20080312Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DEPUTY ATTORNEY GENERAL
DATE:MARCH 11, 2008
SUBJECT:STIPULATION TO ADOPT COMMITMENTS IN IDAHO POWER'
CODE OF CONDUCT CASE, CASE NO. IPC-OI-
On February 19 2008, the remaining parties in Idaho Power s Code of Conduct case
filed a Motion for the Commission to approve the parties ' recent settlement. The parties (Idaho
Power, Staff, and the Industrial Customer of Idaho Power (ICIP)) have agreed on a set of
commitments" which will govern the conduct among Idaho Power, its parent corporation
(IDA CORP), and other affiliates.
BACKGROUND
In January 2001 , Idaho Power 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. In Case No. IPC-01-, 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 IPC-01-2 case because IDACORP decided to withdraw from the
wholesale power business and began closing the trading subsidiary in the summer of 2002.
Application at ~ 3 citing Order No. 29549. The present case remained open "to address any
affiliate transaction issues that remain with other Idaho Power affiliates.Id.
I At the time, IES (and subsequently IDACORP Energy (IE)) 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.
DECISION MEMORANDUM
TERMS OF THE SETTLEMENT STIPULATION
The parties have mutually agreed to a Code of Conduct regarding transactions
between Idaho Power and other affiliates. The list of "commitments" contained in Attachment A
to the Stipulation 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 reasonable
access to all books of accounts as well as all documents, data, and records
of their affiliated interests, which affect the business of Idaho 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.
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 commitments appears as Attachment A to the Settlement
Stipulation.
The parties also note 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 this Stipulation. ~ 4.
The parties assert that the Stipulation represents a fair, just and reasonable resolution
of the issues raised in the proceeding. Motion at ~ 2. The parties further maintain that the
Stipulation is in the public interest. The parties request 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. The parties stand ready to support the Stipulation in any manner deemed
necessary by the Commission.
DECISION MEMORANDUM
PARTIES RECOMMENDATION
Pursuant to Commission Rule 274 , the parties request that the Commission
summarily accept the Settlement Stipulation submitted in this matter and approve the Code of
Conduct applicable to Idaho Power, its parent, and its affiliates.
COMMISSION DECISION
Does the Commission accept the parties Settlement Stipulation and the
accompanying Code of Conduct applicable to Idaho Power, its parent, and its affiliates?
Don Howell
Deputy Attorney General
bls/M:IPC-OI-O8 dh
DECISION MEMORANDUM
BARTON L. KLINE, ISB No. 1526
DONOVAN E. WALKER, ISB No. 5921
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, ID 83707
Tel: [phone]
Fax: [phone]
bkline (gJ idahopower.com
dwalker (gJ idahopower. com
Attorneys for Idaho Power Company
RECEi
ZOOS FEB 19 Pf1 3: 43
fDi\t"\O j)UBLIC
UT!LlTiES COi'AMISS!O
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF IDAHO POWER
COMPANY FOR APPRO V AL OF A
PROPOSED STATEMENT OF POLICY
AND CODE OF CONDUCT COVERING
TRANSACTIONS BETWEEN IDAHO
POWER AND SUBSIDIARIES OF
IDACORP, INC.
) Case No. IPC-OI-
SETTLEMENT STIPULATION
This Settlement Stipulation ("Stipulation ) is entered into by and among the Staff
of the Idaho Public Utilities Commission ("Staff'), Idaho Power Company ("Idaho Power" or
the Company ), and the Industrial Customers of Idaho Power ("ICIP"). These entities are
collectively referred to herein as the "Parties.
INTRODUCTION
The terms and conditions of this Stipulation are set forth herein. The Parties
agree this Stipulation represents a fair, just and reasonable settlement of the issues raised in this
proceeding and that this Stipulation is in the public interest. The Parties believe this Stipulation
and its acceptance by the Idaho Public Utilities Commission ("IPUC" or the "Commission
represents a reasonable resolution of the issues identified in this matter. The Parties, therefore
recommend that the Commission, in accordance with Rule of Procedure (RP) 274, approve this
Stipulation and all of its terms and conditions without material change or condition.
SETTLEMENT STIPULATION -
BACKGROUND
On January 18, 2001 , Idaho Power filed an Application seeking approval of a
proposed Statement of Policy and Code of Conduct covering transactions between Idaho Power
Company, IDACORP Energy Solutions, LP (IES), and other subsidiaries of IDACORP, Inc. On
March 5 , 2001 , the Commission bifurcated the proceedings into Case No. IPC-OI-02 to
consider the Statement of Policy and Code of Conduct between Idaho Power and IES, and Case
No. IPC-OI-08 to consider the Statement of Policy and Code of Conduct applicable to other
IDACORP affiliates engaged in non-utility, non-power transactions with Idaho Power. Order
No. 28649. On July 29 , 2004, the Commission dismissed as moot Case No. IPC-01-
regarding the Code of Conduct between Idaho Power and IES/IDACORP Energy (IE) as IE had
ceased to operate as a going concern. Order No. 29549. This docket, Case No. IPC-OI-
remained open "to address any affiliate transaction issues that remain with other Idaho Power
affiliates." Order No. 29549 at
In April 2001 , ICIP, Power Development Associates, LLC (PDA), and Astaris
LLC were granted intervention in this matter by separate Commission Orders. Order Nos.
28704, 28705 , and 28709.Counsel for PDA has indicated that PDA no longer wishes to
participate in this proceeding. Astaris LLC no longer exists. Counsel for both PDA and Astaris
have been served copies of this Stipulation as well as the Motion for Approval of the Stipulation.
ICIP, Commission Staff, and Idaho Power are signatories to this Stipulation.
This Stipulation sets forth the basic principles of a settlement agreement between
the Parties to this matter.
TERMS OF THE STIPULATION
The Parties have agreed to a mutually acceptable Code of Conduct for Idaho
Power as set forth in paragraphs #1 through #21 of Attachment A, Code of Conduct
incorporated herein by this reference. The Parties agree that the incorporated Code of Conduct
addresses affiliate transactions identified by the Commission in Order No. 29549 as "necessary
to: (1) direct corporate conduct and avoid issues of self-dealing, and (2) provide a framework to
determine if cost recovery for affiliate transactions should prudently be included in rates." Order
No. 29549 at 3.
The Parties agree that this Stipulation represents the agreement of the Parties in
this case. As provided in RP 272, other than any testimony filed in support of the approval of
SETTLEMENT STIPULATION -
this Stipulation, and except to the extent necessary for a Party to explain before the Commission
its own statements and positions with respect to this Stipulation, all statements made and
positions taken in negotiations relating to this Stipulation shall be confidential and will not be
admissible in evidence in this or any other proceeding.
The Parties submit this Stipulation to the Commission and recommend approval
in its entirety pursuant to RP 274.The Parties shall support this Stipulation before the
Commission and no Party shall appeal a Commission Order approving this Stipulation or an
issue resolved by this Stipulation. If this Stipulation is challenged by any person not a party to
this Stipulation , the Parties to this Stipulation reserve the right to file testimony, cross-examine
witnesses and put on such case as they deem appropriate to respond fully to the issues presented
including the right to raise issues that are incorporated in the settlements embodied in this
Stipulation. Notwithstanding this reservation of rights , the Parties to this Stipulation agree that
they will continue to support the Commission s adoption of the terms of this Stipulation.
If the Commission rejects any part or all of this Stipulation, or imposes any
additional material conditions on approval of this Stipulation, each Party reserves the right, upon
written notice to the Commission and the other Parties to this proceeding, within 7 days of the
date of such action by the Commission, to withdraw from this Stipulation , and each Party shall
be entitled to seek reconsideration of the Commission s Order, file testimony as it chooses
cross-examine witnesses , and do all other things necessary to put on such case as it deems
appropriate.In such case, the Parties immediately will request the prompt convening of a
prehearing conference for purposes of establishing a procedural schedule for the completion of
the case. The Parties agree to cooperate in development of a schedule that concludes the
proceeding on the earliest possible date, taking into account the needs of the Parties in
participating in hearings and preparing briefs.
10. The Parties agree that this Stipulation is in the public interest and that all of its
terms and conditions are fair, just and reasonable.
11.The obligations of the Parties under this Stipulation are subject to the
Commission s approval of this Stipulation in accordance with its terms and conditions.
12.This Stipulation may be executed in counterparts and each signed counterpart
shall constitute an original document.
SETTLEMENT STIPULATION -
Respectfully submitted this
ti
day of February 2008.
COMMI8..;;;ION STAFF
Attorneyfor Commission Staff
IDAHO POWER COMPANY
bL
y())~
Donovan E. Walker
Attorney for Idaho Power Company
INDUSTRIAL CUSTOMERS OF IDAHO POWER
D-4-
Pete~~son
Attorney/or ICIP
SETTLEMENT STlPULATlON -
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 from
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 reasonable 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:
CODE OF CONDUCT
IDAHO POWER AND IDA CORP
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 from 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)
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 from 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)
CODE OF CONDUCT
IDAHO POWER AND IDA CORP
10.
11.
12.
13.
14.
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' or IDACORP'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' 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 ' Total Adjusted Capital is defined as
common equity, equity-like securities, preferred equity, capitalized lease
obligations and long-term debt.
Upon request 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.
Upon request, and subject to appropriate confidentiality agreements
IDACORP and Idaho Power Company will provide the Commission
reasonable 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
CODE OF CONDUCT
IDAHO POWER AND IDA CORP
15.
16.
17.
18.
19.
20.
reasonable and mutually acceptable procedure to review these confidential
documents.
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 ' 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, upon request, 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
CODE OF CONDUCT
IDAHO POWER AND IDACORP
the debt procurement will not interfere with any mechanisms that secure the
utility.
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.
CODE OF CONDUCT
IDAHO POWER AND IDACORP