20070829final_order_no_30417.pdf

Office of the Secretary
Service Date
August 29, 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF ATLANTA POWER COMPANY, INC.
FOR AN ACCOUNTING ORDER
AUTHORIZING THE DEFERRAL OF
EXTRAORDINARY EXPENSES
ASSOCIATED WITH THE FAILURE OF
APPLICANT'S HYDROELECTRIC
TURBINE
CASE NO. ATL-07-
ORDER NO. 30417
On August 1 , 2007, Atlanta Power Company (Atlanta Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting an Order
authorizing it to defer on its financial accounting records increased operating costs associated
with the failure of its hydroelectric turbine. The Company contends that the expenses are
extraordinary in nature and well beyond its ability to pay from internally generated revenues.
These expenses are presently being paid from personal funds ofthe owners ofthe Company.
Hydro Turbine Failure
The Company reports that in early June 2007 its turbine at the Kirby Dam on the
Middle Fork of the Boise River failed. In order to provide continued service to customers, the
Company arranged to rent a diesel generator. The diesel generator was installed and has been
providing service since June 16, 2007. Due to the excessive cost of providing service in this
manner, the generator is currently operating only 12 hours per day - six hours in the morning and
six hours in the evening.
The Company reports that it has taken the turbine to Yanke Machine Shop in Boise
for repair. Yanke Machine Shop estimates the repair cost will be approximately $60 000 and has
informed the Company it cannot complete the repairs to the turbine before the last week in
August 2007. Therefore, the Company will continue to experience the extraordinary expenses
associated with operation of the diesel generator.
Extraordinary Costs
As of July 26, 2007, the Company states that it has incurred the following
extraordinary costs associated with the operation of the diesel generator.
Rent - 400 Hours ~ $12.50/Hr
Diesel Fuel - (2 200 gallons)
ORDER NO. 30417
000.
180.
Electric Panel - (Connect to grid)
Gen Set repair - (Water pump)
Battery, Oil & Coolant
Total to Date
741.00
168.
168.
$12 257.
The Company states that it has on hand an inventory of approximately 700 gallons of
diesel fuel and that the average hourly fuel consumption is approximately 3.75 gallons per hour.
With at least 40 days of additional diesel generation expected before the hydro turbine can
resume operation, the Company anticipates additional fuel costs to exceed $3 080. Additional
rent expense is expected to be in excess of $6 000. The exact costs will be unknown until the
hydro turbine is restored to service. The Company expects to exceed the 12 hours per day of
operation to meet the needs ofthe Atlanta community for special occasions.
Order Authorizing Deferral of Expenses
Atlanta Power is not seeking any recovery of its costs at this time. The Company is
requesting an Order from the Commission authorizing the Company to establish a deferred
expense account on its books of financial record. The Company proposes to record all of its
extraordinary costs associated with the operation of the diesel generator in this deferral account.
The Company will make application to the Commission in the future and propose a method of
recovery of these costs, once they are known, together with the final costs on repair of the hydro
turbine. The Company contends that deferred accounting treatment for regulatory purposes is an
appropriate, just and reasonable means of providing the Company an opportunity to seek
recovery of the extraordinary costs it is experiencing due to the unexpected failure of the
Company s hydro turbine.
On August 10, 2007, the Commission issued Notices of Application and Modified
Procedure in Case No. ATL-07-01 and established a deadline for filing written comments of
August 24, 2007. Comments were filed by Commission Staff and two of the Company
customers. The Commission Staff recommends that the Company s Application and request for
an accounting order be approved. The customers question the fairness of being required to pay
for these expenses given the rates paid. One customer recommends prior to any approval that an
audit of the Company s books be conducted to determine whether the Company has invested
prior income wisely. The customer believes that customers have been providing the Company
with additional funds since 1988 for the future repair and maintenance needs ofthe Company.
ORDER NO. 30417
Staff in its comments notes that the Company since filing its Application has
purchased a diesel powered backup generator that is now or soon will be supplying the electrical
needs of Atlanta Power customers. While this acquisition should reduce generator rental costs
during the remainder of the repair period, Staff notes that the purchase has resulted in additional
capital investment by the Company. The Company has not requested accounting treatment of
these costs at this time and Staff recommends that ratemaking treatment of this investment be
addressed in a later filing.
The granting of a deferral order in this case, Staff notes, does not limit Staff s right to
audit, question or challenge the appropriateness, reasonableness and prudence of any cost to be
deferred, as this sort of review is critical to protect ratepayers. This type of review is expected
by Staff to include review of sufficiently detailed supporting documentation provided by the
Company when it seeks recovery of these costs in a subsequent filing. Staffs review at that time
will include obtaining and inspecting the Company s accounts and records, including revenues
expenses, capitalized costs and related items.
An additional area of concern noted by Staff is Atlanta Power s annual reports.
Annual reports are required by Idaho Code ~ 61-405. The Company s 2004, 2005 and 2006
Annual Reports are overdue. Without such reports, it is difficult for Staff to understand the
financial condition of the Company. Staff informed the Company in mid-June that the
information obtained in these annual reports is essential to the processing of any request for rate
relief including an emergency surcharge. The Company has been working with Staff and a
private consultant to finalize these reports. Staff is informed that the filing of these reports is
imminent and that an application for rate relief will immediately follow the filing of the reports.
Staff has been further informed that a Commission Order approving cost recovery will be
required to obtain a loan to pay for turbine repairs before the turbine can be obtained from Yanke
Machine Shop and returned to service.
Commission Findings
The Commission has reviewed the filings of record in Case No. ATL-07-
including the comments and recommendations of Commission Staff and the Company
customers. Atlanta Power has requested an Order authorizing the Company to defer on its
financial accounting records the extraordinary expenses and increased operating costs associated
with the failure of its hydroelectric turbine. The Commission finds it reasonable to grant the
ORDER NO. 30417
requested accounting order authorizing the Company to defer these costs in a separate account
for review. We expect the Company to include supporting documentation in any request for
related rate relief and assure the customers that its records will be audited. We further expect the
Company to bring itself current in the filing of its annual reports without delay. Idaho Code
61-405.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Atlanta Power
Company, an electric utility, and the issues presented in Case No. ATL-07-01 pursuant to the
authority granted in Idaho Code, Title 61 , and the Commission s Rules of Procedure, IDAPA
31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby authorize Atlanta Power Company to
defer on its financial accounting records the extraordinary expenses and increased operating
costs associated with the failure of its hydroelectric turbine.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. 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. 30417
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 'fJ~
day of August 2007.
MARSHA H. SMITH, COMMISSIONER
~~D--~
MACK A. REDFORD, COMMISSIONER
ATTEST:
~~~
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Barbara Barrows
Assistant Commission Secretary
bls/O:ATL-07-01 sw
ORDER NO. 30417