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Idaho Power agrees to rate moratorium through 2012

Idaho Power agrees to rate moratorium through 2012

Idaho Freedom Foundation staff
January 14, 2010

Read the complete press release from the Idaho Public Utilities Commission.

Commission adopts rate moratorium agreement
The Idaho Public Utilities Commission is accepting a settlement between Idaho Power Company and a number of customer groups that places a moratorium on general rate case increases until January 2012 while, at the same time, giving the utility a better opportunity to earn its allowed rate of return.

Idaho Power was in the early stages of filing a rate case last fall that could have resulted in a base rate increase of between 10 and 20 percent effective this June. Instead, the utility and parties to the settlement negotiations reached an agreement that allows Idaho Power to use some of the anticipated reduction customers will get in the Power Cost Adjustment (PCA) surcharge this spring and to accelerate investment tax credits it receives to bolster its earnings.

The agreement is signed by representatives of irrigation customers, industrial and major commercial customers and representatives of low-income residential customers. “It is notable that all of Idaho Power’s major customers and customer groups participated in the discussions leading to the stipulation, and all determined it presented a better alternative to the likely results of a rate case,” the commission said.

One of the participants, the Snake River Alliance, said “the revenue sharing, PCA sharing, and rate case moratorium components of the settlement in this case serve the company and its customers as well as possible in our current economic times.”

The Community Action Partnership Association of Idaho (CAPAI), which represents low-income residential customers, said that “given the company’s recent substantial investments in infrastructure … and given that the company had incurred relatively high costs during the test year, CAPAI believes a general rate case would likely have resulted in an end-result more costly to Idaho Power ratepayers….”

An anticipated significant reduction in the annual Power Cost Adjustment made this a good year for the agreement. Every year on June 1, Idaho Power customers get either a PCA surcharge or a credit on their bills, largely depending on the previous year’s water levels and market conditions. It is anticipated that this year’s PCA will be a significant decrease to customers, though how much of a decrease won’t be known until after April 15. This agreement allows the first $40 million of the anticipated PCA reduction to be shared equally between the customers and the company. The PCA reduction between $40 million and $60 million will go directly to customers as a rate reduction. The next block of up to $75 million will cover the company’s permanent power supply expense account. Should the PCA reduction exceed the $60 million and the amount applied to power supply expense, the next $10 million will be shared between customers and company and any amount beyond that will go directly to reduce customers’ rates.

The agreement also allows Idaho Power to accelerate its use of tax credits it receives on its capital investments to shore up its earnings. The agreement allows the company to accelerate up to $45 million of investment tax credits at $15 million a year for three years if its rate of return falls below 9.5 percent. Idaho Power proposes to share earnings with customers through rate reductions if the company’s ROE is higher than 10.5 percent. Idaho Power has not been able to earn its authorized rate of return in either its Idaho or Oregon jurisdictions for the last decade.

Improved earnings are important to maintain Idaho Power’s ability to finance ongoing plant investments needed to serve customers, the commission said. “The company’s increased financial stability benefits customers by enabling the company to delay rate cases and potentially lower interest costs. It is beneficial to customers and to Idaho Power if the company can enhance its ability to stabilize earnings in the near term, strengthening the company’s position in the financial markets and enabling it to reduce the cost of borrowing funds for operations or plant investment.”

The moratorium applies only to changes in base rates. It does not include possible increases or decreases to the annual PCA or the annual Fixed Cost Adjustment. It also does not include possible increases to energy efficiency riders or increases related to recovery of costs for advanced metering infrastructure, pension expense or increased funding for low-income weatherization.

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to Case No. IPC-E-09-30.

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