HomeMy WebLinkAboutIPCE963.docxBRAD PURDY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0357
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION)
OF IDAHO POWER COMPANY FOR)CASE NO. IPC-E-96-3
AN ORDER APPROVING THE COMPANY'S)
PROPOSED PAYMENTS TO THE NEZ)
PERCE TRIBE PERTAINING TO THE)
COMPANY'S HELLS CANYON COMPLEX)
AND)
FOR AN ACCOUNTING ORDER )COMMENTS OF
CONCERNING THE PAYMENTS TO BE)THE COMMISSION
MADE IN THE EVENT OF FINAL)STAFF
SETTLEMENT.)
____________________________________________)
PURSUANT tothe Commission's Notice of Modified Procedure issued May 7, 1996, the Staff of the Idaho Public Utilities Commission, by and through its Attorney of Record, Brad Purdy, Deputy Attorney General, hereby submits the following comments in response to Idaho Power Company's application.
BACKGROUND
On April 2, 1996, Idaho Power Company (Idaho Power; Company) filed an Application with the Commission seeking approval of proposed payments to be made to the Nez Perce Tribe
(the Tribe) resulting from litigation between the Tribe and the Company. The litigation involves the Tribe’s claims that the Company’s three Hells Canyon hydroelectric projects (Brownlee Dam, Oxbow Dam and Hells Canyon Dam) prevent anadromous fish from reaching their traditional spawning areas destroying certain fish runs and denying access to certain of the Tribe’s usual and accustomed fishing places. These actions allegedly deprive the Tribe of its treaty rights to take fish from the Columbia and Snake Rivers. The Tribe sought compensatory and punitive damages as a result.
Following the filing of a civil action against Idaho Power, the Company and the Tribe entered into settlement negotiations culminating in an agreement between the two parties. That agreement, included with the Company’s Application, provides for the payment by Idaho Power to the Tribe of the equivalent of $16.5 million plus certain earnings from a Trust as set forth in the agreement. Pursuant to the agreement, the Company would pay the Tribe $5 million when the Settlement Agreement is entered into between the parties. At the same time, the Tribe would dismiss an action pending in federal court. Idaho Power would thereafter pay the Tribe a total of $6.5 million in four equal installments. Finally, the Company may also make a payment of $5 million into a trust account on August 3, 2003, the date by which the Company must file its Application to relicense the Hells Canyon complex. The Company is not requesting any action by the Commission at this time in regard to this August 3, 2003 payment.
Idaho Power proposes to capitalize the settlement payments and book them to electric plant in service as a component of construction costs. The payments reflect injuries and damages, insurance or legal expenditures consistent with the Uniform System of Accounts (18 CFR §1.101, A, 8, 14 and 15). The amounts capitalized will be amortized through Account 404, amortization expense.
Idaho Power proposes an alternative treatment if it is determined that capitalization to utility plant is inappropriate. The alternative accounting treatment would defer the settlement payments as a regulatory asset with the amortization through Account 557, other power supply expenses.
Under either alternative, Idaho Power proposes to begin amortization of the settlement payments one month after the payments are made. The monthly amortization would continue through the year 2035. As proposed, the monthly amortization amounts will be included in the Company’s next rate proceeding and will be reflected in the earnings test for purposes of Order No. 26216, Case No. IPC-E-95-11, the rate moratorium and stability of earnings proceeding.
STAFF RECOMMENDATION
Staff recommends approval of capitalizing the settlement payments as proposed. The payments through the year 2000 amounting to $11,500,000 reflect litigation costs for the settlement of claimed injuries and damages. These expenditures are properly booked to plant in service as set forth in the Uniform System of Accounts (18 CFR §1.101, A, 8, 14 and 15). The alternative proposal is also reasonable. However, in light of competitive changes, Staff would prefer not to establish a regulatory asset if the expenditures can be properly capitalized to other plant accounts.
Staff agrees with the proposal to begin amortization of the settlement payments one month after the payments are made. The proposed amortization period through the year 2035 is reasonable.
Idaho Power’s base rates will not change prior to January 1, 2000 as reflected in the rate moratorium adopted in Order No. 26216, Case No. IPC-E-95-11. Therefore, the capitalization of the settlement payments and the amortization of these costs will not increase current rates before the year 2000. The amortization costs will be reflected in the earnings test during the moratorium. The actual return will be lower by including the amortization costs thereby impacting the return used to determine if Investment Tax Credits are utilized to attain an 11.5% return on year-end common equity or if sharing occurs when returns are above 11.75%.
Idaho Power’s proposal establishes a regulatory asset with the deferred credit for the four annual payments of $1,625,000 beginning in 1997. When the annual payments are made, the regulatory asset associated with that payment will be removed from Idaho Power’s accounts as the expenditure is capitalized to plant in service. If a rate case is filed prior to the time this regulatory asset is removed, Staff will review the timing of the remaining payment and probably recommend that the regulatory asset not be included in rate base unless it is offset by Idaho Power’s liability to the Tribe.
DATED at Boise, Idaho, this day of May 1996.
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Brad Purdy
Deputy Attorney General
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Terri Carlock
bp:tc:gdk/ipce963.bpt/umisc/cmtsAccounting Section Supervisor