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Home My WebLink AboutIPC-E-02-2 test.pdfTelephone (208) 388-2674, FAX (208) 388-6936 LARRY D. RIPLEY Senior Attorney April 15, 2002 HAND DELIVERED Ms. Jean D. Jewell, Secretary Idaho Public Utilities Commission 472 West Washington Street P. O. Box 83720 Boise, Idaho 83720-0074 Re: Case No. IPC-E-02-02 Energy Cost Bond Charge Case Dear Ms. Jewell: Please find enclosed for filing the following described documents regarding the above-described case: 1. Nine (9) copies of the Testimony and Exhibits of John R. Gale, with one copy designated as the Reporter’s Copy. A computer disk containing Mr. Gale’s Testimony is also enclosed. 2. An original and seven (7) copies of a document entitled Legal Principles Applicable To Energy Cost Bonding/Securitization. 3. An original and seven (7) copies of a document entitled Submission of Proposed Order. 4. Original and (3) copies of Idaho Power Company’s Response to the First and Second Production Requests of Commission Staff. 3. Three (3) copies of the Workpapers of John R. Gale. I would appreciate it if you would return a stamped copy of this transmittal letter for our files. Very truly yours, /s/ Larry D. Ripley LDR:jb Enclosures c: Parties of Record (w/enclosures) BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION) OF IDAHO POWER COMPANY FOR AN ) CASE NO. IPC-E-02-02 ENERGY COST FINANCING ORDER AND ) AUTHORITY TO INSTITUTE AN ENERGY) COST BOND CHARGE. ) ) IDAHO POWER COMPANY DIRECT TESTIMONY OF JOHN R. GALE GALE, DI 1 Idaho Power Company Q. Please state your name and business address. 1 A. My name is John R. Gale and my business 2 address is 1221 West Idaho Street, Boise, Idaho. 3 Q. By whom are you employed and in what 4 capacity? 5 A. I am employed by Idaho Power Company as Vice 6 President of Regulatory Affairs. 7 Q. What is the purpose of your testimony in 8 this proceeding? 9 A. I will describe Idaho Power Company’s 10 positions and proposals as they relate to a specific PCA 11 rate adjustment for the 2002/2003 PCA rate period, the 12 securitization of a portion of outstanding PCA costs, 13 carrying costs of PCA, implementation of rates, residential 14 rate design, and demand-side management initiatives. 15 Q. What exhibits are you sponsoring? 16 A. I am sponsoring the following exhibits: 17 Exhibit No. 6 FERC Compliance Letter 18 Exhibit No. 7 Idaho PCA Real-Time Pricing 19 Adjustments 20 Exhibit No. 8 Schedule 57, Energy Cost Bond 21 Charge 22 Adjustment to PCA 23 GALE, DI 2 Idaho Power Company Q. Mr. Said outlines the PCA components for 1 this year in his testimony. Did you direct Mr. Said to 2 make an adjustment to the booked true-up component within 3 the PCA calculation? 4 A. Yes. I have directed Mr. Said to decrease 5 the booked PCA true-up component result for the 2002/2003 6 PCA by $4,306,635.82. This adjustment is the Idaho 7 jurisdictional result of repricing the real-time 8 transactions from July 2001 through March 2002. 9 Q. How were these real-time transactions 10 originally priced? 11 A. After July 1, 2001, the transactions were 12 priced in accordance with the methodology detailed in Idaho 13 Power’s compliance filing with the Federal Energy 14 Regulatory Commission (“FERC”) on May 14, 2001. A copy of 15 Idaho Power’s filing letter appears as Exhibit No. 6 and 16 the complete filing is contained in my workpapers that have 17 been submitted to Staff and other intervenors. Under the 18 FERC compliance method, Idaho Power received IDACORP 19 Energy’s (“IE”) highest purchase price in any hour for 20 energy transfers to IE and paid IE’s lowest sales price in 21 any hour for energy transfers from IE. The intent of this 22 method was to have Idaho Power obtain energy at the lowest 23 GALE, DI 3 Idaho Power Company price at which IE was selling and to sell energy at the 1 highest price at which IE was buying. 2 Q. If this is true, then why propose to reprice 3 the real-time transactions? 4 A. Although calculated according to the method 5 previously described, the results indicate that Idaho Power 6 is disadvantaged under the mechanism. The problem occurs 7 because the compliance method at times includes only 8 transactions unrelated to the Northwest markets, because 9 there is no weighting by volume, and because there are more 10 hours without real-time transactions in them than when both 11 purchases and sales are used. 12 Q. When did the company become aware of this 13 transfer price problem? 14 A. It came to management’s attention in late 15 March 2002 as Idaho Power prepared for the pending PCA case 16 and its accompanying audit by the Commission Staff. 17 Q. Has the company attempted to change the 18 real-time transfer price methodology through filings at the 19 FERC? 20 A. Yes. Our original FERC filing used a 21 weighted average of all relevant IE transactions (both 22 purchases and sales) to set the real-time transfer price. 23 GALE, DI 4 Idaho Power Company The company’s original FERC request was identical to the 1 real-time transfer pricing method initially approved by the 2 Idaho and Oregon Commissions. The pricing mechanism 3 recommended provides market proxy for what Idaho Power 4 would have paid or received from a non-affiliate. The 5 real-time transfer price was not approved by the FERC as 6 filed, and the company subsequently made the FERC 7 compliance filing (Docket No. ER01-1329-001) with the 8 methodology currently in place. 9 After the compliance filing was made, Idaho 10 Power again requested that the FERC accept a revised 11 weighted average approach for the real-time transfer price 12 (Docket No. ER02-768-000). 13 In this second request for acceptance of the 14 weighted average approach, Idaho Power explained the 15 benefits of the weighted average pricing. These benefits 16 include first, an assurance that market anomalies in other 17 regions do not impact prices to Idaho Power because of the 18 use of transactions only within a relevant regional market; 19 second, Idaho Power has the benefit of all available 20 relevant market information by using of both sales and 21 purchases, and third, weighting by volume eliminates the 22 ability of IE to fix prices to Idaho Power by use of small 23 GALE, DI 5 Idaho Power Company volume transactions. With the weighted average approach, 1 both Idaho Power and IE receive the same market driven 2 prices. The FERC on March 13, 2002 submitted a letter 3 order to counsel for Idaho Power Company indicating that 4 the company’s filing had not provided sufficient evidence 5 that the revised weighted average pricing methodology was 6 acceptable as a market index. 7 Q. What method was used to reprice the real-8 time transactions from July 2001 until March 2002? 9 A. The weighted average of all IE transactions 10 (both purchases and sales) with an intertie point within 11 Idaho Power’s control area. This was the original real-12 time transfer price method filed with all three 13 commissions – Idaho, Oregon, and the FERC. The company 14 continues to believe that this method is an appropriate 15 proxy for the market for real-time transactions. 16 Q. What is the result of the repricing? 17 A. The net result is a $5.5 million cost 18 reduction on a system basis and a corresponding $4,306,636 19 cost reduction to the Idaho jurisdiction after sharing and 20 an interest component have been applied. A table showing 21 the calculation of the adjustment is Exhibit No. 7 entitled 22 Idaho PCA Real time Pricing Adjustments. 23 GALE, DI 6 Idaho Power Company Q. What does the company plan to do about this 1 situation? 2 A. It is essential that Idaho Power 3 expeditiously implement a single transfer pricing 4 methodology for real-time transactions that is fair to our 5 customers, the company, and IE. The weighted average 6 pricing methodology proposed in Docket No. ER02-768-000 7 meets those criteria. What is unknown at this point is 8 whether the FERC simply needs more information from Idaho 9 Power to convince them that the methodology proposed by the 10 company is sufficiently “reliable and verifiable” or if 11 they are unwilling to accept any market price index that is 12 not proposed and published by a third party such as the Dow 13 Jones Mid-C Index they originally accepted for the day-14 ahead transfer pricing. The March 13, 2002 letter order 15 Idaho Power received denying the company’s request did not 16 provide much guidance. The company intends to meet with 17 the FERC Staff one more time to see if it can obtain a firm 18 commitment from them one way or the other. Without such 19 commitment, it may be prudent for Idaho Power and the 20 Commission to re-assess the continued viability of the 21 company’s relationship with IDACORP Energy. 22 Securitization 23 GALE, DI 7 Idaho Power Company Q. What do you mean by the term 1 “securitization”? 2 A. Securitization is the issuance of bonds 3 under a special Idaho statutory process to finance specific 4 costs – in this instance previously incurred expenses 5 currently being deferred in the company’s PCA accounts. 6 Q. Have utilities used this type of 7 securitization in the past to finance specific unique 8 costs? 9 A. Yes. Puget Sound Energy and Portland 10 General Electric issued bonds to finance their DSM 11 programs. Also California, Montana, Michigan, Texas, New 12 Jersey, Pennsylvania, Vermont, and New Hampshire utilities 13 have used bonds to finance utility stranded costs or reduce 14 rates under special statutory provisions as part of their 15 restructuring plans. 16 Q. Has the Idaho State Legislature enabled 17 utility companies to use this process to finance high 18 wholesale energy costs during unusual circumstances? 19 A. Yes, the Idaho State Legislature enacted 20 Title 61, Chapter 15 in its 2001 legislative session. This 21 legislation allows Idaho public utilities to issue bonds to 22 finance extraordinarily high PCA costs. 23 GALE, DI 8 Idaho Power Company Q. What were the circumstances surrounding the 1 passage of this legislation? 2 A. At the time the Idaho legislation was 3 enacted, the western United States in general and Idaho in 4 particular was embroiled in an energy crisis stemming from 5 high wholesale energy market prices and a drought in the 6 northwest. Most electric utilities, including Idaho Power, 7 were impacted severely. The intent of the legislation was 8 to provide utilities and the Idaho Public Utilities 9 Commission a tool to use as a financing option for 10 unusually high PCA costs. 11 Q. Why does Idaho Power maintain that the time 12 is ripe to utilize the securitization financing tool? 13 A. The western energy crisis has passed due to 14 a variety of supply and demand factors. After months of 15 taking a public position to the contrary, the FERC 16 initiated wholesale price mitigation in the West in June 17 2001. Additional supply was brought on to meet the energy 18 crisis including the company’s Evander Andrews Plant 19 outside Mountain Home, Idaho. Demand for energy dropped 20 for a number of reasons – response to price increases, 21 recession, load reduction programs, and increased consumer 22 conservation. As a result, wholesale prices have returned 23 GALE, DI 9 Idaho Power Company to pre-crisis levels. Hydroelectric generating conditions 1 have improved dramatically following last year’s drought 2 conditions even though they are still below historical 3 normal levels. 4 The Company has planned to meet its expected 5 deficiencies through the next PCA cycle and, as a result of 6 the crisis, has implemented improved risk management 7 techniques. Idaho Power, as well as the West, has learned 8 from the energy crisis and is in much better shape today to 9 manage the next energy situation. 10 At this time, there is only one year of 11 extraordinary high costs remaining to be recovered through 12 rates. Spreading the recovery of a portion of these costs 13 over a number of years offers an opportunity to reduce 14 rates immediately and finance those costs at favorable 15 interest rates. 16 Q. What is Idaho Power’s securitization plan? 17 A. The company proposes to finance 18 approximately $172 million through a bond issuance. Idaho 19 Power’s retail customers would pay the bonds back over a 20 planned three-year period through an itemized charge on 21 their bill. By statute the charge would be based on energy 22 consumed – a charge per kilowatt-hour. The charge would be 23 GALE, DI 10 Idaho Power Company reflected in Schedule 57, Energy Cost Bond Charge, which is 1 Exhibit No. 8. The $172 million represents three primary 2 components: (1) $147 million of Idaho Power’s PCA costs 3 associated with voluntary load reductions for irrigation 4 customers and for Astaris LLC, (2) $18 million of the 5 remaining uncollected expenses associated with the October 6 1, 2001 PCA rate increase, and (3) up to $7 million in 7 estimated overhead costs of putting the financing together. 8 Q. Why did the company decide to securitize the 9 program costs? 10 A. The program costs are unique, provided for 11 specifically by Commission orders, easily audited and 12 verified, and already the subject of a Commission 13 proceeding. These costs are atypical of the company’s 14 usual means of providing resources to meet loads. It is 15 highly unlikely that these programs will be offered again 16 in the foreseeable future. The programs were implemented 17 as the result of specific proceedings resulting in specific 18 Commission orders. Commission Order No. 28699 approved the 19 irrigation load reduction program and Commission Order No. 20 28695 approved the Voluntary Load Reduction Agreement with 21 Astaris. Also, the costs of both programs are currently 22 the subject matter of an existing docket, Case No. IPC-E-23 GALE, DI 11 Idaho Power Company 01-34, which seeks a determination on the specific amount 1 of cost recovery for these programs. Finally, the Staff 2 had already audited the bulk of these transactions at the 3 time Idaho Power submitted its application to the 4 Commission in this instant proceeding, thus facilitating an 5 expedited process. 6 Q. Why include the residual piece of the 7 October 1, 2001 rate increase? 8 A. Including the remaining costs will further 9 levelize rates, particularly for the irrigation customer 10 class and the summer residential load. Also, these costs 11 have already been approved for recovery by the Commission 12 in Order No. 28852. They do not need additional validation 13 or audit before being included in the amount to be 14 securitized. 15 Q. What are the financing costs? 16 A. They are the costs of putting the bond 17 issuance together. They include assorted fees required to 18 issue the bonds such as underwriting, special outside legal 19 counsel, registration, rating agency, and other 20 administrative costs. Idaho Power has initially estimated 21 these costs to be no more than $7 million. At this time 22 the current total estimate for these costs is expected to 23 GALE, DI 12 Idaho Power Company be closer to $5.3 million. Of this, an additional $1.7 1 million can be avoided should the Commission decide to 2 direct the company to self-fund the capital required to 3 establish the special purpose entity discussed later. 4 Q. What is the expected interest rate for the 5 proposed bonds? 6 A. At this time, the company anticipates the 7 bonds will carry a 4.5% interest rate – the best bond rate 8 that can be obtained. 9 Q. Can Idaho Power issue bonds for this 10 interest rate? 11 A. No, it is only as a result of the 12 legislation that allows securitization, and thus a 13 favorable interest rate. 14 Q. Is there a prescribed public interest 15 standard to guide the Commission in its deliberations 16 concerning the issuance of energy cost recovery bonds? 17 A. Yes. The legal standard is set forth in 18 Title 61, Chapter 15, Idaho Code § 61-1503 (1). This 19 standard is discussed in Idaho Power Company’s Legal 20 Principles Applicable to Energy Cost Bonding/Securitization 21 that have been filed as part of this proceeding. 22 GALE, DI 13 Idaho Power Company Q. In the event the Commission determines that 1 it is in the public interest to authorize the issuance of 2 energy cost recovery bonds, could you briefly describe the 3 process for issuing the bonds? 4 A. Once the Commission order has been issued 5 authorizing the approval of the sale of bonds, a special 6 purpose financing entity (“SPE”) is created. The SPE then 7 acquires the energy cost property, which in this case is 8 the $147 million of voluntary load reduction programs and 9 the estimated remaining amounts to be collected on the 10 October 1, 2001 PCA in the sum of $18 million. The SPE 11 then issues bonds, and Idaho Power Company then “sells” the 12 energy cost property to the SPE. An energy cost bond 13 recovery charge is then instituted to repay the SPE. The 14 exact structure of the proposed securitization is set forth 15 in Exhibit No. 9, the proposed order, specifically pages 19 16 through 21. 17 Q. What did the company consider when 18 evaluating the amount to be securitized? 19 A. The company considered several things 20 including: (1) an amount sufficient enough to warrant 21 issuing bonds from an economic perspective, (2) the desired 22 GALE, DI 14 Idaho Power Company rate recovery period, and (3) the ease of Commission audit 1 and validation. 2 Q. Why did the company consider a minimum 3 amount to be securitized? 4 A. The amount to securitize is primarily an 5 economic consideration. Many of the overheads involved in 6 issuing bonds are fixed and so as the total amount to 7 securitize increases, the overhead is spread over more 8 dollars thus reducing the impact of the overall financing 9 rate (fees plus interest). 10 Q. Why is the company proposing a three-year 11 rate to pay back the bonds? 12 A. The company desires to limit the exposure to 13 the possibility of having another unusually high PCA 14 increase occur before this one is paid off and believes 15 this is a desire of the Commission as well. The Statute 16 provides for even a longer period of time to recover the 17 securitized amount through rates. Obviously a longer plan, 18 such as five years, would provide for an even greater first 19 year rate reduction. 20 Q. Why is the ease of audit and expense 21 validation a consideration in determining the amount to be 22 securitized? 23 GALE, DI 15 Idaho Power Company A. The timing of an energy-related bond 1 issuance is quite compressed. Idaho Power sought to 2 include expenses that could be quickly audited, verified, 3 and authorized for cost recovery by the Commission. 4 Q. What is the approximate annual percentage 5 rate (or net effective rate) for financing the deferred 6 costs when both the overhead fees and interest are 7 considered under the company’s proposal? 8 A. The annual percentage rate would range from 9 5.9% to 7.3% depending on what the ultimate financing fees 10 are. 11 Q. For comparison purposes, what is the 12 company’s overall rate of return from its last general rate 13 case in Idaho? 14 A. The overall rate of return granted in IPC-E-15 94-5 was 9.2%. This represents the composite cost 16 structure (debt, equity, and preferred stock) the company 17 relies on to finance its capital items. 18 Q. How might the authorization of 19 securitization impact this year's PCA? 20 A. If the issuance of bonds is approved, the 21 deferred expense account balance would decrease by 22 146,864,392. This would change the true-up portion of this 23 GALE, DI 16 Idaho Power Company year's PCA rate from 1.6903 to 0.5785 cents per kilowatt-1 hour. The 0.5785 cents per kilowatt-hour is calculated by 2 dividing the adjusted deferred expense account balance of 3 $76,422,335 by the 2000 normalized Idaho jurisdictional 4 firm sales 13,209,552 MWHs. The effective rate would be 5 the combination of the updated true-up portion of the PCA 6 of 0.5785 cents per kilowatt-hour and the projected power 7 cost portion of the PCA of 0.2156 cents per kilowatt-hour, 8 and the estimated securitization rate of 0.5600 cents per 9 kilowatt-hour, totaling an effective rate adder of 1.3541 10 cents per kilowatt-hour above base rates. This amount 11 would be 0.3700 cents per kilowatt-hour less then the 12 existing PCA rate of 1.7241 cents per kilowatt-hour which 13 include both the increase approved in April of 2001 and the 14 increase approved in October of 2001. 15 Carrying Costs of PCA 16 Q. What has the Commission authorized as the 17 carrying charge on the true-up deferral balance? 18 A. The Commission has authorized an interest 19 rate equal to the amount provided on customer deposits – 20 currently 4% -- as the carrying charge on the true-up 21 balance. The Commission has not made a determination on 22 GALE, DI 17 Idaho Power Company the appropriate carrying charge if balances are ordered to 1 be carried for longer time periods. 2 Q. Does Idaho Power have any recommendations 3 regarding the carrying costs applied to the PCA on a going 4 forward basis? 5 A. Yes. First, I recommend changing the 6 interest rate applied to the deferral balances to the 7 company’s overall rate of return of 9.2% on a prospective 8 basis beginning June 1, 2002. The change is important 9 because the deferral balances are much greater than ever 10 anticipated (and thus the interest needs to be more 11 reflective of true carrying costs), the symmetry of 12 outcomes originally envisioned by the PCA has been 13 disrupted by the energy crisis, and the company’s overall 14 rate of return provides a more appropriate cost of 15 financing to compare against other methods – specifically 16 the company’s securitization proposal this year. 17 Q. Would your interest rate change continue to 18 apply to both positive and negative PCA deferral balances? 19 A. Yes. 20 Q. How would your proposal impact the 2002/2003 21 PCA recovery alternatives? 22 GALE, DI 18 Idaho Power Company A. It would have a neutral impact to either a 1 full one-year recovery or the company’s securitization 2 plan. Since at this time, no one knows how next year’s 3 actuals will compare to the forecast, the higher interest 4 could impact rates in either direction. However, the 5 change in the interest rate would impact any alternative 6 that would require Idaho Power to continue to finance 7 deferred PCA expenses for more than the upcoming year. 8 Absent a realistic carrying charge on deferred balances, a 9 PCA decision could be made based upon mathematics, but not 10 economics. 11 Q. Do you support the interest rate change for 12 the long-term? 13 A. Yes. I recommend that the interest rate be 14 set at the company’s Idaho overall rate of return and that 15 the interest rate change with each new Commission 16 determination where capital costs and the overall rate of 17 return are reviewed. 18 Q. Is there any additional PCA result related 19 to interest that you would like to call to the Commission’s 20 attention? 21 A. Yes. As I stated before, the original PCA 22 anticipated symmetry of outcomes both in the forecasted 23 GALE, DI 19 Idaho Power Company amounts and in the true-ups. Also, the true-up amounts 1 were not anticipated to grow to the level they did during 2 the energy crisis. Under these assumptions, stopping the 3 accrual of interest on the deferral balances once new PCA 4 rates were implemented each spring was not a major 5 consequence. However, when balances reach one hundred 6 million dollars or more, the impact of carrying those 7 balances (at any legitimate interest rate) is material. 8 For example, the interest on the $47.7 million in case Nos. 9 IPC-E-01-07 and IPC-E-01-11 for seven months at 4% interest 10 amounted to $1,191,628. 11 Accordingly, although the company does not 12 have a methodological fix for this issue, Idaho Power asks 13 the Commission to value these carrying costs in the 14 recovery alternatives it considers. Even at 4% interest a 15 one-year PCA recovery of $252 million will cost $5.5 16 million to carry the debt and keeping today’s rate levels 17 constant at $217 million would cost $4.7 million. The 18 current PCA methodology does not recognize these costs 19 although they are a very real cost to the company. 20 Q. Are there any other financial implications 21 of the company financing the deferrals itself? 22 GALE, DI 20 Idaho Power Company A. Besides inadequate interest on continued 1 deferrals, and cessation of interest on deferrals placed 2 into rates, Idaho Power’s financial ratios are worse under 3 a company-financing model than under the bond proposal 4 because the rating agencies exclude bond financings in 5 their ratio analyses. These ratios can and do impact the 6 company’s overall financing costs. Finally, and obviously, 7 the company’s cash flow situation is greatly improved under 8 the bond proposal. 9 Implementation of New Rates 10 Q. What are the considerations involved in 11 implementing the new PCA rate coincidently with a bond 12 charge? 13 A. Absent a Commission-ordered departure from 14 past procedures, the PCA implementation date is May 16. 15 The bonds cannot actually be sold until a securitization 16 commission order for this proceeding becomes final. Given 17 the schedule for this proceeding, it is impossible to have 18 a final order before May 16, but it is a distinct 19 possibility that the initial order will be issued. The 20 overlap period dated from May 16 appears to be about 16 21 days if everything proceeds normally. 22 GALE, DI 21 Idaho Power Company Q. Do you believe it is important to have a 1 simultaneous PCA and bond rate change? 2 A. Yes. All parties should seek to have one 3 net adjustment this spring rather than two differently 4 timed rate adjustments going in opposite directions. 5 Q. What is the company’s proposal for handling 6 this situation? 7 A. Ideally, the current PCA would remain in 8 place until both the bond charge and the new PCA rate could 9 be implemented together on or about June 1, 2002. This 10 approach raises two issues that can be addressed, - over-11 collection under the current PCA and the impact on the 12 irrigation class. Should the implementation date be 13 extended to June 1, 2002, there would be 16 days of over-14 collection that can easily be identified and applied to 15 next year’s true-up. Based upon the company’s request, the 16 amount over-collected between May 16, 2002 and June 1, 2002 17 would be very small. The issue related to the irrigation 18 class concerns the fact that irrigation loads are seasonal 19 and that they will be disproportionally impacted by the 20 extra days at the higher rate. On the other hand, under 21 the company’s plan, the irrigators will avoid most of their 22 costs related to the October 1, 2001 rate change because 23 GALE, DI 22 Idaho Power Company those amounts are proposed to be securitized. Considering 1 the short time period that rates would need to be extended 2 and the offsetting rate impact to irrigators by 3 securitizing the October 1, 2001 amount, Idaho Power 4 supports a June 1 combined rate implementation. 5 Q. If the Commission does not desire to move 6 the May 16 date to June 1, is there another approach that 7 can address all the requirements of the PCA and the bond 8 issuance? 9 A. Yes. Based upon the Commission’s initial 10 order in the two instant dockets, the company can file 11 tariffs that would implement rates on May 16, 2002, that 12 would be reflective of the combined new PCA charge and the 13 bond charge. The purpose would be to change rates to the 14 new levels on May 16 even though the bond charge would not 15 be known precisely until the bonds were actually priced and 16 sold after a final Commission order. Once the bonds have 17 been issued, the company would submit new tariffs including 18 the final PCA charge, Schedule 55, and the final energy 19 cost bond charge, Schedule 57. Because the SPE cannot be 20 funded until the bonds have been sold, there will be a 21 short timing mismatch in the PCA that can be accounted for 22 in next year’s true-up. 23 GALE, DI 23 Idaho Power Company Residential Rate Design 1 Q. Does Idaho Power recommend the current 2 residential three-tiered rate structure be eliminated? 3 A. Yes. 4 Q. What does Idaho Power recommend be 5 implemented in place of the three-tiered rate structure? 6 A. Idaho Power recommends that a flat rate for 7 all kilowatt-hours of energy consumption be implemented for 8 residential customers on May 16 coincident with the 9 implementation of new PCA rates. 10 Q. Why is Idaho Power making this 11 recommendation? 12 A. Energy is a commodity, which is bought and 13 sold in the marketplace much like other commodities. Idaho 14 Power purchases hundreds of thousands of kilowatt-hours in 15 the marketplace each year. Purchases are made to meet the 16 load requirements of our customers on a system basis. 17 Specific purchases to meet the load requirements of 18 individual customer groups are not made and, therefore, it 19 is impossible to identify costs as being caused by certain 20 customers. For example, Idaho Power does not transact 21 specific purchases to meet the load requirements of only 22 residential space heat customers or the load requirements 23 GALE, DI 24 Idaho Power Company of only industrial food processors. Rather, purchases are 1 made to supply the energy needs for the system as a whole. 2 While the price paid for each purchase will vary depending 3 on when and where the purchase is made, the price paid for 4 the energy included in the purchase will be the same for 5 each kilowatt-hour regardless of what end-use will 6 ultimately consume the energy. That is, the price Idaho 7 Power pays for energy does not depend on whether the energy 8 ultimately is consumed by industrial, irrigation, 9 commercial, electric space heat, or small residential 10 customers. In order for the PCA component of customers’ 11 rates to be reflective of the cost of the energy commodity, 12 and the nature in which the commodity is purchased, the PCA 13 should be uniform for all customers and all customer 14 classes. 15 Q. Are there differences between the various 16 customer classes that should be taken into account when 17 setting the PCA component? 18 A. While load factors and line losses vary 19 between customers and customer classes, the costs 20 associated with these differences are factored into the 21 base energy and, where applicable, demand charges. The PCA 22 is intended to recover, or refund, the variable component 23 GALE, DI 25 Idaho Power Company of power supply expenses. To provide a clear price signal 1 on this variable component of energy, the PCA should be 2 established as a flat, uniform charge. 3 Q. Has the company’s pricing of energy in its 4 service schedules historically reflected a flat commodity 5 price? 6 A. Yes. With the exception of last year’s 7 residential rate, the company’s energy rates for all of its 8 service schedules have been flat, since the early 1980s, 9 meaning the price for all kilowatt-hours consumed by 10 customers within the class is the same. 11 Q. Why has the company continued to support a 12 flat energy rate for all kilowatt-hours of consumption? 13 A. As I have already stated, energy is a 14 commodity. As such, the energy charge should reflect only 15 energy related costs. It has been, and continues to be, a 16 Company goal to establish charges that are reflective of 17 the true cost of providing service. To the extent that the 18 energy charge is designed to recover only energy related 19 costs, there is no cost basis for establishing variable 20 energy prices based solely on quantity of consumption 21 within customer classes. 22 GALE, DI 26 Idaho Power Company Q. Is the PCA proceeding the appropriate time 1 to make major rate design changes? 2 A. No. The PCA was designed to be a flow-3 through rate mechanism that could be processed under an 4 expedited time frame. Major rate design changes should be 5 performed in the context of a general rate case or a 6 separate proceeding like was done for Schedule 19 service 7 in Case No. IPC-E-92-7. 8 Q. Has the PCA mechanism historically reflected 9 a uniform, flat commodity price? 10 A. Yes. When the PCA was initially approved 11 through Commission Order No. 24806, an equal cents per 12 kilowatt-hour charge for all customer classes was adopted 13 as a “cost-based, logical, and equitable method of 14 allocating power supply costs” (Order No. 24806, p. 19) to 15 customers. A flat, uniform PCA rate was approved by the 16 Commission each year since the PCA was adopted in 1993, 17 until the Commission ordered the implementation of a tiered 18 PCA rate for residential customers with the 2001 PCA. 19 Q. Are there other reasons why Idaho Power is 20 recommending a flat PCA charge be implemented? 21 A. Yes. In addition to the company’s belief 22 that the PCA should reflect the commodity price associated 23 GALE, DI 27 Idaho Power Company with variable power supply expense, Idaho Power is 1 recommending a flat PCA charge for residential customers be 2 implemented for a number of other reasons. First, Idaho 3 Power believes that the current three-tiered rate structure 4 unfairly penalizes customers who utilize electric energy 5 for space heating and air conditioning and provides an 6 incorrect price signal for customers who use less than 800 7 kilowatt-hours per billing cycle. Second, the three-tiered 8 rate structure exacerbates the existing residential intra-9 class subsidy. And third, the three-tiered rate structure 10 results in our customers’ perception that meter reading 11 intervals longer than 30 days are unfair. 12 Q. How does the three-tiered rate structure 13 unfairly penalize residential customers who utilize 14 electric energy for space hearing? 15 A. Commission Order No. 28722, which directed 16 the three-tiered rate structure for residential customers 17 to be implemented, indicated that the tiered structure was 18 intended to give a stronger conservation signal to those 19 customers who utilize electric space heat. Although some 20 customers with electric space heat may have the ability to 21 conserve some energy without endangering their health by 22 lowering their thermostats, they do not necessarily have 23 GALE, DI 28 Idaho Power Company more ability to conserve electricity than do other 1 customers who use other fuel sources for space heating. 2 Idaho Power strongly believes that the three-tiered rates 3 place an onus on customers with electric space heat that is 4 disproportionate to the customers’ ability to conserve. In 5 essence, the three-tiered rate structure simply causes 6 customers with electric space heat, many of whom do not 7 have an alternative form of space heating available, to pay 8 significantly higher bills while customers with other forms 9 of space heat receive an artificially low price signal. 10 Q. How does the three-tiered rate structure 11 provide an artificially low price signal to customers who 12 use less than 800 kilowatt-hours? 13 A. The three-tiered rate structure implies that 14 the energy consumed by high-use customers is more valuable 15 than the energy consumed by low-use customers and, 16 therefore, provides more emphasis on energy conservation by 17 high-use customers than by low-use customers. However, 18 since energy is a commodity, Idaho Power believes that all 19 customers should receive the same price signal to conserve 20 energy. A flat energy rate for all kilowatt-hours of 21 consumption provides a truer cost-based price signal than 22 do the tiered rates and effectively conveys to all 23 GALE, DI 29 Idaho Power Company customers that each kilowatt-hour of energy that is 1 conserved has value without placing the onus for 2 conservation on electric space heat customers or other 3 customers with usage greater than 800 kilowatt-hours. 4 Q. Please explain why there is a subsidy within 5 the residential class. 6 A. Although the $2.51 customer charge for 7 residential service recovers a small portion of the fixed 8 costs associated with providing service, under the 9 company’s current rate design, the majority of the fixed 10 costs are recovered through the energy rate. Since the 11 energy rate is the means for recovery of the majority of 12 the fixed costs associated with providing service, 13 customers who consume little energy contribute less towards 14 the recovery of fixed costs than the actual fixed costs 15 required to provide them service. Conversely, customers 16 with high energy consumption contribute more towards the 17 recovery of fixed costs than the actual fixed costs 18 required to provide them service. 19 Q. How does the three-tier rate structure 20 exacerbate the existing subsidy? 21 A. The three-tiered rate structure was created 22 by apportioning a larger amount of the PCA-related costs to 23 GALE, DI 30 Idaho Power Company each of the three tiers. As such, proportionally more 1 power supply-related costs are recovered from kilowatt-2 hours as usage is billed in the second and third tiers. 3 Thus, customers with high-energy consumption contribute 4 more towards the recovery of PCA-related costs on a per 5 kilowatt-hour basis than do customers with low energy 6 consumption. 7 Q. Please explain how this intra-class subsidy 8 can be removed. 9 A. The fixed cost related intra-class subsidy 10 can be removed by establishing a customer charge that fully 11 recovers the fixed costs associated with providing service. 12 Once a “full cost” customer charge is established, the 13 energy charge recovers only energy related costs. 14 Consequently, the full cost to provide service is recovered 15 from each customer regardless of the amount of energy 16 consumed. The PCA-related intra-class subsidy can be 17 removed by establishing a flat energy rate for all 18 kilowatt-hours consumed. 19 Q. How does the three-tiered rate structure 20 impact Idaho Power’s operations? 21 A. Idaho Power establishes its meter reading 22 schedules to maximize efficiency and minimize costs while 23 GALE, DI 31 Idaho Power Company attempting to read meters as close to every 30 days as is 1 possible taking into account weekends and holidays. In 2 setting the meter reading schedules, it is necessary at 3 times to establish billing cycles with as many as 31, 32, 4 or, occasionally, 33 days. With a flat energy rate, 5 customers are not affected by the number of days in their 6 billing cycle as each kilowatt-hour of energy consumed is 7 charged the same. However, with tiered rates, the number 8 of days in a billing cycle can impact the customers’ bills 9 if usage is greater than 800 kWh or greater than 2000 kWh. 10 Customers have expressed their dissatisfaction with the 11 effect the company’s standard practice concerning meter 12 reading intervals has on their bills when combined with 13 tiered rates. As our service territory experiences growth, 14 Idaho Power periodically needs to make changes to its meter 15 reading routes to balance the number of meters read each 16 day and thus maximize personnel time. When routes are 17 revised, the first billing cycle is typically either 18 somewhat shorter or somewhat longer than the standard cycle 19 in order to assimilate the regrouped meter reading routes 20 into the company’s billing sequence. Because of the impact 21 the tiered-rates have on customers’ bills when the billing 22 cycle is longer than 30 days, Idaho Power has postponed 23 GALE, DI 32 Idaho Power Company revamping our meter reading routes to minimize the negative 1 impact to our customers. However, the result has been a 2 decrease in the efficient utilization of the company’s 3 personnel. The three-tier rate structure also creates a 4 customer perception problem when meter readings are 5 estimated because estimated kilowatt-hours may have a 6 billing impact under the tiered approach that would not 7 occur under flat rates. 8 Q. If the Commission decides to return to a 9 flat rate design for residential customers, will there be 10 customers who are disadvantaged by the change from tiered 11 rates? 12 A. Yes. The customers who will be 13 disadvantaged will be the same customers who were 14 advantaged by last year’s rate design change. On the 15 opposite end, those customers who suffered the most under 16 the tiered rate system will get the most relief. The 17 effect, however, will be dampened to all customers under a 18 rate moderation plan such as the company’s bond proposal. 19 GALE, DI 33 Idaho Power Company DSM Initiatives 1 Q. What is the company’s position on Demand-2 Side Management (“DSM”) funding? 3 A. Stable and predictable conservation DSM 4 funding can help preserve continuity in the support and 5 promotion of energy efficiency programs. Idaho Power has 6 maintained that if the Commission desires to implement 7 long-term DSM programming then a sustaining funding 8 mechanism must be approved prior to the effective 9 deployment of a DSM program. In compliance with Commission 10 Order No. 28722, Idaho Power proposed that its Energy 11 Efficiency Program filed July 31, 2001 be funded through an 12 Energy Efficiency Rider should the Commission decide that 13 utility-sponsored DSM efforts are good public policy. 14 As filed, the Energy Efficiency Program 15 promotes the efficient use of electrical energy by 16 providing Idaho Power customers with access to information, 17 products and financing to assist them in making energy 18 efficient decisions and investments. The Program is 19 consistent with Idaho Power’s conservation philosophy; that 20 is to provide meaningful levels of conservation programming 21 while avoiding rate impact concerns by customers. 22 GALE, DI 34 Idaho Power Company The company also supports the Energy 1 Efficiency Rider concept because it allows for the 2 implementation of proven efficiency measures without adding 3 to Idaho Power’s already significant DSM deferred balance 4 of approximately $27 million for past DSM programs. The 5 deferring of expenses associated with DSM programming is 6 not sustaining, has proven to be unsatisfactory in 7 practice, and compounds the ultimate cost to customers. 8 Accordingly, should the Commission desire 9 further funding of conservation programs, a tariff rider 10 that provides for the recovery of energy efficiency program 11 expenses on an ongoing basis is the appropriate mechanism. 12 Q. Has the company pursued any DSM programming 13 since its initial compliance filing? 14 A. In response to the company’s compliance 15 filing, the Commission postponed consideration of the 16 Energy Efficiency Rider and the Energy Efficiency Program 17 issued in Order No. 28894. The order directed Idaho Power 18 to implement limited demand-side management programs for 19 the 2001-2002 winter heating season as well as organize the 20 Idaho Power Energy Efficiency Advisory Group. The company 21 provided compact fluorescent lights to residential 22 customers, distributed informational packets to targeted 23 GALE, DI 35 Idaho Power Company customers, expanded the availability of the “Home Energy 1 Audit” program, enhanced it’s funding to the Low Income 2 Weatherization program, created a charter for the Energy 3 Advisory Group, identified and invited participants, and 4 convened the first meeting of the Energy Efficiency 5 Advisory Group for April 30, 2002. These activities were 6 undertaken in addition to Idaho Power’s ongoing 7 participation in the Northwest Energy Efficiency Alliance 8 (“NEEA”) and the Low Income Weatherization Assistance 9 (“LIWA”). In 2001, Idaho Power spent over $2 million in 10 energy efficiency related activities. 11 Q. How much funding for DSM programming does 12 Idaho Power currently collect from its customers as part of 13 Commission approved rates? 14 A. All funding for DSM activity has been 15 stripped from the company’s revenue requirement in prior 16 Commission proceedings except for NEEA and LIWA 17 commitments. In 1997, Commission Order No. 27660 stated 18 that the amount of DSM expense to be embedded in the 19 company’s rates be set at $212,534. The supplemental 20 monetary outlays that the company has made to support 21 additional efficiency activities have been expensed 22 directly without a corresponding rate adjustment. The NEEA 23 GALE, DI 36 Idaho Power Company activities are funded with revenue sharing amount the 1 company set aside with Commission approval. 2 Q. What is the status of Idaho Power’s Energy 3 Efficiency Program application? 4 A. The Commission has indicated its intent to 5 revisit funding of Idaho Power’s Energy Efficiency Program 6 in the company’s PCA application for the May 16, 2002 7 through May 15, 2003 period. Idaho Power awaits an orderly 8 determination by the Commission that should resolve the two 9 critical issues regarding the appropriate funding for 10 conservation measures via the Energy Efficiency Rider and 11 the creation of successful and effective DSM programs under 12 the Energy Efficiency Program. 13 Q. Does this complete your testimony? 14 A. Yes 15 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION Case No. IPC-E-02-2/3 Idaho Power Company FERC Compliance Letter Exhibit No. 6 J. Gale BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION Case No. IPC-E-02-2/3 Idaho Power Company Power Cost Adjustment Pricing Adjustment Exhibit No. 7 J. Gale BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION Case No. IPC-E-02-2/3 Idaho Power Company Schedule 57 Energy Cost Bond Charge Exhibit No. 8 J. Gale IDAHO POWER COMPANY I.P.U.C. NO. 26, TARIFF NO. 101 ORIGINAL SHEET NO. 57-1 IDAHO Issued by IDAHO POWER COMPANY Issued – John R. Gale, Vice President, Regulatory Affairs Effective – 1221 West Idaho Street, Boise, Idaho SCHEDULE 57 ENERGY COST BOND CHARGE APPLICABILITY This schedule is applicable to the electric energy billed to all retail Customers throughout the Company’s service area within the State of Idaho, including the first block portion of the FMC/Astaris special contract, the energy billed to other retail Customers taking service under special contract, and, on and after July 21, 2002, the energy billed to the existing and future retail Customers located within the Prairie Service Area. This schedule sets out the rates, terms and conditions under which an Energy Cost Bond Charge shall be billed and collected by the Company, a successor Servicer, or any third party that may assume the responsibility for billing or collecting such charge on behalf of the owner of the Energy Cost Property pursuant to the terms of the Financing Order and the Servicing Agreement. DEFINITIONS For the purposes of this schedule the following terms shall have the following meanings: Energy Cost Bond Charge is a non-bypassable charge, expressed in cents per kWh, applied to each Customer’s billed energy on a monthly basis. The monthly Energy Cost Bond Charge will be separately stated on the Customer’s regular bill. Energy Cost Property is the property created by the Financing Order pursuant to Title 61, Idaho Code, Chapter 15. Energy Cost Recovery Bonds are the debt securities issued by the Special Purpose Entity pursuant to Title 61, Idaho Code, Chapter 15 and the Financing Order, together with any additional such securities issued pursuant to Title 61, Idaho Code, Chapter 15 and any subsequent energy cost financing orders issued pursuant to Title 61, Idaho Code, Chapter 15. Financing Order is the energy cost financing order issued by the Commission pursuant to Title 61, Idaho Code, Chapter 15, Order No. ____________. Servicer is the entity responsible for, among other things, billing and collecting the Energy Cost Bond Charge. Servicing Agreement is the agreement, dated ______________, 2002, between the Company, as Servicer, and the Special Purpose Entity, as from time to time in effect. Special Purpose Entity is the owner of Energy Cost Property, on behalf of which the Energy Cost Bond Charge is collected. DETERMINATION OF ENERGY COST BOND CHARGE The Energy Cost Bond Charge shall be adjusted no less frequently than annually in order to ensure that expected Energy Cost Bond Charge collections are sufficient to pay, on a timely basis, the principal of and interest on all Energy Cost Recovery Bonds and all other energy cost amounts approved in the Financing Order. The Energy Cost Bond Charge for a period is determined by dividing (a) the amount necessary to pay, on a timely basis, the principal of and interest on the Energy Cost Recovery Bonds and IDAHO POWER COMPANY I.P.U.C. NO. 26, TARIFF NO. 101 ORIGINAL SHEET NO. 57-2 IDAHO Issued by IDAHO POWER COMPANY Issued – John R. Gale, Vice President, Regulatory Affairs Effective – 1221 West Idaho Street, Boise, Idaho SCHEDULE 57 ENERGY COST BOND CHARGE (Continued) DETERMINATION OF ENERGY COST BOND CHARGE (Continued) all other approved projected energy cost amounts for the period (giving effect to lags between billing and collection and allowing for uncollectibles) by (b) the projected kilowatt-hours of retail energy to be billed for the period. ENERGY COST BOND CHARGE The Energy Cost Bond Charge is ________¢ per kWh for each billed kWh. PAYMENT The billing and payment of the Energy Cost Bond Charge shall be on terms identical to the billing and payment provisions of the service schedule or special contract under which the Customer is taking service. EXPIRATION This schedule shall remain in effect until the Energy Cost Bond Charge collections have been made and remitted to the Special Purpose Entity in an amount sufficient to satisfy all obligations of the Special Purpose Entity in regard to paying the principal of and interest on the Energy Cost Bonds together with all other energy cost amounts whose recovery through the Energy Cost Bond Charge is authorized in the Financing Order, as provided in Title 61, Idaho Code, Chapter 15. This schedule is irrevocable and non- bypassable for the full term during which it applies. LEGAL PRINCIPLES APPLICABLE TO ENERGY COST BONDING/SECURITIZATION, Page 1 LARRY D. RIPLEY ISB #965 Idaho Power Company P. O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-2674 FAX Telephone: (208) 388-6936 Attorney for Idaho Power Company Street Address for Express Mail: 1221 West Idaho Street Boise, Idaho 83702 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) CASE NO. IPC-E-02-02 OF IDAHO POWER COMPANY FOR AN ) ENERGY COST FINANCING ORDER AND ) LEGAL PRINCIPLES AUTHORITY TO INSTITUTE AN ENERGY ) APPLICABLE TO ENERGY COST BOND CHARGE. ) COST BONDING/ ) SECURITIZATION Idaho Power Company, by and through its counsel, Larry D. Ripley, Senior Attorney, herewith submits its position concerning certain legal principles applicable to the Company’s Application for an energy cost financing order and authority to institute an energy cost recovery charge. The Minimum Threshold Under the Securitization Act, a public utility seeking to recover energy cost amounts (as defined in Idaho Code § 61-1502(5)) through an issuance of energy cost recovery bonds must first establish a "trigger" amount. The amount, expressed in cents/kWh for an electric utility, becomes the utility's threshold for issuing energy cost recovery bonds (as explained below). The utility initiates the process by filing a proposed trigger amount with the Commission. The Commission then approves or disapproves the LEGAL PRINCIPLES APPLICABLE TO ENERGY COST BONDING/SECURITIZATION, Page 2 proposed amount. The amount established through this procedure is referred to as the "Minimum Threshold." Once the Minimum Threshold is established for a public utility, the Commission may not issue an energy cost financing order in favor of that utility unless the sum of three amounts (each expressed in cents/kWh for an electric utility) exceeds the Minimum Threshold. In the case of a public utility whose underlying adjustment charge is a PCA charge, the three amounts are: (a) the utility's then-existing PCA charge; (b) any then-existing energy cost bond charge already in place (i.e., 0 for a first-time issuer); and (c) the amount the utility identifies, in its application for an energy cost financing order, as the additional PCA that would be required absent the proposed issuance of energy cost recovery bonds. The Public Interest Standard The Securitization Act contemplates the Commission determining that a securitization is in the public interest before deciding to authorize a securitization. Specifically, a public utility whose underlying adjustment charge is a PCA to issue energy cost recovery bonds may issue energy cost recovery bonds if the Commission determines that the public interest would be better served by: (a) the utility's recovery of the utility's energy cost amounts, including the PCA amounts it proposes to securitize, through the issuance of energy cost recovery bonds over the term of those bonds rather than by: (b) the utility's recovery of those PCA amounts over a one (1) year period assuming a conventional financing of those amounts. Amortization and Legal Maturities Under the Securitization Act, energy cost recovery bonds must have an expected maturity date not later than five (5) years after the date of issuance. In addition, to the extent practicable, the bonds must be scheduled to repay principal in approximately equal amounts over their term. LEGAL PRINCIPLES APPLICABLE TO ENERGY COST BONDING/SECURITIZATION, Page 3 The energy cost recovery bondholders will receive an amortization schedule indicating the payments of principal expected to be made on each interest payment date. The last scheduled principal payment must occur within the five (5) year limit. In addition, to the extent practicable, the schedule will provide for payments in equal amounts over the term of the bonds. The energy cost bond charge is to be set and periodically adjusted with the aim of making principal payments in accordance with the amortization schedule. However, a bond would not be in default if payments are not made in accordance with its amortization schedule. A default occurs only if payment in full is not made on the bond before its legal maturity date. The legal maturity date is generally later than the last scheduled principal amortization date. Under the Securitization Act, energy cost recovery bonds must reach legal maturity no later than seven (7) years after they are issued or two (2) years after scheduled amortization. Dated at Boise, Idaho, this 15th day of April, 2002. /s/ LARRY D. RIPLEY Attorney for Idaho Power Company CERTIFICATE OF SERVICE CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 15th day of April, 2002, I served a true and correct copy of the above and foregoing LEGAL PRINCIPLES APPLICABLE TO ENERGY COST BONDING/SECURITIZATION upon the following named parties by the method indicated below, and addressed to the following: Lisa D. Nordstrom x Hand Delivered Deputy Attorney General U.S. Mail Idaho Public Utilities Commission Overnight Mail 472 W. Washington Street FAX P.O. Box 83720 Boise, Idaho 83720-0074 R. Scott Pasley Hand Delivered Assistant General Counsel x U.S. Mail J.R. Simplot Company Overnight Mail 999 Main Street FAX P.O. Box 27 Boise, Idaho 83702 Peter J. Richardson Hand Delivered Richardson & O’Leary, PLLC x U.S. Mail 99 East State Street, Suite 200 Overnight Mail P.O. Box 1849 FAX Eagle, Idaho 83616 William M. Eddie Hand Delivered Land and Water Fund of the Rockies x U.S. Mail P.O. Box 1612 Overnight Mail Boise, Idaho 83701 FAX /s/ ______________________________________ LARRY D. RIPLEY SUBMISSION OF PROPOSED ORDER, Page 1 LARRY D. RIPLEY ISB #965 Idaho Power Company P. O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-2674 FAX Telephone: (208) 388-6936 Attorney for Idaho Power Company Street Address for Express Mail: 1221 West Idaho Street Boise, Idaho 83702 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF IDAHO POWER COMPANY FOR AN ) CASE NO. IPC-E-02-02 ENERGY COST FINANCING ORDER AND ) AUTHORITY TO INSTITUTE AN ENERGY ) SUBMISSION OF PROPOSED COST BOND CHARGE. ) ORDER ) Idaho Power Company (“the Company”) herewith submits a proposed Order to assist the Commission in its deliberations concerning the technical legal requirements which must be addressed in a Commission Order in the event that the Commission determines that it will authorize the issuance of energy cost recovery bonds and the institution of an energy cost bond charge. The proposed Order was attached to the Company’s Application in this proceeding, but for purposes of the record, the Company submits the proposed Order including Appendices A, B, and C, as Exhibit 9. SUBMISSION OF PROPOSED ORDER, Page 2 Respectfully submitted this 15th day of April, 2002. /s/ LARRY D. RIPLEY Attorney for Idaho Power Company CERTIFICATE OF SERVICE CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 15th day of April, 2002, I served a true and correct copy of the above and foregoing SUBMISSION OF PROPOSED ORDER upon the following named parties by the method indicated below, and addressed to the following: Lisa D. Nordstrom x Hand Delivered Deputy Attorney General U.S. Mail Idaho Public Utilities Commission Overnight Mail 472 W. Washington Street FAX P.O. Box 83720 Boise, Idaho 83720-0074 R. Scott Pasley Hand Delivered Assistant General Counsel x U.S. Mail J.R. Simplot Company Overnight Mail 999 Main Street FAX P.O. Box 27 Boise, Idaho 83702 Peter J. Richardson Hand Delivered Richardson & O’Leary, PLLC x U.S. Mail 99 East State Street, Suite 200 Overnight Mail P.O. Box 1849 FAX Eagle, Idaho 83616 William M. Eddie Hand Delivered Land and Water Fund of the Rockies x U.S. Mail P.O. Box 1612 Overnight Mail Boise, Idaho 83701 FAX /s/ ______________________________________ LARRY D. RIPLEY BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION Case No. IPC-E-02-2 Idaho Power Company Proposed Order Exhibit No. 9 L. Ripley Exhibit A BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY FOR AN ENERGY COST FINANCING ORDER AND AUTHORITY TO INSTITUTE AN ENERGY COST BOND CHARGE ) ) ) ) ) ) ) CASE NO. ______ PROPOSED ORDER PROPOSED ORDER - 2 ENERGY COST FINANCING ORDER TABLE OF CONTENTS I. DISCUSSION AND STATUTORY OVERVIEW ............................................................5 II. DESCRIPTION OF PROPOSED TRANSACTION........................................................11 III. FINDINGS OF FACT.......................................................................................................13 A. IDENTIFICATION AND PROCEDURE................................................................13 B. ENERGY COST AMOUNTS TO BE SECURITIZED ...........................................14 C. STRUCTURE OF THE PROPOSED SECURITIZATION.....................................19 D. USE OF PROCEEDS ...............................................................................................34 IV. CONCLUSIONS OF LAW ..............................................................................................35 V. ORDERING PARAGRAPHS ..........................................................................................45 A. ENERGY COST BOND CHARGES .......................................................................46 B. ENERGY COST RECOVERY BONDS ..................................................................48 C. SERVICING .............................................................................................................50 D. STRUCTURE OF THE SECURITIZATION ..........................................................52 E. USE OF PROCEEDS ...............................................................................................52 F. MISCELLANEOUS PROVISIONS.........................................................................52 APPENDIX A ECBC Rate Tariff APPENDIX B Form of Issuance Notice Filing APPENDIX C Applicant Illustration of Estimated Energy Cost Bond Charges PROPOSED ORDER - 3 ENERGY COST FINANCING ORDER The matter is before the Idaho Public Utilities Commission (the "Commission") upon the Application of Idaho Power Company (the "Applicant"), filed March __, 2002 under Title 61, Idaho Code, Chapter 15, for an energy cost financing order authorizing: (a) the issuance and sale of up to $172,000,000 principal amount of energy cost recovery bonds (the "Energy Cost Recovery Bonds ") to recover the following energy cost amounts (the "Energy Cost Amounts"): (i) previously authorized costs to be recovered as power cost adjustments ("PCA"s) in the approximate amount of $147,000,000, (ii) additional PCAs in the approximate amount of $18,000,000 and (iii) estimated costs related to the issuance of the Energy Cost Recovery Bonds in the approximate amount of $7,000,000; (b) the imposition and collection of a non-bypassable, usage-based energy cost bond charge (the "ECBC"); (c) the methodology for the calculation and adjustment of the ECBC; (d) the sale and/or assignment to a special purpose financing entity (the "SPE") of energy cost property (the "Energy Cost Property") embodying the right to charge, collect and receive the ECBC; (e) the Applicant's entering into a servicing agreement with the SPE providing for the servicing of the Energy Cost Property; and (f) such other transactions, described herein, as are necessary or desirable in connection with the issuance of the Energy Cost Recovery Bonds. This Energy Cost Financing Order addresses the application of the Applicant for an energy cost financing order instituting the ECBC and providing the other aforementioned authorizations. As discussed in this Energy Cost Financing Order, the Commission finds that the public interest will be better served if the Energy Cost Amounts, including those that would otherwise be reflected in a PCA adjustment, are recovered (i) through the issuance of the Energy PROPOSED ORDER - 4 Cost Recovery Bonds over the term of such bonds instead of (ii) over a one (1) year period assuming a conventional financing of such amounts, as is required under Title 61, Idaho Code, Chapter 15 (the "Act"). The Commission finds as well that the securitization approved in this Energy Cost Financing Order meets all other applicable requirements of the Act, and finds that the Applicant's application for such an order should be approved. Accordingly, the Commission approves the securitization of the Energy Cost Amounts on the basis specified in this Energy Cost Financing Order, and authorizes, subject to the terms of this Energy Cost Financing Order, the issuance of the Energy Cost Recovery Bonds, in a principal amount not to exceed $172,000,000; approves the ECBC in an amount to be calculated as provided in this Energy Cost Financing Order; approves the structure of the proposed securitization financing as described in this Energy Cost Financing Order; and approves the form of the Applicant's proposed ECBC rate tariff, annexed hereto as Appendix A (the "ECBC Rate Tariff"), to implement the ECBC. The Applicant has provided a description of the proposed transaction structure in its application. The proposed transaction structure does not contain every relevant detail and in certain places uses only approximations of certain costs and requirements. The final structure will depend in part upon the requirements of the nationally recognized credit rating agencies that will rate the Energy Cost Recovery Bonds and in part upon the market conditions that exist at the time the Energy Cost Recovery Bonds are taken to the market. While the Commission recognizes the need for some degree of flexibility with regard to the final details of the securitization transactions approved in this Energy Cost Financing Order, the Commission has determined that, provided the Energy Cost Recovery Bonds are issued, and PROPOSED ORDER - 5 the ECBC is imposed, in conformity with this Energy Cost Financing Order, the requirements of the Act shall have been met. Such conformity will be established through the Applicant's filing with the Commission an issuance notice filing, in the form annexed hereto as Appendix B (the "Issuance Notice Filing"), such filing to be made on the day on which the structure and pricing terms of the Energy Cost Recovery Bonds are finally determined, or on the next succeeding business day. I. DISCUSSION AND STATUTORY OVERVIEW The State of Idaho has seen an increase in the need for replacement power to the point where "rate shock" has become a concern within the State of Idaho. Such concerns led to the enactment of the Act as Idaho Senate Bill No. 1255, Title 61, Idaho Code, Chapter 15, which was signed into law on April 10, 2001. The legislative intent of the Act is to "provide a process by which the recovery of large energy cost increases through fuel or power cost adjustments … will be facilitated by the issuance of bonds" and to "provide public utilities with a mechanism for recovery of their increased costs while leveling the rate impact of the increase on the public utility's customers."1 The Act authorizes the Commission to issue "energy cost financing orders" in favor of a public utility, pursuant to which "energy cost property" can be created and "energy cost recovery bonds" secured by such property can be issued by an electric or gas public utility and sold to investors to finance "energy cost amounts." Energy cost amounts include costs within various categories listed in the Act, including an electric utility's PCAs, the costs of issuing, supporting and servicing energy cost recovery bonds, the costs of retiring and refunding the utility's existing debt and equity securities in connection with the issuance and sale of energy cost recovery bonds 1 Statement of Purpose RS11252C2. PROPOSED ORDER - 6 and taxes related to the recovery of the "energy cost bond charge," of which the ECBC proposed by the Applicant is an instance. The energy cost bond charge is the mechanism established in the Act for recovering energy cost amounts, including debt service on energy cost recovery bonds. The Act authorizes the imposition and collection of an energy cost bond charge on the bills of a utility's Idaho retail customers. In this instance, the ECBC will be collected by the Applicant or by another Servicer pursuant to a servicing agreement with the SPE, as provided by this Energy Cost Financing Order. The Act requires an energy cost bond charge to be non-bypassable, which means that retail consumers of electricity within a utility's service territory who use the utility's transmission and distribution system will be required to pay the charge even if they elect to purchase electric supply from a third party supplier. Although Idaho does not presently allow for third party suppliers, the Applicant has proposed that the Commission take certain action to ensure the collectibility of the ECBC if the State of Idaho should in the future authorize any third party billing or collection of charges that include the ECBC. This Energy Cost Financing Order contains terms designed to help ensure that the ECBC remains non-bypassable in such circumstance, which will in turn minimize the risk that the SPE would receive insufficient ECBC collections from customers paying to third party suppliers and have to compensate for this shortfall by increasing the amount of the ECBC payable by customers generally. Under the Act, energy cost recovery bonds must have an expected maturity date no later than five (5) years after issuance and a legal maturity date no later than seven (7) years after issuance, and scheduled principal payments must be made, to the extent practicable, in PROPOSED ORDER - 7 approximately equal amounts during each year of the term of the bonds. The Applicant expects the amortization schedule for the Energy Cost Recovery Bonds to provide for the bonds' retirement in full approximately three years after issuance, allowing for final legal maturities up to two years after the expected maturities of the respective classes. In accordance with Chapter 61, Idaho Code, Section 1503(2), scheduled principal payments on the bonds will, to the extent practicable, be in approximately equal amounts during each year of the term of such bonds. The Act provides for the creation of energy cost property by the issuance of an energy cost financing order. Under the Act, an energy cost financing order becomes irrevocable and binding upon the Commission once energy cost recovery bonds are issued based on the order, and the Commission does not have authority to revalue or revise energy cost amounts while such bonds remain outstanding except pursuant to the true-up mechanism described below. Energy cost property constitutes property for all purposes, including for contracts securing energy cost recovery bonds, whether or not the revenues and proceeds arising with respect thereto have accrued. The interest of an assignee or pledgee in energy cost property and in the revenues and collections arising from such property are not subject to set-off, counterclaim, surcharge or defense by the Applicant or any other person or in connection with the bankruptcy of the relevant public utility or any other person. Further, the issuance of energy cost recovery bonds, any related transfer or pledge of energy cost property, and any other transactions incidental to the issuance are exempt from Title 61, Idaho Code, Sections 901 through 908, and to the extent the provisions of Title 61, Idaho Code, Section 1505 conflict with those of Title 28, Idaho Code, Chapter 9, the creation, granting, perfection and enforcement of liens and security interests in energy cost property are governed by the former and not the latter. PROPOSED ORDER - 8 The Act, Chapter 61, Idaho Code, Sections 1505 and 1506, establishes procedures for providing that the sale, assignment or other transfer of energy cost property from a public utility to an assignee will be perfected under Idaho law and that a security interest granted in such energy cost property will be perfected under Idaho law. Chapter 61, Idaho Code, Sections 1505 provides that a transfer by the public utility or an assignee of energy cost property will be treated as a sale or other absolute transfer of all of the transferor's right, title and interest, as in a true sale, and not as a pledge or other financing secured by the energy cost property, if the parties expressly state in governing documents that the transfer is to be a sale or other absolute transfer. Under the Act, Chapter 61, Idaho Code, Section 1502(8), the right of a utility in energy cost property before the transfer of such property or any other rights created under the Act or in an energy cost financing order constitutes only a contract right but such rights, upon their transfer, constitute a current and irrevocably vested property right and do so notwithstanding the fact that the value of such property right will depend upon consumers using electricity and/or the Applicant performing certain services. As authorized by Title 61, Idaho Code, Section 1505(6), the Commission shall by this Energy Cost Financing Order require that, in the event of default by the Applicant in payment of revenues arising with respect to the Energy Cost Property, the Commission or any successor agency shall, on application by the SPE or a transferee of the Energy Cost Property, order the sequestration and payment to such party of revenues arising with respect to the Energy Cost Property. The Act authorizes the Commission to issue energy cost financing orders in favor of a utility only if the sum of (i) any PCAs then in effect, (ii) any energy cost bond charge then in PROPOSED ORDER - 9 effect and (iii) the amount (identified by the utility in an application to the Commission) by which the PCA would need to be increased absent an issuance of energy cost recovery bonds (such sum, the "Pro Forma Charge"), would exceed a minimum threshold amount previously approved by the Commission and in effect at the time of issuance of such energy cost financing order (the "Minimum Threshold"). On May 25, 2001, in Case IPC-E-01-19, the Applicant filed with the Commission an application to set the Minimum Threshold. On June 29, 2001, the Commission, in Order No. 28761, approved a Minimum Threshold of one (1) cent per kWh. In its application, the Applicant asserted that the Pro Forma Charge that would be payable in the absence of the securitization hereby proposed would exceed the Minimum Threshold, and the Commission agrees with this determination. The Act provides for the issuance of an energy cost financing order authorizing the recovery of energy cost amounts through an issuance of energy cost recovery bonds if the Commission finds that the public interest would be better served if a public utility's energy cost amounts, including those that would be reflected in a PCA, are recovered (i) through the issuance of energy cost recovery bonds over the term of those bonds instead of (ii) over a one (1) year period assuming a conventional financing of those amounts (the "Public Interest Standard"). The Commission has determined that this standard is met by the Energy Cost Recovery Bonds. The precise interest rate at which the Energy Cost Recovery Bonds can be sold in a future market is not known today. The Energy Cost Recovery Bonds, however, are expected to amortize over approximately a three year period, are expected to receive the highest long-term debt ratings available from one or more nationally recognized rating agencies, and are expected to be able to finance virtually all of the costs to be recovered. For these reasons the issuance of the Energy Cost Recovery Bonds in lieu of a conventional one (1) year financing will PROPOSED ORDER - 10 significantly reduce the Applicant's costs of financing the Ongoing PCA Amounts (as defined below), and will spread the impact of those costs over a period of time that is of appropriate length from a public interest standpoint. As required in the Act, Chapter 61, Idaho Code, Section 1503(7), this Energy Cost Financing Order institutes a mechanism requiring that the ECBC be reviewed at least annually and that adjustments be made to the ECBC to: (a) correct any undercollections or overcollections during the period since the last such adjustment and (b) ensure the billing of the ECBC necessary to generate the collection of amounts sufficient to timely provide all payments of principal and interest and any other amounts due in connection with the Energy Cost Recovery Bonds (including ongoing fees and expenses and amounts required to be deposited in or allocated to any collection account or subaccount thereunder) during the period for which such adjusted ECBC is to be in effect. In addition to the required annual reviews, more frequent reviews will be allowed to ensure that the amount of the ECBC matches the funding requirements approved in this Energy Cost Financing Order. These provisions will not only help to ensure that the financial requirements of the proposed securitization are met but also that the amount of ECBC collections does not exceed the amount necessary to cover these requirements. To maximize the savings brought to customers through securitization, the Act, Chapter 61, Idaho Code, Section 1503(5), provides as follows: The state of Idaho does hereby pledge to and agree with the owners of energy cost property and with any energy cost recovery bondholders that neither the state nor any of its agencies, including the commission, shall (by legislative action, ballot initiative or other similar process) limit, alter, restrict or impair the energy cost amounts, the energy cost bond charge, the energy cost property, the energy cost financing orders or any rights thereunder or ownership thereof or security interest therein or in any way impair the rights PROPOSED ORDER - 11 or remedies of any energy cost recovery bondholders until the energy cost recovery bonds, including all principal, interest, premium, costs, expenses and arrearages thereon, are fully met and discharged, provided nothing contained in this chapter shall preclude such a limitation, alteration, restriction or impairment if and when adequate provision (including without limitation provision for the payment of principal and interest when due) shall be made by law for the protection of the energy cost recovery bondholders. To facilitate compliance and consistency with applicable statutory provisions, this Energy Cost Financing Order adopts the definitions in Title 61, Idaho Code, Chapter 15. II. DESCRIPTION OF PROPOSED TRANSACTION A full description of the transactions proposed by the Applicant is provided in its application and this docket. A brief summary of the proposed transactions is provided in this section and a more detailed description is included in Section III.C, "Structure of the Proposed Securitization." To facilitate the proposed securitization, the Applicant proposed that the SPE be created and that the Applicant transfer to the SPE the Energy Cost Property and the attendant rights to impose, collect and receive the ECBC along with the other rights arising pursuant to this Energy Cost Financing Order. Upon such transfer, the Energy Cost Property will become a current and irrevocably vested property right pursuant to Title 61, Idaho Code, Section 1502(8). The SPE will issue the Energy Cost Recovery Bonds and transfer the net proceeds from the sale of such bonds to the Applicant in consideration of the transfer of the Energy Cost Property. The SPE will be organized and managed in a manner to ensure that the SPE will be bankruptcy- remote from, and will not be affected by a bankruptcy of, the Applicant or any of its successors. In addition, the SPE will have at least one independent manager, trustee or director whose approval will be required for certain major actions or organizational changes by the SPE. The Energy Cost Recovery Bonds will be issued pursuant to an indenture and administered by an indenture trustee (the "Trustee"). The Energy Cost Recovery Bonds will be PROPOSED ORDER - 12 secured by and payable solely out of the Energy Cost Property and other collateral described in the Applicant's application. This collateral will be pledged to the Trustee for the benefit of the holders of the Energy Cost Recovery Bonds. The Applicant will act as the initial Servicer (in such capacity, the "Servicer") for the Energy Cost Recovery Bonds. The Servicer will collect the ECBC and remit such collections to the Trustee on behalf of the SPE. The Servicer will be responsible for making any required or allowed true-ups of the ECBC. If the Servicer defaults on its obligations under the servicing agreement, the Trustee may appoint a successor Servicer. The ECBC will be calculated to ensure the collection of an amount sufficient to service on a timely basis the principal and interest for the Energy Cost Recovery Bonds and all of the other Energy Cost Amounts. In addition to the annual true-up required by Title 61, Idaho Code, Section 1503(7), periodic true-ups may be performed as necessary to ensure that the amount collected from the ECBC is sufficient to service the Energy Cost Recovery Bonds. The Applicant requests authority to issue the Energy Cost Recovery Bonds in the original principal amount of up to $172,000,000, including therein the amount necessary to recover the energy cost amounts, including up-front and ongoing costs, described in its application and this docket. The Applicant requests approval of an energy cost bond charge in an amount sufficient to recover the principal and interest on such bonds as well as all other energy cost amounts specified in its application and in this docket. The Applicant requests that the ECBC be imposed (i) upon all of the Applicant's existing retail customers and all future retail customers located within its certificated service area as it existed on March 1, 2002 and, in addition, (ii) on and after July 21, 2002, upon all of the PROPOSED ORDER - 13 Applicant's then existing retail customers and all future retail customers located within the Prairie Service Area. III. FINDINGS OF FACT A. IDENTIFICATION AND PROCEDURE. IDENTIFICATION OF APPLICANT AND APPLICATION 1. The Applicant is an electric public utility, incorporated under the laws of the state of Idaho, engaged principally in the generation, purchase, transmission, distribution and sale of electric energy in an approximately 20,000 square-mile area in southern Idaho and eastern Oregon. 2. The Applicant's application was filed on March ___, 2002 and includes the exhibits, schedules and any further filing by or for the Applicant in this docket. PROCEDURAL HISTORY 3. On March 29, 1993, by Order No. 24806 issued in Case No. IPC-E-92-25, the Commission approved the implementation of an annual Power Cost Adjustment PCA procedure (the "PCA Mechanism") to enable the Applicant to collect, or require it to refund, 90% of the difference between net power supply costs actually incurred and those allowed in base rates. Idaho retail customer rates are adjusted annually (up or down) May to May to reflect forecasted changes in the Applicant's net power supply costs for the current PCA year and to true up any deviation between forecasted and actual costs for the previous PCA year (April to March). 4. On May 25, 2001, the Commission determined that the costs of the Irrigation Load Reduction Program (authorizing payments to certain irrigation customers that committed to PROPOSED ORDER - 14 reduce energy consumption) should be treated as a purchased power expense in the PCA Mechanism. On March 28, 2001, the Commission determined that payments for the Astaris Load Reduction Program should be treated as a purchased power expense in the PCA Mechanism. 5. On May 25, 2001, in Case IPC-E-01-19, the Applicant filed with the Commission an application to set the Minimum Threshold. On June 29, 2001, the Commission, in Order No. 28761, approved a Minimum Threshold of one (1) cent per kWh (approximately $128,000,000). 6. On March __, 2002, the Applicant filed its application for an energy cost financing order under Title 61, Idaho Code, Chapter 15, to permit securitization of certain of its energy cost amounts as described in its application. B. ENERGY COST AMOUNTS TO BE SECURITIZED MINIMUM THRESHOLD 7. The energy cost amounts whose securitization is sought include the following PCA amounts, which are either presently includible for recovery through the PCA Mechanism or whose recovery through the PCA Mechanism the Applicant would request absent a securitization (collectively, the "Ongoing PCA Amounts"): (a) approximately $82,000,000 [estimated as of March 8, 2002] of power supply costs incurred in excess of the amounts originally forecast for the 2001-2002 PCA year (excluding voluntary load reduction programs for the irrigators and Astaris); (b) approximately $15,000,000 [estimated as of March 8, 2002] of power supply costs forecasted for the 2002-2003 PCA year (excluding the aforesaid voluntary load reduction programs); (c) approximately $147,000,000 of voluntary load reduction payments to the irrigators and Astaris for the 2001-2002 PCA year; and (d) approximately $18,000,000 PROPOSED ORDER - 15 [estimated as of March 8, 2002] representing the unamortized balance, as of May 16, 2002, of the previously authorized PCA charge for the period October 1 through September 30, 2002. 8. The Ongoing PCA Amounts, absent securitization, would be includible in the 2002 PCA (which covers the PCA year from May 2002 to May 2003). In its application, the Applicant asserted, based on the Ongoing PCA Amounts (which total approximately $262,000,000) that the Pro Forma Charge that would be payable in the absence of the securitization hereby proposed would exceed the Minimum Threshold. 9. The Commission accepts the Applicant's calculation and concludes that the Minimum Threshold has been met. IDENTIFICATION AND AMOUNTS 10. Energy cost amounts are defined to mean amounts that a public utility, assignee or other issuer has been authorized to recover by the Commission pursuant to an energy cost financing order, including without limitation: (a) Amounts recoverable by a public utility pursuant to a fuel or power cost adjustment, a purchased gas adjustment tracker rate, a commodity electric or gas tracker rate adjustment, or a purchased power tracker rate; (b) Expenditures incurred to refinance or retire existing debt or existing equity capital of the public utility through the issuance of energy cost recovery bonds and any costs related thereto; (c) Amounts necessary to recover federal or state taxes actually paid by a public utility, which tax liability is modified by the transactions approved in an energy cost financing order issued by the Commission pursuant to this chapter; and (d) Reasonable costs, as approved by the Commission, relating to the issuance, servicing or refinancing of energy cost recovery bonds under the provisions of Title 61, Idaho Code, Chapter 15, including without limitation principal and interest payments and accruals, sinking fund payments, debt service and other reserves, costs of credit enhancement, indemnities, if any, owed to an assignee or other issuer or the trustee for the energy cost PROPOSED ORDER - 16 recovery bonds, issuance costs and redemption premiums, if any, and all other reasonable fees, costs and charges with respect to energy cost recovery bonds. 11. The Applicant has proposed to recover energy cost amounts consisting of the Ongoing PCAs as well as the up-front costs and ongoing costs identified in this docket. The actual costs of issuing, credit-enhancing and servicing, including third party fees and expenses, the Energy Cost Recovery Bonds will not be known until the Energy Cost Recovery Bonds are priced, and certain ongoing costs relating to the Energy Cost Recovery Bonds may not be known until such costs are incurred. 12. The Applicant has estimated the maximum amount of these costs as shown in this docket and has proposed to recover these estimated amounts as energy cost amounts through securitization pursuant to this Energy Cost Financing Order. The Applicant has proposed that, to the extent that the actual amount of any of the up-front costs incurred by the Applicant varies from the amounts securitized, the Applicant be permitted to recover any additional amounts reasonably incurred, and be required to provide a credit for any excess amounts securitized, in either case pursuant to a subsequent PCA or securitization proceeding. 13. The Applicant has proposed to use the net proceeds received from the sale of the Energy Cost Recovery Bonds for general corporate purposes. PUBLIC INTEREST SERVED BY SECURITIZATION 14. The Act provides that the Commission shall authorize the issuance of energy cost recovery bonds if it determines that the Public Interest Standard has been met. 15. The Commission has made a determination with respect to the Public Interest Standard. The precise interest rate at which the Energy Cost Recovery Bonds can be sold in a future market PROPOSED ORDER - 17 is not known today. The Energy Cost Recovery Bonds, however, are expected to amortize over approximately a three year period. The Applicant’s preliminary discussions with the rating agencies and review of comparable transactions completed on behalf of other electric utilities indicate that (a) the Energy Cost Recovery Bonds will be rated in the highest long-term rating category and (b) the Energy Cost Recovery Bonds will not be treated as debt of the Applicant for credit rating purposes. Accordingly, the recovery of amounts authorized hereby may be financed virtually entirely with Energy Cost Recovery Bonds. Therefore, the Applicant believes that the use of Energy Cost Recovery Bonds will lower the Applicant’s cost of capital as compared to other commercially reasonable financing alternatives. 16. For these reasons, the issuance of the Energy Cost Recovery Bonds satisfies the Public Interest Standard. 17. In its application, the Applicant requested authorization of an initial ECBC between 0.50 cents/kWh and 0.65 cents/kWh, it being understood that if the Commission approves a transaction of less than $172,000,000 principal amount of Energy Cost Recovery Bonds, the high and low points of the range of authorized initial ECBC levels will be reduced ratably. Such range of authorized initial ECBC levels, inclusive of the stated amounts, and taking into account such ratable reduction, is referred to in this Energy Cost Financing Order as the "Expected Range." 18. The determination that the proposed securitization satisfies the Public Interest Standard is dependent upon the assumption that the ECBC will fall within the Expected Range. To ensure that the public is served by the issuance of Energy Cost Recovery Bonds and the imposition of PROPOSED ORDER - 18 an ECBC in place of a PCA charge, the issuance of Energy Cost Recovery Bonds must be structured in a manner that conforms to this assumption. ISSUANCE NOTICE FILING 19. To ensure that the Energy Cost Recovery Bonds fall within the terms approved by this Energy Cost Financing Order, the Applicant has proposed that it be required to submit to the Commission, either on the date on which the structure and pricing of the Energy Cost Recovery Bonds are determined or on the next succeeding business day, the Issuance Notice Filing, which shall set forth the following information: (a) the principal amount of each class or tranche of Energy Cost Recovery Bonds issued; (b) the interest rates and amortization schedules for each such class or tranche; and (c) the ECBC to be put into effect immediately following the date of issuance, together with the Applicant's certification that such charge falls within the Expected Range (after giving effect to any adjustment in the Expected Range). 20. All amounts that require computation for purposes of the Issuance Notice Filing shall be computed using the methodology illustrated in the Applicant's Illustration of Estimated Energy Cost Bond Charges annexed hereto as Appendix C (the "Illustration"). 21. The completion and filing of an issuance notice filing substantially in the form of Appendix B hereto will ensure that any securitization actually undertaken by the Applicant complies with the terms of this Energy Cost Financing Order. Therefore, the Applicant's proposal should be approved. PROPOSED ORDER - 19 C. STRUCTURE OF THE PROPOSED SECURITIZATION. THE SPE 22. For purposes of the proposed securitization, the Applicant will create a special purpose entity, the SPE, which will be a Delaware limited liability company whose sole member will be the Applicant. 23. The SPE will be formed for the limited purpose of acquiring the Energy Cost Property (including any energy cost property authorized by the Commission in a subsequent financing order), issuing the Energy Cost Recovery Bonds (including any energy cost recovery bonds authorized by the Commission in a subsequent financing order), and performing other activities relating thereto or otherwise authorized by this Energy Cost Financing Order. 24. The SPE will not be permitted to engage in any other activities and will have no assets other than the Energy Cost Property (and any subsequent energy cost property) and related assets to support its obligations under the Energy Cost Recovery Bonds (and any subsequent energy cost recovery bonds). Obligations relating to the Energy Cost Recovery Bonds (and any subsequent energy cost recovery bonds) will be the SPE's only significant liabilities. These restrictions on the activities of the SPE and restrictions on the ability of Applicant to take action on the SPE's behalf are imposed to ensure that the SPE will be bankruptcy-remote, as described below, and will not be affected by a bankruptcy of Applicant. 25. The SPE will be managed by a board of managers, trustees or a board of directors with rights similar to those of boards of directors of corporations. As long as the Energy Cost Recovery Bonds remain outstanding, the SPE will have at least one manager, trustee or director who is independent, i.e., who has no affiliation with the Applicant. The SPE will not be PROPOSED ORDER - 20 permitted to amend those provisions of its organizational documents that ensure its bankruptcy- remoteness from the Applicant without the consent of the independent manager, trustee or director. Similarly, the SPE will not be permitted to institute bankruptcy or insolvency proceedings or to consent to the institution of bankruptcy or insolvency proceedings against it, or to dissolve, liquidate, consolidate, convert or merge without the consent of the independent manager, trustee or director. Other restrictions to assure bankruptcy-remoteness may also be included in the organizational documents of the SPE as indicated by the rating agencies. 26. The initial capital of the SPE will be not less than 1.0% of the initial aggregate principal balance of the Energy Cost Recovery Bonds. The initial capital of the SPE will be contributed to the SPE by the Applicant. The capitalization of the SPE must be sufficient to allow the SPE to meet any reasonably expected expenses that might arise relating to the ECBC and the Energy Cost Recovery Bonds. In addition, the SPE is expected to retain earnings on investments of its capital until all of the principal of and interest on the Energy Cost Recovery Bonds and all related expenses have been paid in full. 27. The SPE will issue the Energy Cost Recovery Bonds in an aggregate amount not to exceed the principal amount approved by this Energy Cost Financing Order and will pledge to the Trustee, as collateral for payment of the Energy Cost Recovery Bonds, the Energy Cost Property created by such order, including the SPE's right to receive ECBC collections. In addition, the SPE will pledge to the Trustee certain additional collateral described herein. 28. Concurrently with the issuance of any Energy Cost Recovery Bonds, the Applicant will transfer to the SPE all of the Applicant's rights under this Energy Cost Financing Order, including the right to impose, collect and receive the ECBC. This transfer will be structured so PROPOSED ORDER - 21 as to qualify as a "true sale" within the meaning of Title 61, Idaho Code, Section 1506(1). By virtue of such transfer, the SPE will acquire all of the right, title, and interest of the Applicant in the Energy Cost Property. 29. The use and proposed structure of the SPE and the limitations related to its organization and management are necessary to minimize risks related to the proposed securitization transactions and to minimize the ECBC. Therefore, the use and proposed structure of the SPE, as set forth in Findings of Fact Nos. 23 through 28, should be approved. OTHER CREDIT ENHANCEMENT 30. The Applicant proposes that it retain discretion to provide for various other forms of credit enhancement including letters of credit, reserve accounts, surety bonds, swap arrangements, hedging arrangements and other mechanisms designed to promote the credit quality and marketability of the Energy Cost Recovery Bonds and that the costs of any credit enhancements be included in the amount of qualified costs to be securitized. ENERGY COST PROPERTY 31. Under Title 61, Idaho Code, Section 1502(8), any right that a public utility has in energy cost property before its sale or other transfer, or any other rights created under Title 61, Idaho Code, Chapter 15 or in any energy cost financing order and assignable under Title 61, Idaho Code, Section 1504 or pursuant to an energy cost financing order shall be only a contract right but shall, upon its transfer, constitute a current and irrevocably vested property right notwithstanding the fact that the value of such property right will depend upon consumers using electricity and/or the public utility performing certain services. PROPOSED ORDER - 22 32. Energy cost property and all other collateral will be held and administered by the Trustee pursuant to an indenture, as described in the Applicant's application. This proposal will help ensure the lowest ECBC and should be approved. 33. Under Title 61, Idaho Code, Section 1505(4), energy cost property constitutes property for all purposes, including for contracts securing energy cost recovery bonds, whether or not the revenues and proceeds arising with respect thereto have accrued. SERVICER AND THE SERVICING AGREEMENT. 34. Title 61, Idaho Code, Section 1504(3) provides that, if an interest in energy cost property is sold or assigned, or is pledged as collateral, the Commission shall authorize the public utility to contract with an assignee or other issuer that it will continue to operate its system to provide service to its customers, will collect amounts with respect to energy cost bond charges for the benefit and account of the assignee or other issuer, and will account for and remit these amounts to or for the account of the assignee or other issuer. Contracting with the assignee or other issuer pursuant to this statutory provision does not impair or negate the characterization of the sale, assignment or pledge as an absolute transfer, a true sale or security interest, as applicable. 35. The Applicant will execute a servicing agreement with the SPE. This agreement may be amended, renewed or replaced by another servicing agreement. The Applicant will be the initial Servicer under the servicing agreement but may be succeeded as Servicer by another entity under certain circumstances detailed in the servicing agreement. 36. Pursuant to the servicing agreement, the Servicer is required, among other things, to impose and collect the ECBC for the benefit and account of the SPE, to make the periodic true- up adjustments to the ECBC required or allowed by this Energy Cost Financing Order, and to PROPOSED ORDER - 23 account for and remit the ECBC collections to or for the account of the SPE in accordance with the remittance procedures contained in the servicing agreement without any charge, deduction or surcharge of any kind (other than the servicing fee specified in the servicing agreement). 37. Under the terms of the servicing agreement, if any Servicer fails to fully perform its servicing obligations, the Trustee or its designee may, or upon the instruction of the requisite percentage of holders of the outstanding amount of Energy Cost Recovery Bonds shall, appoint an alternate party to replace the defaulting Servicer, in which case the replacement Servicer will perform the obligations of the Servicer under the servicing agreement. The obligations of the Servicer under the servicing agreement and the circumstances under which an alternate Servicer may be appointed will be more fully described in the servicing agreement. The rights of the SPE under the servicing agreement will be included in the collateral pledged to the Trustee for the benefit of holders of the Energy Cost Recovery Bonds. 38. The obligations to continue to provide service and to collect and account for the energy cost bond charge will be binding upon the Applicant and any other entity that provides transmission and distribution services or direct wire services to (i) the Applicant's existing retail customers and future retail customers located within the Applicant's certificated service area as it existed on March 1, 2002 or (ii) on and after July 21, 2002, the Applicant's then existing retail customers and future retail customers located within the Prairie Service Area. 39. The proposals described in Findings of Fact Nos. 34 through 38 are reasonable, will reduce risk associated with the proposed securitization and will, therefore, facilitate the lowest ECBC and the greatest benefit to customers and should be approved. PROPOSED ORDER - 24 ENERGY COST RECOVERY BONDS 40. The SPE may issue and sell the Energy Cost Recovery Bonds in one or more series and one or more classes or tranches in each series. The scheduled maturity in any series of Energy Cost Recovery Bonds will not exceed approximately three (3) years from the date of issuance of such series. The legal final maturity date of each series and class or tranche and amounts in each series will be finally determined by the Applicant, consistent with this Energy Cost Financing Order and market conditions and indications of the rating agencies at the time of issuance. The Applicant will retain sole discretion regarding whether or when to assign, sell or otherwise transfer any rights concerning Energy Cost Property arising under this Energy Cost Financing Order, or to cause the issuance of any of the Energy Cost Recovery Bonds authorized in this Energy Cost Financing Order. The Applicant may withdraw its application if it disagrees with any of the terms and conditions of this Energy Cost Financing Order or any modification thereof within fourteen (14) days of issuance of this Energy Cost Financing Order or of such modification. 41. The structure of the Energy Cost Recovery Bonds with respect to the maturities and classes or tranches of the energy cost recovery bonds is reasonable and should be approved, provided that the initial ECBC instituted in order to support payments on the Energy Cost Recovery Bonds and all related Energy Cost Amounts falls within the Expected Range. SECURITY FOR ENERGY COST RECOVERY BONDS 42. The payment of the energy cost recovery bonds authorized by this Energy Cost Financing Order is to be secured by the energy cost property created by this Energy Cost Financing Order and by certain other collateral as described in the Applicant's application. The energy cost PROPOSED ORDER - 25 recovery bonds will be issued pursuant to the indenture, which will be administered by the Trustee. The indenture will include provisions for a collection account and subaccounts for the collection and administration of the energy cost bond charge and payment or funding of the principal and interest on the energy cost recovery bonds and other costs, including fees and expenses, in connection with the energy cost recovery bonds, as described in the Applicant's application. Pursuant to the indenture, the SPE will establish a collection account as a trust account to be held by the Trustee as collateral to ensure the payment of the principal, interest, and other costs approved in this Energy Cost Financing Order related to the energy cost recovery bonds in full and on a timely basis. The collection account will include the general subaccount, the overcollateralization subaccount, the capital subaccount, and the reserve subaccount, and may include other subaccounts. A. THE GENERAL SUBACCOUNT. 43. The Trustee will deposit the ECBC collections remitted to it by the Servicer for the account of the SPE into the general subaccount. The Trustee will on a periodic basis apply moneys in the general subaccount to pay servicing expenses and other expenses of the SPE, to pay principal and interest on the Energy Cost Recovery Bonds, and to meet the funding requirements of the other subaccounts. The moneys in the general subaccount (including, to the extent necessary, investment earnings) will be applied by the Trustee to pay principal and interest on the energy cost recovery bonds and all other amounts due in accordance with the terms of the indenture. PROPOSED ORDER - 26 B. THE OVERCOLLATERALIZATION SUBACCOUNT. 44. The overcollateralization subaccount will be periodically funded from ECBC remittances over the life of the Energy Cost Recovery Bonds. The aggregate amount and timing of the actual funding will depend on tax and rating agency requirements, and is expected to be not less than 0.5% of the original principal amount of the Energy Cost Recovery Bonds. The overcollateralization subaccount will serve as collateral to ensure timely payment of principal and interest on the Energy Cost Recovery Bonds and all other amounts due. To the extent that the overcollateralization subaccount must be drawn upon to pay any of these amounts owing to a shortfall in the ECBC remittances, it will be replenished through future ECBC remittances to its required level through the true-up mechanism. The moneys in the overcollateralization subaccount (including investment earnings) will be used by the Trustee to pay principal and interest on the Energy Cost Recovery Bonds and all other amounts due on such bonds. C. THE CAPITAL SUBACCOUNT. 45. When a series of Energy Cost Recovery Bonds is issued, the Applicant will make a capital contribution to the SPE for that series. The SPE will deposit this contribution into the capital subaccount for that series. The amount of the capital contribution will not be less than 1.0% of the original principal amount of each series of Energy Cost Recovery Bonds. The initial capital of the SPE will be contributed to the SPE by the Applicant. The capital subaccount will serve as collateral to ensure timely payment of principal and interest on the Energy Cost Recovery Bonds and all other amounts due. To the extent that the capital subaccount must be drawn upon to pay these amounts due to a shortfall in the ECBC remittances, it will be replenished through future such remittances to its original level through the true-up mechanism. PROPOSED ORDER - 27 46. The moneys in the capital subaccount will be used by the Trustee to pay principal and interest on the Energy Cost Recovery Bonds and all other amounts due. Upon maturity of the Energy Cost Recovery Bonds and the discharge of all obligations payable through the ECBC, all moneys in the capital subaccount, including any investment earnings on amounts on deposit therein, will be released to the SPE for payment to the Applicant. Such investment earnings will not be released to the Applicant before such time. D. THE RESERVE SUBACCOUNT. 47. The reserve subaccount will hold any ECBC remittances and investment earnings on the collection account in excess of the amounts needed to pay current principal and interest on the Energy Cost Recovery Bonds and to pay all of the amounts due (including without limitation funding or replenishing the overcollateralization subaccount and the capital subaccount). Any balance in the reserve subaccount on a true-up adjustment date will be subtracted from the aggregate ECBC amounts otherwise required to be billed. The moneys in the reserve subaccount (including investment earnings thereon) will be used by the Trustee to pay principal and interest on the Energy Cost Recovery Bonds and all other amounts due. E. GENERAL SUBACCOUNT PROVISIONS. 48. The collection account and the subaccounts described above are intended to provide for full and timely payment of scheduled principal and interest on the Energy Cost Recovery Bonds and all other amounts due. If the amount of energy cost bond charge collections remitted to the general subaccount is insufficient to make all scheduled payments of principal and interest on the Energy Cost Recovery Bonds and to make payment on all other amounts due, the reserve PROPOSED ORDER - 28 subaccount, the overcollateralization subaccount, and the capital subaccount will be drawn down, in that order, to make those payments. 49. Any deficiency in the overcollateralization subaccount or the capital subaccount resulting from such withdrawals must be replenished first to the capital subaccount and then to the overcollateralization subaccount on a periodic basis through the true-up mechanism. In addition to the foregoing, there may be such additional accounts and subaccounts as are necessary to segregate amounts received from various sources or to be used for specified purposes. Such accounts and subaccounts will be administered and utilized as set forth in the servicing agreement and the indenture. 50. As provided in Title 61, Idaho Code, Section 1503(10), any surplus ECBC collections in excess of the amounts necessary to pay principal, premium, if any, interest, credit enhancement and all other fees, costs and charges with respect to energy cost recovery bonds will be released by the SPE to the Applicant and used to benefit the Applicant's customers in such manner as the Commission may reasonably determine except to the extent that such use would result in a recharacterization of the tax, accounting or other intended characteristics of the financing and except that amounts in the capital subaccount will be retained by the Applicant. 51. The use of a collection account and its subaccounts in the manner proposed by the Applicant is reasonable, will lower risks associated with the securitization and thus lower the costs to customers, and should, therefore, be approved. PROPOSED ORDER - 29 ENERGY COST BOND CHARGES--IMPOSITION AND COLLECTION, NON- BYPASSIBILITY 52. The Applicant seeks authorization to impose on and collect from its Idaho retail customers an energy cost bond charge in an amount sufficient to provide for the timely recovery of the Energy Cost Amounts, which are approved in this Energy Cost Financing Order (including payment of principal and interest on the Energy Cost Recovery Bonds and ongoing costs related to such bonds). 53. The energy cost bond charge will be separately identified on bills presented to retail customers. 54. If there is a shortfall in payment of an amount billed, the amount paid will, in a manner consistent with the billing and collection systems in use at the time, first, be proportioned between the ECBC and other fees and charges, other than late fees, and second, any remaining portion of the payment will be attributed to late fees. This allocation will facilitate a proper balance between the competing claims to this source of revenue in an equitable manner. 55. The Applicant will collect the ECBC from (i) all of the Applicant's existing retail customers and all future retail customers located within its certificated service area as it existed on March 1, 2002 and, in addition, (ii) on and after July 21, 2002, all of the Applicant's then existing retail customers and all future retail customers located within the Prairie Service Area. 56. The Applicant's proposal related to imposition and collection of the ECBC is reasonable and is necessary to ensure ECBC collections sufficient to support recovery of the Energy Cost Amounts, which should be approved. It is reasonable to approve the form of the ECBC Rate Tariff in this Energy Cost Financing Order and to require that a tariff substantially in the form of PROPOSED ORDER - 30 the ECBC Rate Tariff be filed before any Energy Cost Recovery Bonds are issued, such tariff to become effective upon filing. 57. The Act requires that the ECBC be non-bypassable, which means that retail consumers of electricity within a utility's service territory who use the utility's transmission and distribution system will be required to pay the charge even if they elect to purchase electric supply from a third party supplier, and this Energy Cost Financing Order shall so provide. In addition, although Idaho does not presently allow for third party suppliers, the Applicant has proposed that the Commission take certain action to ensure the collectibility of the ECBC if the State of Idaho should in the future authorize any third party billing or collection of charges that include the ECBC, this so as to minimize the risk that the SPE will receive insufficient ECBC collections from customers paying directly to third party suppliers and an increase in the ECBC payable by customers generally would be required. 58. The Applicant has further proposed that the Commission order that, if and to the extent that the State of Idaho in the future authorizes any third party to bill and collect the ECBC, such third party must (i) meet any creditworthiness criteria subsequently established by the Commission, and (ii) comply with the following billing, collection and remittance procedures and information access requirements: a) such third party must agree to remit the full amount of all ECBC amounts it bills to customers, regardless of whether payments are received from such customers, within thirty (30) days of the Servicer's bill for such charges; b) such third party must agree to provide the Servicer with total monthly kWh usage information for each customer in a timely manner to enable the Servicer to fulfill its obligations, because such information is the basis for assessing the required level of such remittances; PROPOSED ORDER - 31 c) the Servicer shall be entitled, seven (7) days after a default by such third party in remitting any ECBC amounts payable to the Servicer, to assume responsibility for billing the ECBC, or to transfer responsibility to a qualifying third party; d) if and so long as such third party does not maintain at least a "Baa2" and "BBB" (or the equivalent) long-term unsecured credit rating from Moody's Investors Service and Standard & Poor's Rating Services, respectively, such third party must maintain, with the Servicer or as directed by the Servicer, a cash deposit or comparable security equal to two (2) months' maximum estimated collections of the ECBC, as reasonably determined by the Servicer. In the event of a default in the remittance of any such amounts by any such third party, any shortfall in ECBC collections will be included in the true-up; and e) Customers will continue to be responsible for payment to the Servicer of the ECBC billed by any third party to the extent such customer has not paid the ECBC billed to it. In the event of a failure of any customer to pay the ECBC, the Applicant, as Servicer, will be authorized to direct the Applicant (or any successor provider of electric service) to shut-off power to such customer in accordance with Commission policies and procedures and any applicable laws then in effect. 59. The proposals described in Findings of Fact Nos. 52 through 58 are reasonable, will reduce risk associated with the proposed securitization and will, therefore, facilitate the obtainment of the lowest ECBC and the greatest benefit to customers and should be approved. THE TRUE-UP MECHANISM 60. Pursuant to Title 61, Idaho Code, Section 1503(7), the Servicer will apply to the Commission annually to make adjustments to the ECBC, using the methodology shown in the Illustration, to: (a) correct any undercollections or overcollections during the period since the last such adjustment and (b) ensure the billing of the ECBC necessary to generate the collection of amounts sufficient to timely provide all payments of principal and interest and any other amounts due in connection with the Energy Cost Recovery Bonds (including ongoing fees and expenses and amounts required to be deposited in or allocated to any collection account or subaccount thereunder) during the period for which such adjusted ECBC is to be in effect. PROPOSED ORDER - 32 61. The true-up of the ECBC will be based upon the Servicer’s most recent forecast of electricity sales and estimates of debt service and other transaction-related expenses. The calculation of the ECBC will also reflect both a projection of uncollectible ECBC amounts and a projection of payment lags between the billing and collection of ECBC amounts based upon the Applicant's most recent experience, taking into consideration payments of ECBC amounts. 62. The true-up adjustment filing will set forth the Servicer's calculation of the true-up adjustment to the ECBC. The Commission shall, within thirty (30) days after the date of a true- up adjustment filing, approve or disapprove the adjustment application, which review shall be limited to confirming the mathematical accuracy of the Servicer's adjustment. Any necessary corrections to the true-up adjustment that are due to mathematical errors in the calculation of such adjustment or otherwise will be made in future true-up adjustment filings. 63. Title 61, Idaho Code, Section 1503(7) authorizes the Commission to: (a) specify in an energy cost financing order that adjustments will be made to the energy cost bond charge more frequently than annually; (b) provide for adjustments to an energy cost bond charge at more frequent intervals than those initially specified in its energy cost financing order; and (c) authorize a change in the method for calculating an energy cost bond charge from that which was initially specified in its energy cost financing order so as to better ensure the timely recovery of all energy cost amounts. 64. The true-up mechanism proposed by the Applicant is reasonable and will reduce risks related to the Energy Cost Recovery Bonds resulting in a lower ECBC and greater benefits to customers and should be approved. PROPOSED ORDER - 33 TRANSACTION STRUCTURE AND AMOUNT OF ENERGY COST BOND CHARGE 65. The Applicant has proposed a transaction structure that includes (but is not limited to): (a) the use of a special purpose entity as issuer of energy cost recovery bonds, limiting the risks to bond holders of any adverse impact resulting from a bankruptcy proceeding of its parent or any affiliate; (b) the right to impose and collect an energy cost bond charge that is non-bypassable and that must be trued up at least annually, but may be trued up more frequently under certain circumstances, in order to assure the timely payment of the debt service and other ongoing transaction costs; (c) additional collateral in the form of a collection account that will include a capital subaccount of not less than 1.0% of the initial principal amount of the energy cost recovery bonds (plus investment earnings on amounts in such subacccount) and an overcollateralization subaccount that builds up over time to equal not less than an additional 0.5% of the initial principal amount of the energy cost recovery bonds, and other subaccounts, resulting in greater certainty of payment of interest and principal to investors and that are consistent with the requirements of the Internal Revenue Service that are needed to receive the desired federal income tax treatment for the energy cost recovery bond transaction; (d) protection of bondholders against potential defaults by a Servicer that is responsible for billing and collecting the energy cost bond charge from existing or future retail customers; PROPOSED ORDER - 34 (e) benefits for federal income tax purposes including that: (a) the issuance of this Energy Cost Financing Order and the sale of the Energy Cost Property to the SPE will not result in gross income to the Applicant, (b) the issuance of the Energy Cost Recovery Bonds and the transfer of the net proceeds thereof to the Applicant will not result in gross income to the Applicant, (c) the Energy Cost Recovery Bonds will be debt obligations of the Applicant; and (f) the energy cost recovery bonds will be marketed using proven underwriting and marketing processes, through which market conditions and investors' preferences, with regard to the timing of the issuance, the terms and conditions, related maturities, type of interest (fixed or variable) and other aspects of the structuring and pricing will be determined, evaluated and factored into the structuring and pricing of the energy cost recovery bonds. 66. The Applicant's proposed transaction structure, as implemented by this Energy Cost Financing Order, is necessary to enable the Energy Cost Recovery Bonds to obtain the highest possible bond credit rating, to ensure that the structuring and pricing of the Energy Cost Recovery Bonds should result in the lowest ECBC consistent with market conditions and this Energy Cost Financing Order and to ensure the greatest benefit to customers consistent with market conditions. D. USE OF PROCEEDS 67. Upon the issuance of the Energy Cost Recovery Bonds, the SPE will use the net proceeds from the sale of the Energy Cost Recovery Bonds (after payment of transaction costs) to pay to the Applicant the purchase price of the Energy Cost Property. PROPOSED ORDER - 35 68. Upon receipt of the net proceeds from the sale of the Energy Cost Recovery Bonds (after payment of transaction costs), the Applicant shall use such net proceeds for general corporate purposes. IV. CONCLUSIONS OF LAW 1. The Applicant is an electric public utility under the laws of the state of Idaho, engaged principally in the generation, purchase, transmission, distribution and sale of electric energy in an approximately 20,000 square-mile area in southern Idaho and eastern Oregon. 2. The Applicant has met the Minimum Threshold and is entitled to file an application for an Energy Cost Financing Order under Title 61, Idaho Code, Chapter 15. 3. The Commission has jurisdiction and authority over the Applicant's application pursuant to Title 61, Idaho Code, Chapter 15. 4. The Commission has authority to approve this Energy Cost Financing Order under Title 61, Idaho Code, Chapter 15. 5. The Applicant's application does not constitute a major rate proceeding as defined by RP 122. 6. Only the retail portion of energy cost amounts may be recovered through an energy cost bond charge assessed against retail customers. 7. The SPE shall be an "assignee" as defined in Title 61, Idaho Code, Section 1502(1) when all or a portion of the Energy Cost Property is transferred, other than as security, to the SPE. PROPOSED ORDER - 36 8. The holders of the Energy Cost Recovery Bonds and the Trustee shall each be an "energy cost recovery bondholder" as defined in Title 61, Idaho Code, Section 1502(10). 9. The Applicant may authorize the SPE to issue the Energy Cost Recovery Bonds, and the SPE may issue the Energy Cost Recovery Bonds in accordance with this Energy Cost Financing Order. 10. The securitization approved in this Energy Cost Financing Order satisfies the Public Interest Standard. 11. The securitization approved in this Energy Cost Financing Order satisfies the requirement of Title 61, Idaho Code, Section 1503 that energy cost recovery bonds be sold to recover ECA amounts and other energy cost amounts. 12. The securitization approved in this Energy Cost Financing Order satisfies the requirement of Title 61, Idaho Code, Section 1503(1) that the public interest would be better served if the Energy Cost Amounts are recovered through the issuance of energy cost recovery bonds over the term of such bonds as opposed to the recovery of the related ECA amounts (as defined in Title 61, Idaho Code, Section 1502(4)) over a period of one (1) year, assuming a conventional financing of such ECA amounts. 13. The methodology approved in this Energy Cost Financing Order to true up the ECBC satisfies the requirements of Title 61, Idaho Code, Section 1503(7). 14. As provided in Title 61, Idaho Code, Section 1503(5), this Energy Cost Financing Order and the Energy Cost Amounts and ECBC determined herein shall be irrevocable and binding upon the Commission, and the Commission shall not have authority either by rescinding, altering PROPOSED ORDER - 37 or amending this Energy Cost Financing Order or otherwise to, either directly or indirectly, revalue or revise for ratemaking purposes the Energy Cost Amounts. Once the Commission has determined the ECBC, it cannot determine in a later proceeding that the ECBC is unjust or unreasonable or in any way reduce or impair the value of the Energy Cost Property either directly or indirectly by taking the ECBC into account when setting other rates for the Applicant; nor shall the amount of revenues arising with respect thereto be subject to reduction, impairment, postponement or termination, except pursuant to the true-up mechanism. 15. As provided in Title 61, Idaho Code, Sections 1504(4), any requirement under Title 61, Idaho Code, Chapter 15 or this Energy Cost Financing Order that the Commission take action with respect to the subject matter of this Energy Cost Financing Order shall be binding upon the Commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the Commission. The Commission shall have no authority to rescind, alter or amend any such requirement under Title 61, Idaho Code, Chapter 15 or this Energy Cost Financing Order, except pursuant to the true-up mechanism. 16. As provided in Title 61, Idaho Code, Sections 1501(8) and 1504, the rights and interests of the Applicant or its successor under this Energy Cost Financing Order, including the right to impose, collect and receive the ECBC, shall be assignable and shall become a current and irrevocably vested property right upon their transfer to the SPE. 17. The Energy Cost Property shall constitute property for all purposes, including for contracts securing the Energy Cost Recovery Bonds, whether or not the revenues and proceeds arising with respect thereto have accrued, as provided by Title 61, Idaho Code, Section 1505(4). PROPOSED ORDER - 38 18. Upon the transfer by the Applicant of the Energy Cost Property to the SPE in accordance with this Energy Cost Financing Order, the SPE shall have all of the rights of the Applicant with respect to the Energy Cost Property. 19. Any payment of the ECBC by a retail customer shall discharge the retail customer's obligations in respect of such charge but shall not discharge the obligations of the Servicer (or third party recipient, if any, of such payment) to remit such payment to the Trustee or the Servicer, as the case may be. 20. As provided in Title 61, Idaho Code, Section 1506(4), the interest of an assignee or pledgee in the Energy Cost Property and in the revenues and collections arising from such property shall not be subject to set-off, counterclaim, surcharge or defense by the Applicant or any other person, or in connection with the bankruptcy of the Applicant or any other person. 21. If and when the Applicant transfers to the SPE the right to impose, collect, and receive the ECBC and to issue the Energy Cost Recovery Bonds, the Servicer shall be entitled to recover the ECBC associated with the Energy Cost Property only for the benefit of the SPE and the energy cost recovery bondholders in accordance with the servicing agreement. 22. If and when the Applicant transfers its rights in a securitization transaction approved in this Energy Cost Financing Order to the SPE pursuant to documentation that expressly states such transfer to be a sale or other absolute transfer, as contemplated in Title 61, Idaho Code, Section 1506(1), then, pursuant to such statutory provision, the Applicant's transfer shall be a true sale of an interest in the Energy Cost Property and not a secured transaction or other financing arrangement and title, legal and equitable, shall pass to the SPE, and such true sale PROPOSED ORDER - 39 treatment shall apply notwithstanding any contrary treatment for federal and state income and franchise taxes, accounting or other purposes. 23. As provided in Title 61, Idaho Code, Section 1505, a valid and enforceable lien and security interest in the energy cost property in favor of the holders of the energy cost recovery bonds (or the Trustee on their behalf) shall be created by this Energy Cost Financing Order and the execution and delivery of a security agreement with the holders of the energy cost recovery bonds (or the Trustee on their behalf) in connection with the issuance of the Energy Cost Recovery Bonds. The lien and security interest shall attach from the time that value is given by the pledgees of the Energy Cost Property and, on perfection through the filing of a financing statement in accordance with Title 28, Idaho Code, Chapter 9, shall be a continuously perfected security interest in all revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. As provided in Title 61, Idaho Code, Section 1505(3), any financing statement so filed shall remain in effect until a termination statement is filed. 24. As provided in Title 61, Idaho Code, Section 1505(5), subject to the terms of the security agreement covering the Energy Cost Property and the rights of any third parties holding security interests therein perfected in the manner described in such statutory provision, the validity and relative priority of a security interest created under such statutory provision shall not be defeated or adversely affected by the commingling of revenues arising with respect to the Energy Cost Property with other funds of the Applicant, or by any security interest in a deposit account of the Applicant perfected under Title 28, Idaho Code, Chapter 9, into which the revenues are deposited. Subject to the terms of such security agreement, the pledgees of the Energy Cost Property shall have a perfected security interest in all cash and deposit accounts of the Applicant PROPOSED ORDER - 40 in which revenues arising with respect to the Energy Cost Property have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the revenues with respect to the Energy Cost Property received by the Applicant within twelve (12) months before: (a) any default under the security agreement, or (b) the institution of insolvency proceedings by or against the Applicant, less payments from the revenues to the pledgees during such twelve (12) month period. 25. As provided in Title 61, Idaho Code, Section 1505(6), if an event of default occurs under the security agreement covering the Energy Cost Property, the pledgees of the Energy Cost Property, subject to the terms of such security agreement, shall have all rights and remedies of secured parties upon default under Title 28, Idaho Code, Chapter 9, and shall be entitled to foreclose or otherwise enforce their security interest in the Energy Cost Property, subject to the rights of any third parties holding prior security interests in the Energy Cost Property perfected in the manner provided in such statutory provision. In addition, pursuant to Title 61, Idaho Code, Section 1505(6), the Commission shall require in this Energy Cost Financing Order that, in the event of a default by the Applicant in the payment of revenues arising with respect to the Energy Cost Property, the Commission and any successor to the Commission, upon application by the SPE or any subsequent pledgees or transferees of the Energy Cost Property, and without limiting any other remedies available to such persons by reason of such default, shall order the sequestration and payment to the pledgees or transferees of revenues arising with respect to the Energy Cost Property. As provided in Title 61, Idaho Code, Section 1505(6), this Energy Cost Financing Order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the Applicant or any other pledgor or transferor of the Energy Cost Property. PROPOSED ORDER - 41 26. As provided in Title 61, Idaho Code, Section 1505(9), upon the effective date of this Energy Cost Financing Order, there shall exist a statutory lien on all of the Energy Cost Property then existing or thereafter arising pursuant to the terms of this Energy Cost Financing Order. Such lien shall be a first priority lien and shall arise by operation of Title 61, Idaho Code, Section 1505(9) automatically without any action on the part of the Applicant, the SPE or any other person, and shall secure all obligations, then existing or subsequently arising, to the Trustee and to the holders of the Energy Cost Recovery Bonds issued pursuant to this Energy Cost Financing Order. The persons for whose benefit such lien is established shall, upon the occurrence of any event of default under the indenture between the SPE and the Trustee, have all rights and remedies of a secured party upon default under Title 28, Idaho Code, Chapter 9, and shall be entitled to foreclose or otherwise enforce such statutory lien in the Energy Cost Property. Such lien shall attach to the Energy Cost Property regardless of who shall own, or shall subsequently be determined to own, such property including the Applicant, the SPE or any other person. Such lien shall be valid, perfected, and enforceable against the owner of the Energy Cost Property and all third parties upon the effectiveness of this Energy Cost Financing Order without any further public notice; provided, however, that any person may, but shall not be required to, file a financing statement in accordance with Title 61, Idaho Code, Section 1505(3). Any financing statements so filed may be "protective filings" and shall not be evidence of the ownership of the Energy Cost Property. A perfected statutory lien in the Energy Cost Property shall be a continuously perfected lien in all revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued, and conflicting liens shall rank according to priority in time of perfection. In addition, the Commission requires in this Energy Cost Financing Order, pursuant to Title 61, Idaho Code, Section 1505(9), that, in the event of a default by the Applicant PROPOSED ORDER - 42 in payment of revenues arising with respect to the Energy Cost Property, the Commission or any successor to the Commission, upon the application by the beneficiaries of such statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of revenues arising with respect to the Energy Cost Property. 27. As provided in Title 61, Idaho Code, Section 1505(6), if an event of default occurs under the security agreement covering the Energy Cost Property, the pledgees of the Energy Cost Property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Title 28, Idaho Code, Chapter 9, and shall be entitled to foreclose or otherwise enforce their security interest in the Energy Cost Property, subject to the rights of any third parties holding prior security interests in the Energy Cost Property perfected in the manner provided in such provision. 28. As provided by Title 61, Idaho Code, Section 1503(6), the Energy Cost Recovery Bonds authorized by this Energy Cost Financing Order are not a debt or liability of the State of Idaho or of any political subdivision thereof and do not constitute a pledge of the full faith and credit of the State of Idaho or any of its political subdivisions, but are payable solely from the ECBC. Each of the Energy Cost Recovery Bonds shall contain on its face a statement to the following effect: "Neither the full faith and credit nor the taxing power of the state of Idaho is pledged to the payment of the principal of, or interest on, this bond." Title 61, Idaho Code, Section 1503(6) shall not preclude bond guarantees or enhancements pursuant to Title 61, Idaho Code, Chapter 15, nor shall it preclude the payment of compensation for any breach of the State of Idaho's pledge (referred to below) or for any action or failure to act by the Commission in contravention of Title 61, Idaho Code, Chapter 15. PROPOSED ORDER - 43 29. The Act, Chapter 61, Idaho Code, Section 1503(5), provides as follows: The state of Idaho does hereby pledge to and agree with the owners of energy cost property and with any energy cost recovery bondholders that neither the state nor any of its agencies, including the commission, shall (by legislative action, ballot initiative or other similar process) limit, alter, restrict or impair the energy cost amounts, the energy cost bond charge, the energy cost property, the energy cost financing orders or any rights thereunder or ownership thereof or security interest therein or in any way impair the rights or remedies of any energy cost recovery bondholders until the energy cost recovery bonds, including all principal, interest, premium, costs, expenses and arrearages thereon, are fully met and discharged, provided nothing contained in this chapter shall preclude such a limitation, alteration, restriction or impairment if and when adequate provision (including without limitation provision for the payment of principal and interest when due) shall be made by law for the protection of the energy cost recovery bondholders. This pledge and agreement does not preclude the Commission's approval of adjustments to the ECBC pursuant to the true-up mechanism but instead contemplates such action. 30. Pursuant to Title 61, Idaho Code, Section 1503(5), the State of Idaho has acknowledged that any energy cost recovery bondholders (as defined in Title 61, Idaho Code, Section 1502(10)) may and will rely on its pledge and agreement and that they would be irreparably harmed by any such limitation, alteration, restriction or impairment without such adequate provision, and the Applicant and SPE are authorized to include this pledge and agreement in the Energy Cost Recovery Bonds and the documents relating thereto. The Applicant and SPE have indicated that they will include this pledge and agreement in such bonds and related documents. 31. As required by Title 61, Idaho Code, Section 1503(2), this Energy Cost Financing Order shall remain in effect until all Energy Cost Recovery Bonds and all Energy Cost Amounts have been paid in full. 32. As provided in Title 61, Idaho Code, Section 1507, any successor to the Applicant, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding, or pursuant to any merger, sale or transfer, by operation of law or otherwise, shall perform and satisfy all PROPOSED ORDER - 44 obligations of the Applicant pursuant to Title 61, Idaho Code, Chapter 15, in the same manner and to the same extent as was required of the Applicant before such proceeding or merger, sale or transfer including without limitation billing, collecting and paying ECBC collections, and any other revenues arising with respect to the Energy Cost Property, to the Trustee and the holders of the Energy Cost Recovery Bonds and seeking ECBC adjustments, as necessary and permitted by this Energy Cost Financing Order, to recover all Energy Cost Amounts. 33. The Applicant retains sole discretion regarding whether or when to assign, sell or otherwise transfer the rights and interests created by this Energy Cost Financing Order or any interest therein or to cause the issuance of any Energy Cost Recovery Bonds. As provided in Title 61, Idaho Code, Section 1503(3), the Applicant may withdraw its application if it disagrees with any of the terms and conditions of this Energy Cost Financing Order or any modification thereof within fourteen (14) days of issuance of this Energy Cost Financing Order or of such modification. 34. As required in Title 61, Idaho Code, Section 1503(3), this Energy Cost Financing Order specifies the estimated amount of the ECBC and the formula for determining the amount of such charge that from time to time shall be sufficient to recover all of the Energy Cost Amounts. 35. The finality of this Energy Cost Financing Order shall not be impaired in any manner by the participation of the Commission, either directly or through its delegated personnel, in any decisions relating to the issuance of the Energy Cost Recovery Bonds or by the Commission's review, or issuance of any orders, relating to the issuance notice filing to be filed with the Commission pursuant to this Energy Cost Financing Order. PROPOSED ORDER - 45 36. This Energy Cost Financing Order meets the requirements for an Energy Cost Financing Order under Title 61, Idaho Code, Chapter 15. V. ORDERING PARAGRAPHS Based upon the record, the Findings of Fact and Conclusions of Law set forth herein, and for the reasons stated above, the Commission orders: 1. APPROVAL OF APPLICATION. The application of Idaho Power Company for the issuance of an energy cost financing order under Title 61, Idaho Code, Chapter 15 is approved in full, as provided in this Energy Cost Financing Order. 2. AUTHORITY TO SECURITIZE. The Applicant may securitize the Energy Cost Amounts described in its application and this docket in the manner provided by this Energy Cost Financing Order. To the extent that the actual amount of any of the up-front costs incurred by the Applicant varies from the amounts securitized, the Applicant may recover any additional amounts reasonably incurred, and may be required to provide a credit for any excess amounts securitized, in either case pursuant to a subsequent PCA or securitization proceeding. 3. RECOVERY OF ENERGY COST BOND CHARGES. The Applicant shall impose upon, and the Servicer shall collect from, retail customers (and third party providers, if any), as provided in this Energy Cost Financing Order, the ECBC, in an amount sufficient to provide for the timely recovery of the Energy Cost Amounts, as detailed in the application and this docket, including payment of principal and interest on the Energy Cost Recovery Bonds. 4. ISSUANCE NOTICE FILING. This Energy Cost Financing Order shall authorize the issuance of the Energy Cost Recovery Bonds only (i) if the ECBC that would be put into effect on the date of the bonds' issuance falls within the Expected Range and (ii) the Applicant files an PROPOSED ORDER - 46 Issuance Notice Filing substantially in the form of Appendix B hereto either on the date on which the structure and pricing of the Energy Cost Recovery Bonds are determined or on the next succeeding business day. The Issuance Notice Filing shall set forth the following information: (a) the principal amount of each class or tranche of Energy Cost Recovery Bonds issued; (b) the interest rates and amortization schedules for each such class or tranche; and (c) the ECBC to be put into effect on the date of issuance, together with the Applicant's certification that such charge falls within the Expected Range (after giving effect to any adjustment therein to reflect a reduction if the Commission approves a transaction of less than $172,000,000 principal amount of Energy Cost Recovery Bonds). 5. APPROVAL OF ECBC RATE TARIFF. The form of the ECBC Rate Tariff annexed hereto as Appendix A to this Energy Cost Financing Order is approved. Prior to the issuance of any Energy Cost Recovery Bonds under this Energy Cost Financing Order, the Applicant shall file a tariff substantially in the form of Appendix A hereto. Such tariff shall become effective upon filing. A. ENERGY COST BOND CHARGES 6. IMPOSITION AND COLLECTION: SPE'S RIGHTS AND REMEDIES. The Applicant is authorized to impose the ECBC on, and the Servicer is authorized to collect the ECBC from, retail customers (and third party supplies, if any), as provided in this Energy Cost Financing Order, in an amount sufficient to provide for the timely recovery of the Energy Cost Amounts as approved in this Energy Cost Financing Order. If there is a shortfall in payment of an amount billed, the amount paid shall, in a manner consistent with the billing and collection systems in use at the time, first, be proportioned between the ECBC and other fees and charges, other than PROPOSED ORDER - 47 late fees, and second, any remaining portion of the payment shall be attributed to late fees. Upon the transfer by the Applicant of the Energy Cost Property to the SPE, the SPE shall have all of the rights of the Applicant with respect to the Energy Cost Property, including without limitation the right to exercise any and all rights and remedies with respect thereto, including the right to authorize disconnection of electric service and to assess and collect any amounts payable by any retail customer in respect of the Energy Cost Property. 7. COLLECTOR OF ENERGY COST BOND CHARGES. The Applicant shall collect ECBC and shall remit collections of the ECBC to the Trustee for the account of the SPE. 8. NON-BYPASSIBILITY. The ECBC shall be imposed (i) upon all of the Applicant's existing retail customers and all future retail customers located within its certificated service area as it existed on March 1, 2002 and, in addition, (ii) on and after July 21, 2002, upon all of the Applicant's then existing retail customers and all future retail customers located within the Prairie Service Area. In addition, if and to the extent that the State of Idaho in the future authorizes any third party to bill or collect charges that include the ECBC, such third party must (i) meet any creditworthiness criteria subsequently established by the Commission, and (ii) comply with the following billing, collection and remittance procedures and information access requirements: a) such third party must agree to remit the full amount of all ECBC amounts it bills to customers, regardless of whether payments are received from such customers, within thirty (30) days of the Servicer's bill for such charges; b) such third party must agree to provide the Servicer with total monthly kWh usage information for each customer in a timely manner to enable the Servicer to fulfill its obligations, because such information is the basis for assessing the required level of such remittances; PROPOSED ORDER - 48 c) the Servicer shall be entitled, seven (7) days after a default by such third party in remitting any ECBC amounts payable to the Servicer, to assume responsibility for billing the ECBC, or to transfer responsibility to a qualifying third party; d) if and so long as such third party does not maintain at least a "Baa2" and "BBB" (or the equivalent) long-term unsecured credit rating from Moody's Investors Service and Standard & Poor's Rating Services, respectively, such third party must maintain, with the Servicer or as directed by the Servicer, a cash deposit or comparable security equal to two (2) months' maximum estimated collections of the ECBC, as reasonably determined by the Servicer. In the event of a default in the remittance of any such amounts by any such third party, any shortfall in ECBC collections will be included in the true-up; and e) Customers will continue to be responsible for payment to the Servicer of the ECBC billed by any third party to the extent such customer has not paid the ECBC billed to it. In the event of a failure of any customer to pay the ECBC, the Applicant, as Servicer, will be authorized to direct the Applicant (or any successor provider of electric service) to shut-off power to such customer in accordance with Commission policies and procedures and any applicable laws then in effect. 9. TRUE-UPS. True-ups of the ECBC shall be undertaken and conducted as described in Findings of Fact Nos. 60 through 64 of this Energy Cost Financing Order. The Servicer shall file the true-up adjustment with the Commission. 10. OWNERSHIP NOTIFICATION. The Applicant (or any other entity that may bill the ECBC to customers) shall, at least annually, provide written notification, to each retail customer to which the ECBC is billed, that the ECBC collections are the property of the SPE and not of the billing entity. B. ENERGY COST RECOVERY BONDS 11. ISSUANCE. The SPE is authorized to issue Energy Cost Recovery Bonds as specified in this Energy Cost Financing Order. 12. ADDITIONAL FINANCINGS. The Applicant, the SPE or any other assignee may apply for one or more successive energy cost financing orders pursuant to Title 61, Idaho Code, Section 1503(2). PROPOSED ORDER - 49 13. COLLATERAL. All of the Energy Cost Property and other collateral shall be held and administered by the Trustee pursuant to the indenture as described in the Applicant's application. The SPE shall establish a collection account with the Trustee as described in Findings of Fact Nos. 42 through 51. Upon the maturity of the Energy Cost Recovery Bonds and the discharge of all obligations in respect thereof, all amounts in the collection account, other than amounts in the capital subaccount (including investment earnings), shall be released to the SPE and shall be credited to the Applicant's retail customers. The Applicant shall within thirty (30) days after the date that these funds are eligible to be released notify the Commission of the amount of such funds available for crediting to the benefit of its retail customers. 14. FUNDING OF CAPITAL SUBACCOUNT. The capital subaccount shall be funded by a capital contribution from the Applicant in an initial amount of not less than 1.0% of the initial aggregate principal balance of the Energy Cost Recovery Bonds, and investment earnings on such amount are expected to be retained by the SPE pursuant to the indenture until all of the principal of and interest on the Energy Cost Recovery Bonds is paid and all other Energy Cost Amounts are paid in full. Upon the maturity of the Energy Cost Recovery Bonds and the discharge of all obligations in respect thereof, all amounts in the capital subaccount, including investment earnings thereon, shall be released to the SPE for payment to the Applicant. 15. CREDIT ENHANCEMENT. The Applicant may provide for various forms of credit enhancement including letters of credit, reserve accounts, surety bonds, swap arrangements, hedging arrangements and other mechanisms designed to promote the credit quality and marketability of the Energy Cost Recovery Bonds or to mitigate the risk of an increase in interest rates; provided that (i) the costs of such credit enhancement shall not cause the aggregate amount of up-front costs securitized plus the expense of reacquiring debt and equity to exceed the PROPOSED ORDER - 50 amount specified in this docket and (ii) the Commission shall be informed of the decision to use such credit enhancement. This Ordering Paragraph shall not apply to the collection account or those of its subaccounts that have been approved in this Energy Cost Financing Order. 16. LIFE OF BONDS. The scheduled maturity in any series of Energy Cost Recovery Bonds will not exceed approximately three (3) years from the date of issuance of such series. The legal final maturity date of each series and class or tranche and amounts in each series shall be finally determined by the Applicant, consistent with this Energy Cost Financing Order and market conditions and indications of the rating agencies at the time of issuance. 17. AMORTIZATION. Scheduled principal payments on the Energy Cost Recovery Bonds shall, to the extent practicable, be scheduled to be made in approximately equal amounts during each year of the term of such bonds. 18. USE OF THE SPE. The Applicant shall use the SPE, as proposed in its application, in conjunction with the issuance of any energy cost recovery bonds authorized under this Energy Cost Financing Order. The SPE shall be funded with an amount of capital that is sufficient for the SPE to carry out its intended functions and to minimize the possibility that the Applicant would have to extend funds to the SPE in a manner that could jeopardize the bankruptcy- remoteness of the SPE. C. SERVICING 19. SERVICING AGREEMENT. The Commission authorizes the Applicant to enter into the servicing agreement with the SPE and to perform the servicing duties approved in this Energy Cost Financing Order. Without limiting the foregoing, in its capacity as initial Servicer of the energy cost property, the Applicant is authorized to calculate, bill and collect, for the account of PROPOSED ORDER - 51 the SPE, the ECBC initially authorized in this Energy Cost Financing Order, as adjusted from time to time pursuant to the true-up mechanism, and to make such filings and take such other actions as are required or permitted by this Energy Cost Financing Order in connection with the periodic true-ups described in this Energy Cost Financing Order. The Servicer shall be entitled to collect servicing fees in accordance with the provisions of the servicing agreement. As set forth in its application and this docket, the Applicant has indicated that the per annum servicing fee it or any of its affiliates will receive while serving as Servicer shall not at any time exceed 0.25% (25 basis points) of the initial principal balance of each series of Energy Cost Recovery Bonds, payable monthly. 20. REPLACEMENT OF APPLICANT AS SERVICER. In the event of a default by the Applicant in any of its servicing functions with respect to the ECBC, the SPE may replace the Applicant as Servicer in accordance with the terms of the servicing agreement. No entity may replace the Applicant as the Servicer in any of its servicing functions with respect to the energy cost bond charge and the energy cost property authorized by this Energy Cost Financing Order if the replacement would cause any of then current credit ratings of the energy cost recovery bonds to be suspended, withdrawn or downgraded. The per annum servicing fee payable to any Servicer not affiliated with the Applicant shall not at any time exceed 1.25% of the initial principal balance of each series of Energy Cost Recovery Bonds, payable periodically. 21. COLLECTION TERMS. The Servicer shall remit collections of the ECBC to the SPE or the Trustee for the SPE's account in accordance with the terms of the servicing agreement. 22. CONTRACT TO PROVIDE SERVICE. Upon the transfer and pledge of the Energy Cost Property created by this Energy Cost Financing Order to the SPE, the Applicant shall, as PROPOSED ORDER - 52 required by Title 61, Idaho Code, Section 1504(3), contract with the SPE that the Applicant will continue to operate its system to provide service to its customers, will collect amounts with respect to the ECBC for the benefit and account of the SPE, and will account for and remit these amounts to or for the account of the SPE. Such a contract shall not impair or negate the characterization of such transfer or pledge, as the case may be, as an absolute transfer, a true sale or a security interest. D. STRUCTURE OF THE SECURITIZATION 23. STRUCTURE. The Applicant shall structure this securitization as proposed in the Applicant's application as implemented by this Energy Cost Financing Order. E. USE OF PROCEEDS 24. USE OF PROCEEDS. Upon the issuance of the Energy Cost Recovery Bonds, the net proceeds received by the Applicant shall be used for general corporate purposes. F. MISCELLANEOUS PROVISIONS 25. CONTINUING ISSUANCE RIGHT. The Applicant has the continuing irrevocable right to cause the issuance of Energy Cost Recovery Bonds in one or more series, subject to the terms of this Energy Cost Financing Order, for a period of one (1) year after this Energy Cost Financing Order becomes non-appealable, provided that the Applicant may apply to seek an extension or renewal of this Energy Cost Financing Order. 26. BINDING ON SUCCESSORS. This Energy Cost Financing Order, together with the ECBC authorized hereby, shall be binding upon the Applicant and any successor thereto that provides transmission and distribution services or direct wire services to (i) the Applicant's PROPOSED ORDER - 53 existing retail customers and future retail customers located within the Applicant's certificated service area as it existed on March 1, 2002 or (ii) on and after July 21, 2002, the Applicant's then existing retail customers and future retail customers located within the Prairie Service Area. In this paragraph, a "successor" means any entity that succeeds by any means whatsoever to any interest or obligation of its predecessor, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding, or pursuant to any merger, sale or transfer, by operation of law or otherwise. 27. FLEXIBILITY. Subject to compliance with the requirements of this Energy Cost Financing Order, the Applicant and the SPE shall be afforded flexibility in establishing the terms and conditions of the Energy Cost Recovery Bonds, including the final structure of the SPE as a Delaware limited liability company, repayment schedules, term, payment dates, collateral, credit enhancement, required debt service, reserves, interest rates, indices and other financing costs and the ability of the Applicant, at its option, to issue one or more series of the Energy Cost Recovery Bonds. 28. EFFECTIVENESS OF ORDER. Subject to the terms hereof, this Energy Cost Financing Order shall become effective on the date hereof (the "Effective Date"); provided that the Applicant shall not be authorized to impose, collect or receive the ECBC until the Issuance Notice Filing has been made and the Energy Cost Property and other rights of the Applicant under this Energy Cost Financing Order have been transferred to the SPE in conjunction with the issuance of the Energy Cost Recovery Bonds. This Energy Cost Financing Order shall remain in effect from and after the Effective Date (i) until one (1) year from the date on which it shall have become non-appealable if no Energy Cost Recovery Bonds shall have been issued during such one (1) year period or (ii) if Energy Cost Recovery Bonds are issued pursuant to this Energy PROPOSED ORDER - 54 Cost Financing Order within such one (1) year period, then until all of the principal of, interest on and other amounts due under the Energy Cost Recovery Bonds and all other Energy Cost Amounts shall have been paid in full, provided that the Applicant may apply to seek an extension or renewal of this Energy Cost Financing Order. 29. EFFECT. This Energy Cost Financing Order constitutes a legal Energy Cost Financing Order for Idaho Power Company under Title 61, Idaho Code, Chapter 15. The Commission finds this Energy Cost Financing Order complies with the provisions of Title 61, Idaho Code, Chapter 15. An Energy Cost Financing Order gives rise to rights, interests, obligations and duties as expressed in Title 61, Idaho Code, Chapter 15. It is the Commission's express intent to give rise to those rights, interests, obligations and duties by issuing this Energy Cost Financing Order. The Applicant and the Servicer of the Energy Cost Recovery Bonds are directed to take all actions as are required to effectuate the transactions approved in this Energy Cost Financing Order, subject to compliance with the criteria established in this Energy Cost Financing Order. 30. THIS IS A FINAL ORDER. Any person interested in this Energy Cost Financing Order (or in issues finally decided by this Energy Cost Financing Order) or in interlocutory orders previously issued in this case may petition for reconsideration within twenty-one (21) days of the service date of this Energy Cost Financing Order with regard to any matter decided in this Energy Cost Financing Order or in interlocutory orders previously issued in this case. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross- petition for reconsideration. See Title 61, Idaho Code, Section 626. SIGNED AT BOISE, IDAHO THE ____th DAY OF ____, 2002. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 1 LARRY D. RIPLEY ISB #965 Idaho Power Company P. O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-2674 FAX Telephone: (208) 388-6936 Attorney for Idaho Power Company Street Address for Express Mail: 1221 West Idaho Street Boise, Idaho 83702 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF IDAHO POWER COMPANY FOR AN ) CASE NO. IPC-E-02-02 ENERGY COST FINANCING ORDER AND ) IPC-E-02-03 AUTHORITY TO INSTITUTE AN ENERGY ) COST BOND CHARGE. ) ) IDAHO POWER COMPANY’S ) RESPONSE TO FIRST IN THE MATTER OF THE APPLICATION ) PRODUCTION REQUEST OF IDAHO POWER COMPANY FOR ) AND SECOND PRODUCTION AUTHORITY TO IMPLEMENT A POWER ) REQUEST OF COMMISSION COST ADJUSTMENT (PCA) RATE FOR ) STAFF ELECTRIC SERVICE FROM MAY 16, 2002 ) THROUGH MAY 15, 2003. ) ) COMES NOW, Idaho Power Company (“Idaho Power” or “the Company”), and in response to the First Production Request of the Commission Staff dated April 5, 2002, and the Second Production Request of the Commission Staff dated April 10, 2002, herewith submits the following information: IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 2 REQUEST NO. 1: Please provide the number of 7-day disconnect notices mailed to Idaho Power customers, per month, for the period of November 01, 2000 through March 31, 2001. Response to Request No. 1: The number of 7-day notices mailed to Idaho Customers for the period November 24, 2000 through March 31, 2001 was 40,323. December, 2000 8,804 January, 2001 19,521 February, 2001 4,368 March, 2001 7,630 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 2: Please provide the number of 24-hour notices mailed to Idaho Power customers, per month, for the period of November 01, 2000 through March 31, 2001. Response to Request No. 2: The number of 24-hour Notices mailed to Idaho Customers for the period November 24, 2000 through March 31,2001 was 35,467. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 3 December, 2000 7,943 January, 2001 17,261 February, 2001 3,675 March, 2001 6,588 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 3: Please provide the number of actual field disconnects, per month, for the period of November 01, 2000 through March 31, 2001. Response to Request No. 3: The number of field disconnects authorized for the period November 24, 2000 through March 31, 2001 was 2,328. December, 2000 55 January, 2001 361 February, 2001 411 March, 2001 1,501 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 4 general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 4: Please provide the number of Idaho Power customers receiving Low-Income Home Energy Assistance Program (LIHEAP) Funds, and the total dollar amount received for calendar years 2000 and 2001. Response to Request No. 4: In 2000, there were 7,065 customers who received an estimated $1,362,735, and in 2001 there were 9,012 customers who received an estimated $1,983,704. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 5: Please provide the number of Idaho Power customers receiving Project Share Funds, and the total dollar amount received for calendar years 2000 and 2001. Response to Request No. 5: PROJECT SHARE 2000 2001 Idaho Power Customer/Families Assisted by Project Share* 920 1,348 Project Share Funds Allocated to Idaho Power Customers $ 138,050.08 $ 202,201.50 IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 5 * The number of families assisted was estimated, assuming that each family received $150, the maximum annual Project Share gift. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 6: Please provide the number of Idaho Power customers on Budget Pay as of April 2001 and as of April 2002. Response to Request No. 6: The number of Budget Pay Customers as of April 2001 was 40,563. The number of Budget Pay Customers as of April 2002 was 43,218. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 6 REQUEST NO. 7: Please provide the number of energy audits performed for Idaho Power customers for each of the calendar years 2000, 2001 and January- March 2002. Response to Request No. 7: January - March 2002 258 energy audits January - December 2001 1,118 energy audits January - December 2000 1,100 energy audits The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 8: Please provide the dollar amount contributed by Idaho Power to Project Share for the calendar years 2000 and 2001. Response to Request No. 8: PROJECT SHARE 2000 2001 Idaho Power Customer Contribution $ 159,729.81 $ 142,998.26 IDACORP Shareholder Contribution 25,000.00 125,000.00 Idaho Power Company Administration Contribution 15,972.98 14,299.83 Total Contributions $ 200,702.79 $ 282,298.02 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 7 Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 9: Please provide the number of weatherization jobs performed for calendar year 2001 and the total associated cost. Response to Request No. 9: The 2001 weatherization jobs (LIWA Jobs) was as follows: Idaho 266 Oregon 21 Total 287 See also the Response to Request No. 10. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 10: Please provide the dollar amount contributed by Idaho Power to the Low-income Weatherization Program for calendar year 2001. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 8 Response to Request No. 10: the 2001 LIWA contribution was: Idaho $ 331,125.58 Oregon 23,677.99 Total $ 354,803.57 The Company contributed an additional $118,592 to the Low-Income Weatherization program in 2001. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 11: Please provide the dollar amount contributed by Idaho Power to Northwest Energy Efficiency Alliance (NEEA) for calendar year 2001. Response to Request No. 11: In 2001, Idaho Power contributed $1,246,818.18 to the Northwest Energy Efficiency Alliance. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 9 general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 12: Please provide the dollar amount spent on the Conservation Advertising Campaign for calendar year 2001 and provide details of how funds were allocated. Response to Request No. 12: 2001 Energy Conservation Advertising Activity: Description: Cost: Newspaper Ads Weekly “advertorials” in five service area papers; 27 weeks 3/28-9/30/01 production in-house = n/a media buy = $65,835 Radio and TV Ads Radio and network television air time throughout service area March – July and October 2001; produced five ads production = $179,652 media buy = $252,238 subtotal = 431,890 Outdoor Billboards Boise, Twin Falls and Pocatello areas May – July 2001 production = $8,400 media buy = $15,251 subtotal = $23,651 Printed Publications Energy Planner brochure (20,000 qty) energy use information, conservation tips, glossary, etc. production = $8,000 print cost = $4,615 subtotal = $12,615 Energy Cost Calculator slider (20,000) electric cost estimates of appliances/equip. production in-house = n/a print cost = $20,732 “10 Ways to Conserve 10%” booklet (5,000) business-oriented conservation info production in-house = n/a print cost = $5,000 Various Energy Papers (7,000) energy crisis recap, company information, PUC description, conservation info production in-house = n/a print cost = $7,530 TOTAL = $567,253 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 10 Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 13: Please provide the total number of Energy Packets mailed to customers to date and the total associated cost. Was the cost included as part of the Ad Campaign or Weatherization cost? Response to Request No. 13: The CFL bulb packet effort mailed 7,608 packets that included a CFL bulb to low income customers in December 2001. In January 2002 Idaho Power advertised in a bill stuffer an offer to provide a CFL packet for those customers using 2000 kWh or more in a month. The Company sent out 1,900 CFL bulb packets in response to the bill stuffer invitation. Total CFL bulb packets sent out were 9,508. Idaho Power is continuing to distribute the remaining 2,500 packets. To date, the total charges to the work order amount to $90,416.07. The cost of the CFL packet effort was not included as part of the Ad campaign or weatherization cost, but was funded through the BPA C&RD. In addition, when customers call the Company's call center and ask for additional information about ways to reduce their electricity bill, the Company mails packets to those requesting it. As of April 15, 2002, 2,952 packets have been sent at a cost of $7,500. These costs have been charged to the operating expenses of the Company. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 11 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 14: Please provide the number of heating degree-days between November and March for the winter heating seasons of 2000-01 and 2001-02. Please report numbers for Boise, Twin Falls, and Pocatello areas. Response to Request No. 14: Calendar Month Heating Degree Days Boise Pocatello Twin Falls November 2000 960 1,170 1,073 December 2000 1,044 1,239 1,108 January 2001 1,165 1,475 1,237 February 2001 867 1,162 957 March 2001 585 4,621 815 5,861 694 5,069 November 2001 626 817 694 December 2001 1,056 1,338 1,181 January 2002 1,034 1,304 1,170 February 2002 863 1,294 1,099 March 2002 747 4,326 996 5,749 875 5,019 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 12 Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 15: Please provide the number of Idaho Power customers’ bills that were estimated during each of the calendar years 2000 and 2001. Estimated means showing as estimated on customer’s bills using the billing codes “F”, “L”, and “Y”. Response to Request No. 15: The number of estimated bills in 2000 was 17,100. The number of estimated bills in 2001 was 31,137. The Company would caution that the two numbers are not comparable. Under the old CIS system, the Company over the years had reached accommodations with seasonal and irrigation customers that the meters would not be read due to their remote location and low energy consumption. When the new CIS system was implemented, the old CIS accommodation procedures were lost as far as documentation of these accommodations was concerned, and the new CIS system recorded these accounts as being estimated. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 13 witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 16: Please explain how Idaho Power increased its efforts to aggressively pursue delinquent accounts in 2002 versus 2001. How many additional employees were hired to pursue collection of delinquent accounts? What factors are considered currently in deciding which delinquent accounts to pursue? Response to Request No. 16: The Company does not believe that it pursued any extraordinary or aggressive measures in 2002 concerning delinquent accounts. During the implementation of the CIS system in early 2001, there was a reduction in the level of normal efforts concerning the collection of delinquent accounts due to work associated with the new CIS. During the year 2001 and the 2002 heating season, there was an increase in past due accounts and an increase in customers declaring for the moratorium. (See Response to Request No. 17) The Company did increase its field collection staff by six employees beyond the normal “seasonal” staffing increase to respond to the additional work load associated with collection activities. The factors that the Company considers in pursuing delinquent accounts is proprietary and confidential information, and the Company will discuss these factors directly with Staff. The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF, Page 14 witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. REQUEST NO. 17: Please provide the number of customers who declared eligibility for protection from disconnection during the 2000-2001 and the 2001- 2002 heating seasons. Response to Request No. 17: 2000/2001 3,535 2001/2002 7,872 The requested information does not directly relate to the testimony of any witness that the Company is sponsoring in docket numbers IPC-E-02-2 and IPC-E-02-3. Mr. Gale is generally familiar with the information requested, but if detailed information is required, please advise Idaho Power Company in advance and an appropriate witness or witnesses will be made available. The responses to the request for information were obtained from various individuals within the Company under the general guidance of John R. Gale, Vice President of Regulatory Affairs, and Larry D. Ripley, Senior Attorney, Idaho Power Company. Dated at Boise, Idaho, this 15th day of April, 2002. LARRY D. RIPLEY Attorney for Idaho Power Company CERTIFICATE OF SERVICE CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 15th day of April, 2002, I served a true and correct copy of the above and foregoing IDAHO POWER COMPANY’S RESPONSE TO FIRST PRODUCTION REQUEST AND SECOND PRODUCTION REQUEST OF COMMISSION STAFF upon the following named parties by the method indicated below, and addressed to the following: Lisa D. Nordstrom x Hand Delivered Deputy Attorney General U.S. Mail Idaho Public Utilities Commission Overnight Mail 472 W. Washington Street FAX P.O. Box 83720 Boise, Idaho 83720-0074 R. Scott Pasley Hand Delivered Assistant General Counsel x U.S. Mail J.R. Simplot Company Overnight Mail 999 Main Street FAX P.O. Box 27 Boise, Idaho 83702 Peter J. Richardson Hand Delivered Richardson & O’Leary, PLLC x U.S. Mail 99 East State Street, Suite 200 Overnight Mail P.O. Box 1849 FAX Eagle, Idaho 83616 William M. Eddie Hand Delivered Land and Water Fund of the Rockies x U.S. Mail P.O. Box 1612 Overnight Mail Boise, Idaho 83701 FAX ______________________________________ LARRY D. RIPLEY