Attch12_IPCE0124_StaffComments.doc

JOHN HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5470

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE JOINT APPLICATION OF IDAHO POWER
COMPANY, THE URBAN RENEWAL
AGENCY OF THE CITY OF CALDWELL,
IDAHO AND THE CITY OF CALDWELL
FOR APPROVAL OF A SPECIAL LINE INSTALLATION AGREEMENT.
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CASE NO. IPC-E-01-24

COMMENTS OF THE COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission (“Commission”), by and through its Attorney of record, John Hammond, Deputy Attorney General, and submits the following comments in response to Order No. 28791, the Notice of Application and Notice of Modified Procedure issued on July 25, 2001.
On July 13, 2001, Idaho Power Company, the Urban Renewal Agency of the City of Caldwell, Idaho (“URA”) and the City of Caldwell (“Caldwell”) jointly filed an Application requesting Commission approval of a special line installation agreement (“Agreement”) they have entered into.
The Application states that URA and Caldwell have created an Urban Renewal Plan for the Caldwell East Urban Renewal Project that will rehabilitate and develop a specified area of the City. In order to accomplish this the Applicants state that it is necessary to have adequate electric utility service available to the area. Accordingly a new distribution feeder line, the “New Linden Feeder,” will be constructed. The Applicants state that grant monies are available for the construction of the required facilities. Due to the unique nature of funding for the line installation the parties have entered into the agreement pursuant to Rule H, Subparagraph VI, D, i.e., which allows for special arrangements that deviate from Rule H Refund Provisions. Based on this Agreement Idaho Power is willing to construct the New Linden Feeder and related distribution facilities upon payment by Caldwell in the amount of $408,386.30, which is the estimated cost of the facilities. Caldwell also agrees to waive all vested interest rights or payments in the New Linden Feeder in exchange for the Company agreeing to commit to making 10 MW of feeder line capacity available within the Caldwell Project boundaries for seven years. The Application also states that for a period of five years capacity of the New Linden Feeder, in increments larger than 100 kW blocks, that is utilized for service outside the Caldwell Project boundaries will be subject to a capacity based connection charge. The connection charge is designed to provide a source of funding to Idaho Power to assure 10 MW of distribution line capacity is available for the Caldwell project.

STAFF ANALYSIS
The Commission Staff has reviewed the Joint Application. The $408,308.30 to be contributed by the URA is the expected cost of backbone distribution facilities with a 10 MW capacity that would serve the project area. Any additional distribution facilities required within the project area would be provided by Idaho Power Company subject to normal Rule H Line Extension provisions.
The Staff is concerned about the mismatch in time increments between the 5-year period during which connection charges are required for developments outside the Caldwell project and the 7-year period for which Idaho Power has a contractual obligation to provide 10 MW of capacity within the project. The 2-year difference provides a possibility that the general body of Idaho Power ratepayers may have to pay the costs of distribution capacity additions. For example, if, after 5 years, all or part of the 10 MW capacity reservation is not used within the Caldwell project, a developer outside of the project could utilize all or part of the remaining capacity of the new distribution line and pay no connection charges. If the entire 10 MW capacity was then used by a combination of developers inside and out of the Caldwell project, the Company still must guarantee that 10 MW of capacity is available to developers inside the project for the full 7 years of the Agreement. Thus, a developer inside project could require, without charge to itself, the Company to add capacity to the 10 MW line in order to replace that which had been used by developers outside the project who may also have avoided paying connection charges. Under this scenario the Company would most likely attempt to recover the costs of adding this capacity from the general body of ratepayers as it would be unable to do so through connection charges collected from outside developers. The line extension tariff, Rule H, is generally designed to prevent the general body of ratepayers from having to pay this cost.
For many years Idaho Power Company has had an approved line extension policy that, in general, requires customers extending lines or using capacity from recently extended lines to make a contribution toward the costs of the line extension. In this specific case, to allow any developer to avoid these costs while Idaho Power has a remaining contractual obligation to provide that capacity to others within the project is unfair. It is also unfair because that developer gets something free for which all other developers under the line extension policy have to pay for. It is also unfair to the general body of ratepayers to have to pay for distribution capacity for someone else when in similar situations they had to make a contribution to the cost of providing their own distribution capacity.
The probability of the general body of ratepayers having to pay for a distribution upgrade in this specific circumstance cannot reasonably be estimated. Therefore, Staff proposes that the potential inequity be eliminated by extending the collection of the capacity based connection charge to 7 years for developers outside the project area. Such a change has no effect on Caldwell Project participants, therefore, a new contract should not be required. A Commission Order directing that the recovery period and methodology be placed in effect for 7 years should be adequate.
Idaho Power Company included a connection charge collectable for the first 5 years of the agreement because that is the vested interest refund period in Rule H and the Company did not want to set a precedent for a longer refund period. Staff believes that the special circumstances of funding through a federal grant and Caldwell’s requirement that 10 MW be reserved for use within the project for 7 years justify the line extension variations contained in the agreement and also justify a 7-year period for the collection of connection charges. Staff does not believe establishing a 7-year period for the collection of connection charges in this specific case is or should be precedent setting. Idaho Power has indicated that a 7-year period during which connection charges would be collected is acceptable to them in this special circumstance.

STAFF RECOMMENDATION
Staff recommends that the special line installation agreement submitted in this case be approved. Staff further recommends that Idaho Power Company be directed to collect connection charges as described in the agreement except that they should be collected for 7 years.

Dated at Boise, Idaho, this day of August 2001.

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John Hammond Deputy Attorney General

Technical Staff: Keith Hessing

JH:KH:gdk:i:umisc/comments/ipce01.24jhkh
STAFF COMMENTS 1 AUGUST 15, 2001