On May 28, 2010, Idaho Power received an order on three requests filed with the Idaho Public Utilities Commission (IPUC) on March 15, 2010, and one on April 15, 2010.

Two of the March 15 rate actions expand our energy efficiency activities and demonstrate our commitment to helping our customers increase their energy efficiency, providing more opportunity for them to lower their electric energy usage and costs. The third addresses pension funding.

The April 15 filing addresses power costs through the annual Power Cost Adjustment, or PCA.

The approval of the three proposals along with the proposed PCA reduction means customers will experience a $46.8 million overall rate reduction, or an average of 5.2 percent.

Idaho Power encourages customers to become familiar with their usage and use energy wisely. Get information on our Energy Efficiency programs and tools to help make wise energy choices and save energy and money for your home or business.

1. Why does Idaho Power file a Power Cost Adjustment, or PCA?
2. How did the settlement impact the PCA?
3. How does this PCA compare to previous requests?
4. How do stream flows and hydroelectric generation impact the PCA?
5. Where did Idaho Power’s electricity come from last year?

 

1. Why does Idaho Power file a Power Cost Adjustment, or PCA?

The PCA is an annual filing that reflects Idaho Power’s anticipated fuel costs for generating electricity, costs of power purchases to meet customer demand and benefits resulting from sales of surplus energy for the coming year. We sell surplus energy during times of high production and low customer energy needs.

The PCA mechanism allows customers to benefit from our system’s surplus energy sales to the wholesale market. These “off-system” sales revenues are deducted from our power supply costs and reduce the rates our customers pay.

The PCA also brings last year’s forecasted costs in balance with actual expenses. This year the order also reflects rate adjustments based upon a settlement agreement between the company and representatives from a number of customer groups. This collaborative agreement was approved by the IPUC on Jan. 13.

2. How did the settlement impact the PCA?

A number of factors contribute to this year’s decrease in rates. Although the coming year’s forecasted power supply costs are projected to be higher than last year, last year’s forecast was far more accurate than in recent years due to new forecasting methodology. As a result, the true-up portion of the PCA provides for a significant decrease in rates.

The settlement agreement also provides for revenue sharing between Idaho Power and its customers.

The combined impact of changes in rates from forecast to forecast and true-up to true-up is an $87 million total rate reduction. Based upon a predetermined and stipulated revenue sharing allocation of this amount, customers will receive $58 million of that benefit.

Per the settlement agreement, the remaining $29 million will offset the first year of a permanent rate increase with $25 million allocated to address general increases in the company’s cost of service and $4 million allocated to cover underestimated base power supply expenses.

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3. How does this PCA compare to previous requests?

The company actively manages its system operations to help lower power supply costs without jeopardizing its system reliability, service quality or obligation to serve customers.

In 2007 and 2008, the PCA was an increase to customers. However, in 2006 the PCA resulted in a decrease to customers as it has in 2010.

4. How do stream flows and hydroelectric generation impact the PCA?

In years when water is plentiful Idaho Power is able to more fully utilize its 17-dam hydroelectric system, resulting in lower power production costs and associated benefits passed on to customers.

When hydroelectric generating conditions are below average, as they have been for 10 of the past 11 years, Idaho Power must use more expensive resources to meet customers’ need for electricity.

In addition to stream flows, market prices for electricity and natural gas also affect our cost to supply customers’ electricity. To the extent that the current economic conditions are impacting market prices for electricity and natural gas, it is reflected in the PCA. However, it is difficult to quantify the magnitude of the impact.

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5. Where did Idaho Power’s electricity come from last year?

Idaho Power obtains energy from a diverse set of generation resources. In above average water years, our base of 17 clean, low-cost hydroelectric plants on the Snake River is typically our largest source of electricity. We also utilize our natural gas and coal-fired plants and a combination of short-term market purchases and long-term power purchase contracts from independent producers.

The estimated fuel mix for Idaho Power’s resource portfolio under normal and 2009 actual water conditions (1) is shown below (2).

(1) Long-term power purchases with a known fuel source have been identified by fuel type; market purchases have been assigned the Northwest Power Pool Net System Mix for 2008.

(2) This is an estimate of the fuel mix of Idaho Power’s portfolio of generation supply, including market purchases. Because Idaho Power intends to sell the Renewable Energy Certificates (RECs) that it owns in the near-term with proceeds benefiting retail customers, and since Idaho Power does not own the RECs for the other qualified renewable resources represented in the above Resource Portfolio Fuel Mix charts, Idaho Power cannot and does not represent that electricity produced by the above fuel mix was delivered to its retail customers in 2009. For more information on the energy delivered to retail customers see Electricity Delivered to Retail Customers.

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