|
8/29/02 |
IPC-E-01-34 |
In the Matter of the Application of Idaho
Power Company for an Order Approving the Costs to be Included in the
2002/2003 PCA Year for the Irrigation Load Reduction Program and Astaris Load
Reduction Agreement. |
http://www.puc.state.id.us/orders/recent/ON29103.pdf
In the spring of 2001, the Commission approved Idaho Power Company’s Irrigation Load Reduction Program, authorizing the Company to pay large irrigation customers to reduce their electric consumption by at least 100,000 kilowatt hours between March 1, 2001 and November 30, 2001. Order Nos. 28676 and 28699 (Case No. IPC-E-01-3). The Program was implemented in response to two unique conditions: the second worst drought on record and unprecedented wholesale power costs.
On October 19, 2001, the Company filed an Application requesting that the Commission authorize it to recover two components it claimed were Program costs as part of the 2002/2003 Power Cost Adjustment (“PCA”). Case No. IPC-E-01-34. The first component is the direct costs of the Program, i.e., the actual payments made to irrigation customers for reducing their energy consumption. Order No. 28699. The second component is the “lost revenue” which represents a calculated amount of revenue the Company might have received from the sale of power to irrigation customers had the Program not been in operation.
On April 15, 2002, the Commission issued Order No. 28992 granting Idaho Power’s request to recover the Program’s direct costs, which at its conclusion totaled nearly $74 million in payments made to irrigators for reducing their electrical consumption. However, the Commission denied the Company’s request to recover approximately $12 million of lost revenue, i.e., the revenue the Company might have earned if irrigators had not reduced their consumption.
In approving the implementation of this Program the Commission found that:
The direct costs and lost revenue impacts of this Program may be treated as a purchased power expense in the Company’s Power Cost Adjustment (“PCA”) mechanism. Idaho Power and the parties shall develop and present a proposal to the Commission recommending a procedure to calculate the amount of revenue impact that should be passed through the Company’s PCA mechanism.
On April 15, 2002, the Commission issued Order No. 28992 granting in part and denying in part Idaho Power’s Application. The Commission granted Idaho Power’s request to recover the direct costs resulting from this Program. However, the Commission rejected the Company’s request for recovery of lost revenue.
In its findings the Commission stated:
In Order No. 28699 we stated, “direct costs and lost revenue impacts of this Program may be treated as a purchased power expense in the Company’s Power Cost Adjustment (“PCA”) mechanism.” Order No. 28699 (emphasis added). This Commission finding did not guarantee that Idaho Power was entitled to recovery of alleged reduced/lost revenues that resulted from this Program. Rather, the Commission merely recognized that the issue of recovery of these amounts would be considered. Thus, any amount of reduced revenue for which the Company would later seek recovery had to be properly accounted for and subsequently reviewed by the Commission. This issue has been thoroughly addressed and argued by Idaho Power and supported by the Commission Staff. However, the Commission remains unconvinced that Idaho Power should recover reduced revenues in this case.
It Is Not Appropriate for the Company to
Recover Lost Revenue
The Commission finds that lost revenue is not a recoverable “expense” to be recovered from ratepayers like the direct costs from this Program (i.e., the payments to irrigators). In general, the Commission finds that rates should accurately reflect the actual costs incurred to provide service. Given the unique context that caused this Program to be implemented, we find that lost revenue does not constitute an actual cost of providing service that should be borne by ratepayers. To allow Idaho Power to recover lost revenue would at least partially destroy the goal of reducing overall energy costs to all ratepayers at a time when energy costs were at all time highs. To charge ratepayers for lost revenue is unreasonable in the context of the crisis that existed because of the drought and the unprecedented prices in the regional power market at that time. Requiring ratepayers to pay for energy they did not consume, but avoided due to this Program, is also unreasonable.
In fact, the Commission has always believed that cost-effective DSM resources are generally least-cost resources and they are of significant value to the Company, its shareholders, its customers and to the general community. To not acquire such resources merely because the Company may lose some sales of power might constitute imprudence.