DR 98-093
New Hampshire Electric Cooperative, Inc.
Power Cost Adjustment
Report and Supplemental Order Approving
Increase in Power Cost Adjustment
O R D E R N O. 22,991
August 3, 1998
APPEARANCES: Dean, Rice and Kane by Ann Davidson, Esq.
on behalf of the New Hampshire Electric Cooperative, Inc.; Office
of Consumer Advocate by Kenneth E. Traum on behalf of residential
ratepayers; and Todd M. Bohan and James J. Cunningham Jr. for the
Staff of the New Hampshire Public Utilities Commission.
I. PROCEDURAL HISTORY
On May 26, 1998, New Hampshire Electric Cooperative,
Inc. (NHEC) filed with the New Hampshire Public Utilities
Commission (Commission) a request and supporting testimony and
exhibits to increase its Power Cost Adjustment (PCA) factor from
$0.01613 to $0.02670 for effect July 1, 1998 through December 31,
1998. NHEC also filed short term rates for purchases from
Qualifying Facilities (QF). The proposed short term QF rates are
based on the avoided energy rates of each of the four utilities
from which NHEC purchases power. A duly noticed hearing was held
before the Commission on June 16, 1998.
POSITIONS OF THE PARTIES AND STAFF
A. NHEC
In its pre-filed testimony, NHEC proposed an increase
in its PCA factor from the current charge of $0.01613 per kWh to
a charge of $0.02670 per kWh effective on all bills rendered on
and after July 1, 1998. The $0.01057 per kWh increase in the PCA
factor equates to an overall average revenue increase of 6.7
percent.
NHEC's forecasted power cost requirement for the six
month period is $31,325,134. In accordance with Order No.
21,812, the forecasted power costs do not include any costs or
revenues associated with those NHEC ski areas served under
special contract pursuant to tariffs on file with the Federal
Energy Regulatory Commission. In addition to the projected power
cost requirement, there is an expected under-recovery of $435,277
as of June 30, 1998, which yields $31,760,411 of expected power
costs to be recovered during the July through December 1998 PCA
period. Removing $24,600,555 of these costs, which are already
included in base rates, leaves a balance $7,159,856, which when
divided by the forecasted sales of 268,515,176 kWh's, yields a
PCA rate of $0.02666 per kWh before interest. Adjusting for
interest on the under-recovery results in an additional $0.0004
which is added to $0.02666 to arrive at the proposed PCA factor
of $0.02670 per kWh for the 6-month PCA factor.
The NHEC estimates a customer using 500 kWh per month
on Residential Rate D will see an increase in rates from $82.52
to $87.86.
The NHEC testified the increase in the PCA is caused by
several factors; 1) an increase in PSNH's Wholesale Fuel and
Purchased Power Adjustment Clause (FPPAC) surcharge that
contributes $0.00408 per kWh to the PCA increase, 2) the addition
of Maine Yankee litigation costs to the PCA that contributes
$0.00103 per kWh to the increase, and 3) the under-recovery
balance forecast that contributes $0.00378 per kWh to the
increase.
B. OCA
The OCA did not file testimony, but questioned NHEC's
witness about PSNH deferred costs, QF rates and the potential PCA
impact if QF power rates were to displace PSNH APRA power rates,
trigger impacts for the PCA, if any, and legal costs.
C. STAFF
Staff did not file testimony in the proceeding but
questioned the Company witness about NEPOOL allocations, deferral
of costs of Maine Yankee and deferral of PSNH wholesale power
costs and legal costs amounting to an estimated $277,000 that are
included in the PCA filing. At the conclusion of the hearing
Staff placed its positions on the record.
Staff argued that legal costs should not be included in
the PCA because legal costs are administrative costs and not
direct power costs. Staff contended that only power costs should
be considered for recovery in the PCA and that legal costs are
generally considered for recovery in base rates. Staff concluded
that based on information provided by the Company, the PCA
factor, when adjusted to exclude $277,000 for legal costs, is
reduced by $0.00103 from $0.02670 per kWh to $0.02567 per kWh.
The reduced PCA factor of $0.02567 per kWh equates to a reduction
in the overall average revenue increase from 6.7 percent to 6.1
percent.
Staff recommended that the Commission approve the
proposed PCA rate as modified to exclude legal costs. Regarding
QF rates, staff recommended that the proposed QF rates be
approved.
II. COMMISSION ANALYSIS
The PCA factor is based on the forecasted costs of
power, which are not included in base rates, less any over- or
under-recovery from the prior PCA period. These costs are then
divided by the expected energy sales for the upcoming time period
to arrive at the appropriate rate. Under RSA 378:3-a,I fuel
adjustment charges are defined as those just and reasonable costs
that cover increases and decreases in the costs of purchased
electric power.
We find the proposed PCA factor just and reasonable
with the exception of the attorney's fees incurred with regard to
Maine Yankee. We agree with Staff that the removal of these
costs from the PCA factor is appropriate. Although the
Commission authorized the recovery of expenses for attorneys fees
and consulting fees through the PCA factor in another NHEC case,
80 NHPUC 428 (1995), that case is distinguishable because the
expenses related to securing lower cost power. In addition, in
that case the Commission indicated that in general these types of
costs are more appropriately recovered in a base rate proceeding.
In the case at hand, the expenses which NHEC seeks to
recover do not relate to purchasing power; they relate instead to
contesting contractual obligations. Under RSA 378:3-a,I, fuel
adjustment charges are defined as those which cover increases and
decreases in the costs of purchased electric power. We do not
believe in this case that there is the necessary nexus between
these legal fees and power purchases to justify their inclusion
in a fuel or power adjustment clause. Rather, we believe these
are the type of costs incurred in contractual disputes that are
part of the normal operating expenses of a utility that should be
included in and recovered through base rates.
Based upon the foregoing, it is hereby
ORDERED, that the New Hampshire Electric Cooperative
Inc. is authorized to collect a Power Cost Adjustment (PCA)
factor of $0.02567 per kWh; and it is
FURTHER ORDERED, that the short term avoided cost rate
for qualifying facilities is set as follows for this PCA period
at the respective delivery points:
Public Service Company of NH Base Energy 8.153¢
FPPAC .607¢
Central Vermont Public Service Base Energy 1.923¢
New England Power Company Base Energy
On-Peak 2.685¢
Off-Peak 1.669¢
All Hours 2.087¢
Fuel Clause varies
Green Mountain Power Corp. Base Energy 3.96¢
Fuel Charge varies
By order of the Public Utilities Commission of New
Hampshire this third day of August, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Claire D. DiCicco
Assistant Secretary