20061002_1693.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOVAN E. WALKER
DATE:SEPTEMBER 29, 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. The Company requests that its Application be
processed by Modified Procedure.
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
overall rates in the short term, the principal balance and carrying charge will come due in the
future, effecting 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
DECISION MEMORANDUM
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 1 , 2025. The
annual expense would be included in the next general rate case test year.
ST AFF RECOMMENDATION
Staff recommends processing the Company s Application by Modified Procedure
with a comment deadline of October 25 , 2006.
COMMISSION DECISION
Does the Commission wish to process this case by Modified Procedure with
comments due on October 25 20067
DECISION MEMORANDUM