20111117_3504.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

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

FROM: WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL

DATE: NOVEMBER 3, 2011

SUBJECT: IDAHO POWER COMPANY’S APPLICATION TO EXTEND AND
MODIFY ACCOUNTING ORDER TO AMORTIZE ADDITIONAL
ACCUMULATED DEFERRED INCOME TAX CREDITS (ADITC), CASE
NO. IPC-E-11-22

On November 2, 2011, Idaho Power Company filed an Application requesting an
Order “(1) authorizing the Company to extend its ability to amortize additional accumulated
deferred investment tax credits (ADITC) through December 31, 2013, and (2) approving a one-
time adjustment applied in 2011 to a sharing provision of the stipulation approved in Order No.
30978 to allow one-half of the Company’s share of the Idaho jurisdictional return on equity
(ROE) in excess of 10.5 percent to be provided as a customer benefit in the form of a reduction
in rates or an offset to amounts that would otherwise be collected from rates.” Application, p. 1.
ADITC are income tax benefits the Company receives based on the level of plant investment in
previous years. ADITC is normally amortized over the book life of the associated plant
investment and is used to reduce customer income tax expense during the amortized period.
Order No. 30978 was issued January 13, 2010 in Case No. IPC-E-09-30 approving a
stipulation that specifies Company use of ADITC during 2009, 2010 and 2011, including a
potential for revenue sharing in those years. The stipulation approved by the Commission in
Order No. 30978 had three provisions regarding the use of ADITC: (1) if the Company’s Idaho
annual ROE is less than 9.5%, Idaho Power is allowed to amortize additional ADITC up to $45
million during 2009 through 2011 to achieve an actual ROE up to 9.5%. Any unused ADITC
could be carried forward for use in a subsequent year during the three-year period provided the
DECISION MEMORANDUM 2
amount of additional ADITC used in a single year did not exceed $25 million; (2) if the Idaho
jurisdictional ROE exceeded 10.5%, amounts in excess of 10.5% are shared equally between the
Company and its customers; and (3) the Company could not file a general rate case for rates to
become effective prior to January 1, 2012. In 2009 and 2010, the Company’s Idaho
jurisdictional ROE was between 9.5% and 10.5%, resulting in no additional amortization of
ADITC or revenue sharing. Idaho Power does not expect to use any of the $45 million of
eligible ADITC, and expects its 2011 ROE to exceed 10.5% resulting in revenue sharing for
customers. Idaho Power expects the customer share of the return in excess of 10.5% to be
approximately $20 million.
Idaho Power asserts the current ADITC/revenue sharing mechanism has proven to
benefit both customers and the Company, and the Company proposes in its Application to extend
the ADITC mechanism to remain effective through December 31, 2013, under the following
terms:
1. If the Idaho jurisdictional ROE is less than 9.5%, the Company proposes
to amortize additional ADITC in an amount up to $45 million over the
period of 2012-2013 to achieve an actual ROE up to a maximum of 9.5%.
The Company would be allowed to use a maximum level of $25 million in
additional ADITC amortization during 2012.

2. If the Company’s actual ROE for any year during the period 2012-2013 is
above 9.5%, the Company would not use any additional ADITC
amortization. Unused ADITC would be carried forward for use in 2013
up to the total eligible ADITC amount of $45 million.

3. A one-time adjustment to the sharing portion of the mechanism would be
applied in 2011 to allow one-half of the Company’s share of the Idaho
jurisdictional return in excess of 10.5% to be provided as a customer
benefit in the form of a reduction in rates or an offset to amounts that
would otherwise be collected from rates. The Company expects this
sharing amount to be approximately $10 million, in addition to the
estimated $20 million the Company forecasts will be customers’ share
under the existing ADITC sharing provision. For the period 2012-2013, if
the ROE exceeds 10%, amounts in excess of a 10% return would be
shared equally between the Company and its customers.

Idaho Power’s Application states that it will be necessary to have a signed settlement
agreement regarding its proposal on or before December 31, 2011, in order to facilitate the
timely recording of the Company’s 2011 earnings for financial reporting purposes. The
DECISION MEMORANDUM 3
Company also asserts its proposal in this case is contingent upon the Commission’s approval of
the stipulation in its rate case, Case No. IPC-E-11-08. The Company requests that its
Application be processed by Modified Procedure, and also proposes that a workshop be
convened at the offices of the Commission on November 30, 2011, so that interested parties may
discuss the Company’s proposal.
Staff recommends the Commission issue a Notice of Application, Notice of
Intervention Deadline, and Notice of Public Workshop to process the Company’s Application.
Following the workshop on November 30, 2011, the parties can inform the Commission of a
recommended procedure to complete the process on the Company’s Application.
COMMISSION DECISION
Should the Commission issue a Notice of Application, Notice of Intervention
Deadline and Notice of Public Workshop to process the Company’s Application?

Weldon B. Stutzman
Deputy Attorney General

bls/M:IPC-E-11-22_ws