(Editor’s note: This is Part II of a two-part blog series. To read Part I, “Climate Advocacy and Rate Cases: How we pay and what they build,” click here.)
Idaho Power filed its first rate case in more than a decade in June 2023. The likely reasons for filing now are various, but obvious and stated ones include rising interest rates, continued growth in Idaho Power’s service territory, investment in new resources and planned transmission infrastructure, and reforms to net-metering offerings (a story of past and upcoming blogs). We identified several important issues and intervened alongside nine other parties. In this case, and all others, a professional staff of auditors, accountants, engineers, and attorneys advises the Public Utilities Commission (PUC).
After a summer of discovery requests and analysis, Idaho Power, the intervenor parties, and the PUC Staff met for a series of settlement meetings. While the content of those meetings remains confidential, the results were delivered to the PUC and the public last Friday and are now public. ICL believes that the settlement is a fair compromise between all parties. There was a huge amount of work, tact, and flexibility by all needed to reach agreement. It’s not perfect from the perspective of a climate advocate, but it’s alright for everyone involved. There are things to be happy about now, and opportunities to improve future cases.
But the settlement agreement is not the final word in this case. Parties will now write to support parts of the agreement, and the public is welcome to provide comments here or as a letter to the PUC – we encourage you to do so. After technical hearings are held in late November, the PUC can accept or reject the settlement. They are not bound by the agreement – the PUC can approve, modify, or reject any portion under a reasonable, just, and prudent standard. Those words have specific meanings in the energy regulatory world, but it will suffice to say the PUC has broad discretion on what falls within them.
Beyond that, the gains made in this case could be reopened if Idaho Power chooses to file another in the coming years. They signaled on an earnings call that a subsequent rate case in 2024 is likely. Energy regulation must balance accuracy, predictability, and stability, so we want durability in the settlement positions agreed to by parties.
We hope the PUC accepts the settlement in whole. It represents collaboration and the best compromise of all the represented interests. The group of folks advocating at the PUC is small, and despite our many differences of opinion and perspective between us, it’s good to see common ground prevail.
Electric Bills Matter, A lot
A rate case and its related proceedings not only address the total costs of energy supply, but how and to whom those costs are distributed. In simplest terms, rate design is the practice of assigning costs within distinct customer classes. It’s a complicated and nuanced process, but regulators follow a few bedrock guidelines: rates should be fair, change gradually, promote efficiency and other goals, be simple and understandable to the public, and a company should recover all authorized revenue. Meeting all of these guidelines takes balancing, and there are many opinions on how to get it done. And with renewables playing an ever more prominent role in grid operations, many experts see rate design as a critical tool to manage daily loads and integrate clean energy. Just by restructuring how and when customers are charged, we can send price signals and encourage use patterns that will delay or eliminate the need to build more fossil fuel generation.
On a basic level, residential bills are split into monthly charges and a per kilowatt energy price. Monthly charges are standard practice across the industry to recover customer related costs like billing, metering, and customer service. These represent the marginal cost of adding another customer to the grid. All other costs are paid for by the kilowatt, allowing customer control over bills and sending price signals to both customers and power companies to prudently use and build for managed energy use in the long term. Until this year, it’s how Idaho structured its rates.
Over the past year, all three investor-owned utilities in Idaho proposed dramatic changes in their residential rate design by adopting a high monthly charge model. Rocky Mountain Power will now transition from $8 per month to $30, Avista from $7 to $20, and Idaho Power proposed a shift from $5 to $35. Each signaled future moves toward even higher monthly charges. To be clear, these changes wouldn’t charge an average customer more, but rather shift recovery from the per kilowatt price of energy into monthly charges – it is mostly moving money from one accounting bucket to another. We oppose these moves for their downstream effects and equity concerns. A high monthly charge blunts efficiency price signals and confuses the long-term economics of utility growth, capital recruitment, and resource planning. Those looking to jump into the reasoning can read our comments filed jointly with our colleagues at the NW Energy Coalition to Rocky Mountain Power and Avista.
A high monthly charge model is not only bad for resource planning and efficiency, but it also raises equity concerns. Smaller residences and lower-income folks generally use less power with a greater proportion of their income going to energy costs. Reducing usage is an intuitive and direct way to control bills. Charging upfront every month limits the effect of these efforts, which is why public energy advocates across the country oppose increasing monthly charges. Given our organizational mission, ICL is not a public advocate representing any customer class – but our priorities of decarbonization do regularly align with cost saving practices and resource development. In the long run, the most affordable grid is a clean grid. Where and when we can, we will advocate for fair and equitable rates for all.
The settlement agreement reached in the Idaho Power Rate case will increase the current $5 per month charge, to $10, then to $15 over two years. This is a fair compromise between the company’s request and what we think the cost of customer related services ought to be. It’s been a lot of work to get here, and we hope that Idaho Power and the PUC will see rate design as an invaluable tool for energy conservation and eventual decarbonization.
There are opportunities for the public to weigh in, including multiple public hearings:
- Twin Falls: American Legion Post 7 Building, Twin Falls. 477 Seastrom Street. November 27, 2023 at 5 p.m.
- Boise: PUC hearing room, 11331 W. Chinden Boulevard, Building 8, Suite 201-A. November 28, 2023 at 3 p.m.
For details on the public hearings and remote attendance, see page 6 of this Order. To stay updated on energy and climate issues in Idaho, sign up for ICL Climate Campaign email updates.