20020621Order No 29059.pdf

Office of the Secretary
Service Date
June 21, 2002
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE REQUEST OF
ATLANTA POWER COMPANY TO ISSUE A
PROMISSORY NOTE IN THE AMOUNT OF
$34,000
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CASE NO. ATL-E-02-1

ORDER NO. 29059

On May 23, 2002, Atlanta Power Company requested authority to execute a
Promissory Note in the amount of $34,000 payable to its counsel, Givens Pursley LLP. The
purpose of the note is to pay Atlanta Power’s past due amounts for legal services provided by
Givens Pursley. The law firm maintains that Atlanta Power currently owes it approximately
$69,000 (including interest) for legal services and costs undertaken to acquire a Federal Energy
Regulatory Commission (FERC) license for the utility’s hydroelectric facility located at Atlanta,
Idaho. The utility and its counsel assert that the note will allow immediate payment to Givens
Pursley and represents a discount on the outstanding bill by waiving the accrued interest on the
past due amounts. After reviewing the draft Promissory Note and the Staff’s comments, we
approve the Note as conditioned below.
THE PROMISSORY NOTE
Under the terms of the draft Promissory Note, Atlanta Power shall pay approximately
24 monthly installments of principal and interest in the amount of approximately $1,636.46 until
the Note’s maturity date of May 1, 2004. The interest rate on the Note will be 14%. See Note ¶
1.3. The Note also provides that Atlanta Power has the right to make prepayments at any time
without penalty. Id. at ¶ 2. All payments made under the Note will first apply to fees and
charges (including late charges, attorneys fees and costs), then to interest, and then to principal.
Id. at ¶ 1.3.
The Promissory Note is to be secured by a separate “Lock Box Agreement” to be
executed by the utility and the payee. Id. at ¶ 9. A Lock Box Agreement is an agreement that
generally prescribes the order or priority of expense payments made from the utility’s accounts
receivable and makes those payments. The Lock Box would become effective only upon a
default in making the monthly payment of principal or interest when due. The Lock Box
Agreement would provide that customer payments due Atlanta Power be paid into the Lock Box.
ORDER NO. 29059 1
All disbursements from the Lock Box would be made pursuant to pre-set provisions of the Lock
Box Agreement. Although the exact terms of the Lock Box have not been reduced to writing,
the Staff, the utility and the broker that will arrange the resale did agree that the Lock Box (if
necessary) would operate in the following manner.
(1) First, a $2,000 reserve will be maintained in each and every month for the
purpose of renting and operating a back-up generator (if needed by the
utility);

(2) Next, an additional $2000 reserve will be maintained in each and every
month for the purpose of making the payments due (by the due date) for
applicable insurance, property taxes, Forest Service special use permits,
IPUC fees, and the monthly minimum income tax payable by Atlanta
Power;

(3) Next, pay $100 monthly toward the Water Resources Loan amount
outstanding;

(4) Next, pay $555.10 monthly toward the Energy Loan amount outstanding
(loan for water diversion bladder);

(5) Next, pay the monthly installment on the Promissory Note by the due
date established. The amount may vary but is estimated to be
approximately $1,636.46; and

(6) The remaining balance of the Lock Box funds be available to Atlanta
Power for payment of other operating expenses.

STAFF COMMENTS
After reviewing the Promissory Note and the suggested terms for the Lock Box, Staff
asserted that the estimated monthly payment of $1,636.46 is reasonable if Atlanta Power
appropriately focuses on monthly cash management. Based upon Atlanta Power’s monthly cash
flow during calendar year 2001, Staff determined that the minimum revenues it received in any
one month during the year was approximately $4,700. The Staff’s audit showed that the
Company’s total annual revenues during calendar year 2001 were $63,794. Consequently, Staff
determined that there was sufficient monthly cash flow to meet the estimated monthly payment
contemplated in the Promissory Note.
Staff also recommended that the 14% interest rate of the Note not be utilized to
establish customer rates. The Staff asserted that Atlanta Power’s return on equity should be the
maximum rate allowed for ratemaking purposes. The Staff also recommended that paragraph 9
ORDER NO. 29059 2
of the Promissory Note be modified to reflect when the Lock Box Agreement would become
effective. Staff recommended that the Lock Box Agreement not be used except when the utility
defaulted on the Note. As previously mentioned, the Staff also agreed to the proposed Lock Box
provisions discussed above. The Staff proposed that the following language be added to
paragraph 9 of the Promissory Note:
At the time of noticing a default, the Idaho Public Utilities Commission will
be simultaneously notified of the default. This notice must be provided at
least fourteen (14) days in advance of the establishment of the Lock Box
terms. The terms for payment from the Lock Box shall be approved by the
IPUC prior to implementation.

Finally, the Staff also recommended that copies of all executed versions of the Promissory Note
and any and all renegotiated or resale contracts for the Note be provided to the Commission.
DISCUSSION
Having reviewed the draft Promissory Note and the comments of the Commission
Staff, we approve Atlanta Power’s issuance of a Promissory Note in the amount of $34,000 as
conditioned below. We agree with the Staff’s recommendation that the Note’s 14% interest rate
will not be utilized to establish the Company’s revenue requirement. In addition, the
Commission shall require that copies of all executed versions of the Promissory Note and any
and all renegotiated or resale contracts for the Note be provided to the Commission.
We also agree with the Staff, utility and the broker’s recommendations that the Lock
Box not be utilized except upon default of the Note. Although we agree in principle with the six
recommended provisions of the Lock Box, there may be other provisions which are warranted to
address circumstances that may arise during the term of the Promissory Note. Consequently, we
direct that Paragraph No. 9 of the Promissory Note be modified to read as follows:
This Note is secured by a Lock Box Agreement, to be separately executed by
the Maker and Payee. The Lock Box Agreement shall not become
operational except under default as set forth in Paragraph No. 4 above. If a
default occurs, the holder shall notify the Maker and the Idaho Public
Utilities Commission in writing. The Commission’s notice shall be sent to
PO Box 83720, Boise, Idaho 83720-0074. This notice to the Maker and the
Commission shall be provided at least fourteen (14) days in advance of the
establishment of the Lock Box terms. At a minimum, the terms of the Lock
Box shall contain the six (6) provisions contained in Order No. 29059 at p. 2.

ORDER NO. 29059 3
In summary, we find it reasonable for Atlanta Power to execute a Promissory Note in
the amount of $34,000 as modified above. Use of the Promissory Note benefits both Atlanta
Power and its counsel. Atlanta Power benefits by not having to pay the interest charge on past
due amounts. Likewise, counsel benefits by the immediate payment of the $34,000 and the
subsequent holder of the Note benefits by receiving payments including interest under the Note.
The Commission further finds that Atlanta Power has sufficient monthly cash flow to meet
estimated Note payments of $1,636.46 per month. Finally, the Commission finds it reasonable
to defer implementation of the Lock Box mechanism until a default has been noticed. The Lock
Box shall contain at a minimum the six terms and conditions proposed by Staff, the utility and
the broker as set out above.
O R D E R
IT IS HEREBY ORDERED that Atlanta Power Company’s request to execute a
Promissory Note in the amount $34,000 is approved as conditioned in the body of this Order.
This Order shall not be effective until the Company has paid the filing fee of $50.
IT IS FURTHER ORDERED that the Promissory Note’s interest rate of 14% will not
be used to establish the Company’s revenue requirement or customer rates.
IT IS FURTHER ORDERED that the Commission’s review and approval of this
matter shall not be construed to obligate the State of Idaho to pay or guarantee in any manner
whatsoever any security authorized, issued, assumed or guaranteed under the provisions of Idaho
Code, Title 61, Chapter 9 (Idaho Code §§ 61-901 et seq.).
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. ATL-E-02-1
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this Case No. ATL-E-02-1. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626.
ORDER NO. 29059 4
ORDER NO. 29059 5
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of June 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

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