Power Cost Adjustment (PCA) FAQs
- What is a Power Cost Adjustment?
- Why does Idaho Power file a PCA?
- What does this filing mean to my bill?
- What is “Revenue Sharing” and how does it affect the PCA?
- Why does Idaho Power need to increase prices?
- Are you also going to file a general rate case in 2013?
- How does the 2013 PCA compare to previous requests?
- How do stream flows and hydroelectric generation impact the annual PCA?
- Where did Idaho Power’s electricity come from last year?
- How will this filing affect Idaho Power’s Oregon customers’ bills?
- Where can I look at your filing and potentially share my thoughts?
- How can I manage my bill and control costs?
- Where can I get even more information about the 2013 PCA?
On April 15, Idaho Power submitted its annual Power Cost Adjustment (PCA) proposal for approval by the Idaho Public Utilities Commission (IPUC). The PCA is a cost recovery tool that passes on both the benefits and costs of supplying energy to Idaho Power customers. Idaho Power has made the filing annually since 1992. Neither Idaho Power nor its shareholders receive any financial return on this filing.
When Idaho Power’s officers became aware of the magnitude of this year’s PCA, they sought to find a way to reduce the PCA rate impact for customers.
Therefore, Idaho Power is providing the IPUC with an option to mitigate the amount and lessen the price impact to customers. The option Idaho Power is providing would be to collect $87.9 million this year and defer $52.5 million until next year. If the mitigation option is approved by the IPUC, the overall percentage increase from current rates would be 9.60 percent rather than the 15.34 percent overall increase that would be required to collect the entire PCA in one year.
Idaho Power recognizes that this deferral could result in compounding, or “pancaking,” of customer price impacts for the 2014-2015 PCA year. However, because this year’s hydrologic conditions are forecast to be historically poor, it is unlikely that next year’s conditions will be a lot worse.
2. Why does Idaho Power file a 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 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.
Idaho Power actively manages its system operations to help lower power supply costs without jeopardizing its system reliability, service quality or obligation to serve customers.
3. What does this filing mean to my bill?
Revenue Impact by Class: Percentage Change from Current Prices
|Residential||Small General Service||Large General Service||Large Power||Irrigation||Overall Change||Total Increase|
|Unmitigated Total||12.54%||10.36%||16.70%||22.01%||15.38%||15.34%||$140.4 million|
|Mitigated Total||8.03%||6.80%||10.38%||13.30%||9.65%||9.60%||$87.9 million|
If the full (unmitigated) PCA proposal is approved by the commission, the price Idaho customers pay for electric service will increase by $140.4 million, or an overall percentage increase of 15.34 from current prices, beginning June 1. The typical Idaho residential customer using 1,050 kilowatt-hours (kWh) of energy per month will see an increase of about $11.38 on their monthly bill. The actual percentage of change will depend on a customer’s group and the rate they pay.
If the mitigated PCA proposal is approved by the commission, the price Idaho customers pay for electric service will increase by $87.9 million, or an overall percentage increase of 9.60 from current prices, beginning June 1. The typical Idaho residential customer using 1,050 kWh of energy per month will see an increase of about $7.28 on their monthly bill. The actual percentage of change will depend on a customer’s group and the rate they pay.
Idaho Power will share $21.8 million in revenue with customers in 2013:
- $7.2 million as an offset to the 2013 PCA rates (already deducted from the total PCA increase as detailed above)
- $14.6 million as an offset to the company’s pension balancing account
This sharing happens according to a December 2011 IPUC-approved modification and extension of the previous accounting order that allowed the company to use investment tax credits (ITC) for earnings support if earnings fell below a certain return on equity, or share with customers earnings in excess of a specified return on equity.
In 2012, Idaho Power’s Idaho jurisdictional return on equity was 11.18 percent, which is above the 10 percent threshold for revenue sharing based on the December 2011 settlement agreement. The 2012 Idaho jurisdictional earnings in excess of 10 percent return on equity totaled $21.8 million. Per the terms of the December 2011 settlement agreement, sharing will be provided to Idaho customers in two tiers:
- If return on year-end equity in Idaho is between 10.0 percent and 10.5 percent, the amount of these earnings exceeding a 10.0 percent return on year-end equity but less than a 10.5 percent return on year-end equity will be shared equally between the Idaho customers and Idaho Power. The sharing in this tier will be provided to customers as an offset to the 2013 PCA rates. This amount is $7.2 million for 2012.
- If Idaho Power's return on year-end equity exceeds 10.5 percent, the amount of Idaho Power's Idaho jurisdictional earnings exceeding a 10.5 percent return on year-end equity for the applicable year will be shared 75 percent with Idaho customers and 25 percent to Idaho Power. The sharing in this tier has been provided to customers as an offset to the company’s pension balancing account. This amount is $14.6 million for 2012.
Idaho Power works hard to provide reliable, fair-priced electric service to its customers. Although prices sometimes change, at the end of the day we all still pay a low price for our electricity relative to the value it provides. Electricity is an essential and highly reliable service, yet a power bill is sometimes equivalent in amount to a cable or satellite TV bill, or the cost of an occasional dinner and a movie.
We’ve all seen other prices go up: a gallon of gas, a gallon of milk. Electricity prices fluctuate as well. The annual PCA can be either an increase or a decrease based on actual power supply costs.
To provide power today and to plan for tomorrow, Idaho Power must invest in our aging infrastructure and in new infrastructure. Examples of investments we make to serve our customers include generation resources like the new Langley Gulch Power Plant, power line maintenance and construction, power poles, transformers, upgraded meters, etc. Compliance with reliability and environmental requirements like dam relicensing, and increases in material costs, such as steel poles and copper wire, also drive higher prices, as does repairing fire and wind damage, which is unavoidable in our service area.
As a regulated utility, Idaho Power pays ahead of time for facilities and expenses needed to serve our customers and gets back the cost of the investment, along with a fair and reasonable return (which is determined and authorized by the IPUC) or the expenses later. Two major costs for Idaho Power are fuel like natural gas and coal, and power purchased on the open market to serve customers.
Idaho Power will not file a general rate case in 2013.
In 2008, and 2009 the PCA was an increase to customers. However, in 2010 and 2011 the PCA resulted in a decrease to customers. In 2012 the PCA was again an increase, as is this year’s.
Since the inception of the PCA, the single largest PCA increase was $244.4 million in 2002 associated with the 2001-2002 PCA Year (during the California energy crisis). The second largest year-over-year change in PCA revenue was associated with the PCA approved in 2001, which allowed recovery of an incremental $168.3 million in PCA revenue over a one-year period.
The two most significant factors that contributed to the amount required to “true-up” this year’s PCA were:
- 1.8 million megawatt-hours lower actual hydro generation than the 2012-2013 forecasted amount.
- Lower actual market energy prices compared to the 2012-2013 forecasted prices.
Both of these factors contributed to lower surplus energy sales revenue, which offsets power supply expenses recovered from customers.
In years when water is plentiful, Idaho Power is able to more fully use 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, Idaho Power must use more expensive resources to meet customers’ need for electricity.
The following factors caused lower than projected hydroelectric generation for the 2012-13 PCA year, which is being “trued up” in the April 15 filing:
Warmer than normal April 2012 temperatures caused:
- Reduction in flow past Milner Dam on the Snake River, at the beginning of Idaho Power’s hydroelectric system, in spring 2012 related to irrigation withdrawals coming on fast and furious. Flow is critical to Idaho Power’s ability to fully use its hydroelectric system.
- Shortened Snake River Basin runoff season, with runoff happening disproportionately during April at levels above the hydraulic capacity of Hells Canyon generators.
- Drier than normal conditions in the Snake River Basin during the snow accumulation season from December 2012 through March 2013.
In 2012, hydroelectric generation comprised 52 percent of Idaho Power's total system generation, compared to 69 percent during 2011.
In its 2012 SEC Form 10-K report released Feb. 21, 2013, Idaho Power reported it expects hydroelectric generation during 2013 to be in the range of 6.0 to 8.0 million megawatt-hours (MWh), compared to 8.0 million MWh in 2012 and 10.9 million MWh in 2011. Median annual hydroelectric generation is 8.6 million MWh.
The anticipated range for 2013 will be updated in May when Idaho Power files its quarterly SEC Form 10-Q.
The PCA also reflects the extent to which current economic conditions impact market prices for electricity and natural gas to supply customers’ electricity.
Surplus sales for the 2012-2013 PCA year have been lower than projected primarily because of:
- Lower than projected hydro generation (as explained above)
- Lower than projected thermal generation because of
- Lower than projected wholesale electric prices, and
- Downward changes in retail load in the region.
Energy security for our customers is strengthened by having a broad mix of energy resources. Idaho Power’s resource mix is mostly low-cost hydro and low-emission coal, and also higher-cost renewables. Integration and other expenses this past year have increased power costs significantly. It’s important to realize that all available options for producing power cost money.
Idaho Power gets 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 and its tributaries is typically our largest source of electricity. We also use our efficient natural gas and low-emission coal-fired plants and a combination of short-term market purchases and long-term power purchase contracts from independent producers.
Additionally, Idaho Power is pursuing other resources, including transmission projects, and constantly evaluating other options; we are always looking for reliable, responsible, fair-priced energy resources.
This filing will not affect our Oregon customers’ bills. However, Idaho Power does have a similar power cost adjustment mechanism in Oregon, and recently filed its Annual Power Cost Update with the Oregon Public Utility Commission. If approved, our Oregon customers will see an overall price increase of 6.03 percent effective June 1, 2013.
Idaho Power’s filing is a proposal that is subject to public review and approval by the IPUC. Copies of the application are available to the public at the IPUC, 472 W. Washington, Boise, Idaho, 83702, Idaho Power regional offices or on Idaho Power’s website, or the IPUC website. You can view additional, related materials on the filing at www.idahopower.com/PCA.
There are actions you can take to help manage your energy use and lower your electric bills. Idaho Power wants to make sure you have all the tools you need to accomplish your energy goals and manage your use.
Idaho Power’s new “High Bill Help” Web page offers payment options and wise-use tips. Find out how to understand your electric bill, check out various payment options, and get information about Idaho Power energy efficiency programs and tips to use energy wisely.
You are also encouraged to register to use myAccount today. With myAccount you can access your account information 24/7: view your bill, request service, see what your monthly Budget Pay amount would be, or complete a Home Profile to understand how you’re using energy.
Once you understand where electricity is used in your home and how you are specifically using it, you can make choices. You can control your spending on energy and be more comfortable knowing what you are paying for, when and why. It is also one of the first steps you can take to become more energy efficient. Know your house, know your use and know that you are in control.
Simple things you can do to lower your energy use
- Turn lights, appliances and electronics off when not in use.
- Clean or replace furnace filters at least twice each year.
- Clean coils on refrigerators and freezers semi-annually.
- Use timers on landscape pumps and special-use heaters.
- Lower water heater temperature to 120° F.
- Install low-flow showerheads.
- Wash clothes in cold water. Hot water costs 12 times more.
- Replace O-rings on leaky faucets.
- Do full loads of laundry and dishes.
- Install weather seals around doors, switches, etc.
When you become an online manager of your Idaho Power account, you’ll have 24-hour access to a Web portal where you can learn about your energy use with data from your meter. You can see how your use compares to previous months, when you use energy (down to the hour!), how high and low temperatures affect usage and much more. From here, you are in the driver’s seat and you can look at options and make choices that work for you.
Has your bill changed? Ask yourself these questions:
- What’s happening with the weather? Extreme temperatures can have a large impact. This is especially important when comparing your use year-to-year.
- Has your household changed? Extra people can increase your use.
- Have your habits changed or are there seasonal issues to consider? Is someone home more? Do you have landscape pumps, a pool or a hot tub? Are you cooking differently or doing more laundry due to outdoor activity?
- Have you added high-energy users such as an extra refrigerator or freezer, hot tub or outside water feature?
- Have you moved recently? It might be a good idea to have a whole-house inspection. Complete information is not always transferred from the prior owner to the new owner.
It is normal for energy bills to fluctuate month-to-month and year-to-year due to weather, family changes and price adjustments. But significant, unexplained fluctuations in energy use may be an indication of equipment failure or other problems that need to be addressed.