20080623_2278.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:WELDON STUTZMAN
DEPUTY ATTORNEY GENERAL
DATE:JUNE 16, 2008
SUBJECT:CASE NO. P AC-08-
P ACIFICORP'S REQUEST FOR AN ACCOUNTING ORDER
AUTHORIZING THE COMPANY TO ESTABLISH A
REGULATORY ASSET
On April 11 , 2008, Rocky Mountain Power a division of PacifiCorp filed an
Application for an accounting order authorizing the Company to establish a regulatory asset for a
payment made to the owner of a generation facility. The $8.7 million payment gives PacifiCorp
an exclusive opportunity to negotiate for the purchase of all tangible and intangible assets
contracts , permits and other rights associated with the generation facility. The payment also is a
deposit toward the total purchase price.
On May I , 2008, the Commission issued a Notice of Application and Notice of
Modified Procedure to establish a period for interested parties to file comments.
comments were filed only by Commission Staff.
Written
The Company s request in this filing is limited to the exclusivity payment. The
Company did not ask for approval of any term or condition relating to the transaction, or for
recognition that the acquisition of the plant is reasonable and prudent. The Company will record
the exclusivity payment in Account 182.3 (Other Regulatory Assets). The total purchase price
will ultimately be credited to "Electric Plant in Service" and will be included in rates only after
all approvals are completed and the proper rate treatment has been determined by the
Commission. Until the amount is included in the "Electric Plant in Service" account it will
remain on the Company s books as a regulatory asset.The Commission has previously
DECISION MEMORANDUM
determined that an account similar to this should not accrue any interest. (See Case No. A VU-
07-, Order No. 30492).
The Company maintains that acqmnng the facility is consistent with its current
generating portfolio, its IRP and the industry s general direction of new generation.The
prudency of the acquisition will be part of a more extensive review of the generating facility
acquisition prior to the investment being included in rate base in a future rate case. Allowing the
Company to defer the exclusivity payment permits the total cost of the facility and the prudency
of all the costs to be reviewed by the Commission in a future rate proceeding.
STAFF RECOMMENDATION
Staff recommends approval of Rocky Mountain Power Company s Application for an
accounting order authorizing the Company to establish a regulatory asset for a payment made for
the right to an exclusive period to negotiate with a third party for the purchase of a generating
facility subject to the following conditions and reservations: That the cost of the exclusivity
payment be booked to a regulatory asset account and remain separate from the Electric Plant in
Service account until the facility is owned by the Company, and that the regulatory asset not
accrue any interest or carrying charges.
The Commission should note in its Order that the exclusivity payment will not be
considered in a ratemaking proceeding until such time as the total cost of the facility is
considered in a future rate case, and that the Commission reserves the right to review the
prudency and proper ratemaking treatment for the total cost of the facility when the Company
proposes these costs be included in rates.
COMMISSION DECISION
Should Rocky Mountain Power s Application for authorization to establish a
regulatory asset for an $8.7 million payment toward acquisition of a generating facility be
approved, with the conditions that the payment be booked to a regulatory asset account and
remain separate from the Electric Plant in Service account until the facility is owned by the
Company, and that the regulatory asset not accrue interest on carrying charges?
--L-,-
~eldon . Stutzman
Deputy Attorney General
bls/M:PAC-O8-02 ws2
DECISION MEMORANDUM