20190108PAC to IIPA OCS 1e Set 3 (1-7).pdf

January 3, 2019

Cheryl Murray
Office of Consumer Services
160 East 300 South
Salt Lake City, Utah 84111
[e-mail] (C)

Donna Ramas
Ramas Regulatory Consulting, LLC
4654 Driftwood Drive
Commerce Twp., MI 48382
[e-mail] (C)

RE: UT Docket No. 18-035-36
OCS 3rd Set Data Request (1-7)

Please find enclosed Rocky Mountain Power’s Responses to OCS 3rd Set Data Requests 3.1-3.6
and Redacted and Confidential Response to OCS 3.7. Also provided is Attachment OCS 3.2.
Confidential information is provided subject to Public Service Commission of Utah Rule 746-1-
602 and 746-1-603. If you have any questions, please call me at [phone].

Sincerely,

___/s/___
Jana Saba
Manager, Regulation

Enclosures

C.c. Erika Tedder/DPU [e-mail] (C)
Roxie McCullar/DPU [e-mail] (C)
Sophie Hayes/WRA [e-mail] (C)
Nancy Kelly/WRA [e-mail] (C)
Penny Anderson/WRA [e-mail] (W)
Gary A. Dodge/UAE [e-mail] (W)
Phillip J. Russell/UAE [e-mail] (C)
Kevin Higgins/UAE [e-mail] (C)
Neal Townsend/UAE [e-mail] (C)(W)
Courtney Higgins/UAE [e-mail] (C)(W)
Justin Bieber/UAE [e-mail] (C)(W)
Hunter Holman/UCE [e-mail] (C)
Sarah Wright/UCE [e-mail] (C)

1407 W. North Temple
Salt Lake City, UT 84116
18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.1

OCS Data Request 3.1

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 23 – 26,
which states that “The amount of current tax reduction not reflected in rates, along with
the non-protected excess deferred income taxes (“EDIT”) balances will be used to reduce
Utah’s share of the Dave Johnston plant’s current net book value by offsetting
depreciation expense.” Additionally, lines 48 – 50 state: “Since the Company cannot
separate and buy down the Utah allocated share of each Qualifying Thermal Plant’s net
book value, the Company will make an accounting entry to offset Utah’s estimated share
of the annual depreciation expense.”
a. Since the Company proposes that the adjustment be made to the annual depreciation
expense instead of to the net book value of the Dave Johnston plants to which the
depreciation rates are applied, please confirm that the Utah jurisdictional amount of
the current tax reduction not reflected in rates and the non-protected EDIT (shown as
$183,461,000 in the workpapers provided with the second supplemental filing and in
Settlement Attachment 1 in Docket No. 17-035-69) will be reflected as an offset to
rate base in the next rate case. If not confirmed, please explain in detail why not and
explain how ratepayers will receive the benefit of the rate base offset associated with
these balances in future rate cases.

b. If the anticipated offset to rate base in the next rate case associated with the Utah
jurisdictional amount of the current tax reduction not reflected in rates and the non-
protected EDIT differs from $183,461,000, please provide the Company’s current
best estimate of the amount and explain why the amount differs from the
$183,461,000 identified in the “Depreciation Buy Down” column of Settlement
Attachment 1 in Docket No. 17-035-69

Response to OCS Data Request 3.1

a. The Company confirms that a rate base offset for the current tax reduction and the
non-protected EDIT will be included in the next general rate case.

b. The Company’s estimated offset to rate base associated with the Utah jurisdictional
current tax amount and the non-protected EDIT does not differ from the
$183,461,000 estimate provided.
18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.2

OCS Data Request 3.2

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 23 – 26,
which states that “The amount of current tax reduction not reflected in rates, along with
the non-protected excess deferred income taxes (“EDIT”) balances will be used to reduce
Utah’s share of the Dave Johnston plant’s current net book value by offsetting
depreciation expense.” Additionally, lines 48 – 50 state: “Since the Company cannot
separate and buy down the Utah allocated share of each Qualifying Thermal Plant’s net
book value, the Company will make an accounting entry to offset Utah’s estimated share
of the annual depreciation expense.” Paragraph 40 of the Settlement Stipulation in
Docket No. 17-035-69 states: “Parties agree that the non-protected EDIT balances will
be used to accelerate depreciation of the Dave Johnston thermal generation plant,
reducing Utah’s share of the plant’s current net book balance. The accelerated
depreciation and non-protected EDIT balance reduction will be recorded prior to year-
end 2018.”
a. Please explain how the Company’s proposed treatment of offsetting depreciation
expense is consistent with Paragraph 40 of the Stipulation.

b. Please provide a copy of the journal entries used by the Company to record the
accelerated depreciation and non-protected EDIT balance referenced in Paragraph 40
of the Stipulation. If the FERC accounts are not identified in the journal entries, then
please identify the respective FERC accounts. If the journal entries have not yet been
made, then provide the anticipated journal entries and update this response with the
actual entries when recorded on the Company’s books.

Response to OCS Data Request 3.2

a. The Company will make an accounting entry to record a liability balance for the
amount of current tax reduction not reflected in rate and the non-protected EDIT
balances associated with the accelerated depreciation of the Dave Johnston plant’s net
book value. This liability balance will be debited and the offset will be credited to
deferred tax expense. Accumulated depreciation will be credited with the same
amount and the offset will be debited to the Utah allocated depreciation expense for
the Dave Johnston plant. The net impact of these entries will result in a decrease to
Utah’s share of the Dave Johnston plant’s net book balance.
As the Company annually depreciates the Dave Johnston plant, the Company will
make an accounting entry to offset Utah’s estimated share of the annual depreciation
expense. Please refer to Data Response OCS 3.4b for further explanation.
b. The journal entries have not yet been made but will be recorded as part of the
Company’s year-end accounting process in early January. Please see Attachment
OCS 3.2 for the detailed journal entries, which include the respective FERC accounts.

18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.3

OCS Data Request 3.3

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 86 - 87,
which states: “The amounts shown in the Total Utah Balance reflected in Table B of the
Stipulation did not include the net salvage associated with interim retirements.” Please
provide a version of Table B of the Stipulation that includes an additional column for the
estimated “net salvage associated with interim retirements” and the revised “Total Utah
Balance.”

Response to OCS Data Request 3.3

Below is a revised version of Table B of the Stipulation, adding the estimated net salvage
associated with interim retirements.

TABLE B

Utah
Projected
Net Book
Balance
Utah
Projected
Decomm.
Subtotal
Utah
Utah
Projected
Interim Net
Salvage
Total Utah
Balance
Cholla Unit 4 $122 million $9 million $131 million $2 million $133 million
Craig Units 1 & 2 $47 million $1 million $48 million $1 million $49 million
Colstrip Units 3 & 4 $51 million $6 million $57 million $1 million $58 million
Jim Bridger Unit 1 $42 million $4 million $46 million $1 million $47 million
Jim Bridger Unit 2 $54 million $4 million $58 million $2 million $60 million
Total $340 million $347 million
18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.4

OCS Data Request 3.4

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 68 - 71,
which states: “The Company is proposing to hold the Utah Accrual Adjustment constant
and will true-up any differences in the Company’s next depreciation study or at a time of
plant closure, whichever is sooner. The differences will be shown in the Company’s
results of operations report filed with the PSC.”
a. Please provide an example of the format that will be used in future results of
operations reports to show the differences caused by the dynamic Utah allocation
factor.
b. Please explain, in detail, how the differences caused by the change in Utah allocation
factors will be calculated. Include a sample calculation for clarity.
c. By stating that the “Utah Accrual Adjustment” will remain constant, does this mean
that an annual dollar amount of accrual on a Utah jurisdictional basis will be
calculated as of 12/31/20 based on the actual plant balances as of that date, with that
amount then remaining constant until a future depreciation case?
d. By stating that the “Utah Accrual Adjustment” will remain constant, does this mean
that Utah Accrual Adjustment presented in this case will be based on the forecasted
12/31/20 amounts included in the Company’s filing on a Utah jurisdictional basis,
with the amount presented in the Second Supplemental filing remaining constant until
a future depreciation case?
e. Please confirm that the actual “Utah Accrual Adjustments” that will be used in the
next rate case will be determined based on the actual December 31, 2020 balances by
plant and not based on the estimated 2020 plant balances contained in the
depreciation filing. If not confirmed, explain, in detail, why the actual Utah Accrual
Adjustments will not be determined based on the actual plant balances.
f. Please more fully explain how the “Utah Accrual Adjustment” that the Company is
proposing to remain constant will be determined and indicate when the final amount
of the Utah Accrual Adjustment will be determined.

Response to OCS Data Request 3.4

a. The Company will account for the Utah Accrual Adjustment in separately identified
accounts allocated situs to Utah. The Utah Accrual Adjustment is a fixed amount
whereas depreciation expense and reserve will be allocated based on the appropriate
allocation factor. Both accounts will be provided in the Company’s unadjusted
accounting data submitted in the B-Tabs of the Utah results of operations.
b. In the workpapers provided in this docket, supporting RMP Exhibit 1, Excel tab “UT
Depr Study” column Z, the “Utah Accrual Adjustment,” reflects the adjustment that
will be made to offset actual annual depreciation expense. This adjustment was
calculated using a 43.5042% System Generation (“SG”) allocation factor from the
Utah December 2017 Results of Operations report. If the SG allocation factor were to
increase for Utah in a future results of operations, the amount of actual depreciation
expense would not equal the adjustment to depreciation expense as calculated in the
18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.4

workpapers. A similar difference would happen if Utah’s SG allocation factor were to
decrease.
c. No. The Company has calculated this adjustment based on projected balances as of
December 31, 2020. This is consistent with the Company’s calculation and approval
of the depreciation rates used in the depreciation study filed in this docket.
d. Yes.
e. Please see OCS Data Response 3.4c.
f. The amount included in filing is assumed to be the final Utah Accrual Adjustment
and will not be updated until the Company’s next depreciation study filing.
18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.5

OCS Data Request 3.5

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 27 - 30,
which states: “The STEP Depreciation Funds will be used to offset depreciation expense
and reduce Utah’s share of the plant’s current net book value of the Qualified Thermal
Plant units listed in Table 1 below, to the extent possible, in the order listed.” (underline
added) Additionally, lines 40 – 42 state: “To buy down the Qualifying Thermal Plants,
the Company reflected an offset as a STEP Adjustment or Tax Settlement Adjustment to
the estimated December 31, 2020 net book value and calculated annual depreciation
amount of the revised work paper supporting Exhibit RMP__(SRM-1).” (underline
added) Is it the Company’s proposal that the actual Utah Accrual Adjustments to be used
in the next rate case be based on the amounts calculated in the Second Supplemental
Filing, or will the amounts be recalculated at the time of the next rate case to reflect: a)
updated projections of the December 31, 2020 net book values; and b)
updated projection of the December 31, 2020 STEP fund balance? Please explain your
response.

Response to OCS Data Request 3.5

The Company is proposing to use the amounts calculated in the Second Supplemental
Filing for the actual Utah Accrual Adjustments in the next rate case. Consistent with the
treatment in a depreciation study filing, where the plant balances are projected forward
and used to develop a depreciation rate, the plant balances are not recalculated upon a
rate case filing. The Company will be updating to the actual STEP fund balance to ensure
the appropriate funds are available for the acceleration of the Qualified Thermal Plants.

18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.6

OCS Data Request 3.6

Paragraph 47 of the Stipulation in Docket 17-035-69 indicates, in part, that “The Parties
further agree that the available STEP Depreciation Funds on December 31, 2020 will be
used to accelerate depreciation and reduce the Total Utah Balance of the Qualifying
Thermal Plant units listed…” Please confirm that at the time of the next rate case, the
Company will reduce the amount included in rate base for the Utah balance of the
Qualifying Thermal Plants by the amount of STEP funds projected to be available as of
December 31, 2020. If not confirmed, explain in detail why not.

Response to OCS Data Request 3.6

The Company confirms that the rate base will reflect reduced Utah balances of the
Qualifying Thermal Plants by the amount of STEP funds applied towards the accelerated
depreciation of the plants as of December 31, 2020.

18-035-36 / Rocky Mountain Power
January 3, 2019
OCS Data Request 3.7

OCS Data Request 3.7

Refer to the Second Supplemental Testimony of Steven R. McDougal, lines 43 - 45,
which indicates that the Utah-allocated share was calculated based on the December 2017
ROO Utah SG factor of 43.5042%.
a. Please provide the actual Utah SG factor based on the December results of operations
for 2013 through 2016.
b. Please provide the current Utah SG factor.
c. Please provide the Company’s current best projection of the Utah SG factor as of
December for the years 2018 through 2025.

Confidential Response to OCS Data Request 3.7

a. Please see the below:
Year Utah SG factor
2013 43.0745%
2014 43.3300%
2015 43.7438%
2016 43.0182%

b. The Utah SG allocation factor for June 2018 Result of Operations is 43.2964%.
c. Please see the confidential table below:
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Confidential information is provided subject to Public Service Commission of Utah Rule
746-1-602 and 746-1-603.