20070116_1795.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:CECELIA A. GASSNER
DATE:JANUARY 12,2007
SUBJECT:IDAHO POWER COMPANY'S APPLICATION FOR AN ACCOUNTING
ORDER TO COMPLY WITH SF AS 158 REGARDING TREATMENT OF
PENSION AND POSTRETIREMENT BENEFIT OBLIGATIONS, CASE
NO. IPC-06-
On December 18, 2006, Idaho Power Company ("Idaho Power" or "Company ) filed
an Application for an order authorizing the Company to record certain pension and
postretirement costs in accordance with certain recent changes implemented by the Financial
Accounting Standards Board (F ASB). This Commission has the jurisdiction over such request
pursuant to Idaho Code ~ 61-524.
THE APPLICATION
Idaho Power seeks an order authorizing the Company to: (1) record, as a regulatory
asset or regulatory liability, the cumulative financial impact resulting from the Company
implementation of Statement of Financial Accounting Standards (SF AS) 158, and (2) record on
an ongoing basis, as a regulatory asset or a regulatory liability, an amount equal to the changes in
the SF AS 158 related balances. The Company states that this will not materially affect the
current level of pension and postretirement costs or cost of capital calculations included in the
Company s revenue requirement.
The Company currently accounts for penSIOn and postretirement benefits in
accordance with SFAS Nos. 87, 88 , 106, and 132(R). SFAS 158 requires companies with at
least one employer defined benefit plan to (1) recognize that funded status of a benefit plan in its
statement of financial position, and (2) recognize as a component of other comprehensive
income, net of tax, the actuarial gains or losses and prior service costs or credits that arise during
DECISION MEMORANDUM
the period but are not recognized as components of net periodic benefit cost pursuant to SF
No. 87. SF AS 158 thus requires companies to recognize and account for pension and other
postretirement benefit plans differently than they have. These changes affect pension assets and
liabilities and other comprehensive income, but do not affect the company s income statement.
Other comprehensive income" is a component of equity that is used in general rate case to
determine Idaho Power s revenue requirement. Idaho Power states that unless the Application
approved, the changes demanded by SF AS 158 will affect the calculation of its revenue
requirement in future rate cases.
The Company states that it is ready to comply with SF AS 158. It further states that
this standard will affect capitalization ratios used by regulatory bodies, credit rating agencies
and covenants of debt financings. Thus, the Company seeks approval by this Commission to
record the effect of the adoption of the standard , allowing other comprehensive income to be
deferred as a regulatory asset or liability. The Company does not intend by this Application to
request any approval regarding future ratemaking treatment or to change the current cost
recovery of SF AS 87 or SF AS 106 expenses.
STAFF RECOMMENDATION
Staff recommends that the Company s Application be processed by Modified
Procedure with a twenty-one (21) day comment period. This should allow sufficient time for
interested parties to review the Company s Application and file their comments with the
Commission. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-.204.
COMMISSION DECISION
Does the Commission preliminarily find that the public interest may not require a
hearing to consider the issues presented in this case, and that this case is appropriate for
Modified Procedure pursuant to Commission Rules of Procedure 201 through 204?
Does the Commission approve of the recommended comment period?
" /
kn-L.A~
Cecelia A4assner
M:IPC-O6-
DECISION MEMORANDUM