20100517_2961.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: MAY 12, 2010

SUBJECT: PACIFICORP’S APPLICATION FOR APPROVAL OF AN
ACCOUNTING ORDER RECORDING CERTAIN POST-RETIREMENT
PRESCRIPTION DRUG COSTS AS A REGULATORY ASSET, CASE
NO. PAC-E-10-04

On April 2, 2010, PacifiCorp dba Rocky Mountain Power (“Rocky Mountain” or
“Company”) filed an Application with the Idaho Public Utilities Commission (“Commission”),
pursuant to Idaho Code §§ 61-301, 61-307, 61-622, and 61-623, for approval of an accounting
order authorizing the Company to record a regulatory asset associated with tax benefits
previously reflected in rates that will no longer be realized for certain costs incurred for post-
retirement prescription drug coverage as the result of the Patient Protection and Affordable Care
Act (“Act”). Application at 1.
THE APPLICATION
Rocky Mountain states that its Application was instigated by the passage of the Act
on March 23, 2010. Id. at 2. The Act “contains provisions for a federal subsidy for employers
offering post-retirement prescription drug coverage to its retirees. . . .” Id. at 3. According to
Rocky Mountain, “[t]he Act changes the deductibility of certain costs incurred for post-
retirement prescription drug coverage.” Id. at 2. Prior to the Act, employers were allowed “to
deduct the entire cost of providing the coverage, even though a portion is offset by the subsidy.”
Id. at 3. The Act eliminates the “current rule permitting deduction of the portion of the expense
that is offset by the subsidy.” Id.

DECISION MEMORANDUM 2
As a result, Rocky Mountain requests authorization for the recording of a “regulatory
asset to FERC Account 182.3 (Other Regulatory Assets) and a credit to FERC Account 410.1
(Deferred Tax Expense) to recover the Idaho Portion of tax benefits previously reflected in rates
that will no longer be realized as the result of the Act.” Id. at 4. If Commission approval is
granted, the aforementioned regulatory asset would be amortized “over a period of four years
beginning January 1, 2011, and reflect the amortization expense in the Company’s next general
rate case.” Id. at 2-3.
Rocky Mountain estimates a $30.0 million system-wide OPEB (Other Post-
Employment Benefit) related cost associated with the change in the law. Id. at 3-4. The
Company attributes approximately $11.4 million of that amount to the first quarter of the 2010
calendar year resulting, when amortized and grossed up for tax effects, in a revenue requirement
impact of approximately $18.5 million on a total Company basis amortized over four years. Id.
at 4. The Company claims that Idaho’s share of the regulatory asset would be approximately
$1.0 million. Id.
Rocky Mountain does not request a final Commission decision regarding rate
recovery. Id.
STAFF RECOMMENDATION
Staff has reviewed the Rocky Mountain’s Application and recommends that it be
processed through Modified Procedure with a comment deadline of June 10, 2010. See IDAPA
31.01.01.201-.204.
COMMISSION DECISION
Does the Commission wish to process Rocky Mountain’s Application through
Modified Procedure with a June 10, 2010 comment deadline?

M:PAC-E-10-04_np