20070808Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
RANDY LOBB
DATE:AUGUST 2, 2007
SUBJECT:CASE NO. A TL-07-01 (Atlanta Power)
REQUEST FOR ACCOUNTING ORDER
On August 2007, Atlanta Power Company (Atlanta Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting an Order
authorizing the Company 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 of the owners of the Company.
Hydro Turbine Failure
In early June 2007 the Company reports that its turbine at the Kirby Dam on the
Middle Fork of the Boise River failed. The Company, in order to provide continued service to
customers, arranged for the rental of 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 only operating 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 has estimated the cost to repair the turbine 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 ofthe diesel generator.
DECISION MEMORANDUM AUGUST 2, 2007
Extraordinary Costs
As of July 26, 2007, the Company states that it has experienced the following
extraordinary costs associated with the operation of the diesel generator.
Rent - 400 Hours (ill $12.50/Hr
Diesel Fuel - (2 200 gallons)
Electric Panel - (Connect to grid)
Gen Set repair - (Water pump)
Battery, Oil & Coolant
Total to Date
000.
180.
741.00
168.
168.
$12 257.
The Company states that it currently has on hand an inventory of approximately 700
gallons of diesel fuel. Therefore, the Company calculates the average hourly fuel consumption
to be approximately 3.75 gallons per hour (2 200 gallons minus 700 gallons = 1 500
gallons/$400 = 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
cost to exceed $3 080 (40 days x 12 hours = 480 hours x 3.75 gallons = 1 800 gallons less 700
gallon inventory = 1 100 gallons (ill $2.80 per gallon = $3 080). Additional Rent Expense
expected to be in excess of $6 000 ($12.50 x 480 hours). The exact cost will be unknown until
such time as the hydro turbine is restored to service. The Company expects on occasion to
exceed the 12 hours per day of operation to meet the needs of the 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.
DECISION MEMORANDUM AUGUST 2, 2007
Atlanta Power requests that the Commission consider the matter under Modified
Procedure and enter its Order authorizing the deferral ofthe Company s extraordinary costs.
COMMISSION DECISION
Atlanta Power Company has requested an accounting Order authorizing deferral of
expenses associated with the failure of its hydroelectric turbine. The Company requests that this
matter be processed pursuant to Modified Procedure, i., by written submission rather than by
hearing. Reference Commission Rules of Procedure IDAPA 31.01.01.201-204. It is Staffs
intention to file comments regarding the Company s Application. Does the Commission concur
with the recommended procedure?
Scott Woodbury
M:ATL-O7-01 sw
DECISION MEMORANDUM AUGUST 2, 2007