20031217Mountain View Power Reply Comments.pdf

RECEIVED
::'
!LEO
Ronald L. Williams
Attorney at Law
1015 W. Hays St.
Boise ill 83702
208-344-6633
ISB # 3034
Attorney for Mountain View Power, Inc.
zaD3 DEC 17 PM 4: (4
i\i,u !'ibLIL;
UT IL ITIES COf~\~1ISSI0N
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF IDAHO POWER
COMPANY FOR A CERTIFICATE OF
PUBLIC CONVENIENCE AND
NECESSITY FOR THE RATEBASING
OF THE BENNETT MOUNTAIN POWERPLANT.
CASE NO. IPC-O3-
REPLY COMMENTS OF
MOUNTIN VIEW POWER,
INc.
Mountain View Power, Inc. (MVP), by and through its Attorney, Ronald L.
Williams, provide these Reply Comments to Staff Comments of December 15, 2003
only as they relate to Staffs analysis and recommendations concerning tax increment
financing and sales taxes.
Tax Increment Financing
Staff recommends, to the extent tax increment financing (TIP) in excess of three
million dollars benefits the Bennett Mountain Project (the "Project"), that additional
construction savings be passed on to Idaho Power. (Staff Comments, page 26) Staff also
recommends Idaho Power s audit capability of MVP's books be extended to Staff
auditors. (Staff Comments, page 37) Both of these recommendations should be rej ected
by the Commission, as they were derived from an in-accurate representation of the facts
and in essence, are recommendations for rate-of-return regulation of MVP and Siemens-
Westinghouse Power Corporation (Siemens).
First, Staff is in error in assuming $3 million in TIF financing remained in MVP'
bid. The $3 million referred to by Staff was an amount assumed by MVP in MVP'
original bid to Idaho Power. That bid was subsequently revised later, and MVP'
assumptions regarding the likelihood of TIP financing assistance were also revised.
MVP REPLY TO STAFF COMMENTS Page 1
In addition MVP and Siemens revised the risk allocation between them
concerning TIP. Staff s recommendation would require revisions to both the Idaho
Power-MVP Agreement, and the MVP-Siemens Agreement, concerning allocation of TIP
construction financing assistance. Staffs recommendation asserts regulatory authority
over the profitability of a contractor and a sub-contractor to a regulated utility. The
Commission should reject Staffs recommendation to re-align construction benefits
without also realigning construction risk.
MVP currently carries 100% of the risk that TIP funds will not be available, in
some amount less than MVP's revised TIP estimate.For TIP funds to assist in
construction financing, significant work must be performed by MVP, at substantial
expense. Idaho Power is not assisting MVP in this effort. Idaho Power' interest in the
TIP has already vested. Ratepayers are already benefiting from MVP's assumption (in its
revised bid price) that some amount of TIP will offset Project construction costs. If no
TIP funds are available, then MVP and Siemens - not Idaho Power, or its ratepayers -
absorb the additional construction cost. Staffs recommendation avoids discussion of the
risk, expense and effort concerning TIP.
Alternatively, MVP's supports Staffs recommendation, provided that it is
revised to address both reward and risk concerning TIP. If TIP funding is available for
project infrastructure that exceeds the revised TIP estimate , MVP will share that "bonus
with the Company, as a reduction to the contract price. Conversely, ifMVP receives TIP
funding below the estimate, there will be a contract price increase by the amount of the
shortfall.Staff can have full TIP audit rights.Under this adjustment to Staffs
recommendation, TIP rewards and risks are now in balance.
Sales Taxes
Staff comments on page 26 that "the turbine intended for the project has been
purchased from a secondary market" and therefore, sales taxes on the turbine "have
already been paid by the previous buyer." (Staff Comments, Page 26, 27)
1 Which Th, and always has been, a confidential and proprietary number, comprising what MVP and
Siemens would describe as contingent profitability.
MVP REPLY TO STAFF COMMENTS Page 2
Staff is in error. The Westinghouse 501FD turbine generator to be installed at the
Project site by Siemens is a brand new unit Siemens will manufacture for this Project.
There is no previous buyer of the turbine.
MVP's did investigate the secondary market for turbines, and whether one was
available on which sales taxes had been paid. MVP's investigation showed that such a
buyer-turned-seller would then immediately claim a sales tax refund from their respective
taxing jurisdiction, claiming a "purchase for resale" sales tax exemption. This would then
nullify MVP's ability to claim a "credit" for sales tax previously paid another taxing
jurisdiction, as allowed by Idaho Code g 63-36210).
For the reasons outlined above the Commission should reject Staffs
recommendations concerning tax increment financing and the phantom payment of sales
taxes.
Respectfully submitted this ih day of December, 2003.
R.A/ l!J~
Isl Ronald L. Williams
Ronald L. Williams
Vice President and General Counsel
Mountain View Power, Inc.
MVP REPLY TO STAFF COMMENTS Page 3