20020722Reply Comments.pdf

LARRY D.RIPLEY ISB #965
Idaho Power Company
P.O.Box 70
Boise,Idaho 83707 CTelephone:[phone] üílL S COMNSSION
FAX TelephoneNo.[phone]
Attorney for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise,Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF IDAHO POWER COMPANY FOR AN )CASE NO.IPC-E-02-7
ACCOUNTING ORDER AUTHORIZING )IDAHO POWER TO DEFER FACILITY )IDAHO POWER COMPANY'S
CHARGES RELATING TO THE MOUNTAIN )REPLY COMMENTS
HOME NATURAL GAS FACILITY.)
Staff of the Idaho Public Utilities Commission (Staff)filed comments
July 11,2002,in the above-entitled matter in response to the Commission's Notice of
Application and Notice of Modified Procedure.Staff was the only party in this
proceeding that filed any comments.The Staff's analysis is divided into two parts:
(1)an interpretation as to Commission Order No.29026 issued in the last PCA
proceeding with a short discussion relating to the effect of Staff's interpretation of that
Order,and (2)Staff's proposal as to the "proper"accounting treatment for the facilities
charge.Each point will be addressed separatelyby Idaho Power Company.
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 1
FINDINGS IN COMMISSION ORDER NO.29026
As to Staff's analysis of Order No.29026,all that is required is to review
the Commission's own Notice of Applicationissued in this proceeding.That Notice
succinctly and concisely captures the determination by the Commission that was made
in Order No.29026 and succinctly and concisely sets forth the Commission's discussion
as to Idaho Power's proposal concerning the facilities charge.For the convenience of
the Commission,that portion of the Commission's Notice is set forth below:
THE APPLICATION
YOU ARE HEREBY NOTIFIED that ldaho Power applied for
an accounting order on June 2,2002 that would authorize Idaho
Power to defer facility charges relating to the Mountain Home
natural gas facility.The Commission had previously disallowed
recovery of these amounts (also known as the Williams Facility
Charge Adjustment)as a PCA expense in Case Nos.IPC-E-02-2
and -3.Order No.29026.In relevant part,the Commission stated:
4.Williams Facility Charqe Adjustment.Williams Gas
Pipeline West (Williams)charged Idaho Power the first
annual billing for paymentof $419,054 to install a meter
station,control equipment,and a 4,200 foot pipeline from the
mainline to Idaho Power's Mountain Home natural gas
facility.A fluctuatingannual facility charge will pay for these
items over the next 30 years.Staff argued that this charge is
more like a capital cost than an annual gas delivery
expense.Thus,it would be more appropriate to seek
recovery of this amount as a capital asset cost in ratebase
than to be recovered through the PCA.Tr.at 427-28.The
Companyindicated that because it is booked to a PCA-
appropriate account,is fuel-related,and varies year to year,
the facilities charge is appropriate for inclusion in the PCA.
Tr.at 561.
Commission Findings.The Commission finds that although
the facilities charge is not a capital expense per se,it has
many of the characteristics of a capital expense normally
recovered as an asset in rate base.The charge pays for
plant investment over time and includes expenses related to
depreciation,interest,a return and maintenance on the plant
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 2
investment.Althoughthis charge enables Idaho Power to
buy fuel from Williams,the repayment structure over 30
years is typical of a capital investment.Thus,the facilities
charge should be considered for recovery in Idaho Power's
next rate case --not in this PCA case.The $419,054shall
not be recovered through the PCA.
Order No.29026 at 12.
YOU ARE FURTHER NOTIFIED that because the
Commission determined in Order No.29026 that the facilities
charge should be treated for revenue requirement purposes in a
manner similar to that afforded capital investments,Idaho Power
now requests that the facilities charge expendituresbe treated in
the same manner as other expenditureswhich have been deferred
by the Commission until the Company'snext revenue requirement
case.Application at 2.
Staff's interpretation that the Commission's Order denying recovery
of the facilities charge as a PCA recovery was a determination by the
Commission that the Company should absorb the facilities charge as an expense
until the next general revenue requirement proceeding is not a valid interpretation
of the Commission's Order,nor is it reasonable.
STAFF'S PROPOSAL AS TO THE PROPER ACCOUNTING
TREATMENT OF THE FACILITIES CHARGE IS UNREASONABLE
The Order in Case No.IPC-E-01-12 authorizing the Mountain Home
Project provided in pertinent part the following:
IT IS FURTHER ORDERED and the Commission does
hereby approve inclusion of the Mountain Home Station's cost of
fuel,fuel storage and fuel transportfor recovery through the
Company'sexisting PCA mechanism.
It is undisputed that the cost of fuel and fuel transportationincludes the
facilities charge Idaho Power is paying on the metering facilities and pipeline tap that is
required in order for gas to be transportedand delivered to at the Mountain Home
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 3
facility.Idaho Power included those costs in its PCA and the Commission in its
judgmentdisallowed those costs for inclusion in the PCA.The Commission did n.ot rule
that those costs should be absorbed by Idaho Power and not recovered as a
reasonable and legitimate cost.The end result of Staff's proposal is to require that
Idaho Power absorb the facilities charge which is required in order to provide for the
transportation/deliveryof the fuel,i.e.,gas,as an expense to the Mountain Home
facility.Such a proposal is tantamount to disallowingthe facilities charge as a
recoverable expense until the new revenue requirement case.Deferring the recovery of
this expense until the next revenue requirement case accomplishesthe Commission's
desire without placing the cost burden solely on Idaho Power.
Staff,in arriving at the conclusion that Idaho Power must absorb the
facilities charge expenses,has attemptedto compare the facilities charge arrangement
to a capital lease.Under the Company'sinterpretation of accounting principles,this is
not appropriate.The facilities charge is a charge by the pipeline company,i.e.,the
utility in this case,to Idaho Power,i.e.,the customer in this case.The facilities charge
provides that the operation,maintenance and control of the facility is the responsibility
of the pipeline company,i.e.,the utility.This facilities charge arrangementand the
method for computing the charges are contained in the pipeline company'stariff
approved by the Federal Energy RegulatoryCommission.The underlying agreement
between the utility and the Company is for services and does not transfer the right to
use the property,plantor equipment.This arrangementcan be likened to the facilities
charges that Idaho Power imposes on its customers when special facilities are required,
which are also tariff charges approvedby the Idaho Commission.The result is clear.
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 4
The special facilities charge is nothing more nor less than a charge imposed by the
utility on a customer for services requested by the customer and provided by the utility.
This arrangement is not a capital lease but a contract for services.
CONCLUSION
The Company proposed that it be permittedto defer with interest the 2001
and 2002 facilities charges as a regulatory asset because the year 2001 had expired
and by the time an order is issued in this proceeding,it would be the latter part of 2002.
The Company submitted what it believed to be a reasonable approach by proposing the
amortization of the 2001-2002 expenses,over a ten-year period,commencing
January 1,2003 as a non-PCA related cost.Under this proposal the facilities charge
expenditures incurred prior to the next revenue requirement case are deferred with
amortization of the expenses commencing January 1 of the followingyear.This has the
effect of levelizing the expendituresand allows the Company to recover the
unamortized portion of the expendituresover a period of time.Staff in their comments
recognize that they are recommendingthat Idaho Power simply absorb all of the
facilities charge expenses until the next general revenue requirement proceeding.Why
the Company should absorb the facilities charge expenses is never really discussed by
Staff.The result,however,is obvious.Staff's proposal is a recommendation that the
Company absorb the facilities charge as an expense without any recovery.While not
challenging the Commission's decision that the facilities charge is not a PCA related
cost recovery,the Company believes that Staff's proposal that it absorb all of the
facilities charges as an expense is unfair.This is particularly true in the face of Order
No.29026,which the Companybelieved authorized recovery of the facilities charges,
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 5
since the charges are directly related to fuel delivery and transportation.
Respectfullysubmitted this 19th day of July,2002.
LARRY 6.RIPLEY
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS,Page 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 19th day of July,2002,I served a true
and correct copy of the above and foregoing IDAHO POWER COMPANY'S REPLY
COMMENTS upon the followingnamed parties by the method indicated below,and
addressed to the following:
Lisa D.Nordstrom _Hand Delivered
Deputy Attorney General x U.S.Mail
Idaho Public Utilities Commission OvernightMail
472 W.Washington Street FAX
P.O.Box 83720
Boise,Idaho 83720-0074
ARRY D.RIfLEY
CERTIFICATE OF SERVICE