20070517Comments.pdf

DONOV AN E. WALKER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
O BOX 83720
BOISE, IDAHO 83720-0074
PHONE: [phone]
FAX: [phone]
IDAHO BARNO. 5921
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
BONNEVILLE POWER ADMINISTRATION
FOR A DECLARATORY ORDER
DISCLAIMING JURISDICTION.COMMENTS OF THE
COMMISSION STAFF
CASE NO. BPA-O7-
On April 25, 2007 , the Commission issued a Notice of Petition and Modified
Procedure in this matter. Order No. 30308. In its Order, the Commission sought comments on
Bonneville Power Administration Petition seeking a Declaratory Order disclaiming
Commission jurisdiction and regulation in a proposed lease financing arrangement for the
construction of various electric transmission facilities within the State of Idaho.
comments are submitted pursuant to the Commission s Order No. 30308.
These
BP A's PETITION
On April 6, 2007 , Bonneville Power Administration (BP A) Petitioned the
Commission for a Declaratory Order disclaiming Commission jurisdiction and regulation of the
Owner/Lessor in a proposed lease financing arrangement for the construction of various electric
transmission facilities within the State of Idaho. BP A states that it is a federal power marketing
administration within the u.S. Department of Energy that markets wholesale electrical power
and operates transmission facilities in the West and Pacific Northwest. Petition at 2. BP A
proposes to enter into a lease financing arrangement under which it would acquire, construct
and/or install various, and as of yet undetermined, transmission facilities (Facilities) for the
purposes of enhancing transmission grid reliability, ensuring compliance with mandatory
STAFF COMMENTS MAY 16 2007
reliability standards, enabling the integration of new generation, and managing grid congestion.
Id. Some of the Facilities will be located in Idaho and all Facilities will be used exclusively by
BP A to provide interstate transmission service and will not be available for use for bundled retail
service. Id.
Construction of the Facilities will be financed by a special purpose entity (SPE) that
is the Owner/Lessor. !d. The Facilities will be owned by the SPE, Northwest Infrastructure
Financing Corporation II, which will be formed expressly for the purpose of arranging for the
financing of the Facilities. Id. at 4. All of the capital stock of the SPE will be owned by JH
Holdings, acting solely as trustee under a trust agreement between J.H. Management Corporation
(JHM) as grantor, and JH Holdings Corporation (JHH) as trustee. Id. All of the capital stock of
JHM and JHH will be owned by the 1960 Trust, an independent charitable support organization
operated for the benefit of Harvard University. !d. at 4-5. The SPE will not engage in any
business other than arranging for the acquisition and financing of the Facilities. !d. at 5.
The SPE will finance the construction of the Facilities through one or more loans.
1'he SPE's sole source of funds to repay the loan(s) will be payments made by BPA under the
lease of the Facilities to BP A. Id. The SPA will lease its undivided interest in each of the
Facilities to BP A at the time each such Facility is acquired, installed, and/or constructed. !d.
The term of the lease will be seven (7) years from the date that the master lease and the first lease
commitment is executed. Id. BP A will agree in the lease to operate and maintain the Facilities
in the same manner as it operates and maintains its other transmission facilities. Id. The SPE
will have no operating responsibilities or control rights with respect to the Facilities. Id. A draft
of the lease agreement was filed with the Petition.
BP A requests that the Commission issue a Declaratory Order disclaiming jurisdiction
over the Owner/Lessor SPE in the proposed lease financing for the construction of the
transmission facilities. !d. at 8.
STAFF COMMENTS
The Commission is vested with the power and jurisdiction to supervise and regulate
every public utility in the state and to do all things necessary to carry out the spirit and intent of
the provisions of Title 61 Idaho Code. Idaho Code 9 61-501. Idaho Code 9 61-129 defines the
term "public utility" and states that entities meeting that definition will be subject to the
jurisdiction, control, and regulation of the Commission.
STAFF COMMENTS MAY 16 2007
The term public utility" when used in this act includes every.
. .
electrical corporation. . . as those terms are defined in this chapter and
each thereof is hereby declared to be a public utility and to be subject to
the jurisdiction, control and regulation of the commission and the
provisions of this act: provided, that the term "public utility" as used in
this act shall cover cases both where the service is performed and the
commodity delivered directly to the public or some portion thereof
and where the service is performed or the commodity delivered to any
corporation or corporations, or any person or persons, who in turn, either
directly or indirectly or mediately or immediately, performs the services
or delivers such commodity to or for the public or some portion
thereof.
Idaho Code 961-129 (emphasis added).
The term electrical corporation when used in this act includes every
corporation or person, their lessees, trustees, receivers or trustees
appointed by any court whatsoever, owning, controlling, operating or
managing any electric plant for compensation within this state. . .
Idaho Code 9 61-119 (emphasis added). A corporation does not include a municipal corporation
a mutual nonprofit or cooperative, or any other public utility organized and operated for service
at cost and not for profit. Idaho Code 9 61-104.
The term electric plant" when used in this act includes all real estate
fixtures and personal property, owned, controlled, operated or managedin connection with or to facilitate the production, generation
transmission, delivery or furnishing of electricity. . .
Idaho Code 9 61-118 (emphasis added).
Consequently, an electrical corporation (as defined above) is a public utility subject
to the jurisdiction, control, and regulation of the Commission where the service is performed and
the commodity delivered to the public or some portion thereof for compensation within the state
ofIdaho. !daho Code 9 61-129.
There have been a number of cases dealing with the Commission s jurisdiction and
!daho Code 961-129. In Humbird Lumber v. Idaho PUC 39 Idaho 505 228 P. 271 (1924), the
Idaho Supreme Court explained that the test for determining whether a company was a public
utility depends on whether the company has held itself out as ready, able and willing to serve the
public. In that case, the Lumber Company had constructed and installed complete water systems
at its plants for use in its operations and for fire protection. Humbird Lumber 39 Idaho 505 228
P. 271 272 (1924). Northern Pacific Railway Company had its own depots, roundhouses, cattle
STAFF COMMENTS MAY 16 2007
pens, office, and other facilities adjoining to the plants of the Lumber Company. Id. The
Railroad had its own water system installed, and received its water from the Sandpoint Water &
Light Company, a public utility. Id. The Railroad discontinued its service from Sandpoint
Water & Light and connected its system with that of the Lumber Company. Id. The Lumber
Company thereafter supplied the Railroad with water under contract. Id. It was stipulated that
the Lumber Company never furnished water to any other person, company, or corporation, did
not intend to engage in the utility business, and did not offer to and did not intend to offer to
engage in the utility business in any manner whatsoever. !d. The Court concluded that: (1) the
evidence did not justify the conclusion that the lumber company was "operating" its water
system "for compensation" because the primary purpose was always to provide fire protection
for its sawmills, and the supply to the Railroad was incidental to that primary purpose; and (2)
furnishing water to one person or corporation, under contract, does not constitute a delivery of
water to the public or some portion thereof. !d.228 P. at 272-73.
In another early Idaho case, our Supreme Court observed that a corporation becomes
a utility "only when and to the extent that the business of such corporation becomes devoted to a
public use.Stoehr v. Natatorium Company, 34 Idaho 217, 221 , 200 P. 132 (1921). In this latter
case, a water corporation sold surplus water to a limited number of residents in Boise. Even
though the company received compensation for the sale of its water, it did not serve all
customers that applied. See also Public Utilities Commission v. Natatorium Company, 36 Idaho
287 , 211 P. 533 (1922). Similar to the stipulation in Humbird Lumber it was stipulated in
Natatorium that:
The said hot water was not developed and acquired for the purpose of
sale to the general public, and neither the Natatorium Company nor any
of its predecessors in interest have ever held it open to use or purchase by
the general public but at all times since its original discovery it was, and
now is, intended for use primarily for the said natatorium for sanitary and
bathing purposes.
34 Idaho at 218 200 P. at 133. The primary purpose of the Natatorium s water was to supply
itself with natural hot springs water for bathing and sanitary service, and like Humbird Lumber
the limited service was never intended or held out to be a utility. The people who received hot
water at their homes for heating did not rely upon the Natatorium s service for potable, drinking
water.
STAFF COMMENTS MAY 16 2007
The Commission has applied these Idaho Supreme Court precedents in a similar
declaratory ruling context in the case of LLP Power Generation, LLC Case No. GNR-01-
Order No. 28793 (July 25 , 2001).In that case, the Commission ruled that the lease of
locomotive engines to third parties so that they could generate electricity within Idaho for sale on
the wholesale market did not subject the lessor to the Commission s regulatory authority
pursuant to Idaho Code Title 61. Order No. 28793.
Applying the facts set out in the Petition to the relevant sections of Title 61, as well
as the holdings of the cases noted above, leads the Staff to conclude that BP A's proposed lease
financing arrangement for the construction of various electric transmission facilities within the
State of Idaho does not subject the Owner/Lessor, special purpose entity (SPE), Northwest
Infrastructure Financing Corporation II, to the Commission s jurisdiction and regulation. The
SPE's leasing of transmission facilities to BP A does not constitute the provision of utility service
to the public. According to the Petition, the SPE will be formed expressly for the purpose of
arranging for the financing of the transmission facilities, and will lease its undivided interest in
the transmission facilities to BP A. BP A will operate and maintain the Facilities in the same
manner as it operates and maintains its other transmission facilities, and the SPE will have no
operating responsibilities or control rights with respect to the Facilities.Additionally, the
Facilities will be used exclusively by BP A to provide interstate transmission service and will not
be available for use for bundled retail service. Petition at 2. Consequently, Staff believes, based
upon the representations made in the Petition, the SPE, Owner/Lessor, would not be subject to
the Commission s regulation.
In summary, based upon the facts presented in BPA's Petition, the Staff believes that
the SPE's leasing oftransmission facilities to BPA does not subject the SPE to the Commission
regulatory jurisdiction under Idaho Code, Title 61. The Staff further recommends that the
requested Declaratory Order be limited to the facts as set forth in BP A's Petition.
Respectively submitted this ~day of May 2007.
cf) #l--
ONOV AN E. WALKER
Deputy Attorney General
Technical Staff: Terri Carlock
i:umisc/commentsfbpaeO7.1dwtc
STAFF COMMENTS MAY 16 2007
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF MAY 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. BPA-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
ROBB F. ROBERTS
BP A / GENERAL COUNSEL
ROUTING LC-
PO BOX 3621
PORTLAND OR 97232
RANDALL C BUDGE
RACINE OLSON ET AL
PO BOX 1391
POCATELLO ID 83204
SECRETARY
CERTIFICATE OF SERVICE