20030410Notice of Proposed Order.pdf

Office of the Secretary
Service Date
April 10 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION
OF ATLANTA POWER COMPANY'S RATESAND CUSTOMER SERVICE. CASE NO. ATL-O3-
NOTICE OF PROPOSED ORDER
NOTICE OF COMMENT
DEADLINE
On September 11 , 2000, the Commission received a petition from residents of
Atlanta, Idaho, enumerating their concerns about the electric service being provided by Atlanta
Power Company (Atlanta Power; Company). The petition requested "a formal investigation into
the reliability of electrical service for the Atlanta townsite." In October 2000, Staff proposed to
audit the Company, compile outage information, identify potential improvements and
associated costs and survey customers concerning their desire to improve service reliability and
the amount they are willing to pay to do so.The Commission approved Staff s
recommendation that the customer complaints initially be processed on an informal basis.
During the subsequent period Staff worked with the Company and its customers
which resulted in several improvements and a report detailing Staff s findings. The report
together with the financial analysis and customer survey upon which the report is based, was
brought before the Commission during its March 10, 2003 decision meeting.
Pursuant to the Commission s Procedural Rule 312, the Commission may issue a
Proposed Order in any proceeding and provide an opportunity for parties to file written
comments. The Commission now issues this Proposed Order and will accept written comments
from interested persons until May 1 , 2003. The Commission may revise this Proposed Order in
response to any written comments, and may adopt it as a final Order. See IDAPA 31.01.01.312.
SUMMARY OF STAFF'S INVESTIGATION
Staffs investigation focused on three main areas of concern: (1) the Company
ability to promptly repair the system when an outage occurs; (2) a perceived lack of
communication with customers; and (3) the need for a backup generator. During the two-year
investigation, two of the three identified areas of concern have been improved, to wit: a third
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person who lives in Atlanta is now available to assist with system problems and a local telephone
number (864-2228) has been established to keep customers informed of planned outages and
progress on repairs when the system is out of service. Staff recommended no formal
Commission action in these areas.
Backup Generator
Atlanta Power Company is a backcountry power system with a single source of
hydro-generation. Because it is not interconnected with any other electric supply system, the
entire system is without power if the turbine or generator fails. When rates were last established
in 1993, the capital and operating costs of a backup generator were included. Sometime later the
fully depreciated backup generator quit working and has not been repaired or replaced.
Atlanta Power s position is that the backup generator is old, inefficient, and not
economical to repair. Since it quit working, Atlanta Power rents a backup generator from Boise
(an all-day trip) when an outage will take more than a day to repair. Atlanta Power believes that
if the system can be repaired or parts ordered and received in a comparable amount of time, it is
a better use of the Company s time and money to work on repairing the system. This policy,
coupled with unplanned outages that are difficult to diagnose and replacement parts that are not
stocked in the Boise area, can leave Atlanta Power customers without power for a few days at a
time.
Atlanta Power has offered to provide an on-site backup generator if the costs can be
recovered from its customers. Atlanta Power has even provided cost estimates for backup
generation that were below those obtained by Commission Staff. However, the audit reveals that
revenues from current rates are not enough to reimburse the Company for the costs of having a
Company-owned, on-site backup generator.
Staff recommended that Atlanta Power continue to bring in a leased generator when a
multi-day outage is identified rather than purchase a new one for several reasons. First, a survey
of the 65 Atlanta Power customers indicates that only one of the 50 responding customers is
willing to pay substantially higher rates to have Atlanta Power acquire an on-site backup
generator. Second, nearly a third of Atlanta Power customers have already invested in personal
backup generators. Finally, a Company-owned backup generator cannot provide electricity to all
customers under all outage scenarios.
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Staff Audit
Using the Company s estimated 1999 capital structure, embedded cost of debt, and a
10% cost of equity, Staff calculated a 9.24% overall rate of return based upon the information
provided by the Company. In the context of a 1999 test year, Staff estimated that the Company
is over-earning by approximately $3 000 1 or 5.6%. The test year rate base does not include
diesel backup generators because they were determined to not be used and useful in previous
revIews.
On June 4, 1993, the Commission in Case No. ATL-93-1 directed the Company
to implement, and utilize proper utility accounting procedures and recordkeeping, including, but
not limited to, the preparation and retention of adequate source documentation.Order No.
24925. Staff noted that the Company has not complied with this Order and still needs to improve
its recordkeeping. Because Atlanta Power last submitted an annual report for calendar year
1997, the Company is not in compliance with Idaho Code ~ 61-405, which requires such reports
to be submitted before April 15 of each year. Staff recommends that all past due annual reports
be filed by June 15 2003.
The Company has also established a pattern of paying obligations in an untimely
fashion as noted in Section X, page 11 of Attachment A to the report. This practice incurs
additional interest charges and late fees that are not the responsibility of the ratepayers, increases
the Company s unpaid obligations, and diminishes Company cash. None of these late fees are
incorporated into the revenue requirement estimated in Staff s analysis.
October 2002, the Company paid off two loans that were in arrears.
In September and
On May 9, 2002, the Federal Energy Regulatory Commission (FERC) issued a 30-
year license for the Atlanta Power Station Hydroelectric Project. The Order issuing the license
placed a number of requirements on the licensee. However, to Staffs knowledge, the costs
associated with the licensing conditions to be borne by the Company are not currently known
and measurable. Finally, Staff proposed to work with the Company to develop a plan to
complete reasonable maintenance items.
1 For more infonnation about revenues, expenses, and rate base, see the fITst two paragraphs of Section XI, page 12
of Attachment A to Staff's report.
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COMMISSION DISCUSSION AND FINDINGS
After reviewing the investigative report, financial analysis and customer survey
submitted by Staff, the Commission finds that considerable progress has already been made to
address the concerns identified in the September 2000 customer petition. We appreciate the
efforts of Atlanta Power Company and Staff to make a third person available to repair system
problems and establish a local telephone number to keep customers apprised of outage
information. Given Atlanta Power s isolated service territory and single source of generation
these measures will provide significant customer benefit at minimal cost.
The customers ' petition also requested the Commission investigate the ability of
Atlanta Power to provide consistent, quality power. We find that Atlanta Power customers are
sometimes without power for several days at a time in part because it is not economical to repair
the backup generator. To remedy this reliability concern, Atlanta Power has offered to provide
an on-site backup generator if the costs can be recovered from its customers. However, Staffs
financial audit reveals that revenues from current rates are not enough to reimburse the Company
for the costs of having a Company-owned, on-site backup generator. The Commission is
reluctant to direct Atlanta Power to purchase a new backup generator when Staffs customer
survey indicates that customers are not willing to bear any substantial rate increase to cover its
cost and many customers already have their own back-up generators.Under these
circumstances, the Commission finds that Atlanta Power should continue to bring in a leased
generator when a multi-day outage is identified rather than purchase a new one. To minimize the
likelihood of future unplanned outages, the Commission also directs Staff and the Company to
develop a plan to complete reasonable maintenance items.
While Atlanta Power has struggled with recordkeeping and annual reporting issues
for the last decade, the Commission finds that the Company should rectify the issues identified in
Staffs financial audit as soon as possible. We further find that Atlanta Power should use the
Staff Audit Report for 1999 as the basis for filing future annual reports. Generally speaking, the
annual reports of regulated utilities are kept on file at the Commission so that Staff, the Idaho
Tax Commission, and the public at large can access them for a variety of purposes. Because the
Company has not filed annual reports since 1998, we direct Atlanta Power to file its past due
annual reports for 2000, 2001 , and 2002 by June 15 , 2003. Although the Commission does not
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excuse non-compliance with annual reporting requirements, we do not see the value of requiring
the Company to file annual reports for the years prior to Staffs audit (e., 1998 and 1999).
NOTICE OF COMMENT DEADLINES
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
exceptions with respect to this Proposed Order is Thursday, May , 2003.
YOU ARE FURTHER NOTIFIED that written comments concerning this Proposed
Order must be mailed to the Idaho Public Utilities Commission and Atlanta Power Company at
the following addresses:
COMMISSION SECRETARY
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
LYNN STEVENSON
ATLANTA POWER CONWANY
319 RIVER ROAD
BLISS, ill 83314
Street Address for Express Mail:
472 W WASHINGTON ST
BOISE, ID 83702-5983
These comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.state.id.. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document.
YOU ARE FURTHER NOTIFIED that we make our findings as a Proposed Order.
Interested persons may file written comments concerning the Proposed Order no later than
Thursday, May 1, 2003. Atlanta Power Company shall have until Thursday, May 8, 2003 to
file a written response to these comments. At the conclusion of these comment periods we will
consider all comments filed and issue a final Order.
YOU ARE FURTHER NOTIFIED that the Staff Report, financial analysis and
customer survey referenced in this Order can be viewed during regular business hours at the
Idaho Public Utilities Commission, 472 West Washington Street, Boise, Idaho.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Atlanta Power
Company, an electric utility, and the issues presented in this case pursuant to Idaho Code, Title
and the Commission Rules of Procedure IDAPA 31.01.01.000 seq.
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Issued by the Idaho Public Utilities Commission at Boise, Idaho this
""'"
day of April 2003.
ATTEST:
~~e
Commission Secretary
N:ATLE0301 Proposed Order
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MARSHA H. SMITH, COMMISSIONER