PacifiCorp filed a general rate case in Washington last month that would lower rates for its 137,000 customers in the state, and facilitate compliance with Washington's Clean Energy Transformation Act.
The utility says its total revenue requirement in the case is $3.1 million, but proposes offsetting that revenue increase by deploying $7.1 million in deferred tax benefits associated with the federal Tax Cuts and Job Act, leaving customers with a proposed revenue decrease of $4 million, or a 1.1 percent overall rate decrease [UE-191024].
PacifiCorp is requesting a rate of return of 7.69 percent, and a return on equity of 10.2 percent, along with a capital structure of 52.55 percent equity, 47.44 percent long-term debt.
This is the company's first general rate case in Washington since completing an abbreviated case in 2015, and comes when PacifiCorp is investing more than $3.1 billion in its Energy Vision 2020 plan, which calls for developing 1,500 MW of new wind in Wyoming, repowering 1,309 MW of wind and building 140 miles of new transmission line in Wyoming.
The rate case is a "proactive response to rapidly changing market conditions, including through implementation of our Energy Vision 2020 plan," the company said in testimony filed Dec. 13.
"PacifiCorp is also responding to changing energy policies in the West, such as the Clean Energy Transformation Act (CETA), by transitioning Washington to a new inter-jurisdictional cost allocation methodology that allows Washington to take advantage of PacifiCorp's integrated system of generation and transmission," according to testimony in the case.
PacifiCorp is also asking Washington regulators to approve a change in the company's multistate protocol, a cost-allocation process the utility uses to divvy up costs among its six-state service territory.
The Washington UTC adopted a different mechanism in 2006 that isolated costs and revenues associated with assets electrically interconnected to PacifiCorp's West Balancing Authority Area (PACW), and allocated to Washington a proportionate share of costs and benefits based primarily on Washington's relative contribution to demand and energy requirements within PACW.
PacifiCorp is proposing what's called a Washington Inter-Jurisdictional Allocation Methodology (WIJAM), which assigns to Washington costs and benefits of PacifiCorp's full transmission system, as well as full access to all of PacifiCorp's nonemitting and non-QF resources located across PacifiCorp's entire system, according to testimony in the case.
The utility, WUTC staff, Public Counsel and Packaging Corporation of America have already signed a memorandum of understanding on a new cost-allocation formula.
WIJAM would provide Washington customers with a $27 million benefit in the first year, the utility says, while also positioning PacifiCorp to achieve compliance with CETA on a risk-adjusted, least-cost basis, according to the filing.
PacifiCorp's Washington customers would be able to take advantage of the benefits of PacifiCorp's integrated system, including full access to PacifiCorp's nearly 1,040 MW of repowered wind facilities and approximately 1,500 MW of new wind resources and associated transmission located in Wyoming.
The utility also is asking Washington regulators to accelerate depreciation on its shares of Colstrip Unit 4 and the Jim Bridger power plant to Dec. 31, 2023.
For a decade, PacifiCorp's cost-allocation protocol was based on operating its transmission and generation assets as a single system to serve its six-state service territory. Except for distribution, states were served from a common portfolio of assets.
But state policies in Washington, Oregon and California prohibiting the use of coal-fired generation have challenged the multistate protocol, along with diverging state policies related to PURPA, retail choice and independent power increasingly clashed with PacifiCorp's long-standing practice of planning for a single integrated system, the utility says.
WIJAM would be specific to PacifiCorp's Washington territory, while the utility has proposed a new 2020 protocol in Oregon, Idaho, Utah and Wyoming, and plans to include the protocol in its upcoming rate case in California.
"The 2020 Protocol and the WIJAM will facilitate PacifiCorp's compliance [with CETA] by removing coal-fired resources from customer rates no later than Dec. 31, 2025, and by providing Washington customers greater access to PacifiCorp's non-emitting, non-QF generating resources," the utility said in testimony.
The 2020 protocol describes certain cost-allocation issues that will be implemented during an "interim period," from Jan. 1, 2020 until Dec 31, 2023. The 2020 protocol resolves a host of issues such as allocation of generation costs and fixed assignment of new resources; transmission costs; distribution costs; system overhead costs; and administrative and general costs.
But it's still a work in progress, according to the filing. The utility and customer groups still need to figure out how long-term resource planning for the post-interim period will address least-cost planning for the entirety of PacifiCorp's integrated system while also identifying individual state load and resource balances and accommodating individual state policies.
In addition to a new long-term resource planning process, the post-interim period will also require a process for determining states' fixed share of new resource acquisitions. The details of both new processes have been discussed at length in MSP meetings over the last two years; however, more time is necessary to fully develop robust and durable proposals for processes fundamental to PacifiCorp's operations, the utility said.
Under the 2020 protocol, PacifiCorp would gradually remove the cost of coal-fired generation from California, Oregon and Washington rates, while assigning Idaho, Utah and Wyoming additional allocation costs and benefits associated from coal-fired resources, according to the filing.
"The 2020 protocol represents a fundamental shift in how the company proposes to address inter-jurisdictional cost allocation, with the ultimate goal of moving away from dynamic allocation factors and a common generation resource portfolio to a cost-allocation protocol with fixed allocation factors for generation resources and state-specific resource portfolios," Etta Lockey, VP of regulation at PacifiCorp, said in testimony.
Lockey told Clearing Up that PacifiCorp is asking WUTC to approve aspects of the 2020 protocol that are applicable to Washington, although she noted WIJAM is designed to be a "durable, long-term allocation method. If Washington decided not to join the 2020 protocol, the WIJAM could endure."
She added, "There are important policy issues at play, with compliance with CETA and the transition to renewables," referring to the need to file a rate case. "We are transitioning Washington to a more holistic view of our system, and we're able to do all of those things that are a part of our Energy Vision 2020, and offer a rate decrease to our Washington customers. We're pretty proud of that."