20070824Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
RECEIVED
"f\
....
l\ ; I,
iJ\) nu'J ,.... I
UT!
~~:
f~S) d~j.;r;,\~S10N
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
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-O7-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on
August 10 2007, submits the following comments.
BACKGROUND
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 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.
The Company states these expenses are presently being paid from personal funds of the owners
of the Company.
STAFF COMMENTS AUGUST 24, 2007
Hydro Turbine Failure
On June 10 2007 the Company s 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 of the diesel generator.
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 (fY $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.
In its Application the Company states that it expects to operate using the diesel generator
for at least another 40 days (beyond July 26). The Company estimates an additional generator
rental cost of $6 000 and fuel costs of $3 080. The exact costs will be unknown until such time
as the hydro turbine is restored to service.
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.
STAFF COMMENTS AUGUST 24, 2007
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.
ST AFF REVIEW AND RECOMMENDATIONS
Staff has reviewed the Company s Application and recommends that the Commission
approve deferred accounting treatment for Atlanta Power s extraordinary costs to operate diesel
generation as proposed in its Application. Consistent with Commission practice, no carrying
charge on the deferred amounts should be earned.
Once it was known that the turbine was severely damaged and that repairs would require
a long period of time, the Commission Staff strongly encouraged the Company to purchase a
backup diesel generator to get the Company through the repair period and to be available in
Atlanta as a backup to address future outages. Although it has taken longer than Staff hoped, we
are informed that the Company 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, the purchase has
resulted in additional capital investment by the Company. The Company has not requested a
deferral of these costs at this time and Staff recommends that ratemaking treatment of this
investment be addressed in a later filing.
The deferral of the costs as requested in the Application acknowledges the extraordinary
nature of these costs and allows these costs to be deferred as an appropriate cost for future
ratemaking treatment. A deferral order in the case does not limit the right of Staff to audit
question and challenge the appropriateness, reasonableness and prudence of any costs deferred
as this sort of review is critical to protect ratepayers. This type of review is expected to include
review of sufficiently detailed supporting documentation provided by the Company when it
seeks and justifies recovery of these costs in a subsequent filing. Staff s review at that time will
also include obtaining and inspecting the accounts and records from the Company as should be
maintained for a regulated utility, including revenues, expenses, capitalized costs and other
related items.
STAFF COMMENTS AUGUST 24, 2007
Staff s other area of concern has been Atlanta Power s annual reports. Annual reports are
required by Idaho Code ~ 61-405. Atlanta Power 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 contained 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 the Staff and a private consultant to finalize
these reports. Staff is informed that the filing of these reports is imminent. Staff has also been
informed that an Application for rate relief will immediately follow the filing of the reports. In
fact, Staff has been further informed that a final order approving cost recovery will be required to
obtain a loan to pay for turbine repairs before the turbine can be obtained from Yankes and
returned to service.
Respectfully submitted this '1 day of August 2007.
Scott Wood ury
Deputy Attorney General
Technical Staff: Keith Hessing
Patricia Harms
i:/umisc/comments/atleO7. I swkhph
STAFF COMMENTS AUGUST 24, 2007
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 24TH DAY OF AUGUST 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. ATL-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
ISRAEL RA Y
PRESIDENT
ATLANTA POWER COMPANY
11140 CHICKEN DINNER ROAD
CALDWELL ID 83607
ROBERT SMITH
UTILITY CONSULTANT
2209 N BRYSON RD
BOISE ID 83713
SECRE
CERTIFICATE OF SERVICE