Idaho Public Utilities Commission

Case No. IPC-E-12-17, Order No. 32533

April 27, 2012

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

Idaho Power’s annual PCA is proposed 5.1 percent increase

The portion of Idaho Power Company electric rates that change every June 1 due to streamflows and the variable costs of purchasing power would increase by an average 5.1 percent, according to an Idaho Power request to state regulators. For residential customers, the proposed increase is 3.8 percent.

The Idaho Public Utilities Commission is taking comments on the annual Power Cost Adjustment (PCA) through May 15. Idaho Power is proposing a combination of several other rate increases and decreases to take effect at the same time (June 1) as the PCA and another (Langley Gulch) to become effective July 1. If all the adjustments are approved as submitted, the average increase for all customer classes would be 8.45 percent. For the residential class, the increase would be 7.13 percent. All these cases are summarized below.

On June 1 of every year since 1993, Idaho Power is allowed to adjust its rates up or down to reflect its annual cost of providing electricity. Because about half of the company’s power generation comes from hydropower facilities, Idaho Power’s power supply cost varies from year to year due to changes in Snake River streamflows and changes in wholesale market power prices. The annual PCA surcharge or credit is combined with the company’s base rate (which covers fixed costs) to produce an overall energy rate.

This year, Idaho Power claims its power supply expense is $43 million above what is now collected in the PCA, requiring about a 5.1 percent increase. Last year’s PCA was a 6.5 percent decrease. Idaho Power’s earnings are not impacted by the PCA. All the revenue collected in the PCA is kept in a deferred account, audited by the commission, and can be used only to pay down power supply expense.

This year’s water forecast is slightly better than normal hydro conditions for the April-July runoff period, so water is not a primary factor in this year’s PCA. Idaho Power claims that the primary driver in increased power supply expense is $66.7 million in new power purchases under the provisions of the federal Public Utility Regulatory Policies Act, or PURPA. PURPA requires regulated utilities to buy energy from qualifying renewable energy facilities at the same price the utility avoids by not having to generate the power itself or buy it from other sources. The vast majority of Idaho Power’s PURPA contracts during the last year are from wind projects.

The commission has also set comment deadlines in some of the other rate adjustments now pending. A summary of those follows:

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.

The commission is also taking comments on this application though May 3. Idaho Power will file reply comments by no later than May 15.

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 of sharing credit due customers totals about $47.4 million. About $27.1 million will be shared with customers through the annual Power Cost Adjustment mechanism and $20.3 million will be used to apply against the company’s pension balancing account that would otherwise be collected through rates. The result is about a 3.2 percent reduction to rates. The commission is taking comments on this application through May 4.

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. The comment deadline is May 25.

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 330-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. The comment deadline is May 30. After considering written comments, the commission may conduct a formal hearing in this matter.

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.

The comment deadline has passed in the following cases with a commission ruling expected soon:

Mechanical metering depreciation, Case No. IPC-E-12-07, 1.25 percent decrease

Idaho Power is seeking authority to decrease base rates by $10.5 million 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.

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. For an average residential customer using 1,050 kWhs per month, this results in an increase of 24 cents. For commercial customers using the company average of 450 kWhs per month, the proposed increase is about 15 cents per month.

Transmission deferral, IPC-E-12-06, 0.08 percent increase

In this application, the company seeks to recover $2 million over three years for 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 the 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.

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