20040716Final Order No 29529.pdf

Office of the Secretary
Service Date
July 16 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
KIMBALL PROPERTIES LIMITED
PARTNERSHIP, AND HEWLETT-PACKARD CASE NO. IPC-OO-
COMPANY,
CO MPLAIN ANTS
vs.
IDAHO POWER COMPANY, AN IDAHO ORDER NO. 29529
CORPORATION
RESPONDENT.
On August 10, 2000, Kimball Properties Limited Partnership (Kimball) and Hewlett-
Packard Company (Hewlett-Packard; HP), collectively HP/Kimball, filed a Complaint for
reparations against Idaho Power Company (Idaho Power; Company). HP/Kimball is seeking to
recover $490 824 (with interest) paid to Idaho Power as a condition of service and as a
contribution in aid of construction (CIAC). Idaho Power contends that HPlKimball requested 4
MW of electric power, that the Company did not have available capacity to serve the load, that
construction of a substation was required and that a CIAC was required under the Company
line extension policy. The Commission in this Order determines that Idaho Power s CIAC
policy is just and reasonable and that HP/Kimball is not entitled to a refund.
Pursuant to Commission Notice, a technical hearing in this matter was held in Boise
on March 4, 2004. The following parties appeared by and through their respective counsel of
record:
Idaho Power Company Monica Moen, Esq.
Barton Kline, Esq.
Kimball Properties Limited Partnership
Hewlett-Packard Company
Peter J. Richardson, Esq.
Commission Staff Scott Woodbury, Esq.
ORDER NO. 29529
Background
The Commission has reviewed the filings of record and transcript of proceedings and
finds the facts in this case to be straightforward. In June 1999, HP/Kimball requested Idaho
Power to provide 4 MW of electric power to serve the load requirements of a Hewlett-Packard
call center" to be built and located within the Kimball Business Park at 303 North Kimball, an
area in Boise just west of the Boise Towne Square shopping center. Because the service request
was for more than 1 megawatt, it was assumed by HP and Idaho Power that HP would be a
Schedule 19 Large Power Service customer. Tr. p. 59. Idaho Power determined that it did not
have sufficient capacity in the area to serve the 4 MW load request and that additional facilities
were required. Tr. p. 191.
The 4 MW requested by HPlKimball was both a large load and a high load density
request. Tr. p. 188. Although there was available capacity from area feeders, the Company
found there was not enough to accommodate the entire amount of the HP lKimball request. It
was also determined by the Company to be impractical to reconfigure the service areas to
combine available capacity into a single service location.To do so would have led to
overlapping and non-contiguous service by different feeders that would likely have created
undesirable operational, reliability and safety consequences for the Company. Tr. p. 192. There
were also indications that Hewlett Packard's requirements might increase beyond the 4
request. Tr. p. 194. The Company decided that construction of a new 20 MW substation, known
as the Bethel Court Substation, near the comer of Maple Grove and Franklin Street was required
to serve the HPlKimballload. Although construction of the 20 MW substation was a higher total
cost option, the customer s pro rata share was less than the cost of other options. Tr. pp. 61 , 193.
A 20 MW substation would also provide flexibility in meeting the future demands ofHP. Tr. pp.
193 , 194.
Idaho Power informed HP/Kimball that before it would proceed with the new Bethel
Court Substation, a contribution in aid of construction in the amount of $490 824 would have to
be paid. Reference Exhibit No.5. The contribution amount was Hewlett-Packard's pro rata 4
MW share of the new 20 MW substation. Tr. p. 70. On October 29, 1993, the contribution
amount was paid by Hewlett-Packard under protest, HP/Kimball reserving the right to dispute
the assessment and to receive any refund arriving from a settlement thereof.
ORDER NO. 29529
It was not until after the Bethel Court Substation was constructed that it became
apparent that the Hewlett-Packard call center would not be a Schedule 19 customer. Tr. pp. 132
133. Qualification and service under Schedule 19 rates requires that a customer register a
metered demand of 1 000 kW or more for at least three billing periods. Exhibit 104. The 4 MW
load never materialized. The call center was constructed in four phases and was comprised of
three meters and four buildings. As reflected in an Idaho Power Record of Decision dated May
, 1999, Hewlett-Packard anticipated that each of the four buildings would have a load
requirement of 1 MW or larger. Exhibit 101 , Tr. p. 198. As it turns out, the combined load of
the call center complex is not 4 MW, it is only 1.5 MW. Tr. p. 135. None of the individual
buildings or meter points have ever qualified for service under Schedule 19. The buildings are
all served under Large General Service Schedule 9.
Complaint
HPlKimball argues that the Kimball Business Park area is a rapidly growing business
and commercial district and that Idaho Power would have had to construct a new substation in
that vicinity to meet generic load growth regardless of the construction of the Kimball Business
Park. HP IKimball alleges that no other customers have been required or asked to pay a portion
of the Bethel Court Substation.HP/Kimball contends that it has suffered discriminatory
treatment at the hands of Idaho Power.
Hewlett-Packard does not dispute the necessity of constructing a new substation and
concedes that Idaho Power is free to design its electric system as it sees fit. Tr. pp. 60, 61. Nor
it seems, does HP dispute that construction of a new substation was the least cost alternative to
Hewlett-Packard. Tr. p. 61. HP does contend, however, that the need for the Bethel Court
Substation was the result of poor planning decisions that left Idaho Power without adequate
distribution corridors into the heart of a high-density load area. Tr. pp. 61 , 63 , 64, 66, 67.
Located just south of Franklin Road adjacent to the Union Pacific Railroad tracks, the Bethel
Court Substation lies almost exactly in the center of a very densely developed part of the
Boise/Meridian urban area, an area bounded by the Ustick, Wye, Cloverdale and Victory
Substations.
Hewlett-Packard contends that Idaho Power s CIAC policy regarding contributions
from Schedule 19 customers for construction of new substations is arbitrary and irrational.
Additionally, HP believes that the Company does not apply its policy on a consistent basis and
ORDER NO. 29529
that the policy is thereby capricious and discriminatory. HP believes that it has been unfairly
singled out. Tr. p. 58.
Idaho Power s policy of requirIng contribution from Schedule 19 customers
HP/Kimball contends, is arbitrary and irrational because it requires contribution only of new load
that comes on line near the time of construction. Tr. p. 71. HP contends that Idaho Power
policy regarding required contributions for substation and transmission upgrades is arbitrary
because two identical industrial customers will be treated very differently, depending solely on
the timing of each request for service. It is further irrational, it states, because the decision to
assess only the first customer and not every subsequent customer has no relationship to cost
causation. Tr. p. 85. If HP had constructed its call center at a location where there was sufficient
capacity to serve its load, then under Idaho Power s system of cost apportionment, HP would not
have been assessed any charge for a substation or transmission upgrades. Tr. pp. 71 , 72. Also, if
a new industrial customer were to now locate in the Kimball Business Park, then that new
customer would not be charged anYthing for the use of the Bethel Court Substation. Tr. p. 72.
The contribution required of HP IKimball, the Complainants state was nothing other than a
matter of timing." Tr. p. 72.
As another instance of inconsistency in Company practice, HP IKimball points out
that none of the four HP buildings are now or have ever been served under industrial Schedule
19. To qualify for Schedule 19 rates the load must be greater than 1 MW. The buildings are all
served instead under Large General Service Schedule 9. Each of the three individual delivery
points or meters for HP are billed separately. If the loads were amalgamated, HP contends that it
would be served under lower Schedule 19 rates. Idaho Power, HP contends, amalgamates loads
for the purpose of charging for substation construction but does not amalgamate the very same
loads for other billing purposes. Tr. pp. 74, 75.
HP/Kimball requests a refund of the CIAC, in the full amount with interest or in a
lesser amount pursuant to alternative calculation methods. Tr. pp. 73-77. Because HP is served
under Schedule 9, Commission Staff recommends a refund in an amount proportionate to the
share of substation capacity that HP is actually using. For the share of substation capacity that
HP/Kimball requested and paid for but never utilized, Staff recommends that HP/Kimball not be
permitted a refund. Tr. pp. 134, 135.
ORDER NO. 29529
Answer
Idaho Power states that but for HP/Kimball's request it would not have constructed
the Bethel Court Substation. Addressing HP/Kimball's contention that Idaho Power has "
written policy" on how to or when to assess industrial customers a fee for construction of
transmission or substation facilities, (Tr. pp. 86, 87) the Company states that its policy
concerning CIAC is applied on a consistent basis every time a new customer requests service. In
each such instance, the Company (1) determines appropriate service schedules based on
customer request, (2) determines the appropriate facilities required to serve the request, (3)
complies with Rule H provisions for determining CIAC, and (4) when facilities other than Rule
H are required, the Company enters into a special agreement to address required CIAC. Tr. pp.
264, 265. Rather than being a capricious and discriminatory policy administered on an ad hoc
basis, Idaho Power maintains that the CIAC policy is very predictable. Tr. p. 268. Idaho Power
believes that when electrical requirements do not dictate the construction of additional facilities
it is inappropriate to require a CIAC. New customers should be encouraged, it states, to locate in
areas with available capacity. This results in more fully utilizing the system. Tr. p. 268. Rule
, the Company states, embodies a standard policy by which the Company seeks contributions in
aid of construction. The same procedure is followed under Schedule 19 for collecting
contributions for substations. Tr. p. 273. Similar procedures are also followed for PURP A QFs
under Schedule 72 in determining the adequacy of existing facilities to accept additional
generation. Tr. p. 274.
Regarding the Company s CIAC policy for Schedule 19 customers, the Company
states that if it receives multiple requests for service within a similar time-frame, whether by the
same customer or multiple customers, the Company views all of those requests as contributing
equally to the need to upgrade the facility and each of those customers would be expected to pay
for the increased capacity on the same prorata basis. It is an issue of fairness, the Company
states. Tr. pp. 199 223 , 224.
Idaho Power disputes HP IKimball' s contention that the Company amalgamated loads
for purposes of charging for the substation construction.First, Idaho Power notes that
HP IKimball' s request was a single request for 4 MW.Second, the buildings and timing
ORDER NO. 29529
communicated by HP outside of the formal signed service request indicated that each of the
buildings would be over 1 MW. Tr. p. 198.
Addressing HP IKimball' s contention that a clear set of rules and guidelines akin to
Rule H for CIAC for Schedule 19 customers is needed to alleviate future disputes, Idaho Power
contends that no change is needed to the Company s Schedule 19 CIAC policy. Tr. p. 316.
Idaho Power points out that the outcome of HP/Kimball and Staff refund proposals is
that other customers absorb additional costs because Hewlett-Packard and Kimball Properties
failed to properly assess their load requirements. Tr. p. 276. No other Schedule 19 requests
requiring contributions in aid of construction for substation facilities, the Company contends
have ever been subject to refund. Tr. p. 276. A new customer who requires no additional
facilities provides a benefit to other customers. A new customer who requires additional
facilities, but is not required to make a contribution in aid of construction, adds costs to be
recovered by the Company from other customers who don t require the additional facilities. Tr.
277.
Idaho Power argues that a refund should not be granted based upon an after-the-fact
determination that things did not turn out as HP IKimball had planned. HP IKimball, the
Company states, should not be singled out for special treatment. Tr. p. 278.
Commission Findings
The Commission supports the payment of contributions in aid of construction, as such
payments directly offset Company investment and additions to rate base. If no contribution had
been required from HP IKimball, Idaho Power would have borne the full risk that enough other
customers would eventually materialize to utilize the available capacity. Additionally, requiring
a contribution from new Schedule 19 customers provides an incentive for those customers to
accurately estimate their loads when requesting service. The risk of speculative development
should be on the customer requesting service, not on Idaho Power and its other customers.
HP IKimball contends that the contribution required for the Bethel Court Substation
was nothing other than a "matter of timing.We agree, and we find that any customer
requesting 4 MW of new load at that time and at that location would have been treated by the
Company under the same rules and in the same manner. We find no evidence of discrimination
or preference.
ORDER NO. 29529
At the time the request for new service was made, HP/Kimball informed Idaho Power
that its load at the location would be approximately 4 MW. The Company s electric tariff
Schedule 19 is applicable for customers with a firm electric demand of 1 to 25 MW. Tr. p. 102.
Idaho Power proceeded to design and construct the necessary facilities to serve a 4 MW load
and assessed charges for the Bethel Court Substation as if HP IKimball was a Schedule 19
customer. Tr. p. 132. The Company is not responsible for the fact that the 4 MW of load never
materialized.
Rule H, the Company s general Line Extension tariff, provides "this Rule does not
apply to transmission or substation facilities , or to requests for electric service that are of a
speculative nature.Exhibit 103. Rule H does not apply in this case because the complaint
concerns costs associated with the Bethel Court Substation facilities. Idaho Power Schedule 19
states "To the extent that additional facilities not provided for under Rule H, including
transmission and/or substation facilities, are required to provide the requested service, special
arrangements will be made in a separate agreement between the customer and the Company.
Exhibit 104. Schedule 19 customers pay for their share of substation costs through up-front
charges when capacity is not available. Schedule 9 customers pay nothing up-front and instead
pay for substations over time through rates, as do other customer classes. We find that Idaho
Power has not violated any tariffs or rules by seeking a substation contribution from HP/Kimball.
In determining that additional substation facilities were needed to provide service, Idaho Power
assessed the capabilities of the electric system, engaged in system planning and exercised its
judgment.Although HP/Kimball presents much testimony on the configuration of the
Company s electric system in the area surrounding the Kimball Business Park, the Commission
finds no reason or justification to second guess the Company s system planning decisions.
The Commission finds that no refund is warranted and that no compromise refund is
warranted. There is clear and convincing evidence that Idaho Power followed its line extension
policy. We also find that the policy is fair, just and reasonable and that it fairly allocates the
costs of new facilities. We find that the CIAC was correctly assessed to HP/Kimball.
CONCLUSIONS OF LAW
The Commission has jurisdiction over Idaho Power Company, an electric utility, and
the issues presented in Case No. IPC-00-12 pursuant to the authority granted under Title 61
Idaho Code and the Commission s Rules of Procedure, IDAP A 31.01.01.000 et seq.
ORDER NO. 29529
ORDER
In consideration of the foregoing and as more particularly described above IT IS
HEREBY ORDERED and the Commission does hereby find that HP/Kimball is not entitled to a
refund of the $490 824 contribution in aid of construction (CIAC) paid to Idaho Power Company
for the Bethel Court Substation.
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. 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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this I UJ t-J...
day of July 2004.
1\NDER, PRESIDENT
~.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
vld/O:IPCEOO12 sw3
ORDER NO. 29529