20080421final_order_no_30530.pdf

Office of the Secretary
Service Date
April 21 , 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL OF )
A PROPOSED STATEMENT OF POLICY ANDCODE OF CONDUCT COVERING
TRANSACTIONS BETWEEN IDAHO POWER
AND SUBSIDIARIES OF IDACORP, INC.
CASE NO. IPC-OI-
ORDER NO. 30530
In January 2001 , Idaho Power Company filed an Application seeking approval of a
proposed "Statement of Policy and Code of Conduct" covering transactions between Idaho Power
Company, other subsidiaries of IDACORP, and IDACORP Energy Solutions (IES).The
Commission subsequently bifurcated the proceeding. Order No. 28649. In Case No. IPC-O 1-
the Commission intended to consider the conduct between Idaho Power and IES. In Case No. IPC-
01-, the Commission intended to consider the conduct between Idaho Power (the regulated
entity) and other IDACORP affiliates engaged in non-power transactions with Idaho Power. In July
2004, the Commission dismissed the 01-2 case because IDACORP decided to withdraw from the
wholesale power business and began closing the trading subsidiary in the summer of2002. This 01-
08 case remained open "to address any affiliate transaction issues that remain with other Idaho Power
affiliates." Order No. 29549.
On February 19, 2008, the remaining active parties (ICIP, Idaho Power, and the Staff)
filed a Motion for the Commission to approve the parties' recent settlement. In their Settlement
Stipulation, the parties agreed on a set of21 "Commitments" which will govern the conduct among
Idaho Power, its parent corporation (IDACORP), and other affiliates. On March 27, 2008, the
parties revised the wording of five commitments based upon comments by the Commission at its
March 13 , 2008 decision meeting. Having reviewed the parties' Revised Code of Conduct , we
approve the Revised Code of Conduct and its 21 Commitments.
1 At the time, IES (and subsequently IDACORP Energy (lED was IDACORP's wholly owned subsidiary engaged in the
marketing of electricity and natural gas on the wholesale level. IES also made sales to retail customers in states where
retail access was permitted.
ORDER NO. 30530
THE SETTLEMENT STIPULATION
A. The Terms
The parties mutually agreed to a Revised Code of Conduct regarding transactions
between Idaho Power and other affiliates. The list of "Commitments" are designed to prescribe the
conduct between Idaho Power and an affiliate, avoid issues of self-dealing, and provide a framework
to determine if cost recovery for affiliate transitions should be included in rates. Id. at ~ 6 citing
Order No. 29549 at 3. More specifically, Idaho Power and IDACORP agree to several safeguards
including:
. IDACORP and Idaho Power will provide the Commission access to all books
of accounts as well as all documents, data, and records of their affiliated
interests, which affect the business ofIdaho Power Company. Commitment
No.
. IDACORP, Idaho Power, and all affiliates will make their employees
officers, directors, and agents available to testify before the Commission.
Commitment No. 3.
. IDACORP and Idaho Power agree that at least one director on each Board of
Directors will have prior experience with respect to the operation, financial
analysis, or regulation of a regulated gas or electric utility. Commitment No.
. IDACORP and Idaho Power will provide the Commission reasonable access
to corporate minutes and all committee minutes. Commitment No. 14.
The complete list of the agreed-upon revised Commitments are attached to this Order and appear as
Replacement Attachment A to the Settlement Stipulation dated March 27, 2008.
The parties noted that Power Development Associates and Astaris were previously
granted intervention in this matter. Astaris no longer exists and counsel for Power Development
indicated that it does not wish to participate in the proceeding. Counsel for both Astaris and Power
Development were served copies of the Stipulation. ~ 4.
The parties asserted that the Stipulation represents a fair, just and reasonable resolution
of the issues raised in the proceeding. Motion at ~ 2. The parties further maintained that the
Stipulation is in the public interest. The parties requested that the Commission approve the
Stipulation and accompanying Code of Conduct agreed to by the parties pursuant to Rule 274
IDAPA 31.01.01.274.
ORDER NO. 30530
B. The Revisions
As indicated, the Settlement Stipulation and its 21 Commitments were reviewed by the
Commission at its March 13 2008 decision meeting. At that meeting, the Commission requested
that the parties consider several modifications to the Commitments. In particular, the Commission
asked the parties to consider removing the word "reasonable" from paragraph Nos. 2 and
reasonable" access). In addition, the Commission asked the parties to consider removing the words
upon request" from paragraph No. 13 and 19. The parties consented to the Commission
recommendations and submitted a Revised Code of Conduct on March 27 2008.
DISCUSSION
Based upon our review of the revised Commitments, we find the Commitments
contained in the Revised Code of Conduct to be appropriate and reasonable. Pursuant to our
authority under Rule 274, the Commission accepts the Settlement Stipulation and approves the
Revised Code of Conduct and its application to Idaho Power, its parent (IDA CORP), and its
affiliates.
Taken as a whole, we find the Commitments are in the public interest. In particular, the
Commitments will ensure continued access to books and records, and implement important ring-
fencing protections. These ring-fencing provisions isolate the credit risks ofIdaho Power from the
credit risks ofIDACORP and other affiliates.
ORDER
IT IS HEREBY ORDERED that the parties' Motion for Approval of the Stipulation and
the Revised Code of Conduct is approved. Pursuant to our Rule 274, the Commission accepts and
approves the Stipulation and the Revised Code of Conduct including the 21 Commitments.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-01-
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 or in interlocutory Orders previously issued in this case.
Within seven (7) days after any person has petitioned for reconsideration, any other person may
cross-petition for reconsideration. See Idaho Code ~ 61-626.
ORDER NO. 30530
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :L
/ d
day of April 2008.
ATTEST:
~~~
Commission Secretary
bls/O:IPC-Ol-
ORDER NO. 30530
MARSHA H. SMITH, COMMISSIONER
. .
REVISED CODE OF CONDUCT
IDAHO POWER COMPANY
IDACORP
COMMISSION STAFF
Idaho Power Company will Comply with the following Code of Conduct:
1.)Idaho Power Company will maintain its own books and records, separate ITom
IDACORP's books and records. Idaho Power Company s financial books and
records and state and federal utility regulatory filings and documents will
continue to be available to the Commission, upon request.
Subject to appropriate confidentiality agreements IDACORP and Idaho Power
Company will provide the Commission access to all books of account as well
as all documents, data, and records of their affiliated interests, which pertain
to transactions between Idaho Power Company and its affiliated interests or
transactions which could have an adverse affect on the business of Idaho
Power Company.
IDACORP, Idaho Power Company and all affiliates will make their
employees, officers, directors and agents available to testify before the
Commission to provide information relevant to matters within the jurisdiction
of the Commission.
IDACORP and Idaho Power Company agree that one of its independent
directors on each Board of Directors will have had prior experience with
respect to the operation, financial analysis or regulation of the regulated gas or
electric utility industry.
Upon request, Idaho Power Company will provide the Commission with a
copy of any affiliated interest report filed in other jurisdictions.
IDACORP and Idaho Power Company will comply with all applicable statutes
and any regulations promulgated pursuant to the statutes regarding affiliated
interest transactions, including timely filing of applications and reports.
Idaho Power Company will not subsidize any affiliated interest and shall
comply with the Commission s applicable orders and rules with respect to
such matters.
Any proposed cost allocation methodology for the allocation of corporate and
affiliate investments, expenses, and overheads, required by law, rule or order
to be submitted to the Commission for approval, will comply with the
following principles:
REVISED CODE OF CONDUCT
IDAHO POWER AND IDACORP
ATTACHMENT
Case No. IPC-01-
ORDER NO. 30530
. '
a. For services rendered to Idaho Power Company or each cost category
subject to allocation to Idaho Power Company by IDACORP or any of
Idaho Power s affiliates, Idaho Power must be able to demonstrate that
such service or cost category is necessary to Idaho Power Company for the
performance of its regulated operations, is not duplicative of services
already being performed within Idaho Power Company, and is reasonable
and prudent. (Affiliates and IDACORP do not charge to Idaho Power)
b. Cost allocations to Idaho Power Company ITom IDACORP will be based
on generally accepted accounting standards; that is, in general, direct costs
will be charged to specific subsidiaries whenever possible and shared or
indirect costs will be allocated based upon the primary cost-driving
factors. (See above note)
c. IDACORP and its subsidiaries will have in place accounting systems
adequate to support the allocation and assignment of costs of IDACORP
executives and other relevant personnel to Idaho Power Company. (See
above note)
d. An audit trail will be maintained such that all costs subject to allocation
can be specifically identified, particularly with respect to their origin.
addition, the audit trail must be adequately supported. Failure to
adequately support any allocated cost may result in denial of its recovery
in rates.
e. Costs which would have been denied recovery in rates had they been
directly incurred by Idaho Power Company regulated operations will
likewise be denied recovery whether they are allocated directly or
indirectly through subsidiaries in the IDACORP group to Idaho Power
Company. (see above note)
f. For services provided by Idaho Power to IDACORP or any affiliated
interest, Idaho Power current Service Level Agreements (SLA'
provide a reasonable method of allocating costs for rate-setting. Any
changes to the SLA methodology will be submitted to the Commission
upon request.
g.
IDACORP and Idaho Power Company commit to use asymmetrical
pricing (i., lower of cost or market for transactions to Idaho Power
Company and higher of cost or market for transactions ITom Idaho Power
Company) for affiliate charges or costs not covered by the provisions of
any cost sharing agreement or Service Level Agreements (SLA), if a
readily identifiable market for the goods, services or assets exists, and if
the transaction involves a cost of more than $100,000. (See above note)
REVISED CODE OF CONDUCT
IDAHO POWER AND lDACORP
10.
11.)
12.
Idaho Power Company will maintain separate debt and, if outstanding,
preferred stock ratings. Idaho Power Company will maintain its own
corporate credit rating, as well as ratings for each long-term debt and
preferred stock (if any) issuance.
Neither Idaho Power Company nor its subsidiaries will, on a prospective
basis, without prior notification to the Commission, make loans or transfer
funds (other than dividends and payments for inter-company services
provided as part of the normal course of business) to IDACORP or its
affiliates, or assume any obligation or liability as guarantor, endorser, surety
or otherwise for IDACORP or its affiliates; provided that this condition will
not prevent Idaho Power Company from assuming any obligation or liability
on behalf of a subsidiary of Idaho Power Company. Any changes to current
arrangements will require Commission approval. IDACORP will not pledge
any of the assets of the business of Idaho Power Company as backing for any
securities which IDACORP or its affiliates (but excluding Idaho Power
Company and its subsidiaries) may issue.
Nothing in these commitments shall be interpreted as a waiver of Idaho Power
Company s or IDACORP's rights to request confidential treatment for
information that is the subject of any commitments.
Idaho Power Company commits that it will not make any dividends to
IDACORP that will reduce Idaho Power Company s common equity capital
below 35% of its Total Adjusted Capital without Commission approval. This
percentage will be adjusted, as necessary, to account for any changes to
Generally Accepted Accounting Principles (GAAP) after approval of this
transaction. For purposes of calculating the numerator of the percentage
common equity will include equity-like securities a.k.a. hybrid securities but
will not include any portion of Idaho Power Company preferred stock issued
and outstanding. Idaho Power Company s Total Adjusted Capital is defined
as common equity, equity-like securities, preferred equity, capitalized lease
obligations and long-term debt.
13.Idaho Power Company will provide to the Commission a report covering the
preceding calendar year, in which it describes its compliance with the
provision of item 12, concerning the equity levels and payment of dividends.
14.Upon request, and subject to appropriate confidentiality agreements
IDACORP and Idaho Power Company will provide the Commission access to
corporate minutes including Board of Director s minutes and all committee
minutes, along with any related source documents that are relevant to the
business and risk analysis of Idaho Power Company. Idaho Power Company
and the Commission Staff currently have established a reasonable and
mutually acceptable procedure to review these confidential documents.
REVISED CODE OF CONDUCT
IDAHO POWER AND IDACORP
15.
16.
17.
18.
19.
20.
Upon request, and subject to appropriate confidentiality agreements
IDACORP and Idaho Power Company will provide the Commission
reasonable access to operational internal and risk audit reports and
documentation. Idaho Power Company and the Commission Staff currently
have established a reasonable and mutually acceptable procedure to review
these confidential documents.
Idaho Power Company will provide the Commission and Staff with
notification of all publicly announced proposals for divestiture, spin-off, or
sale of any integral Idaho Power Company function. Idaho Power Company
will also file for Commission approval of divestiture, spin-off, or sale of any
integral Idaho Power Company function which is subject to IPUC jurisdiction.
This condition does not limit any jurisdiction the Commission may have.
Subject to appropriate confidentiality agreements, Idaho Power Company will
notify the Commission prior to implementation of plans by Idaho Power
Company or IDACORP: (1) to form an affiliate for the purpose of transacting
business with Idaho Power Company s regulated operations; (2) to commence
new business transactions between an existing affiliate and Idaho Power
Company; or (3) to dissolve an affiliate which has transacted substantial
business with Idaho Power Company.
Idaho Power Company will notify the Commission as soon as practicable
following any public announcement of: (1) any acquisition of a regulated or
unregulated business representing 5 percent or more of the capitalization of
IDACORP; or (2) the change in effective control or acquisition of any
material part or all of Idaho Power Company by any other firm, whether by
merger, combination, transfer of stock or assets.
Idaho Power Company will provide to the Commission, on an informational
basis, credit rating agency news releases and final reports regarding Idaho
Power Company when such reports are known to Idaho Power Company and
are available to the public.
Idaho Power Company commits that in the event that Idaho Power Company
obtains a loan from its parent company or any affiliated company, Idaho
Power Company will in any subsequent rate proceeding demonstrate that the
debt obligation interest, terms, and conditions are comparable to or less than
what Idaho Power Company could have obtained in the market at the time the
debt was obtained by Idaho Power Company, that the loan is on reasonable
terms and without markup to the holding company s cost of funds, and that
the debt procurement will not interfere with any mechanisms that secure the
utility.
REVISED CODE OF CONDUCT
IDAHO POWER AND IDACORP
, . . .
21.)IDACORP and Idaho Power Company commit that no amendments, revisions
or modifications will be made to the agreements and commitments set out in
their settlement stipulation without prior Commission approval.
REVISED CODE OF CONDUCT
IDAHO POWER AND IDA CORP