.

Included in the proposed average 4 percent increase is an increase in the monthly service charge from $4 to $5 per month. The new rates, if approved, would become effective Jan. 1. The parties are proposing a 7.86 percent rate of return. The company sought 8.17 percent.

Parties signing the settlement include commission staff, the Idaho Irrigation Pumpers Association, the Industrial Customers of Idaho Power, the Department of Energy, Micron Technology, the Idaho Conservation League, the Snake River Alliance, the Northwest Energy Coalition and Hoku Materials. The Community Action Partnership Association of Idaho, which represents customers on low- and fixed-incomes, participated in the settlement discussions but not sign largely because Idaho Power has not agreed to increase its funding for a low-income weatherization program.

The signing parties agreed to defer and amortize over four years a nearly $300,000 expense for a turbine inspection. They also propose to defer $436,000 for a Light Detection and Ranging survey and amortize that over 10 years. That deferral and amortization mitigate the size of rate increases for customers.

Some issues were not resolved and will be argued during the Dec. 5 technical hearing while others will be handled separately in other cases.

Issues to be argued during the technical hearing include the amount of funding that Idaho Power should provide for a low-income weatherization program; the surcharge level for the Energy Efficiency Rider (now set at 4.75 percent of billed rates) and the method used to calculate facilities charges for large commercial and industrial customers.

The issues to be handled separately include the amount paid by parties requesting a line extension and whether the annual pilot Fixed Cost Adjustment (FCA) mechanism should be made permanent.

The commission will conduct three public hearings, giving customers an opportunity to testify regarding the proposed settlement. Those hearings will be:

· Thursday, Nov. 3, at 7 p.m. in the Power County Courthouse Annex, 500 Pocatello Ave., in American Falls.

· Wednesday, Nov. 9, at 7 p.m. at the Gooding County Planning and Zoning Building, 145 Seventh Ave. East in Gooding.

· Monday, Dec. 5, at 7 p.m. at the commission hearing room, 472 W. Washington St. in Boise.

The technical hearing will also be Dec. 5 beginning at 9:30 a.m. in the commission hearing room.

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.

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.

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.

Idaho Power serves nearly 500,000 customers in southern Idaho and eastern Oregon.

Customers can track the case on the commission’s Web site, www.puc.idaho.gov., where the company’s application, including testimony from company officials and intervening parties as well as customer comments are posted. Click on the electric icon, then on “Open Electric Cases,” and scroll down to Case No. IPC-E-11-08.

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