20070604final_order_no_30335.pdf

Office of the Secretary
Service Date
June 4, 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
BONNEVILLE POWER ADMINISTRATION
FOR A DECLARATORY ORDER
DISCLAIMING JURISDICTION ORDER NO. 30335
CASE NO. BP A-07-
On April 6, 2007, Bonneville Power Administration (BPA) 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. On April 25 , 2007, the Commission issued a
Notice of Petition and Modified Procedure seeking comments on this matter. Order No. 30308.
Commission Staff was the only party to file comments. With this Order the Commission grants
the Petition as more fully set forth below.
BP PETITION
On April 6, 2007, Bonneville Power Administration (BPA) 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
reliability standards, enabling the integration of new generation, and managing grid congestion.
fd. 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. fd.
Construction of the Facilities will be financed by a special purpose entity (SPE) that
is the Owner Lessor. fd. 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. fd. at 4. All of the capital stock of the SPE will be owned by JH
ORDER NO. 30335
Holdings, acting solely as trustee under a trust agreement between J .H. Management Corporation
(JHM) as grantor, and JH Holdings Corporation (JHH) as trustee. fd. 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. fd. at 4-5. The SPE will not engage in any
business other than arranging for the acquisition and financing of the Facilities. fd. at 5.
The SPE will finance the construction of the Facilities through one or more loans.
The 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. fd. The SPE 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. fd.
The term of the lease will be seven years from the date that the master lease and the first lease
commitment are executed. fd. 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. fd. The SPE
will have no operating responsibilities or control rights with respect to the Facilities. fd. 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. fd. at 8.
STAFF COMMENTS
On May 16, 2007, the Commission Staff submitted comments in this matter. Based
upon the facts presented in BPA's Petition, the Staff concluded that the SPE's leasing of
transmission facilities to BPA does not subject the SPE to the Commission s regulatory
jurisdiction. The Staff noted that an electrical corporation 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 of
Idaho. fdaho Code ~ 61-129.
Relying on Idaho Supreme Court cases, Idaho Code, and a prior Commission Order
regarding the leasing of locomotive engines for the generation of electricity, the Staff concluded
that the SPE's leasing of transmission facilities to BP A does not constitute the provision of
utility service to the "public." The Staff observed that 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
ORDER NO. 30335
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.
DISCUSSION/FINDINGS
The Commission has jurisdiction over this matter by virtue of fdaho Code ~ 61-501
and Utah Power Light v. fdaho PUC 112 Idaho 10, 730 P.2d 930 (1986)(finding PUC had
jurisdiction to determine by declaratory order which regulated electrical utility had the right to be
the sole supplier of electricity to electric customer under the Uniform Declaratory Judgments
Act fdaho Code ~~ 10-1201 et seq.
The Commission finds that BP A satisfies the technical requirements of Rule 101.
The Petition in this case does not require that the Commission resolve issues of a factual nature.
Rather, the Commission must simply determine, based upon the factual scenario posed in the
Petition, whether BPA's proposed lease financing arrangement for the construction of various
electric transmission facilities within the State of Idaho subjects the Owner Lessor, SPE
Northwest Infrastructure Financing Corporation II, to the Commission s jurisdiction and
regulation under Title 61 of the Idaho Code.
The term "electrical corporation" includes every corporation or person owning,
controlling, operating or managing any electric plant for compensation within this state. fdaho
Code ~ 61-119. 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.fdaho Code ~ 61-104.The term "electrical plant" includes all property owned
controlled, operated or managed in connection with or to facilitate the production, generation
transmission, delivery or furnishing of electricity. fdaho Code ~ 61-118. fdaho Code ~ 61-129
defines the term "public utility" and declares that entities meeting that definition will be subject
to the jurisdiction, control, and regulation of the Commission. An electrical corporation (as
defined above) is a public utility where: (1) utility service is performed and/or the commodity
delivered to the public or some portion thereof, and (2) it is provided for compensation. fdaho
Code ~ 61-129.
ORDER NO. 30335
There have been a number of cases dealing with the Commission s jurisdiction and
the public utility definition from Idaho Code ~ 61-129. In Humbird Lumber v. Idaho PUC
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 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.
fd. 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. Id. 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. Id.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 ~ll times since its original discovery it was, and now is
ORDER NO. 30335
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.
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-OI-
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, the Commission concludes 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, based upon the
representations made in the Petition the SPE Owner Lessor, would not be subject to the
Commission s jurisdiction and regulation under Title 61 ofldaho Code.
ORDER
IT IS HEREBY ORDERED that BP A's Petition for a declaratory order is granted.
After reviewing the particular facts of this case, as presented in the Petition, the Commission
ORDER NO. 30335
concludes 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 under Title 61 of Idaho Code.
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 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 ~ 61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /-.f ti--'
day of June 2007.
~J;L J~-
ARSHA H. SMITH, COMMISSIONER
ATTEST:
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tfap D. Jewell i
C~mmission Secretary
O:BPA-07-01 dw2
ORDER NO. 30335