20030829Comments.pdf

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LISA D. NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY TO REVISE ITS
DEPRECIATION RATES FOR PLANT IN SERVICE. CASE NO. IPC-O3- 7
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Lisa D. Nordstrom, Deputy Attorney General, and in response to the
Amended Notice of Comment Deadline issued in Order No. 29313 on August 6, 2003, submits
the following comments.
Idaho Power Company filed an Application on May 6 2003, requesting authority to
revise its depreciation rates for the Company s electric plant in service. Idaho Power
depreciation rates have not been significantly changed since the Commission issued Order No.
24739 in 1993. Although the Company s total annual depreciation expense would increase by
nearly $7.0 million under its proposal the present Application does not request a change in
electric rates.
STAFF COMMENTS AUGUST 29 , 2003
STAFF ANALYSIS
With the exception of a few accounts, Staff was generally satisfied with the Application
as filed with the Commission. Staff analysis verified that the proposed rates were generally
comparable to those used by industry for similar companies and to rates that were recently
approved for PacifiCorp.l The proposed Idaho Power rates compared favorably to PacifiCorp
rates in that they generally required equal or lower salvage costs and similar or longer asset lives.
After conducting its analysis, Staff participated in public meetings and settlement discussions
with the Company and the Industrial Customers of Idaho Power (ICIP). The purpose of the
meetings was to resolve concerns Staff and the ICIP had with regard to the Application as filed.
The Company and Staff have made considerable progress and are working to develop a written
Stipulation to submit to the Commission. The Company and Staff have agreed in principle to
resolve the primary issues of concern as discussed below. The anticipated Stipulation will
reduce the overall requested depreciation rate from approximately 3.15% to 3.05% and reduce
the annual requested increase in depreciation expense from $7.0 million to $4.3 million.
Accounts 311, 312.1, 312., 314 - Steam Production Plant
The Company has agreed to lower the salvage costs from negative ten percent to negative
five percent for the Jim Bridger plant to match the PacifiCorp rate that was recently approved by
this Commission. Staff believes this change is reasonable for the shared facility. By changing
the negative salvage costs, the requested depreciation expense drops by $978 813 per year based
on 2001 plant levels.
Accounts 331, 332.1, 332., 332.3, 333, 334 - Hydraulic Production Plant
In its original Application, the Company proposed a plant life equal to the term of each
hydro facility s current Federal Energy Regulatory Commission s (FERC) operating license.
Staff does not believe that the life of a hydro facility should be based solely on the term of the
1 See Case No. PAC-02-, Order No. 29265.
2 Based on the $2 900 657 420 of depreciable plant at the end of 200
3 The FERC regulates the use of each hydraulic production facility. Each facility must undergo a rigorous
relicensing process at the end of its current license period. This process could make the facility more expensive to
operate. Therefore, there is uncertainty associated with the FERC relicensing process. It should be considered as
one potential usefullife-lirniting concern.
STAFF COMMENTS AUGUST 29, 2003
FERC license. There are other more important factors that should be considered, such as the
actual projected physical life of the facility and any possible gain that might be realized if the
property were sold or condemned prior to the end of that period. Although the parties ' positions
have been clearly defined through discussions with the Company, this philosophical difference
will not be resolved in the anticipated Stipulation. Staff is satisfied that the Company is willing
to consider other relevant factors in the future in addition to the FERC license term. In addition
to recognizing Staff s concerns regarding the proposed lives of the hydro facilities, the Company
has also agreed to more appropriately evaluate the negative salvage costs proposed for some
items in these accounts. Although Staff has not endorsed all components of the calculated
overall rate, we believe the end result is reasonable. It reduces the proposed depreciation
expense by $1 051 464 per year based on 2001 plant levels.
Accounts 354 and 355 -Transmission Equipment
The Company s Application requested a significant increase in the negative salvage costs
associated with accounts 354 and 355.4 These increases appear out ofline with the rates recently
approved for PacifiCorp and those used by other companies in the electric industry. After
reviewing additional data for these accounts, the Company agreed to make some reductions in
the proposed negative salvage rates. Instead of a negative salvage rate of 50%, the Company has
agreed to a negative salvage of 30% for account 354. Account 355 will be adjusted from
negative 75% to negative 60%. Staff supports these changes as reasonable. The combined effect
of the two changes will reduce the proposed depreciation expense by $656 153 based on 2001
plant levels.
Accounts 391.2 and 391.21 - Computer Equipment
These accounts contain computer equipment that is accounted for by vintage year on a
total dollar basis, and is therefore amortized instead of depreciated. This is consistent with past
Company and industry practices. In its Application, the Company proposed changing the lives
of its computer equipment from eight years to five (Account 391.2) and six (Account 391.21)
years. While Staff supports these changes, Staff did not support the methodology proposed to
accelerate amortization of the older equipment. The Company originally proposed an
4 Account 354 contains transmission towers and fixtures while account 355 contains transmission poles and fixtures.
STAFF COMMENTS AUGUST 29, 2003
accelerated amortization by increasing the rate for all computer equipment. The Stipulation will
provide a more reasonable amortization period by amortizing older equipment at a faster rate
than the newer equipment. Under the Stipulation, the Company will amortize equipment
purchased before 2001 at a faster rate and equipment purchased after 2001 at the proposed
five-year and six-year rates. Idaho Power will establish additional subaccounts to properly
account for the different amortization rates. Staff believes this is a reasonable compromise
because this methodology will allow the Company to recover the amounts related to the older
equipment sooner while amortizing the newer equipment over its proper life.
SUMMARY AND RECOMMENDATION
The anticipated Stipulation will reduce the overall requested rate from approximately
15% to 3.05% and reduce the annual requested increase in depreciation expense from $7.
million to $4.3 million.5 The stipulated rates will be reflected in the upcoming Idaho Power rate
case as an adjustment to decrease the pro-forma depreciation expense. Staff believes this
Stipulation will be in the best interest of all Idaho customers. The stipulated rates will be a
reasonable reflection ofthe lives and salvage costs ofthe Company s depreciable assets. Based
on the information stated above Staff believes:
1. That the anticipated Stipulation will reflect the agreements in principle Staff
identified in these comments. If the Stipulation embodies the principles outlined
above, it will provide reasonable rates for Idaho Power and its customers and should
be approved as filed. Staff anticipates a signed stipulation will be filed with the
Commission on or about September 9 2003 (the Company s Reply Comment
deadline).
2. That the Company should bring another depreciation study before the Commission
within five years to better allow the Company and the Commission to respond to the
changing needs of the Company and its customers.
5 Based on the $2 900 657 420 of depreciable plant at the end of 2001.
STAFF COMMENTS AUGUST 29, 2003
Respectfully submitted this ,21 ~ day of August 2003.
Technical Staff: Alden Holm
Michael Fuss
LN:i :/umisc/comments/ipceO3. 71nahmfuss
STAFF COMMENTS AUGUST 29, 2003
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 29TH DAY OF AUGUST 2003
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-03-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
BARTON L KLINE
MONICA MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
JOHN R GALE
VICE PRESIDENT, REGULATORY
AFFAIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
PETER J RICHARDSON
RICHARDSON & O'LEARY
99 ESTATE ST STE 200
EAGLE ID 83616
DON READING
BEN JOHNSON ASSOCIATES
6070 HILL ROAD
BOISE ID 83703
CERTIFICATE OF SERVICE