20160115IPC to Staff 4.pdf

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An IDACORP Comoanv
LISA D. NORDSTROM
Lead Counsel
I [e-mail]
January 15' 2016 tdaho Public utilities commission
oflice of the,$g;tau
vlA HAND DELIVERY JAN I 5 2016Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 west washington street Boise' ldaho
Boise, Idaho 83702
Re: Case No. IPC-E-15-26
Application for Approval of the Transfer and Sale of Certain Assets to the
United States Department of Justice Federal Bureau of Investigation
- ldaho Power Company's Response to the Second Production Request of
the Commission Staff
Dear Ms. Jewell:
Enclosed forfiling in the above matter please find an original and three (3) copies of
ldaho Power Company's Response to the Second Production Request of the Commission
Staff.
lf you have any questions about this filing, please do not hesitate to contact me.
Very truly yours,
d",- e a4otL/4?o,r\-
Lisa D. Nordstrom
LDN:kkt
Enclosure
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221West ldaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I nordstrom@ ida hopower. com
Attorney for ldaho Power Company
!N THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AN
ORDER APPROVING THE TRANSFER AND
SALE OF CERTAIN ASSETS TO THE
UNITED STATES DEPARTMENT OF
JUSTICE FEDERAL BUREAU OF
INVESTIGATION.
ldaho Public Utilities Commrssron
Office of the SecrREcE,r.St'u
JAN I 5 20,6
Boise, fdaho
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. |PC-E-15-26
IDAHO POWER COMPANY'S
RESPONSE TO THE SECOND
PRODUCTION REQUEST OF
THE COMMISSION STAFF
COMES NOW, ldaho Power Company ("ldaho Powed' or "Comp?ry"), and in
response to the Second Production Request of the Commission Staff to ldaho Power
Company dated January 8,2016, herewith submits the following information:
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF. 1
REQUEST NO. 4: ln previous cases (IPC-E-05-16 and IPC-E-09-32), the
Company's methodology used only Net Book Value in its pricing methodology. ln both
cases, the Company stated that the resulting sales price was revenue neutral, and
would not affect the rates of other ldaho Power Customers. ln its current application,
the Company states that its sale price methodology ensures the cost of supplying
service will not increase, and that rates will not be impacted. The Company further
states that its pricing methodology used the following five components:
Net Book Value
True-up of Past Levelized Rate of Return
Near-term Rate of Return lmpact Resulting from the Sale of Assets
Near-term Operational lmpact Resulting from the Sale of Assets
e. Net Tax Gross-up
Please explain why these components were not considered in previous sales,
and why it is appropriate to include them in the present case.
RESPONSE TO REQUEST NO. 4: The circumstances coincident with the sales
of facilities referenced in this request were unique and different from one another. Both
cases (IPC-E-05-16 and IPC-E-09-32) involved sales made prior to the establishment of
Rule M. The Company's practice prior to the establishment of Rule M was not to sell
Facilities Charge assets unless unique circumstances existed, such as operational
issues or the facilities no longer being used. Following the establishment of Rule M, the
Company developed a uniform methodology to determine a sales price at which it would
be willing to sell Facilities Charge assets. The current methodology for establishing a
sales price at which the Company is willing to sell Facilities Charge assets includes the
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 2
a.
b.
c.
d.
five pricing components mentioned above. While the Company has consistently applied
this pricing methodology in buy-out quotes provided to customers since the inception of
Rule M, the sale to the Federal Bureau of lnvestigation ("FBl") is the first case in which
the customer and the Company have agreed on a sales price and requested approval
from the ldaho Public Utilities Commission ("Commission"). The sales prior to Rule M
involved extenuating circumstances explained in more detail below.
Rule M
Following the establishment of Rule M, a pricing methodology to determine the
sale price at which the Company would be willing to sell the Assets to the FBI was
developed to ensure that the Company and its customers are not negatively impacted
by a transaction under Section 3 of Rule M. Rule M, Facilities Charge Service, is a
service option available to customers that have facilities installed beyond the point of
delivery that are installed to solely benefit the customer. As a result of customers
requesting changes to the Company's Facilities Charge practices in the most recent
general rate case ("GRC"), Case No. !PC-E-11-08, ldaho Power proposed an option for
customers to request the purchase of Company-owned facilities installed beyond the
point of delivery, which ultimately became Section 3 of Rule M. The Company
developed its specific pricing methodology following Commission approval of Rule M as
part of the GRC in final Order No. 32426.
Prior to the GRC and the establishment of Rule M, no formal option existed for
customers to request to purchase Facilities Charge assets in the Company's tariff.
While Rule M provides customers the option to request to purchase Facilities Charge
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 3
assets, ldaho Power is not required to sell the assets and will only agree to a sale if the
results of the transaction will have no negative impact to the Company or its customers.
The requirements for sale of Company-owned facilities that needed to be fulfilled
prior to Rule M are described in ldaho Code S 61-328. This ldaho Code section
requires that the transaction is consistent with the public interest, that the cost of and
rates for supplying service will not be increased by reason of such transaction, and that
the applicant for such acquisition or transfer has the bona fide intent and financial ability
to operate and maintain said property in the public service. Such sales were rare and
ldaho Power evaluated each request for sale on a case by case basis.
In anticipation that with the implementation of Rule M the number of requests for
purchase of facilities from the Company would rise, the Company determined a
methodology which includes the five pricing components to provide a consistent
determination of a sales price that would be acceptable to the Company and not
negatively impact customers. In addition to meeting the requirements of ldaho Code $
61-328, Rule M also established further provisions for the sale of Facilities Charge
assets. ln order for a Facilities Charge asset to be sold, Section 3 of Rule M also
requires the transaction results in no mixed ownership of facilities, the customer must
provide the operation and maintenance of all facilities installed beyond the point of
delivery after the sale is complete, and the customer must prepay engineering costs for
sales determinations taking greater than 16 estimated hours of preparation. ldaho Code
S 61-328 requires that customers are not negatively impacted while the methodology
proposed in Case No. IPC-E-15-26 under Section 3 of Rule M takes into consideration
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 4
the impact of the sales transaction to both the customers and the Company, including
its shareholders.
Case No. IPC-E-05-16
Case No. IPC-E-05-16 involved the sale and transfer of certain Company-owned
facilities from ldaho Power to Sinclair Oil Corporation, a Wyoming Corporation, d/b/a
Sun Valley Company ("Sun Valley"). The distribution facilities sold were originally
installed to serve portions of the Sun Valley Resort including the Lodge, the lnn, stores
in the mall area, and the skating rinks. Sun Valley was in a Master Metering service
arrangement in accordance with the Company's Rule E and had tenants in the mal!.
Some of the tenants in the mall had service provided by ldaho Power while others had
service provided by Sun Valley. During the years leading up to the transaction, Sun
Valley had expanded its facilities as part of its development plan. The Company
explained in Staff's Audit Request No. 26 in Case No. IPC-E-05-16 that a consequence
of the expansion was that Sun Valley's facilities in certain circumstances were built
around ldaho Power's electrical facilities, making access for maintenance difficult.
These circumstances were detrimental to ldaho Power being able to provide safe and
reliable service. As further explained in the Company's response to Audit Request No.
26, ldaho Power was willing to forego the future revenue associated with the facilities in
the sale transaction to eliminate the operational difficulties associated with the
intermingling of facilities. The transaction led to operational efficiencies for ldaho Power
and alleviated concerns about safety and equipment access. The Commission
determined the sales price and the transaction met the requirements of ldaho Code $
61-328 and approved the sale in Order No. 29864.
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 5
Case No. IPC-E-09-32
Case No. !PC-E-09-32 involved the sale and transfer of the Goshen Series
Capacitor Bank from ldaho Power to PacifiCorp. This transaction was unique and not
associated with a traditional Facilities Charge asset. The Goshen Series Capacitor
Bank was part of the larger Jim Bridger transmission system that was owned jointly by
ldaho Power and PacifiCorp. The transmission system was built by both utilities to
deliver electricity produced by the jointly-owned Jim Bridger generating plant to
customers located in their respective service territories. ldaho Power paid for the costs
of the Goshen Series Capacitor Bank and entered into an agreement with PacifiCorp
whereby PacifiCorp would pay for its use of the bank. This joint use of an asset was not
a typical Facilities Charge agreement. The Facilities Charge Service is applicable to
Idaho Power-owned facilities installed beyond the point of delivery for the sole benefit of
the customer, whereas the Goshen Series Capacitor Bank was installed to benefit a!!
customers. Furthermore, the transmission system was jointly owned and no point of
delivery was delineated. PacifiCorp was not an ldaho Power customer and could not
enter into a standard Facilities Charge agreement. Rather, ldaho Power and PacifiCorp
had a transmission facilities agreement, pursuant to which PacifiCorp made an annual
use of facilities payment to ldaho Power associated with the Goshen Series Capacitor
Bank.
ln 2006, PacifiCorp commenced construction of the Three Mile Knoll Substation,
which included a new capacitor bank for the substation. The new substation rendered
the Goshen Series Capacitor Bank unnecessary and unusable in its location. For this
reason, ldaho Power and PacifiCorp entered into an agreement to use the Goshen
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 6
Series Capacitor Bank to replace a different capacitor bank located at another
substation on the Jim Bridger transmission system.
ln the Company's response to Staff's Audit Request No. 8 in Case No. IPC-E-O9-
32, an inquiry as to why it was more beneficial to sell the asset instead of keeping it to
use in the near future, the Company explained that there was no current need by the
Company for the Goshen Series Capacitor Bank. The capacitor bank was used as part
of an upgrade to PacifiCorp's transmission system to improve regional transmission as
a whole, extend the life of the existing transmission network, and improve grid power
flow. Selling the Goshen Series Capacitor Bank, which was deemed to be unusable in
the near future, at net book value allowed ldaho Power to remove the asset from its rate
base and improve operational efficiency. The Commission determined the sales price
and the transaction met the requirements of ldaho Code S 61-328 and approved the
sale in Order No. 31007.
The response to this Request is sponsored by Zach Harris, Regulatory Analyst ll,
ldaho Power Company.
DATED at Boise, ldaho, this 1sth day of January 2016
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 7
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 1sth day of January 20161 served a true and
conect copy of IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF upon the following named
parties by the method indicated below, and addressed to the following:
Gommission Staff
Daphne Huang
Deputy Attorney General
ldaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Gustomers of ldaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
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FAXX Emai!peter@richA rdsonadams.com
qreg@richardsonad ams. com
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Overnight Mail
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Email [e-mail]
IDAHO POWER COMPANY'S RESPONSE TO THE SECOND
PRODUCTION REQUEST OF THE COMMISSION STAFF - 8