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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RON LAW BILL EASTLAKE LOU ANN WESTERFIELD DON HOWELL RANDY LOBB ALDEN HOLM TERRI CARLOCK TONYA CLARK BEV BARKER GENE FADNESS WORKING FILE FROM: LISA NORDSTROM DATE: JUNE 7, 2002 RE: IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AN ACCOUNTING ORDER AUTHORIZING DEFERRAL OF FACILITY CHARGES RELATING TO THE MOUNTAIN HOME NATURAL GAS FACILITY, CASE NO. IPC-E-02-7. On June 3, 2002, Idaho Power Company applied for an accounting order authorizing Idaho Power to defer facility charges relating to the Mountain Home natural gas facility. On May 13, 2002, the Commission disallowed recovery of the Williams Facility Charge Adjustment as a PCA expense in Case Nos. IPC-E-02-2 and -3. Order No. 29026. In relevant part, the Commission stated: 4. Williams Facility Charge Adjustment. Williams Gas Pipeline West (Williams) charged Idaho Power the first annual billing for payment of $419,054 to install a meter station, control equipment, and a 4,200 foot pipeline from the mainline to Idaho Power's Mountain Home natural gas facility. A fluctuating annual facility charge will pay for these items over the next 30 years. Staff argued that this charge is more like a capital cost than an annual gas delivery expense. Thus, it would be more appropriate to seek recovery of this amount as a capital asset cost in ratebase than to be recovered through the PCA. Tr. at 427-28. The Company indicated that because it is booked to a PCA-appropriate account, is fuel-related, and varies year to year, the facilities charge is appropriate for inclusion in the PCA. Tr. at 561. Commission Findings. The Commission finds that although the facilities charge is not a capital expense per se, it has many of the characteristics of a capital expense normally recovered as an asset in rate base. The charge pays for plant investment over time and includes expenses related to depreciation, interest, a return and maintenance on the plant investment. Although this charge enables Idaho Power to buy fuel from Williams, the repayment structure over 30 years is typical of a capital investment. Thus, the facilities charge should be considered for recovery in Idaho Power's next rate case - not in this PCA case. The $419,054 shall not be recovered through the PCA. Order No.29026 at 12. Since the Commission has determined that the facilities charge should be treated for revenue requirement purposes in a manner similar to that afforded capital investments, Idaho Power requests that the facilities charge expenditures be treated in the same manner as other expenditures which have been deferred by the Commission until the Company's next revenue requirement case. Application at 2. Idaho Power proposes accounting and ratemaking treatment for annual billings of facility charges associated with the Company's Danskin generation facility. Specifically, the Company would defer with interest the Williams facility charges incurred during the years 2001 and 2002 to install equipment and pipeline to the Mountain Home natural gas facility to Account 182.3 (Regulatory Assets). This amount would be amortized as a non-PCA related cost over a ten (10) year period commencing January 2003. The facility charges incurred by the Company for the year 2003 would be amortized over a ten (10) year period commencing January 2004. At the next general rate case, the Company's facilities charge incurred in the future would be treated in the same manner as depreciation, i.e., the average annual amount of the facilities charge would be a non-PCA expense during the operating life of the Danskin generation facility. Application at 3. The Company requests that this Application be processed on an expedited basis under Modified Procedure, i.e., by written submission rather than by an evidentiary hearing. Application at 4. STAFF RECOMMENDATION Staff recommends that this case be processed under Modified Procedure with a standard 21-day comment period. COMMISSION DECISION Does the Commission wish to process Idaho Power's request for a deferred accounting order under Modified Procedure with a 21-day comment period? Lisa D. Nordstrom M:IPCE0207_ln