20061030_1717.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOVAN E. WALKER
DATE:OCTOBER 27,2006
SUBJECT:IDAHO POWER'S APPLICATION FOR AN ACCOUNTING ORDER
REGARDING AMERICAN FALLS REPLACEMENT DAM REFUNDING
BONDS - CASE NO. IPC-06-
On September 7, 2006, Idaho Power Company filed an Application seeking an
accounting order for authority to amortize the principal balance owed on American Falls
Replacement Dam Refunding Bonds (the Bonds) over the remaining term of the Bonds and
operating license of the American Falls Dam. On October 5 , 2006, the Commission issued Order
No. 30142 requesting that interested persons file comments regarding the Application no later
than October 25 2006. Only the Commission Staff filed comments and it recommended that the
Commission approve the Company s Application.
THE APPLICATION
According to the Company s Application, in April 2000 the Company refinanced the
Bonds to a variable rate, interest-only mode. The principal amount of $19 885 000 is due in full
in February 2025, the same time that the Company s operating license expires at the American
Falls Dam. The interest on the Bonds is currently being paid monthly and expensed to Water for
Power (Account 536). The principal balance is currently recorded as a liability (Account
224200) with a corresponding deferred debit (Account 186727) in the same account.
Idaho Power states that since refinancing the Bonds in 2000 it has not amortized the
principal amount and has charged only the interest payments to the Water for Power expense.
The Company states that as a result, Idaho customers have only been paying the interest portion
of the debt since the 2003 general rate case (IPC-03-13). While this has resulted in lower
DECISION MEMORANDUM
overall rates in the short term, the principal balance and carrying charge will come due in the
future, affecting rates.
The Company proposes that the deferred debit be amortized over the remaining life
of the Bonds and the license. The Application states that by amortizing the deferred asset over
the remaining lives of the Bonds and license (i., 2025), current retail customers receiving the
benefits of this facility would fund the recovery of the principal portion just as they are currently
funding the interest portion.The Company proposes amortizing the $19 885 000 in equal
monthly amounts beginning January 1 , 2006 through January 31 , 2025. This will result in an
additional $1 042 008.72 annual O&M expense for the years 2006 through 2024, and one
month's amortization of $86 834.06 in 2025 before the Bonds mature February 2025. The
annual expense would be included in the next general rate case test year.
ST AFF COMMENTS
Staff reviewed the Company s Application as well as any Application and Orders
regarding the Bonds dating back to 1976. Staff recommends that the proposed amortization
the Bonds, as well as the proposed transaction to record the principal amount of the Bonds and
the current accounts and entries to record interest expenses is reasonable. Staff recommends that
the Commission approve the Company s request.
COMMISSION DECISION
Does the Commission wish to approve the Company s request for the proposed
accounting order to modify the accounting treatment for the American Falls Replacement Dam
Refunding Bonds and amortize the principal balance owed on the Bonds over the remaining term
of the Bonds?
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C(/
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Donovan E. Walker
M:IPC-O6-19 dw2
DECISION MEMORANDUM