20061120_1737.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:NOVEMBER 16,2006
SUBJECT:CASE NO. IPC-06-20 (Idaho Power)
REQUEST FOR AN ACCOUNTING
TREATMENT OF DSM PROGRAMS
ORDER REGARDING
Application
On September 11 , 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) for an accounting order
authorizing the Company to track its transactions for Demand Side Management (DSM)
programs by implementing supplemental accounting treatment for its Energy Efficiency Rider.
As reflected in the Company s Application, since the 2002 approval of the Energy
Efficiency Rider (Rider) by the Commission in Order No. 29026, DSM programs have been an
integral part of the Company s operations.On May 13, 2005, in Order No. 29784, the
Commission approved an increase in the funding and program expenditures associated with the
Rider by authorizing the collection of 1.5% of customers' base revenues.
According to Generally Accepted Accounting Principles (GAAP), Statement of
Financial Accounting Concept (SFAC) No. 6, ~~ 70, 78-, 215 , money collected and expended
as part of a company s standard business needs to be reflected on the company s income
statement.
Presently Idaho Power utilizes the following accounting entries to track rider funds:
1. As funding is received from customers, the following transaction is made
to record cash received and set up the obligation to spend the money in
the future on specific programs funded through the Energy Efficiency
Rider:
DECISION MEMORANDUM
Dr. Account 131000 - Cash
Cr. Account 254201 - Regulatory Liability
2. As DSM program expenditures are made, the following transaction
made to record cash paid and reduce the liability account:
Dr. Account 254201 - Regulatory Liability
Cr. Account 131000 - Cash
These accounting entries, the Company contends, accurately track DSM-related regulatory
liabilities by recording all transaction activity exclusively through the Company s balance sheet
accounts.
The Company in this Application, however, in addition to continuing the above
mentioned balance sheet accounting entries, to be consistent with GAAP standards, proposes to
implement an automatic "monthly voucher" to parallel the balance sheet activity in the
Company s income statement. At the end of each month, the Company would make a set of
accounting entries to recognize the expenditures made in serving the regulatory obligation along
with an equal, offsetting entry to recognize the proceeds from Energy Efficiency Rider funds.
To accomplish this objective, the proposed accounting entries are:
Dr. Account 908.xxx - Customer Service Operating Expense
Cr. Account 456.xxx - Other Operating Revenue
Because the incoming and outgoing dollars recognized in the Income statement
subaccounts will be of equal amounts, the net result of the Company s net income will be zero.
Idaho Power contends therefore that there are no current economic tax liability changes or any
other net financial effects from the inclusion of these income statement accounting entries.
However, for external reporting purposes, the accounting trail of specific DSM related funding
and expenditures will be much easier to track through income statement detail rather than relying
solely on cumulative balance sheet activity.
In summary, the Company states that it is not proposing to change its current balance
sheet accounting procedures regarding Energy Efficiency Rider funding. The Company seeks
only to make parallel accounting entries to the income statement in an attempt to more closely
comply with GAAP standards and auditing efficiencies. If the Company s proposed accounting
entries are approved, it states that there will be no effect on the Company s net income. Nor, it
states, are there any ratemaking implications associated with its proposal.
DECISION MEMORANDUM
Comments
On September 28 2006, the Commission issued Notices of Application and Modified
Procedure in Case No. IPC-06-20. The deadline for filing comments was November 1 2006.
The Commission Staff was the only party to file comments. Staff recommends approval of the
Application and proposed accounting changes.
Staff conducted an audit of the Company s current accounting treatment of DSM to
determine how the Company accounts for DSM expenditures now and how the proposed
accounting treatment will be used to track expenditures in the future. Staff is confident that the
Company-proposed subaccounts and adjustment methodology for rate cases will provide the
ability to ensure that any expenses associated with the DSM rider programs or funding will not
be commingled or receive double recovery for ratemaking purposes. Staff is confident that the
proposed DSM expenditure bookkeeping and accounting changes requested by Idaho Power will
provide the Company with the ability to be consistent with GAAP accounting requirements. It
will also allow parties to accurately track DSM rider revenues, expenditures and related
regulatory liabilities. The proposed changes in accounting treatment, Staff agrees, will have no
impact on the Company s net income and will make it easier to track the DSM detail in the
income statement.
COMMISSION DECISION
Idaho Power in Case No. IPC-06-20 has requested an accounting order authorizing
proposed treatment of DSM programs. The Company is not proposing to change its current
balance sheet accounting procedures regarding Energy Efficiency Rider funding. The Company
seeks to make only parallel accounting entries to the income statement in an attempt to more
closely comply with GAAP standards and auditing efficiencies. If the Company s proposed
accounting entries are approved, there will be no effect on the Company s net income. Nor, as
the Company states, are there any ratemaking implications associated with its proposal. Staff
recommends that the Company s Application be approved. Does the Commission agree?
Scott Woodbury
blslM:IPC-O6-20 sw2
DECISION MEMORANDUM