VII. Revenue Allocation and Rate Design

Excluding addressing a proposal of KWUA and Interior to establish a rate credit for upper Klamath River Basin customers, DRA and CFBF were the only interested parties submitting revenue allocation and rate design testimony.

PacifiCorp proposed a revenue allocation method that would establish a cost increase cap for all customer classes equal to 1.33 times the overall percentage increase in rates. DRA proposed an alternative rate cap, limiting rate class revenue increases to 2.5% above the system average increase in rates. The following table summarizes the differences between PacifiCorp and DRA's revenue allocation methodology for residential, major commercial and industrial, and public street lighting.

Schedule	Classification	DRA	PacifiCorp
	Residential	13.3%	14.4%
	Commercial & Industrial
A-25	Small General Service	7.7	6.4
A-32	Small General Service	7.8	6.5
A-36 & AT-48	Large General Service	7.7	6.5
PA-20	Agricultural Pumping Service	12.9	12.9
	Total Commercial & Industrial	8.4%	7.4%
	Total Public Street Lighting	8.6%	7.2%
	Total Sales to Customers	10.8%	10.8%

In the area of rate design, DRA recommends the use of a composite tier differential method to set residential commodity rates. DRA also took exception to several of PacifiCorp's proposed fee increases and tariff changes. CFBF opposed PacifiCorp's request to change its rate structure for Schedule PA-20 Agricultural Pumping Service's annual load size charges to a declining block structure from the current composition.

A. Proposed Settlement

After PacifiCorp issued its revenue allocation and rate design rebuttal testimony, PacifiCorp conferred with both DRA and CFBF individually to address those revenue allocation and rate design differences. Subsequent to those discussions, PacifiCorp, DRA and CFBF reached a verbal agreement that resolved their revenue allocation and rate design issues, as well as all service fee and tariff provision issues.

All interested parties were invited to a July 18, 2006 revenue allocation and rate design settlement conference. Interested parties participating in that conference included: PacifiCorp, DRA, County of Siskiyou, KWUA, PCFFA and ONRC. Following that conference, PacifiCorp, CFBF and DRA finalized and signed a settlement agreement that resolved all revenue allocation and rate design issues except the KWUA irrigation customers rate credit. On July 21, 2006, subsequent to that settlement conference, PacifiCorp, DRA and CFBF filed a joint motion for adoption on their revenue allocation and rate design settlement agreement²¹

The proposed revenue allocation and rate design agreement provides for the capping of all customer classes rate increases as proposed by DRA, to 2.5% above the system average increase in rates.²² A copy of that agreement, excluding supporting schedules and attachments is attached to this order as Attachment B.

B. Discussion

As in our analysis of the proposed revenue requirement settlement agreement we find that the revenue allocation and rate design settlement agreement was between the active parties interested in the revenue allocation and rate design issues, and we find that there was no opposition to the proposed settlement agreement. Hence, the settlement commands the sponsorship of the active parties. The settlement also fairly reflects the affected interests of shareholders through PacifiCorp, PacifiCorp's general ratepayers through DRA, and PacifiCorp's irrigation customers through CFBF. Also, a review of the revenue allocation and rate design settlement agreement enables us to conclude that no term of the settlement contravenes any statutory provision or any Commission decision.

Finally, we address whether sufficient information exists to assess the reasonableness of the agreement. To that, we review the agreement and exhibits which detail the specific rates and fees resulting from the Settlement.²³ The limiting of rate class revenue increases to 2.5% above the system average increase in rates is appropriate because, among other matters, it retains consistency with revenue allocation in the most recent rate cases of other California utilities.

With regard to Schedule PA-20 Agricultural Pumping Service, the annual load size distribution demand charges for single and three phase customers shall be flat across all demand levels and equal to $13.20 per distribution demand/kW for all applicable load sizes. This eliminates an incentive that customers of this class would have to request multiple service drops and install a number of smaller, less efficient irrigation pumps to obtain a lower demand charge where larger pumps with fewer service connections would be more efficient, while retaining a reasonably low demand charge for customers with lower demand. With regard to agreed upon moderate increases in service fees, gradual increases were warranted to prevent too large an increase at one time.

The settled revenue allocation and rate design falls well within the range of possible outcomes if litigation had occurred, as both DRA and PacifiCorp's proposals resulted in rates that were very similar and are low relative to other California investor-owned electric utilities. Similarly, the PacifiCorp and CFBF compromise results in a reasonable demand charge and is well within the range of similar charges approved in other proceedings. The agreement is reasonable in light of the record, consistent with law, and in the public interest.

The basic charge remains the same for all PacifiCorp services except for Large General Services Schedule A-36 and Commercial Schedule OL-42. The basic charge for Schedule A-36 increases to $180.00 from $160.00. Basic charge for single phase Schedule OL-42 increases to $8.90 from $8.00 and three phase to $12.20 from $11.00. However, there is an increase in the energy charge for each category as summarized in the following table. Details of the adopted rate charges are set forth in Attachment C of this order. The following tabulation summarizes the new rates due to the settlement agreement.

CATEGORY	BASELINE			NON-BASELINE
(ALL AMOUNTS ARE IN CENTS PER kWh)
	Present	Adopted	Present		Adopted
Residential	7.575	8.641	8.881		10.131
Residential-CARE	5.994	6.847	7.039		8.039
Small General A-25			9.538		10.364
Commercial H2O Heating			7.811		8.877
Small General A-32			7.300		8.336
Large General A-36			5.408		6.119
Large General AT-48			4.296		5.197
Agricultural PA-20			6.318		7.564
Commercial OL-42			11.106		11.890

²¹ Although CFBF is an active party and signatory to the settlement agreement, it limited its participation in the agreement to the appropriate rates under the PA-20 tariff. CFBF expressed no opinion on the rates of other customer classes.

²² An exception to that agreement is the transition rate paid by the Klamath Irrigators pursuant to D.06-04-034.

²³ Exhibits attached to the Joint Motion by PacifiCorp, DRA, and CFBF for adoption of settlement agreement were filed as part of the joint motion and are not attached to this order due to the voluminous and detailed spread sheets. Exhibit 1 sets forth the present and proposed revenue distributed by rate schedule; Exhibit 2 proposed rate design; Exhibit 3 present revenues and billing determinants for present prices; and, Exhibit 4 contains tariff language containing revised service fees and tariff provisions.