20171004Wyoming_OCA Set 2 (1-12).pdf

ROCKY MOUNTAINPOWER
A DIVISION OF PACIRCORP 1407 W North Temple,Suite 330
Salt Lake City,Utah 84116
September 25,2017
Christopher Leger,Counsel
Wyoming Bar #6-3963
Wyoming Office of Consumer Advocate
2515 Warren Avenue,Suite 304
Cheyenne,WY 82002
RE:WyomingDocket 20000-519-EA-17
OCA 2nd Set Data Request (1-12)
Please find enclosed Rocky Mountain Power's Responses to OCA 2nd Set Data Requests 2.1-
2.12.Also provided are Attachments OCA 2.10-1,2.11,and 2.12.Provided on the enclosed
Confidential CD are Confidential Attachments OCA 2.8 and 2.10-2.Confidential informationis
provided subject to the terms and conditions of the protective agreement in this proceeding.If
you have any questions,please call me at [phone].
Manager,Regulation
Enclosures
C.C.:Meridith Bell/WPSC (C)
Lori L.Brand/WPSC lori and wyo.ov (W)
John Burbridge/WPSC (W)
Michelle Bohanan/WPSC (W)
Kara Seveland/WPSC kara.seveland wvo gov (W)
Morgan Fish/WPSC _morgan Ish _wyogov (W)
Marci Norby/WPSC (W)
Abigail C.Briggerman/WIEC c_o_m (C)
Patti Penn/WIEC (W)
Bob Pomeroy/WIEC (W)
Thor Nelson/WIEC tnelson hollandhart com (W)
Emanuel Cocian/WIEC (W)
Nik Stoffel/WIEC N (W)
Crystal J.McDonough/NLRA (C)
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.1
OCA Data Request 2.1
Pursuant to Rocky Mountain Power's proposal,wind plant that is retired as part of the
repowering project(s)would be credited to plant in service and debited to accumulated
depreciation.What would happen to the accumulated deferred income taxes (ADIT)
associated with the retired plant under this proposal?Would that portion of the ADIT
essentially become payableto the IRS and thus,no longer reflected on the corporate
books?
Response to OCA Data Request 2.1
To the extent the book basis in the wind plant that is retired as part of the repowering
project(s)is transferred from gross plant in service to the accumulated reserve there will
be no change in the accumulated deferred income tax (ADIT)recorded to FERC Account
282 for the net book basis because the net book basis remains unchanged.
At the time title to the portion of the retired wind plant has been relinquished,the
remaining tax basis will be deducted against taxable income.
Respondent:Brian Keyser
Witness:JeffLarsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.2
OCA Data Request 2.2
If a regulatory asset were to be established for the undepreciated portion of the wind plant
proposed to be retired as part of the repowering project(s),what accumulated deferred
income taxes (ADIT)or other income tax implications are created that are different from
those in response to Data Request 2.1 above.
Response to OCA Data Request 2.2
Like the Company's response to OCA Data Request 2.1,to the extent the net book basis
in the wind plant that is retired as part of the repowering project(s)is transferred from
gross plant in service and the accumulated reserve to a regulatory asset,there will be no
change in the total amount of accumulated deferred income tax (ADIT)for the net book
basis because the net book basis remains unchanged.The primary difference is that in
OCA Data Request 2.1,the ADIT remained within FERC Account 282,while under this
scenario,the ADIT will be transferred from FERC Account 282 to FERC Account 283.
Also like OCA Data Request 2.1,at the time title to the portion of the retired wind plant
has been relinquished,the remaining tax basis will be deducted against taxable income.
Respondent:Brian Keyser
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.3
OCA Data Request 2.3
Is there a risk that PacifiCorp will not be able to use,on a current year basis,the
Production Tax Credit or the bonus depreciation that will be associated with either the
repowering project or the new wind/transmission project because it will send PacifiCorp
into a net operating loss (NOL)basis?Please explain.
(a)If the response involves an explanation that involves treating PacifiCorp's taxes on a
basis other than as a stand-alone entity for the purpose of regulatory reporting and
ratemaking,please include in the explanation why it is appropriateto assume
anything other than a stand-alone tax entity for regulatory purposes.
(b)If the response is that an NOL will be created,please explain the impact of not being
able to use all of the tax benefits in each current tax year on the economics of the
repowering project.
Response to OCA Data Request 2.3
The Company's current forecast reflects that the Company will be able to use,on a
current-year basis,the production tax credit (PTC)and the bonus depreciation that will be
associated with both the repowering project and the new wind/transmission project and
will not be in an net operating loss (NOL)position.
(a)For ratemaking purposes,the Company calculates its net taxable income on a stand-
alone basis.
(b)This question is not applicable as the Company is not forecasting that an NOL will be
created.
Respondent:Brian Keyser
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.4
OCA Data Request 2.4
Referring to Exhibit RMP (JKL-3),please explain why the accumulated deferred income
tax (ADIT)balance is consistent for three consecutive months,even when the gross plant
balance changes within those three months.
(a)If the response is that the ADIT is only calculated quarterly,please describe which
sets of plant balances are used to compute that quarterly ADIT.Historical amount?
Forecast amounts?
Response to OCA Data Request 2.4
Please refer to the Direct Testimony of Company witness,Jeffrey K.Larsen,specifically
Exhibit RMP (JKL-3),which-for forecasting purposes only-reflectsthe forecasted
accumulated deferred income tax (ADIT),updated quarterly.
The ADIT balance reflects the difference between the Company's book basis in the
capital assets and the income tax basis.Twenty-fivepercent of the current year's
deferred taxes is added to ADIT in March 2020,June 2020,September 2020 and
December 2020.
Referring to Exhibit RMP_(JKL-3)cell $P$15,the December 2019 ADIT balance of
$161,239 was calculated as follows:
Book Basis
Original Cost $984,807
Accumulated Depreciation ($8,454)
Book Basis $976,353
Tax Basis
Original Cost $984,807
Accumulated Depreciation ($433,315)
Book Basis $551,492
Accumulated Deferred Income Taxes
Book Basis $976,353
Less Tax Basis ($551 492)
Difference $424,861
Income Tax Rate 37.951%
Accumulated DIT $161 239
Note (1):Tax depreciation assumes 30-percent bonus depreciation and 20-years Modified
Accelerated Cost Recovery System (MACRS).First-year 20-year MACRS allowance is
20 percent reduced by 30-percent bonus depreciation taken,or 14 percent.Total first-year
tax depreciation is 44 percent;that is,30-percent bonus depreciation plusl4-percentfirst-
year MACRS.Accumulated tax depreciation of $433,315 is the product of:(a)original
cost of $984,807;and (b)first-year tax depreciation of 44 percent.
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.4
Referring to Exhibit RMP_(JKL-3)cell $S$15,the March 2020 ADIT balance of
$181,788 was calculated as follows:
ADIT balance December 31,2019 $161,239
2020 Deferred Income Taxes
ADIT December 31,2020 $243,436
ADIT December 31,2019 ($161 239)
2020 Additions to ADIT $82,197
First Quarter Additions (25 percent)$20,549
ADIT March 31,2020 $181,788
Respondent:Mark Paul
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.5
OCA Data Request 2.5
Exhibit RMP (JKL-5),page 5 of 10,defines the new depreciation expense as "...the New
Capital Investment monthlybalances less the Base Capital Investment,multipliedby the
current depreciation rates."What monthlybalance is intended by this definition?The
end of month balance from the prior month?Or,the prior end of month balance plus the
new capital additions for the current month?
Response to OCA Data Request 2.5
Consistent with current Company accounting practices,the monthlybalance for the New
Capital Investment to be multipliedby the depreciation rate should be the New Capital
Investment end-of-month balance from the prior month plus half of the current month's
New Capital Investment additions to electric plant in service.
Respondent:Terrell Spackman
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.6
OCA Data Request 2.6
Exhibit RMP (JKL-5),page 3 of 10,defines the new capital investment as "...the actual
monthlyelectric plant-in-service balances associated with the wind repowering."What
monthlybalance is intended by this definition?The end of month balance from the prior
month?Or,the prior end of month balance plus the new capital additions for the current
month?
(a)Please explain the appropriateness of the proposal if the responses to Data Requests
2.5 and 2.6 are different?
Response to OCA Data Request 2.6
New Capital Investment at the end of any given month would include repowering electric
plant-in-service ending balances from the prior month plus new repowering capital
additions to electric plant in service during the current month.
Using an average monthlyNew Capital Investment balance for determining depreciation
expense is consistent with current Company accounting practices.However,as explained
in Exhibit RMP (JKL-3)at page 5,for purposes of calculating the return on rate base
within the Resource Tracking Mechanism (RTM),the Company proposes that the rate of
return be multipliedby the beginning net rate base each month.Therefore,for purposes
of calculating return on rate base within the RTM,the Company would use a prior end-
of-month balance.This proposed calculation of return will result in increased customer
benefits in the RTM deferral calculation compared to using a more traditional average
monthlyrate base.
Respondent:Terrell Spackman
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.7
OCA Data Request 2.7
Please list and describe the categories of costs (includingthe FERC account references)
that Rocky Mountain Power intends be included in the New Operations and Maintenance
Expense category shown on Exhibit RMP (JKL-5),page 4 of 10.If FERC account
references are used to define categories of costs,please describe and explain whether the
entire set of costs included in such FERC account will be included or only a portion of
the account.
Response to OCA Data Request 2.7
The New Operations and Maintenance Expense category as shown in Exhibit
RMP_(JKL-5)will consist of costs booked to the listed FERC accounts (546,548-554,
556,and 557)that are booked into the Company's accounting records on the specific
location codes for the assets included in the repowering project.
Respondent:Jonathan Hale
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.8
OCA Data Request 2.8
Referring to page 15,lines 12-16,of Mr.Hemstreet's direct testimony,please provide
information and quantitative data (such as average run time and failure rate)on the
gearbox failure rate for the gearboxes at Leaning Juniper and Marengo compared to the
gearboxes in the remainder of the wind generation fleet.
Response to OCA Data Request 2.8
Please refer to Confidential Attachment OCA 2.8.
Confidential information is provided subject to the terms and conditions of the protective
agreement in this proceeding.
Respondent:Tim Hemstreet
Witness:Tim Hemstreet
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.9
OCA Data Request 2.9
Please provide the response to Utah OCS Data Request 2.1.
Response to OCA Data Request 2.9
The Company assumes that the Utah docket being referenced for OCS Data Request 2.1
is 17-035-39.Based on this assumption,the Company responds as follows:
OCS Data Request 2.1
Refer to the Direct Testimony of Jeffrey K.Larsen,lines 165-72,which indicates,
in part,that the Company will "...defer the full amount of the capital investment,
ADR and ADIT related to repowering to the RTM and will calculate a return on
the net plant balance.
(a)Does the Company agree that the net book value of the existing wind projects
it is proposing to repower is currentlylower than the amounts incorporated in
the current base rates for those same projects?If no,explain why not.
(b)Since the current net book value (PIS less ADR less ADIT)of the existing
wind project assets that are being repowered are lower than the amounts
considered in current base rates,please explain why the reduction in the net
book value for the existing assets is not being used to offset the net book value
associated with the repowering in the proposed RTM calculations.
Response to OCS Data Request 2.1
The Company is proposing to include the incremental costs and savings only as
described in the application and not perform a true-up of current balances versus
what was included in the last rate case,which was a settled case that lacked
specific findings on line item details.Therefore,the current level in base rates is
not factored in,which is similar to the treatment that the Company is proposing
for the level of production tax credits (PTC)in base rates.Virtuallyall of the
PTCs in base rates will expire before repowering,resulting in a significant change
relative to the amount included in the last general rate case filing.The RTM
addresses the incremental new costs until all items are reflected in bases rates
through a future rate case.
Respondent:Terrell Spackman
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.10
OCA Data Request 2.10
Please provide the response to Utah DPU Data Request 1.10.
Response to OCA Data Request 2.10
The Company assumes that the Utah docket being referenced for DPU Data Request 1.10
is 17-035-39.Based on this assumption,the Company responds as follows:
Please refer to Attachment OCS 2.10-1 and Confidential Attachment OCS 2.10-2.
Confidential information is provided subject to the terms and conditions of the protective
agreement in this proceeding.
Respondent:Terrell Spackman
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.11
OCA Data Request 2.11
Please provide the wind generatingplant net balances as of 12/31/15,by wind project,
included in the revenue requirement in the most recent Wyoming rate case.The style of
the response should be modeled after the response to Utah DPU data request 1.10 but
should show the balances used for determining current Wyoming rates.
Response to OCA Data Request 2.11
The Company assumes that the reference to "Utah DPU data request 1.10"is intended to
reference DPU Data Request 1.10 in Utah Docket 17-035-39.Based on this assumption,
the Company responds as follows:
Please see Attachment OCA 2.11.Please note that this attachment includes all of the
Company-owned wind generationand therefore includes some assets that are not
proposed for repowering project.
Respondent:Terrell Spackman
Witness:Jeff Larsen
20000-519-EA-17 /Rocky Mountain Power
September 25,2017
OCA Data Request 2.12
OCA Data Request 2.12
Please provide any accumulated deferred income tax (ADIT)balances that would have
been associated with the wind plant balances included in the most recent Wyomingrate
case revenue requirement determination.
(a)If the wind plant balances currentlyrecovered in Wyoming retail rates were to be
netted against the new investment,would the ADIT balances also need to be netted?
Please explain.
Response to OCA Data Request 2.12
Please refer to Attachment OCA 2.12.
(a)Accumulated deferred income tax (ADIT)balances follow the respective assets they
are associated with.Please refer to the Company's responses to OCA Data Request
2.1 and OCA Data Request 2.2 for the impact to the ADIT balances from the
retirement of a portion of the wind plant associated with repowering.
Respondent:Brian Keyser
Witness:Jeff Larsen