20030620_512.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:PATRICIA HARMS
WELDON STUTZMAN
DATE:JUNE 18, 2003
RE:CASE NO. PAC-03-8 (PacifiCorp)
ACCOUNTING ORDER REGARDING TREATMENT OF CERTAIN
ASSET RETIREMENT OBLIGATIONS
On May 27 2003 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with the Idaho Public Utilities Commission (Commission)
seeking an Accounting Order authorizing the Company to record regulatory assets and/or
liabilities associated with implementation of Statement of Financial Accounting Standards
(SFAS) 143 (Accounting for Asset Retirement Obligations). On the same date, the Company
also filed applications with the state commissions of Oregon, Utah, Washington and Wyoming.
This change, the Company states, will not affect the current level of asset removal cost included
in the Company s revenue requirement through depreciation expense. The Company further
states that nothing in the Application is intended to request any approval regarding future
ratemaking treatment. Pursuant to Idaho Code ~ 61-524, the Commission is empowered to
establish a system of accounts to be kept by the public utilities subject to its jurisdiction.
THE APPLICATION
Under the accounting method currently used by the Company for both financial
reporting and ratemaking purposes, the cost of removing a tangible long-lived asset at retirement
is included in the calculation of depreciation rates as negative salvage and is recovered over the
useful life of the asset. Under this method, the accrued removal cost is included in Account 108
DECISION MEMORANDUM - 1 -JUNE 18 2003
Accumulated Depreciation. Under SFAS 143 , entities are required to recognize and account for
certain asset retirement obligations in a manner different from the way that PacifiCorp and other
public utilities have traditionally recognized and accounted for such costs. Specifically, if a
legally enforceable asset retirement obligation ("ARO"), as defined by SFAS 143 is deemed to
exist, an entity must measure and record the liability for the ARO on its books. SF AS 143 was
effective for financial statements issued for fiscal years beginning after June 15, 2002.
The accounting changes proposed in the Application are supported by a series of exhibits
identifying the proposed journal entries the Company believes are needed for compliance with
SFAS 143. Compliance with this accounting standard affects the Company as a whole and
therefore affects other jurisdictions in which the Company operates. Staff recommends that the
Commission issue a notice of application in Case No. PAC-03-8 and establish an intervention
deadline of July 21 , 2003. Staff further recommends that the Application be processed under
Modified Procedure, i., by written submission rather than by hearing. Reference Commission
Rules of Procedure, IDAPA 31.01.01.201- 204.
In order to appropriately review the Application, Staff recommends that the Commission
wait to establish further deadlines for filing in this case until Staff has received additional
information from the Company. Staff will also determine that individual Staff recommendations
in the various states do not create accounting anomalies.
Commission Decision
Staff recommends that the Commission issue a notice of application in Case No. PAC-
03-8 and establish an intervention deadline of July 21 , 2003. Staff further recommends that the
Application be processed under Modified Procedure pursuant to IDAPA 31.01.01.201-204. Staff
also recommends that the Commission wait to establish further deadlines for filing in this case
until Staff has received additional information from the Company and has coordinated with other
PacifiCorp states.
Does the Commission find the proposed procedure acceptable?
G~ ~ t\, ~ IVY\A
Patricia Harms
I:\transfer\fas 143decmemo
DECISION MEMORANDUM - 2 -JUNE 18 2003