Planning for Idaho’s
electricity needs
Facts about electric prices in today’s
challenging economy
the economy is not as robust. This same pattern has
occurred before, in the late 1970s and early 1980s.
Rocky Mountain Power has reduced its original request
by $2.8 million to a total of $24.9 million or a 12.3 percent
average increase. This reduction is due to tax benefits on
capital investment that were not certain last May, when
the company first filed its request. One of the company’s
core principles is regulatory integrity, and with the
extension of this tax benefit, we will pass lower costs on to
our customers. We take seriously our obligation to serve
customers, to control costs in every way we can and to
continually identify cost reduction opportunities such as
this tax benefit.
Our job: keep the power flowing;
invest for the future
To make sure electric service is safe and reliable for
customers today and in the future, Rocky Mountain
Power is building power plants, transmission lines and
neighborhood distribution equipment to serve customers
in Idaho and the other states we serve. For power plants,
main transmission and other facilities shared by several
states, Idaho customers pay only for the share they use,
about 6 percent of the total. The graph below shows
the company’s growing investment specifically for
Idaho customers.
Company profits in Idaho are modest
One thing we hear a lot is that the company has
a “guaranteed profit.” That’s actually incorrect.
Regulatory commissions in each state establish an
upper limit for utility profits, or rate of return. The fact
is, Rocky Mountain Power has seldom reached this limit.
Our actual rate of return is really quite modest. The graph
below compares our earnings in Idaho with those of our
largest customers in recent years. As an essential public
service, we believe an electric utility should provide good
returns, not great returns.
Idaho capital investment spending
$18.00
$16.00
$14.00
$ Millions
$12.00
$10.00
Earnings comparison
45%
$8.00
40%
35%
Return on Equity
$6.00
$4.00
$2.00
$
2008
2009
2010
Upgrade
Replace/Repair
Reinforcements
New Connects
Mandated
We consider carefully before asking
for a price increase
Rocky Mountain Power does not take lightly this request
to raise customer prices, especially in a difficult economy.
However, it is critical that prices reflect the actual costs
of serving our customers. With the company’s obligation
to serve, we must make investments regardless of the
economy. And, these investments are years in planning
and construction, meaning that these investments often
start in strong economic times but are completed when
30%
25%
20%
15%
10%
5%
0%
-5%
2005
2006
2007
2008
2009
RMP authorized return
RMP actual return
Returns for certain large RMP industrial customers
A financially stable utility is good for customers. Here’s why:
a fair return makes borrowing money less costly through
lower interest rates. That’s how Rocky Mountain Power
comes up with billions of dollars up-front to build power
plants, transmission lines and electric equipment in
Idaho neighborhoods. As borrowing costs are lower,
customer prices are lower. Also, Rocky Mountain Power’s
owners have re-invested all profits since 2006 back into
equipment to serve customers better because they recognize
how urgently new facilities are needed. They also recognize
the responsibility to serve customers well comes first.
Electricity prices should be fair to
all customers
Keeping electricity a good value
We examine the electric needs of all our customers
in detail every year. We plan annually, and for longrange needs, 10 years and 20 years in advance.
This long-range planning is public, and we invite public
comments. When we build something, from the smallest
neighborhood power line to our largest power plants
and transmission lines, we build because our customers
need it. We must be able to demonstrate to utility
regulators that these decisions are prudent and the
best deal for customers.
Large industrial customers in southeastern Idaho are some
of the largest electric users in the company’s six-state service
area. For many years, some of these customers paid electric
prices that were well below what it costs to provide the service.
Beginning about five years ago, the company began working
through the established regulatory process with the Idaho
Public Utilities Commission to bring these customers closer to
the actual cost of serving them.
If electric prices do not reflect the true cost of providing the
service, an unfair subsidy can exist for that customer. It is
simple fairness that prices for all kinds of customers reflect the
actual costs to provide their electric service.
Comparison of world electricity prices
Electricity usage by Idaho customer class
12.00
11.4
cents per kilowatt hour
9.24
8.00
8.42
6.30
6.00
7.86
7.06
7.31
5.08
4.00
4.30
cents per kilowatt hour
10.00
10.00
8.5
8.00
6.8
6.00
6.4
5.2
4.00
2.00
2.00
0.00
0.00
Residential
Commercial /
Industrial
Irrigation
Monsanto
Amount customers currently pay for the service they receive
Actual cost to provide service to that customer group
Gap – Reason for price increase
How electricity prices are set
Prices differ for various types of customers, based on their
share of how much it costs to operate and maintain local
substations and distribution lines, read the meter, calculate
the bill and provide 24-hour customer service. The process for
determining the cost of service is approved by state regulators.
The proposed changes below are updated from our original
request, intended to bring all customer prices more closely
to the actual costs to serve them, which is a basic objective of
utility regulation.
Standard residential service: 7.2 percent
Time of Use residential: 14.7 percent
Small general service: 9.7 percent
Medium & large gen. service: 12.8 percent
Irrigation: 7.6 percent
Large industrial: 14.7 percent to 18 percent
© 12/10 Rocky Mountain Power
Mexico
China
USA
Average
Idaho
Canada
Source: International Energy Agency, www.chinaview.cn
and U.S. Energy Information Administration.
We work hard to strike the right balance between
operational expenses, customer service, and preventive
maintenance. Over the past four years, we have reduced
our administrative and general costs by $76 million,
or 32 percent. Even with these reductions, the employees
who live and work in Idaho continue to deliver excellent
customer service.
Idaho electric prices are some of the lowest in the
world, largely due to abundant hydroelectric resources.
Even compared with other low-cost Idaho utilities,
Rocky Mountain Power prices remain competitive,
in the lower middle of Idaho providers.
As businesses throughout our service area compete in an
increasingly global economy, we’ll continue our work to
keep electricity a good value for all our customers.