20080912final_order_no_30638.pdf

Office ofthe Secretary
Service Date
September 12 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION FOR
AUTHORITY TO DEFER COLSTRIP
LAWSUIT SETTLEMENT PAYMENT
CASE NO. A VU-08-
ORDER NO. 30638
On May 22, 2008, A vista Corporation ("A vista" or "Company ) filed an Application
with the Idaho Public Utilities Commission ("Commission ) seeking an accounting order
authorizing the Company to defer payment of its portion of a lawsuit settlement payment
originating from litigation involving the Colstrip Generating Project in Colstrip, Montana.
Pursuant to Idaho Code 9 61-524, the Commission is empowered to establish a system of
accounts to be kept by public utilities subject to its jurisdiction. On July 9, 2008, the
Commission issued a Notice of Application and Modified Procedure. The Commission Staff
was the only party to submit comments regarding Avista s Application.
THE APPLICATION
In May 2003 , various parties (all of which are residents or businesses of Colstrip,
Montana) filed a consolidated complaint against the owners of the Colstrip Generating Project
(Colstrip) in Montana District Court. A vista states that it owns a 15 percent interest in Units 3 &
4 of the Colstrip Generating Project. The plaintiffs alleged damages to buildings as a result of
rising groundwater, as well as damages from contaminated waters leaking from the holding
ponds of Colstrip. The plaintiffs sought compensatory and punitive damages for abatement
unjust enrichment, trespass, property diminution, and emotional distress.
A vista estimates that its share of the lawsuit settlement payment, absent any recovery
from applicable insurance carriers, is $2 084 443. Avista claims that it could potentially recover
approximately $734 035 under the relevant insurance policies and thereby reduce its out-of-
pocket expense to approximately $1 350 408. The defendant, Colstrip Generating Project, is
currently seeking indemnification from its insurance carriers. A vista does not speculate as to the
possible outcome.
Avista asserts that the settlement represents a favorable resolution of this matter
because the settlement: (1) offers a final resolution of more than five years of disputed litigation;
(2) represents a substantial reduction of Avista s potential exposure for "excessive compensatory
ORDER NO. 30638
and punitive damages ; (3) facilitates Avista s negotiation with the Montana Department of
Environmental Quality concerning appropriate remediation efforts at the Colstrip facility; and
(4) assists the defendants in limiting any future claims by providing them with "rights of first
refusal with respect to plaintiffs ' properties." Application at
A vista requests an "order allowing for the deferral of the settlement payment." /d.
4. The Company states that it will more fully "address the prudency and recovery of the
settlement payment, and propose a method of recovery of the settlement paymentL)" minus "any
reimbursement from insurance carriers " in its next general rate case, or any other proceeding the
Commission deems appropriate. /d.
The Company specifically requests the "authority to defer the Colstrip settlement
payment in Account 186 - Miscellaneous Deferred Debits.Id. The Company states that the
settlement payment will be allocated to the Washington and Idaho jurisdictions based on the
current Production/Transmission allocation of 64.59% to Washington and 35.41 % to Idaho, and
placed in separate Washington and Idaho 186-accounts.Id. The Company would apply the
typical customer deposit rate to Idaho s share of the deferrals. Id.
COMMENTS
Staff reviewed Avista s Application for an order authorizing a deferral of the Colstrip
Lawsuit Settlement Payment and recommends that the Company be permitted to defer its share
of the settlement payment. Staff believes that the Application is appropriate because absent an
accounting order the Company would most likely not be allowed recovery for past expenses in
its next general rate case. However, Staff does not support Avista s request for a carrying charge
on the Idaho share of the deferrals.
Staff notes that approving the Company s request for a deferral "would not change
rates currently charged to customers.Staff Comments at 3. The deferral amount would be
diverted into Account 186 - Miscellaneous Deferred Debits and allocated to the Idaho and
Washington jurisdictions at the production/transmission allocation percentage of 64.59% for
Washington and 35.41% for Idaho. Id. The Idaho jurisdictional share of the $2 084,443
settlement payment would be approximately $738 101 , less any insurance proceeds. Id. Avista
estimates that it could recover approximately $259 922 under relevant insurance policies
lowering the Idaho total to approximately $478 179. /d. A vista included the Colstrip project in
ORDER NO. 30638
the rate base and expenses upon which A vista s revenue requirement and resulting rates were
calculated. Id.; see also Case No. A VU - E-04-0 1.
As mentioned above, Staff does not support "Avista s proposed accounting
treatment" that would allow the Company to "accrue interest on the Idaho share of the deferrals
at the customer deposit rate.Id. at 3. Staff believes that "granting the Company deferral of
expenses that would likely otherwise be unrecoverable is sufficient relief to the Company.Id.
at 3-
Thus, Staff recommended that the Commission authorize the following:
1. Deferral of the settlement payment into Account 186 - MiscellaneousDeferred Debits without interest;
2. Recording any insurance proceeds received by the Company in Account
186- Miscellaneous Deferred Debits, reducing the total amount of thesettlement payment;
3. Recording the amounts in Account 186 - Miscellaneous Deferred Debits
according to the aforementioned Idaho and Washingtonproduction/transmission jurisdictional allocation; and
4. Delaying any recovery for the amount of the deferral until the next general
rate case or other proceeding as the Commission deems appropriate.
CONCLUSIONS OF LAW
A vista Corporation is an electric corporation within the definition of Idaho Code
61-119, and a public utility within the definition of Idaho Code 9 61-129. The Idaho Public
Utilities Commission has jurisdiction over this matter pursuant to
Idaho Code 9 61-524 and
IDAPA 31.01.01.052.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings in Case No. A VU-08-
including Staffs comments. Avista s Application seeks an accounting order authorizing the
Company to defer payment of its portion of a lawsuit settlement payment and to institute a
carrying charge on Idaho s jurisdictional share of the settlement payment.
The Commission finds that a deferral of A vista s share of the lawsuit settlement
payment is appropriate because it preserves for a future decision whether A vista is entitled to a
recovery of the deferred amount. Without a deferral the Company could not later bring this issue
before the Commission.
ORDER NO. 30638
The treatment of regulatory assets (i., whether or not rates of return or carrying
charges are allowed on them) is subject to the discretion of the IPUC.
Idaho Power Company
Idaho State Tax Comm '141 Idaho 316, 323, 109 P .3d 170, 177 (2005). A carrying charge on
deferred accounts may be warranted in cases where the utility sought "an order authorizing
deferred accounting in advance of the expenditure, or the deferral account is related to
implementation of a program the Commission has ordered." Order No. 30235. Additionally, the
Commission must allow a just, fair and reasonable allowance for funds used during construction
or similar account to be accumulated, computed in accordance with generally accepted
accounting principles.Idaho Code 9 61-502A.
The Commission finds that Avista s decision to enter into the April 2008 Colstrip
Lawsuit Settlement Agreement was not preceded by an Application for an Order authorizing
deferred accounting treatment, nor was it in response to a Commission Order instructing the
Company to enter into said agreement. The settlement agreement does not relate to funds used
during construction. Thus, in accordance with its judicially affirmed discretionary authority over
carrying charges, the Commission finds that a carrying charge on the deferral of the Idaho
jurisdictional share of the lawsuit settlement payment is not warranted.
ORDER
IT IS HEREBY ORDERED that the Application of Avista Corporation seeking an
accounting order authorizing the Company to defer its portion of a lawsuit settlement payment
originating from litigation involving the Colstrip Generating Project in Colstrip, Montana is
granted.
IT IS FURTHER ORDERED that Avista Corporation s request to institute a carrying
charge on the Idaho jurisdictional share of the deferral amount is denied.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) 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. Within seven (7) days
after any person has petitioned for reconsideration any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30638
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /;l.
1'/..
day of September 2008.
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,t ~--.-Q. .l\
MACK A. REDFO
MARSHA H. SMITH, COMMISSIONER
ATTEST:~(J~
Je 'D. Jewell
Commission Secretary
O:A VU-O8-np2
ORDER NO. 30638