5. How Should a Surcharge be Recovered?
PacifiCorp proposes to spread the estimated $13.76 million surcharge equally over a nine-year period resulting in annual collections of approximately $1.53 million/year, which translates into a bill increase of about $1.61/month for the average residential customer.27 In support of its request to collect the proposed surcharge over nine years, PacifiCorp states that the KHSA has a target start date for removal of the Klamath assets of January 1, 2020.28 Additionally, by collecting the surcharge over nine years and collecting interest on the balance of those funds, the difference between the estimated cost allocable to California customers ($16 million) and what PacifiCorp is actually charging the ratepayers ($13.76 million) is reduced.29
PacifiCorp requests that the rate design of its proposed surcharge be based on an allocation among customers classes based on each class's share of generation revenues, which PacifiCorp believes is equitable.30 Conservation Groups support PacifiCorp's proposed surcharge allocation methodology.31
DRA initially recommended that, if a surcharge is instituted, it be recovered over 18 years, in order to: 1) reflect what it considers the risks and uncertainties identified in the KHSA and elsewhere that may result in the United States Secretary of the Interior terminating the KHSA; and 2) safeguard against overcollection of surcharge revenues from PacifiCorp's California customers in order to minimize ratepayer exposure to any unrealized costs.32 In its Opening Brief, DRA does not oppose PacifiCorp's proposed surcharge rate design allocation method, but only if dam removal begins in 2020.33
It is impossible to determine at this time whether dam removal will actually begin in 2020, however, that is the planned date. In order to ensure that sufficient funds are available to pay for dam removal as it occurs, it is necessary to begin collecting the surcharge well before the estimated date for beginning dam removal.
PacifiCorp states that the surcharge amount collected from California customers may have to be adjusted in the future to reflect variations in load forecasts, but the annual surcharge revenue will not exceed 2% of the authorized annual revenue requirement as of January 1, 2010. PacifiCorp also proposes that if there are funds remaining in the trust accounts after removal of the Klamath assets or if the KHSA does not come to fruition, these funds must be used for the benefit of customers through refunds, the funding of beneficial programs associated with the Klamath assets, or to fund relicensing of the Klamath assets.34 PacifiCorp did not propose in what forum it would request any future adjustment to or refund of the surcharge.35
We find that it is essential that the surcharge of $13.76 million be collected over nine years, not to exceed the 2% limit of the authorized annual revenue requirement as of January 1, 2010, in order to support the anticipated KHSA removal start date, and to accrue sufficient interest to make up the difference between the surcharge collected from California customers and the amount allocated to PacifiCorp's California customers by the KHSA. By collecting the surcharge over nine years, there is time for interest to accrue on the amount collected, which is intended to allow California ratepayers to pay less in rates. Any other option for collecting the surcharge would either result in not having sufficient funds at the target start date for removal of the Klamath assets or require ratepayers to pay more of the cost attributable to California customers. For example, if the ratepayers were to pay the surcharge beginning at a date closer to the target start of removal of the Klamath assets, there would be less time for interest to accrue on the surcharge collected, which would result in California ratepayers having to pay more in order to have sufficient funds by the target start date of removal. In addition, beginning the surcharge closer to the target start of removal would require a higher monthly surcharge just to accrue the same principal amount by the target start of removal.
PacifiCorp's proposed rate design methodology, which allocates the surcharge to customer classes based on authorized generation revenues is reasonable and is adopted herein, because it is based on already authorized revenue allocations. In order to be consistent with the calculation of the surcharge limit of 2%, which is based on an authorized figure as of January 1, 2010, the allocation of the surcharge among customer classes adopted herein should also be based on the authorized inputs (in this case the authorized allocation of generation revenues) as of January 1,2010. As shown in Exhibit PPL-201, the resulting surcharge revenue requirement for each class will be collected from customers within that class based on the number of kilowatt hours consumed. Within 30 days after this decision is issued, PacifiCorp must file a Tier 1 advice letter requesting approval of revised tariff sheets that add the surcharge ordered herein. However, the surcharge will not be effective until the Energy Division determines that the filed tariff changes are in compliance with this decision and Commission staff informs the assigned ALJ and service list of the current proceeding that the California Klamath Trust Accounts have been established. Within 30 days of the latter of (i) the Energy Division's determination of compliance and (ii) Commission staff notification of the California Klamath Trust Accounts establishment, PacifiCorp must begin collecting the surcharge from its California customers, and collect such surcharge over nine years.
The surcharge authorized herein together with the interest accrued, is refundable if the KHSA is terminated, protecting ratepayer funds from being used for purposes other than the benefit of ratepayers. The amount of the surcharge may also be revised, which will protect both ratepayers and PacifiCorp. If PacifiCorp collects too much money, a reduction in the surcharge amount may be requested, protecting ratepayers from being overcharged. If PacifiCorp does not collect enough funds, an increase in the surcharge amount within the 2% limit discussed above may be requested.36 Any consideration of how to refund the surcharge or any revision to the amount of the surcharge must be requested through an application, with notice to all parties of record in the current proceeding, in order for all interested parties to have an opportunity to weigh in on how the funds should be refunded or revised.
27 A.10-03-015 at 4-5.
28 KHSA at Section 7.3.1 and A.10-03-015 at 4.
29 A.10-03-015 at 2 and KHSA at Section 4.1.1.E.
30 Exhibit PPL-200 at 8-9 and A.10-03-015 at 5.
31 Conservation Group Opening Brief at 17.
32 Exhibit DRA-001R at 3.
33 DRA Opening Brief at 14.
34 A.10-03-015 at 6 and KHSA at Section 4.4.3.
35 Exhibit PPL-200 at 8.
36 KHSA at Section 4.1.1.C, E.
