20091019_2741.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:OCTOBER 15,2009
RE:IDAHO POWER COMPANY'S REQUEST FOR AN ACCOUNTING
ORDER ON QUALIFYING REPORTING ENTITY CONTRACTS -
CASE NO. IPC-09-16.
Idaho Power Company filed an Application requesting an Accounting Order associated
with Qualifying Reporting Entity (QRE) services. The QRE services will be provided to
renewable generation units located in the Idaho Power Balancing Authority area that are under
contract with Idaho Power to certify renewable energy credits (RECs) in the Western Renewable
Electricity Generation Information System (WREGIS). Idaho Power requests approval of the
proposed accounting and ratemaking treatment for revenues and expenses associated with the
QRE services.
Renewable Energy Credits (RECs) are tracked through WREGIS for various purposes
throughout many western states. The WREGIS process requires that a party, independent of the
owner of the renewable generation unit, supply WREGIS with the actual monthly MWHs (one
MWH equals one REC) that a renewable generation unit has delivered. WREGIS refers to the
independent party as a QRE. Idaho Power has been approved as a QRE by the WREGIS
administrator. This QRE approval enables Idaho Power to use the WREGIS system to track the
RECs from the Elkhorn wind farm, the Raft River geothermal generation units and any other
renewable units when developed.
Other renewable generation units within the Idaho Power Balancing Authority have
requested Idaho Power provide QRE services for their projects. Idaho Power is willing to
provide these services under contract where the costs are fully compensated by the party
DECISION MEMORANDUM OCTOBER 15 2009
requesting the service. The Oregon Public Utility Commission (OPUC) in Docket No. UM 1394
considered several issues in addressing a similar request from parties. After several workshops
and rounds of comments, the Oregon parties compromised on a Qualified Reporting Entity
Agreement and entered into a Memorandum of Understanding (MOU). The OPUC Staff
proposed and parties agreed that the costs and revenues associated with QRE agreements will be
treated as an "above-the-line" expense for ratemaking purposes. Idaho Power ultimately agreed
to the compromise position and signed the MOU. Staff notes that the MOU has a two-year
review period. On or about March 15 2011 parties in Oregon will convene a review workshop.
Idaho Power requests consistent treatment in Idaho. Idaho Power proposes that the
following process and accounting be used to record expenses and revenues associated with
providing voluntary QRE services:a. The Company s Delivery Finance group will create a yearly QRE services work
order that will have the following eight tasks:
1. Set-up Expenses - Idaho
11. Set-up Revenue - Idaho
111. Monthly Reporting Expenses - Idaho
IV. Monthly Reporting Revenue - Idaho
v. Set-up Expenses - Oregon
vi. Set-up Revenue - Oregon
V11. Monthly Reporting Expenses - Oregon
Vlll. Monthly Reporting Revenue - Oregon
The account 415020 REV FM MJ&CW-QRE REPORTING will be used to
record the revenue.
The account 416020 EXP FM MJ&CW-QRE REPORTING will be used to
record the expenses.
If Delivery Finance provides QRE service for one of the Company s generation
resources, Delivery Finance will charge the Company s Power Supply group via
an internal accounting entry that will debit the revenue account using a Power
Supply cost center and will credit the revenue account using a Delivery cost
center. This is required by GAAP to prevent Idaho Power from recognizing
revenue from itself for external financial reporting purposes.
DECISION MEMORANDUM OCTOBER 15,2009
Delivery Finance will directly bill all other project owner , including Company
affliates, for QRE services.
One ofthe key elements of the QRE Agreement is the pricing mechanism that
enables Idaho Power to charge the actual cost to perform QRE services. All
time and expenses incurred in providing QRE service to any entity will be
charged to the expense tasks on the work order. All revenue billed for providing
the QRE service will be credited to the revenue tasks on the work order.
Annually, Delivery Finance will analyze the expenses (including overheads and
profit) charged to the work order to determine if the rates it charges for its
services need to be adjusted.
Staff has reviewed the Oregon process and documents in UM 1394 including the
contracts and MOU. The Idaho Power estimated time requirements, costs and service charges
have also been reviewed. The contracts establish charges that will be based on full cost
recovery; however data associated with providing the QRE service are still estimated. For this
reason and concern related to the true impact on customer rates, Staff thoroughly evaluated the
above-the-line treatment. The estimates cover the expected costs and are designed to be revenue
neutral. Staff believes review of actual costs, allocation of costs and revenues for Idaho Power
associated with the QRE services and client contracts needs to be analyzed after the initial two-
year period.
STAFF RECOMMENDATION
Staff recommends an Accounting Order be issued to approve the above accounting and
ratemaking process through the two-year review process established in Oregon. Staff
recommends Idaho Power be required to file a full analytical report on the QRE services
covering client contracts, actual costs, allocation of costs, and revenues. The report should be
filed following the Oregon workshops but no later than October 31 , 2011.
COMMISSION DECISION
Does the Commission wish to issue an Accounting Order approving the above accounting
and ratemaking process?
DECISION MEMORANDUM OCTOBER 15 2009
Does the Commission wish to require a full analytical report be filed with the
Commission by Idaho Power following the two-year review process in Oregon but no later than
October 31 , 2011?
j~1J-U
Terri Carlock
TC\ipceO9.16 QREC DMIO.15.
DECISION MEMORANDUM OCTOBER 15 , 2009