HomeMy WebLinkAbout20240801Staff Comments.pdf RECEIVED
Thursday, August 1, 2024 2:31:42 PM
IDAHO PUBLIC
UTILITIES COMMISSION
DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0312
IDAHO BAR NO. 9917
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF ROCKY MOUNTAIN )
POWER'S APPLICATION FOR APPROVAL ) CASE NO. PAC-E-24-06
OF THE TRANSFER OF PORTIONS OF THE )
NORTH TEMPLE PROPERTY AND )
ACCOUNTING ORDER ) REDACTED COMMENTS OF
THE COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Dayn Hardie, Deputy Attorney General, submits the following
comments.
BACKGROUND
On April 15, 2024, PacifiCorp dba Rocky Mountain Power("Company") applied for
approval of a Property Transfer Agreement("Transfer Agreement") it entered with LHM DEV
E, LLC ("Developer") and a determination that the disposition of the property is in the public
interest. The Company also requested an accounting order authorizing it to record any net
proceeds from the transfer as a regulatory liability. The Company requested its Application be
processed by Modified Procedure and the Commission issue a final order by October 1, 2024.
The Company represents the North Temple property ("NTP") it seeks authority to sell
contains facilities supporting several of the Company's operational functions in the six states it
STAFF COMMENTS 1 AUGUST 1, 2024
operates. These functions include engineering, IT, HR, renewable energy development, health
and safety, legal, finance, customer service, grid operations, regulatory, thermal generation,
environmental, and facilities/property management. The grid operations center located on the
property supports the mountain west service territories. The Company represents these facilities
house the above-mentioned functions and associated personnel, which no longer meet disaster
recovery requirements and have exceeded their useful lives. The Company lists a myriad of
issues present at the existing facilities to support its position.
The Company commissioned a third-party assessment that explored renovating the
existing facilities on the NTP or constructing new facilities. According to the study, new
construction would cost at least ten percent less than renovation of existing facilities.
The Company's plans for the initial phase consist of a new headquarters ("New HQ") and
the possibility of a new energy services building ("New ESB").1 The New ESB would be built
to critical infrastructure resilience risk category IV standards that would ensure the critical
infrastructure remains operational during and after extreme incidents. The Company plans to
develop 4-10 acres of the NTP and would retain about 35 acres for the Gadsby power plant and
substation.
NTP contains several "Blocks"that will be available to the Developer after relevant
conditions have been met. The Developer is not required to exercise its entire option at once and
the Transfer Agreement contains a timeline for mandatory purchases. The Transfer Agreement
also contains the agreed upon price for the Blocks and price escalators to account for time.
The Company is not seeking a prudence determination in this case. If authorized, the
Company will credit Federal Energy Regulatory Commission("FERC") Account 254-Other
Regulatory Liabilities and debit FERC Account 421.1-Gain on disposition of property.
STAFF ANALYSIS
Staff reviewed the proposed Transfer Agreement and Application. Staff agrees with
certain portions of the Transfer Agreement but has reservations about other parts. Staff
recommends approval of the sale and transfer of the NTP Blocks but believes the Commission
should withhold approval of the submitted Transfer Agreement and order the Company to
'Exhibit 1 of the Company's Application shows that the remodel would include about 234,000 sq ft and the new
headquarters construction would include 150,000 sq ft.
STAFF COMMENTS 2 AUGUST 1, 2024
provide a copy of the finalized Transfer Agreement in a future rate proceeding when the
proceeds and costs associated with the sale of the North Temple Property are known.
Staff has also reviewed the Company's request for an accounting order to record any net
proceeds from the Transfer Agreement as a regulatory liability. Staff recommends the
accounting treatment be approved with an added carrying charge equal to the customer deposit
rate.
Accounting treatment
The Company's proposed accounting treatment is to defer the amounts of any property
dispositions (currently unknown due to certain aspects of the Transfer Agreement), by crediting
FERC Account 254-Other Regulatory Liabilities and debiting FERC Account 421.1-gain on
Disposition of Property. All transactions will be subject to a prudence review and final decision
on rate recovery in a future regulatory filing.
Staff has reviewed the proposed accounting treatment and believes that an accounting
order allowing the Company to record proceeds from the disposition of the NTP Blocks as a
regulatory liability is appropriate. Staff also believes that a carrying charge equal to the
customer deposit rate should be applied to any net proceeds from the sale of the NTP. This
deferred liability would offset future costs that may arise in a subsequent rate proceeding.
Without knowing when the next rate proceeding will happen, a carrying charge would be in the
public interest and would be a benefit to Idaho customers.
Transfer Agreement
The Transfer Agreement identifies Block 1-A, Block 1-B, Block 2, Block 3, and Block 4
at the NTP for sale to the Developer. The Agreement also states portions of Blocks 1-B and 2
will be retained for the New HQ and potential New ESB facilities. Application at 8-9. Section
2(b) of the Transfer Agreement provides a timeline for purchase of the Blocks from March 1,
2024, through December 31, 2039. Mandatory purchases by the Developer begin January 1,
2028, as per Section 14(a) of the Transfer Agreement. Application at 9. However, as defined in
the Master Development Agreement ("MDA") within the Transfer Agreement, the Company
would offer the Developer an extension for the right of first offer and right of first refusal to
STAFF COMMENTS 3 AUGUST 1, 2024
purchase Block 4, which would expire In the Company's confidential
response to Production Request No. 9, `
" Staff is not opposed to the sale of the Blocks of NTP and
recommends the Commission approve the sale and transfer of the NTP Blocks.
While Staff is not opposed to the sale and transfer of the NTP Blocks, Staff has concerns
regarding other components within the Transfer Agreement. Several additional agreements still
being negotiated that are interlaced within the Transfer Agreement are not related to the sale of
the NTP and contain terms and conditions that must be met prior to the sale of any of the Blocks,
such as an executed MDA, negotiated deadlines, and construction of new facilities. The
Company's vague or incomplete responses to certain discovery requests leaves vital portions of
the agreement(s)unknown or incomplete and without this information the Transfer Agreement
places an unknown risk on customers when the Company seeks recovery. Therefore, Staff does
not recommend the Commission approve the submitted Transfer Agreement. Additionally, when
the Company seeks recovery of costs associated with the sale and transfer of NTP, Staff
recommends the Commission order the Company to file a copy of the finalized Transfer
Agreement.
New HQ and New ESB
Staff is concerned the Transfer Agreement has constraints and requirements regarding the
New HQ and New ESB, which are unknown currently, but present unknown risks to ratepayers.
One of the Company's requests in this case is for approval of the Transfer Agreement, which
may include construction of the New HQ and New ESB. The Transfer Agreement refers to
benchmarks pertaining to the development and construction of a New HQ and possible New
ESB, as well as the requirement for a MDA, which must be executed prior to the sale of Blocks.3
The Transfer Agreement requires written notification from the Company to the Developer for the
New HQ and New ESB construction to be accepted or declined by no later than
z Confidential Exhibit No. 2(8)(e)at 13.
s Confidential Exhibit No. 2(2)(h)at 4.
4 Confidential Exhibit No. 2(10)(a)(i)at 16.
STAFF COMMENTS 4 AUGUST 1, 2024
As of July 10, 2024, Staff has not received confirmation of the status of the Company's decision.
This notification will determine whether the Developer may deliver an Exercise Notice to
acquire NTP Blocks where the potential new building sites are included. When asked to provide
updated cost estimates and construction timelines for the construction of the New HQ and New
ESB, the Company objected to providing updated information. See Company response to
Production Request Nos. 4 and 12. The Company stated that it"only seeks approval for the
transfer of property under Idaho Code 61-328." Id.
Transmission Lines
The Transfer Agreement also includes Confidential Schedule 11, which details the
Company's obligation to relocate/upgrade existing transmission lines that are located in_
The Company stated the estimated costs would be approximately
See Company confidential response to Production
Request No. 17. The Transfer Agreement also states there will be an impacted transmission line
in_ Staff notes that there will need to be further agreements for Transmission Line
easements on the impacted Blocks between the Company and third parties.
MDA
The Transfer Agreement contains a placeholder for the MDA, which contains several
conditions for the sale of the property, such as deadlines, construction terms of new facilities,
and timeline of construction. The Company stated in their response to Production Request No. 8
that the MDA is being negotiated, and it expects to be completed by June of 2024. The MDA
has not been provided to Staff as of July 31, 2024. The MDA is a significant component of the
Transfer Agreement as it contains terms that align with deadlines that must be negotiated prior to
the execution of the Transfer Agreement.
The MDA also has a Success Fee associated with the Transfer Agreement.6 In response
to Production Request No. 7, the Company stated, "[t]he Success Fee provides a potential
positive sales price adjustment if conditions described in the Master Development Agreement
(MDA) are met related to the Developer development success related to Major League Baseball
s Confidential Exhibit No.2(11)(b)at 17.
6 Confidential Exhibit No. 2(8)(i)at 14.
STAFF COMMENTS 5 AUGUST 1, 2024
(MLB) and if the Company makes certain property available within agreed upon timelines."
Staff does not believe this term is relevant to the transfer of NTP Blocks.
The MDA refers to a "Master Plan" which provides eight minimum requirements that
the Company and the Developer would need to approve. One of the requirements refers to
property outside of the Company's ownership.7 Staff inquired about the property outside of the
NTP in Production Request No. 11. In the Company's response, it stated, "[t]here will not be a
separate master plan for the Company property that does not also include the Developer's
additionally acquired property on the Company's east and west flanks." Staff does not believe
that the Company's Transfer Agreement should include property outside of the Company's
ownership and it should not be included as a requirement in the sale of the NTP Blocks.
STAFF RECOMMENDATION
Staff recommends the Commission:
1. Approve the Company's request for an accounting order allowing it to record proceeds
from the disposition of NTP Blocks as a regulatory liability;
2. Approve a carrying charge equal to customer deposit rate to apply to the regulatory
liability;
3. Approve the sale and transfer of the NTP Blocks;
4. Withold approval of the submitted Transfer Agreement; and
5. Order the Company to provide a copy of the finalized Transfer Agreement in a future rate
proceeding when the Company seeks recovery of costs associated with the sale of the
North Temple Property.
Respectfully submitted this 1" day of August 2024.
1
Dayn H die
Deputy Attorney General
Technical Staff: Leena Gilman, Kimberly Loskot, Vicki Stephens
I:\Utility\UMISC\COMMENTS\PAC-E-24-06 Comments-Redacted.docx
7 Confidential Exhibit No. 2 (8)(k)(viii)at 14.
STAFF COMMENTS 6 AUGUST 1, 2024
CERTIFICATE OF SERVICE
/51-
I
I HEREBY CERTIFY THAT I HAVE THIS I DAY OF AUGUST 2024,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF, IN CASE NO. PAC-E-24-06, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
MARK ALDER JOE DALLAS
ROCKY MOUNTAIN POWER ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330 825 NE MULTNOMAH ST
SALT LAKE CITY UT 84116 STE 2000
E-MAIL: mark.alder cupacificorp.com PORTLAND OR 97232
E-MAIL: joseph.dallas-mpacificorp.com
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datarequest(&'pacificorp.com
PATRICIA JORDA , SECRETARY
CERTIFICATE OF SERVICE