Idaho Public Utilities Commission

Case No. PAC-E-10-07

June 15, 2010

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

Commission begins processing Rocky Mountain rate case

The Idaho Public Utilities Commission has suspended for up to six months an application by PacifiCorp to increase customer rates by an average 13.7 percent.

The suspension will allow time for the commission’s staff of auditors, engineers and attorneys to thoroughly review the company’s application. PacifiCorp does business as Rocky Mountain Power in southeastern Idaho, where it serves about 70,000 customers.

The commission cannot, by state law, arbitrarily refuse to consider utility rate increase requests. State statutes require that all rate requests be considered by the commission to determine whether the expenses the utility seeks to recover through customer rates were needed to serve customers and if they were prudently incurred. The commission is free to accept, reject or modify the company’s request. However, when the commission denies expense recovery it must be able to legally demonstrate why the expenses were not needed or prudently incurred. All commission decisions can be appealed to the state Supreme Court by the utility, intervenors or customers.

The commission has set an intervention deadline of June 30 for parties seeking “intervenor” status in the case. Parties, typically representing large customers or groups of customers, intervene in rate cases to present evidence, cross-examine witnesses, participate in settlement conferences and make and argue motions. Parties seeking intervenor status to date include Agrium, Inc. (Nu West), the Idaho Irrigation Pumpers Association and Monsanto. As the case develops, members of the general public, who do not have intervenor status, will have the opportunity to submit written comments for the case record and participate in public workshops and testify at hearings that will be scheduled later.

Increased investment

Rocky Mountain Power states the increase is needed to cover expenses for more than $4 billion of new plant investment and $87 million in increased power supply costs. Investments proposed in this case are already serving customers or will be by the end of 2010. Those include eight new wind generation plants, a 345-kilovolt transmission line from Downey to Salt to Lake City, environmental improvements at the Dave Johnston, Huntington and Jim Bridger power plants, turbine upgrades at the Hunter, Huntington and Jim Bridge power plants and hydro power relicensing and upgrade investments.

About 30 percent of the requested additional yearly revenue requirement of $27.7 million is due to increases in power supply costs which include expenses related to fuel, purchases of power from the wholesale market and transmission wheeling. The largest contributors to the proposed increase in power supply are increasing coal costs and the replacement of older power supply contracts that had lower prices with newer, higher-priced contracts.

According to testimony filed by the company, lower load projections and current economic conditions have resulted in Rocky Mountain scaling back some transmission and distribution capital expenditures from previously planned levels. The company has reduced its 10-year capital budget from nearly $2.2 billion per year to $1.6 billion annually and plans no investments in new company-owned generation until 2014.

Despite those reductions, Rocky Mountain asserts it still must continue its multi-year program of investing in renewable energy, transmission facilities and environmental controls.

According to testimony filed by company president Richard Walje, a significant amount of new capital investment is coming from PacifiCorp’s parent company, MidAmerican Energy Holdings Company. According to Walje, Rocky Mountain expects to receive $100 million in additional cash equity contributions from MEHC before the end of this year. MEHC has not taken any dividends from PacifiCorp since MEHC acquired PacifiCorp in 2006 and is not expected to take any cash out of the business, Walje said.

Rate structure

Responding to a directive from the commission after the company’s last rate case, Rocky Mountain is proposing a two-tiered rate structure for residential customers under which customers pay more when their use exceeds 800 kWh per month.

Customers who stay below the company’s average residential use of 839 kWh year-round will pay only about 1 percent more per year under the company’s proposed rate. However, larger users will see substantially large increases if the application is approved.

The proposed winter rate (November through April) for the first 800 kWh of use is 6.55 cents per kWh. For use above that, the proposed rate jumps to 8.84 cents. The current winter rate for residential customers is about 8 cents per kWh.

The proposed residential summer rate for the first 800 kWh is 8.95 cents per kWh. Use above that is proposed to be about 12 cents. The current summer rate is about 10.4 cents.

Proposed increases for customer classes vary according to the cost the company incurs to serve each customer class.

The company’s proposed increase for residential customers, including all energy and customer service charges, is about 8 percent.

For residential customers who are on optional Time of Day Rates, the proposed increase is 15.6 percent. However, the average rate for a time-of-day customer would still be about 1.35 cents per kWh lower than standard residential rates, according to the company’s application.

The proposed increase for small general service customers is 10.8 percent, for medium- and large- general service customers, 14.6 percent; for irrigation customers, 9.6 percent; and for large industrial customers, from 15.9 percent to 19.6 percent. The proposed increases for Rocky Mountain’s large contract customers are 19.6 percent for Monsanto and 15.9 percent for Nu-West.

The company’s last rate case was filed in September 2008 when Rocky Mountain requested a 4 percent overall increase. That case was settled in April 2009 when the company was granted a 3.1 percent increase.

Customers can track the progress of the case on the commission’s Web site where the company’s application, as well as testimony from several company officials, is posted. As the case progresses, testimony from commission staff and intervenors will be added as will customer comments. The Web site is www.puc.idaho.gov. Click on the electric icon, then on “Open Electric Cases,” and scroll down to Case No. PAC-E-10-07.

Copies of the application are also available at company offices in Rexburg, Preston, Shelley and Montpelier.