Idaho Public Utilities Commission

Case Nos. IPC-E-12-03, March 30, 2012

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

Commission processing seven rate adjustments

The Idaho Public Utilities Commission is taking comments or conducting workshops on seven rate adjustment applications from Idaho Power Company that, if approved in their entirety, would increase customers rates by an average 3.35 percent by no later than July 1.

Not included among these seven adjustments is the annual Power Cost Adjustment (PCA) which also becomes effective June 1 each year and could have a positive or negative impact on the 3.35 percent increase now proposed. Idaho Power is expected to file its PCA application on or about April 15.

The proposed adjustments having the largest impact on rates are the Langley Gulch gas plant, a 7.1 percent increase and the second year of a revenue sharing mechanism, a 3.2 percent decrease.

A summary of all the applications follows:

Langley Gulch, Case No. IPC-E-12-14, 7.1 percent increase

Idaho Power seeks to increase its annual revenue by $60 million to pay for a $398 million natural gas plant five miles south of New Plymouth. According to the company’s figures, the average increase if approved will be 7.1 percent effective July 1.

The 300-megawatt plant came in under the $427 million commitment estimate approved in the commission granted Idaho Power a Certificate of Public Necessity and Convenience to construct the plant in 2009. The plant is scheduled to be online on or before July 1.

Intervening parties to date include the Industrial Customers of Idaho, Idaho Irrigation Pumpers Association and Micron Technology. Intervening parties will convene a prehearing conference to discuss the scheduling of the case and a formal public comment period will be announced.

Revenue Sharing, Case No. IPC-E-12-13, 3.2 percent decrease

As part of its 2010 rate case settlement, Idaho Power agreed to share 50-50 with customers all revenue exceeding 10 percent Return on Equity (ROE). Seventy-five percent of the company’s share of earnings above 10.5 percent will be used to offset company pension expenses that would otherwise be included in customer rates.

In this application, Idaho Power states the amount due customers is $27 million. About $20.3 million of that will be used to apply against the company’s pension balancing account that would otherwise e collected through rates. The result is about a 3.2 percent reduction to rates.

The commission will take comments on this application through May 4.

Mechanical metering depreciation, Case No. IPC-E-12-07, 1.22 percent decrease

Idaho Power is seeking authority to decrease base rates due to the removal of accelerated depreciation expense associated with removal of mechanical meters.

The company recently completed a three-year installation of automated meters. Mechanical metering equipment will be fully depreciated on May 31, 2012. As a result, Idaho Power proposes to decrease annual revenue by $10.5 million, which reduces rates by 1.22 percent effective June 1.

The commission is taking comments on this application through April 10.

Depreciation rates, Case No. IPC-E-12-08, 0.31 percent increase

Idaho Power is seeking a $2.65 million increase to base rates to account for an increase in depreciation rates for plant-in-service. The increase is based on updated net salvage percentages and service life estimates for all plant assets, with the exception of the Boardman coal plant and automated meters, which are being handled in separate applications.

The proposed increase varies from 0.29 percent to 0.32 percent, with the proposed residential increase at 0.31 percent.

Commission staff will conduct an informal workshop on this application (and the one below) on Thursday, April 5, at 9 a.m. in the commission hearing room, 472 W. Washington St. The commission is also taking comments on this application, though a firm comment deadline has not been established.

Boardman balancing account, Case No. IPC-E-12-09, 0.18 percent increase

In February, the commission approved Idaho Power’s application to establish a balancing account related to the early closure of the Boardman coal plant in Oregon. Idaho Power is a 10 percent of the owner of the plant due to be closed in 2020.

The balancing account tracks, on a cumulative basis, the difference between revenues and expenses associated with the shutdown. It ensures customers pay only for actual expenditures. Idaho’s share of the annual change to base rates the company is requesting to recover is $1.58 million. The proposed increase varies among customer classes from 0.17 percent to 0.2 percent, with the proposed residential increase at 0.18 percent.

The $1.58 million includes the return associated with Boardman capital investments net the accumulated depreciation forecasted through Boardman’s remaining life, the costs of accelerating the plant’s depreciation and the decommissioning costs associated with the shutdown.

Fixed cost adjustment, Case No. IPC-E-12-12, 0.28 percent increase

The FCA, implemented in 2007, allows Idaho Power to recover the fixed costs it loses when conservation programs result in lower power sales.

Without a mechanism like the FCA, there is a financial disincentive for Idaho Power to promote energy efficiency and conservation because it loses revenue when conservation results in power sales declining. Sometimes referred to as “decoupling,” the FCA decouples or separates Idaho Power’s fixed costs from its energy sales, assuring the utility will be able to recover its fixed costs as established in the most recent rate case regardless of how much energy customers save. If the company under collects its fixed costs of serving customers, customers get a surcharge. Conversely, if the company over collects fixed costs, customers receive a credit, as they did in the first year of the program. The commission capped the percentage increase that could be collected from residential and small-business customers at no more than 3 percent.

This year, Idaho Power under-collected $8.83 million in fixed costs from the residential class and $1.48 million from the small-business class. Building on what already exists in the FCA account, the company is proposing an increase of $1.16 million from both the residential and small-business classes of 0.28 percent effective June 1. This equates to a new FCA rate of 0.2028 cents per kWh for residential customers and 0.2597 cents per kWh for small-business customers.

The commission is taking comments on this application through April 10.

Transmission deferral, IPC-E-12-06, 0.06 percent increase

In this application, the company seeks to amortize $2 million over three years to recover lost transmission revenue associated with a federal transmission case.

In that case, the Federal Energy Regulatory Commission (FERC) found that Idaho Power had assessed transmission fees to PacifiCorp for transmission service on Idaho Power lines that were significantly lower than that Open Access Transmission Tariff (OATT) rates Idaho Power proposed to charge other customers for similar transmission service. The rate charged PacifiCorp was part of three “Legacy Agreements” the two utilities entered into during the 1960s regarding transmission service from the Jim Bridger power plant in western Wyoming to each utilities’ respective service territories. Since the initial FERC order, Idaho Power petitioned for rehearing and did amend portions of the Legacy Agreements, but the utility lost on appeal.

The commission is taking comment on this application through April 19 and the company may file a reply no later than April 27.

To submit comments on any of the above cases, go to the commission’s Website at www.puc.idaho.gov and click on "Comments & Questions About a Case." Fill in the appropriate case number listed above and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.

You can read further information about any of these cases by going to the commission’s Web site, clicking on the electric icon, then on “Open Electric Cases,” and scrolling down to the appropriate case number.

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