20080813Idaho PUC Intervention and Comments.pdf

STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
VIA E-FILING
August 13 2008
Kimberly D. Bose, Secretary
Federal Energy Regulatory Commission
888 First Street N.
Washington, D.C. 20426
RE:Docket No. EF08-2011-000
Bonneville Power Administration 2008 Average System Cost Methodology
Dear Secretary Bose:
Pursuant the Commission s Notice of Filing issued July 23 , 2008, the Idaho Public Utilities
Commission ("Idaho PUC") submits its Notice of Intervention, Protest and Comments in the
above referenced case.
Sincerely,
!diLen
Deputy Attorney General
bls!N:FERC EFO8-2011-000 Bose
Contracts & Administrative Law Division, Idaho Public Utilities Commission
O. Box 83720, Boise, Idaho 83720-0074, Telephone: [phone], FAX: [phone], E-mail: IpuclQipuc.state.id.
Located at 472 West Washington St., Boise, Idaho 83702
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
IN THE MATTER OF
BONNEVILLE POWER ADMINISTRATION
Docket No. EF08-2011-000
NOTICE OF INTERVENTION, PROTEST, AND COMMENTS
OF THE IDAHO PUBLIC UTILITIES COMMISSION
The Idaho Public Utilities Commission ("Idaho PUC") files this Notice of Intervention
Partial Protest and Supporting Comments in response to the Federal Energy Regulatory
Commission s ("Commission July 23 , 2008 Notice of Filing of Bonneville Power
Administration s ("BPA") proposed Average System Cost Methodology (2008 ASCM), Docket
No. EF08-2011-000. Section 5(c)(7) of the Pacific Northwest Electric Power Planning and
Conservation Act ("Northwest Power Act" or "NP A") authorizes the Commission to review and
approve the proposed 2008 ASCM. 16 US.C. ~ 839c(c)(7).
I. COMMUNICATIONS
All pleadings, correspondence or communications related to this proceeding should
be addressed to the following persons:
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington
PO Box 83720
Boise, Idaho 83720-0074
Telephone: [phone]Fax: [phone]
E-mail: don.howell~puc.idaho.gov
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS
Lou Ann Westerfield, Policy Strategist
Idaho Public Utilities Commission
472 West Washington
PO Box 83720
Boise, Idaho 83720-0074
Telephone: [phone]Fax: [phone]
E-mail: louann.westerfield~puc.idaho.gov
Docket No. EF08-2011-000
II. NOTICE OF INTERVENTION
Pursuant to Rule 214 of the Commission s Rules of Practice and Procedure, 18 C.
~ 385.214(a)(2), the Idaho PUC hereby intervenes in the above-entitled matter. In addition to
our statutory consultation with BP A on March 27 , 2008, the Idaho PUC submitted initial
comments in the BPA proceeding, and submitted additional comments in response to BPA'
Draft Record of Decision in the underlying ASCM proceeding. BP A Final Record of Decision
(FROD) 1 at 15-16. The Idaho PUC also regulates the Idaho retail electric rates of Avista, Idaho
Power Company and PacifiCorp - all participating utilities in the ASCM and the Residential
Exchange Program.
III. PROTEST
A. Background
Section 5(c) of the Northwest Power Act allows regional electric utilities (including the
three investor-owned utilities (lOUs) of Avista, Idaho Power and PacifiCorp) to participate in the
Residential Exchange Program (REP). 16 US.C. ~ 839c(c). When it enacted the REP , Congress
intended to provide rate parity between the generally lower rates of BP A's preference customers
and the higher rates paid by residential and small farm customers of the IOUs. H.R. Report No.
96-976(1) ~ 5 at 60, 1980 U.A.N. 5989; FROD at 2-3. Congress recognized that the
exchange mechanism may not result in parity between BPA's PF Exchange rate and the retail
rates of eligible IOU customers
, "
but it should equalize the wholesale costs of the electric power
with a resulting benefit (to) the investor-owned utilities' customers.Id.
1 Hereinafter, BPA's Final Record of Decision will be denoted as FROD.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
The REP is the mechanism used to calculate the level of monetary benefits for the
exchanging utilities "2 e., the six regional IOUs in the Pacific Northwest: Avista, Idaho Power
Northwestern, PacifiCorp, Portland General Electric Company, and Puget Sound Energy. In its
transmittal letter, BP A explained that there are three components to the REP mechanism. First
there is the calculation of each utility s average system cost (ASC) using the approved ASC
methodology. The proposed 2008 ASCM is the subject matter of this docket (EF08-20 11-000).
Second, is the establishment of the PF Exchange rate in BPA's Section 7(i) rate proceeding (WP-
07 Supp.).3 Third, BP A and the exchanging utilities must negotiate new Residential Purchase
and Sales Agreements (RPSAs) containing the calculations for new REP benefits in BP A Docket
No. PS-4 Each of these three components are the subject of separate but concurrent BP
dockets. BPA intends to implement the new REP on October 1 2008. Transmittal Letter at 4-
In determining REP benefits, BP A first determines the ASC for each IOu. BP A then
compares the IOU's ASC with BPA's PF Exchange rate as established in BPA's Section 7(i) rate
proceeding. Generally, if the IOU's ASC is greater than the PF Exchange rate, then REP
benefits are paid to the IOu. The benefit amount is calculated by multiplying the difference
between the IOU'higher ASC and BPA'lower PF Exchange rate, by the IOU's residential and
small farm load. "For example, if a Utility had an ASC of $50/MWh and BPA's PF Exchange
rate was $30/MWh then the Utility would receive REP payments equal to the difference
2 FROD at 2.
3 In its transmittal letter dated July 7, 2008, BPA states that it "has developed a revised PF Exchange rate that BPA
will submit for interim approval effective October 1 2008." Transmittal Letter at 4 (emphasis added). However
BPA is not scheduled to issue its Final ROD in its rate proceeding (and establishing the new PF Exchange rate) until
September 22 2008. BPA Scheduling Order WP-07-HOO-I02 issued July 8, 2008.
4 Again, BP A states in its transmittal letter that it "has recently negotiated new RPSAs to be effective October I
2008." Transmittal Letter at 4 (emphasis added). As of this date, BPA has not issued its Record of Decision in its
RPSA docket (No. PS-6) or executed any new RPSAs.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
($20/MWh) multiplied by the Utility s residential and small farm load." FROD at 3. "The
exchange actually transfers no power to or from BP A because the 'exchange' is simply
accounting transaction: 'In practice, only dollars are exchanged, not electric power.
'"
FROD at
citing CP National Corp. v. BPA 928 F.2d 905 , 907 (9th Cir. 1991), quoting Public Utility
Commissioner of Oregon v. BPA 583 F.Supp. 752, 754 (D.Or. 1984).
B. The "Deemer" Mechanism
In addition to the three factors mentioned above, there is a fourth factor which determines
whether an IOU is eligible to receive benefits under the REP. The fourth factor is whether the
exchanging utility has a negative "deemer" balance. The deemer mechanism is a remnant of the
1981 RPSAs between BP A and three of the IOU s. Section 10 ("Election to Equalize Rates ) of
the respective RPSA for Avista, Idaho Power and Northwestern provided that when the IOU'
ASC was lower than the BP A PF Exchange rate, the IOU may elect to have its ASC "deemed
equal" to the PF rate.s In the Final ROD, BPA explains the deemer mechanism in the following
manner:
When the BPA PF Exchange rate is lower than a participating utility s ASC, BPA
pays the net cost to that Utility. However, when the PF Exchange rate is higher
than the (utility s) ASC, i.e., when the net cost of the exchange is negative, BP A
has previously provided the utility a unilateral right to "deem" its ASC equal to
the PF rate, so that no payment flows from the utility to BP
FROD at 3-4 (emphasis added).
BPA's characterization that an IOU may "'deem' its ASC equal to the PF rate" is
misleading. If read literally, an ASC (e.$30/MWh) that is "equal" to the PF Exchange rate
(e.$30/MWh) would result in no difference and no REP benefits. However, in practice, the
deemer mechanism calculates the actual difference between a utility s lower ASC and the higher
s The phrase "deemed equal" appears to be the source of the term "deemer.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
PF rate, and results in a "negative" deemer balance. For example, if an IOU's ASC is $25/MWh
and BP A's PF Exchange rate is $35/MWh, the utility would accumulate a negative balance of
$10IMWh, multiplied by the utility s residential and small farm load. As BP A stated in its
Federal Register notice and in its Final ROD, the accumulated (negative) deemer balances "must
be paid (to BPA) before the Utility can receive positive REP benefits." FROD at 4, 167; 73
Fed.Reg. at 7270, 7271 at n.4 (Feb. 7, 2008). BPA asserts that as of October 1 2007, Avista
alleged deemer balance was $99.3 million and Idaho Power s alleged deemer balance was
$245.36 million.
How did the utilities accumulate large deemer balances? As BP A explains in Section 2.
of its Final ROD , after BP A adopted and the Commission approved the 1984 ASCM, the ASCs
for both A vista and Idaho Power became lower than BP A's PF rate. After the changes to the
1984 ASCM, neither A vista nor Idaho Power received any REP benefits and they subsequently
suspended, then terminated their RPSAs. Because their ASCs were lower than BP A's PF rate
they accumulated negative deemer balances. FROD ~ 2.3 at 6-11. As mentioned, these two
utilities suspended their RPSAs, thereby suspending the accumulation of deemer "principal" in
1987/1988. Since that time, their respective deemer balances have increased for more than 20
years by the application of interest - simple interest for A vista and compound interest for Idaho
Power. 6
C. The Idaho PUC's Deemer Issue
The Idaho PUC raised the deemer issue during its consultation with BPA on March 27
2008, in its initial comments on the ASCM, and again in its comments addressing the Draft
6 Although BPA acknowledges in the WP-07 rate hearing that it follows the Commission s Uniform System of
Accounts in maintaining its financial books and records, the deemers have never been recorded in BPA's books and
accounts. WP-07 Tr. Vol. I, p. 98, 11.5-7; WP-07-ID-ICC-AT3.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
ROD. FROD at 16. The Idaho PUC urged BPA to eliminate the deemer mechanism from the
ASCM. Idaho PUC comments on the Draft ROD at 3. The Idaho PUC asserted that:
The proposed ASCM changes included in the Draft ROD are related and
interconnected to decisions and issues associated with the WP-07 Supplemental
Rate Case, as well as the proposed bridge and long-term (RPSA) contracts. We
understand the rationale for parallel proceedings on these issues, but are
concerned that addressing each matter in separate dockets may fail to recognize
the impact of decisions in one proceeding on issues in the other proceedings.
Specifically, the "deemer" issue remains a concern of the IPUC, and one that was
raised during the consultation process and in our comments on ASCM, but our
concern was not addressed in the Draft ROD. One of the decisions reflected in
the Draft ROD illustrates the relationship between this overlapping issue and the
decisions in the Draft ROD. In Section 4.1.8 of the Draft ROD, BP A recites a
comment filed in response to the appropriate consequences if a utility fails to file
an Appendix 1. BP A proposes that a failure to file an Appendix 1 will result in
BP A "the utility s ASC equal to the PF 1 exchange rate until the end of the
Exchange Period.Draft ROD Section 4.1.8 (Evaluation of Positions) at p. 33.
The commenter noted that suspending REP benefits "creates an alternative to
incurring a deemer balance should the utility anticipate that its ASC will drop
below the PF exchange rate during that period Id.
IPUC Comments on the Draft ROD at 3 (emphasis added).
BP A addressed our deemer concerns in Section 4.10.13 (Deemer Mechanism) of the
Final ROD. FROD at 67-68. There BPA stated that the "deemer mechanism is not established
in the ASCM, but instead is established in the RPSAs.
...
BP A respects the comments of the
IPUC on this issue and encourages the (Idaho PUC) to submit its comments on the deemer
mechanism in the RPSA forum." FROD at 168. BPA concluded that it "will not decide issues
regarding the deemer mechanism in this ASCM proceeding, but will address such issues in the
concurrent proceeding to develop RPSAs for exchanging utilities.Id.
BPA's decision not to address the deemer issue in the ASCM is unfortunate. As
delineated above, the ASC is one of the components necessary to determine whether an IOU is
eligible for long-term REP benefits. A change in the ASC or BPA's PF exchange rate that
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
results in an ASC lower than the PF rate, may involuntarily place the IOU in deemer status.
Thus, the only way to remedy the deemer issue is to address it consistently in this proceeding,
the upcoming WP-07 Supplemental rate proceeding, and the RPSAs. Otherwise, the deemer
issue will remain unresolved.
D. BPA Relies Upon the Deemer Mechanism to Decide Another Issue
Although BP A asserted that the deemer mechanism is not part of the ASCM , BP
nevertheless relied upon the deemer mechanism when it resolved another ASCM issue. In
Section 4.1.8 ofthe Final ROD, BPA noted Snohomish's concern that a utility s failure to timely
file its Appendix 1 , or file a deficient Appendix 1
, "
creates an alternative to incurring a deemer
balance should the utility anticipate that its ASC will drop below the PF Exchange rate during
that period." FROD at 34 (emphasis added). Snohomish recommended in its comments that the
appropriate consequence for a utility failing to file an Appendix 1 or filing a deficient Appendix
, should "result in termination of the RPSA for the term of the Agreement, provided that the
failure or deficiency is not corrected.Id.
In deciding the consequence of a utility failing to file an Appendix 1 , BP A stated:
Under the proposed ASCM, a Utility could fail to file an Appendix 1 in order to
avoid accumulating a deemer balance. This would be inappropriate.Snohomish' s
proposed solution, however, may not establish a proper remedy. If a utility were
required to terminate its RPSA, there is nothing that requires the termination to be
for the full term of the terminated RPSA. The Utility could later offer to sell
power to BPA at its ASC pursuant to Section 5(c) of the Northwest Power Act
and resume participation in the REP after the period in which it should have
accumulated a deemer balance Therefore, in order to address the problem, a
Utility s failure to timely file an Appendix 1 will result in a waiver of the Utility
right to participate in the ASC review proceeding to establish its ASc.
FROD at 34 (emphasis added).? Despite BPA's decision in Section 4.10.13 that the Idaho PUC'
deemer issues are more properly addressed in the RPSA proceeding, BP A relies upon the deemer
7 There is no mention in Section 4.1.8 ofIdaho s comments related to this section.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
issue to decide the filing issue set out above.8 It is unreasonable for BP A to decide an ASCM
issue based upon the apparent continuation of the deemer issue.
BP A also proposed a different resolution when a utility fails to file its Appendix 1 by
June 1 because the utility executed a RPSA after the Review Period or during a subsequent
Exchange Period. BP A decided that the remedy is to "set the Utility s ASC equal to the PF
Exchange rate until the end ofthe Exchange Period.FROD at 35 (emphasis added). BPA goes
on to explain that a utility making a late RPSA filing "will receive no benefits until the following
Exchange period begins.Id. The language "set the Utility s ASC equal to the PF Exchange
rate" is nearly identical to the deemer mechanism language used by BP A in this docket ("deem
its ASC equal to the PF rate ) and the 1981 RPSA provision (the utility "may elect to have its
(ASC) deemed equal to the (PF) rate
).
FROD at 4. It is not clear from the Final ROD or the
ASCM whether BP A intends for late filing utility's to accrue negative deemer balances when
BPA sets the ASC equal to the PF rate until the end of the Exchange Period. FROD at 35-
Atch A. ~ II.D.1 at 5. If BPA intends to continue the deemer mechanism by the use of this
language, this too is unreasonable and unlawful.
E. Legal Argument
There is nothing in the Northwest Power Act or its legislative history that authorizes the
deemer mechanism, i., where benefits flow in the opposite direction - from exchanging utilities
to BP A. Congress intended the REP to provide benefits the regional IOUs by reducing the
wholesale rate disparity between BPA's preference customers and IOU customers. FROD at 2;
1980 u.S.c.A.N. 5989 (p. 60). As consistently construed by the Ninth Circuit, the Northwest
8 Snohomish also asked BP A to confirm that utilities failing to execute an RPSA for the 2012-2028 period will be
precluded from participating in the REP for that period. Snohomish maintained that allowing utilities to exit and
enter the REP during 2012-2028 would "effectively eliminate any future deemer accounts." FROD at 34. BPA
responded that the deemer mechanism is to be resolved in the RPSA proceeding. Id.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-20 11-000
Power Act contemplates that BP A and the exchanging utilities would exchange when a utility
ASC was above BPA's PF rate. Portland General Electric Co. v. Bonneville Power Admin.
PGE'
),
501 F.3d 1009, 1015 (9th Cir. 2007), cert. denied - U.S. -' 128 S.Ct. 2902
(2008); Golden Northwest Aluminum v. Bonneville Power Admin. ("Golden Northwest"
),
501
3d 1037, 1047 (9th Cir. 2007), cert denied sub nom. PGE u.S. -' 128 S.Ct. 2902
(2008); Washington Utilities and Transp. Comm 'v. FERC 26 F.3d 935 936-37 (9th Cir. 1994).
The exchange program in "Section 5(c) permits IOUs to exchange power they have purchased or
generated for lower-cost power generated by BPA.PGE 501 F.3d 1015 (emphasis added).
Rather than conferring a benefit and achieving parity between BPA's PF rate and the IOUs retail
rates, the operation ofthe deemer mechanism turns Section 5( c) on its head.
Further, the filing of individual ASCs by the IOUs, the execution of the RPSAs and
BP A's calculation of the new PF Exchange rate in its Section 7(i) rate proceeding (WP-07 Supp.
is too compressed. According to BP A's schedule in the rate proceeding, it will not issue a final
ROD and PF Exchange rate until September 22, 2008 to be effective October 1 , 2008. Thus, a
utility filing its ASC on June 1 of each year has no way to ascertain whether its ASC will be
above or below the PF Exchange rate until the next BPA Section 7(i) rate proceeding occurs.9 If
after such a proceeding occurs, the utility finds itself in "deemer" status , not only will it receive
no REP benefits during the rate period, but it will owe BP A the deemer balance whenever it
becomes eligible again for REP benefits in the future. Deemer balances may also accrue if a
utility fails to timely file its Appendix 1 and the utility executes a RPSA after the Review Period
or during a subsequent Exchange Period. FROD ~ 4.1.8 at 34-, Atch. A, ~ II.D.1 at 5.
9 Given the long-term RPSAs, there is no certainty that the current relationship between an IOU's ASC and the PF
Exchange rate will remain the same over time. For example, the PF rate could increase to levels above the IOU'
ASC. Such a risk should not be compounded by the accumulation of deemer balances.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
Rather than creating "wholesale rate parity," the "deemer" mechanism creates a subsidy
flowing from the lower-ASC IOUs to be BPA. This may, in fact, result in wholesale market
manipulation because BP A and the REP recipients all compete in the same bilateral Pacific
Northwest and western wholesale markets.
IV. COMMENTS IN SUPPORT OF THE PROPOSED 2008 ASCM
Except for the aforementioned deemer issues, the Idaho PUC urges the Commission to
approve BPA's proposed 2008 ASCM. We believe the other changes including the 2008 ASCM
are improvements over the 1984 ASCM. Specifically, the Idaho PUC supports BP A's ultimate
decision to use FERC Form 1 data as the primary data source for Base ASC determination; allow
the yearly adjustment of ASCs to reflect major new resource additions; and the inclusion of
transmission costs, federal income taxes, return on equity, and regulatory assets and liabilities
(such as power cost adjustments, intervenor funding, AFUDC, and sales of emISSiOn
allowances). See FROD at 26-31-41-102-112 113-122 125-142 145-146.
The Idaho PUC believes that the changes included in BPA's 2008 ASCM represent a
greater appreciation of the actual operational and capital costs that utilities face, and the factors
that we, and the other state regulatory commissions, must address when establishing IOU rates
for electric services. These changes will enhance the ability of BP A to meet the objective of a
broader and more equitable sharing of the benefits of the Columbia River Hydroelectric system
with the IOU residential and small farm customers within the region.
A. Use of FERC Form
As BP A acknowledges, the 1984 ASC "jurisdictional" methodology was unduly complex
and became an administrative burden for all parties. See FROD at 24. The Idaho PUC supports
BP A's decision to simplify this process and primarily rely on information commonly available in
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-20l1-000
the annual FERC Form 1 filings. Id. All of the regional IOUs are required to collect and file
FERC Form 1 information every year. Id. The procedures and methodology for collecting and
assembling this information are well established and relatively consistent throughout the
industry.Thus, utilizing the data from the annual FERC Form 1 filing will reduce the
administrative burden of and add transparency to the ASCM process. Id.
Another advantage of using FERC Form 1 data is that it is updated annually, and the
reporting period is the same for all reporting utilities. Id. at 25. The 1984 methodology relied
upon data from state commission rate cases. For those IOUs with service areas in multiple
states, each jurisdiction could have used a different test year. Id. The consistency and timeliness
of the FERC Form 1 data should reduce disputes about the information and also simplify the
resolution of any disputes that do arise. Id.
The Form 1 data are publicly available and relatively easy to access, which should
enhance the opportunity for all interested parties to review the information reported by the IOUs.
Id. This transparency should benefit the public review process by making it easier and more
efficient for parties to evaluate the data in a shorter time frame. Id. The Form 1 is "certified" by
the submitting utility, and a certified public accountant must attest that the reported data conform
to the FERC Uniform System of Accounts. FERC Form 1 Instructions ~ 3 at p. i-ii; 18 C.
Part 101. Id.FERC may assess penalties for violations of its regulations if data are not
submitted. Id. at p. vii; 16 U. C. ~ 825a(a). Id.
The proposed methodology for adjusting the Form 1 data for those utilities with service
areas outside of the region appears to be a reasonable compromise between complexity and
administrative burden and should be sufficiently accurate to minimize any concerns regarding
inequitable treatment. Id.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
B. New Major Resource Adjustments
The (2008) ASCM will adopt a materiality threshold of a 2.5 percent change in a
Utility s Base Period ASC for determining when a change in ASC will be made for resource
additions or reductions.Id. at 48. Utilities will be permitted to submit individual resources for
review so long as each individual resource in the stack is responsible for at least a 0.5 percent
increase in the utility s the base period ASC. Id.
Major resource additions and power purchases have significant impacts upon a utility
ASC, especially for smaller IOUs such as Avista and Idaho Power. Delaying the recognition of
such major costs until they appear in the subsequent FERC Form 1 data would inevitably result
in significant discrepancies. Consequently, the Idaho PUC supports BP A's decision to allow for
changes to a utility's ASC when new resources meet the 2.5 percent threshold requirement.
C. Transmission Costs
BP A's decision to include "major new transmission investments" is also an appropriate
and necessary change to the ASC. Id. at 50. The cost oftransmitting energy from the generating
facility to the utility s load centers is appropriate to include in the ASCM. Id. at 126-129.
Decisions on the siting of resource facilities involve comparisons of the total costs of the
different locations , including transporting generation resources such as the fuel and cooling
water to the site, as well as the transmission of the generated electricity from the site. Id. at 129.
Many utilities have located generating facilities outside of the Pacific Northwest and far from
their load centers to be closer to the source of coal. Id. These mine-mouth facilities were located
outside the region because the companies projected the cost of transporting the coal would
exceed the cost of transmission facilities to bring the generated electricity to the load. Failure to
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-20ll-000
include the cost of such transmission facilities would not conform to industry practices and is
detrimental to residential and small farm customers. Id.
This will become even more important as the region s utilities add more renewable
energy resources to their generation portfolios. Id. Renewable generating facilities typically
need to be located where the resource is located, without regard to where the load is located. Id.
at 134. Whether it is wind, geothermal, solar, or hydro , our experience is that these types of
facilities are not located near load centers. Id. at 129. In fact, renewable wind resources are
often not located near existing transmission facilities. The costs of the transmission facilities
required to get the electricity to load centers are an important component of the utility s ASc.
In our comments, the Idaho PUC asserted all of the coal-fired generation used in Idaho is
transported to Idaho load centers from distant locations. FROD at 129. For example, Avista
customers in northern Idaho and eastern Washington are served by electricity generated at the
Colstrip mine-mouth facility in central Montana. This generating facility is over 600 miles from
Avista s load center.In addition, Idaho Power acquired its coal generating resources by
partnering with neighboring utilities. Idaho Power customers receive part of the generation from
the Boardman coal facility near Boardman, Oregon, which is nearly 270 miles from the Treasure
Valley load center (TVLC); from the Valmy coal plant near Valmy, Nevada, which is almost 300
miles from the TVLC; and from the Jim Bridger mine-mouth coal facilities near Rock Springs
Wyoming, which are almost 500 miles from the TVLC.While the Boardman and Valmy
facilities are not mine-mouth facilities Idaho Power is a co-owner in those projects, as well as the
Bridger facility.
Finally, PacifiCorp s Idaho customers are served from system resources, the closest of
which are the Jim Bridger generation facility near Rock Springs, Wyoming, and the Hunter
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
facility in Utah. Both of these generation complexes are located near coal mines , and both are
more than 200 miles from the center ofPacifiCorp s Idaho load center.
At the time each of these resources was acquired by the respective IOUs, this
Commission found the cost of the Company s participation in the project, including the costs of
the related transmission facilities, to be a reasonable and prudent expenditure. The costs of the
transmission facilities required to move the electricity to the companies' load centers were part
of the overall project evaluated by the Idaho PUC. These transmission costs are included in the
rates customers pay, and BP A has justifiably included them as part of the ASC methodology.
FROD at 129.
D. Return on Equity
The Idaho PUC strongly supports BPA's decision to include the cost of the return on
equity (ROE) in the ASC. "The ASCM will allow return on equity in ASC starting from a
Utility s most recent Regulatory Body approved return." FROD at 112. The exclusion of this
cost was on of the most deficient aspects of the 1984 ASC methodology because it failed to
recognize the very real impact that an IOU's capital structure has upon its operating and capital
costs. The cost of common equity in an IOU's capital structure results in a reduction of the
company s cost of debt. Id. at 102.
In the " 1984 ASCM, BP A excluded the cost of equity from ASC primarily because of
concern that Regulatory Bodies might increase the allowed ROE to compensate Utilities for the
cost of terminated plants.Id. at 103. These concerns that led to excluding ROE costs either no
longer exist or are adequately addressed by other regulatory bodies. Id.
The financial markets recognize that one function of the ROE is to spread risk to
shareholders, and the absence of ROE would result in a "significant" increase in an IOU's cost of
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-20l1-000
debt. Id. at 104. The 1984 methodology took advantage of the lower cost of debt in a typical
IOU capital structure by failing to include the cost of that equity. Id. The final decision to
include ROE in the proposed 2008 ASCM corrects this deficiency in the 1984 methodology.
Thus, the Idaho PUC supports the proposal to include ROE costs in the new ASCM.
E. Federal Income Taxes
The Idaho PUC also supports BPA's decision to include Federal marginal income taxes
in the ASCM. FROD at 122. Income taxes are a real , significant, and distinct cost that is
incurred by IOUs , and income taxes are widely recognized as one of the costs of conducting
business. Id. at 114. The failure to include tax costs would deny the residential and small farm
customers ofIOUs their benefits under the Act. Id.
V. CONCLUSION
The deemer mechanism is contrary to Section 5( c) of the Northwest Power Act. Thus, it
is unreasonable for BP A to decide the 2008 ASCM issue of failing to file an Appendix 1 or file a
defective Appendix 1 based upon deemer considerations. If BP A intends to continue the deemer
mechanism when a utility fails to file an Appendix 1 because of a new RPSA for the
commencement of the Review Period or during a subsequent Exchange Period - by setting "the
utility s ASC equal to the PF Exchange rate" - that too is unreasonable and unlawful. The Idaho
PUC urges the Commission to eliminate the deemer mechanism from the 2008 ASCM. Finally,
with the exceptions noted above, the Idaho PUC supports the proposed 2008 ASCM as set out in
greater detail above.
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
Respectfully submitted this 13th day of August 2008.
For the Idaho Public Utilities Commission
Donald L. How I II
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
Idaho Bar No. 3366
bls!N :EF08-20 11-000 dh Intervention
IDAHO PUC INTERVENTION
PROTEST AND COMMENTS Docket No. EF08-2011-000
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 13th day of August 2008, served the foregoing
Notice of Intervention, Protest and Comments, in FERC Docket No. EF08-20ll-000, by e-
mailing a copy thereof to the following:
Richard A. Greene
Office of General Counsel - Routing LC7
Bonneville Power Administration
905 NE 11 th Avenue
PO Box 3621
Portland, OR 97208-3621
E-mail: ragreene~bpa.gov
N:FERC EFO8-2011-000 Cert