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Home My WebLink About20040901Comments in Support of Settlement.pdf"\""-;"""' ; .r- ./ ;~; ' t j,- r -; 'L ,-' l"... .' 1-- --.. 1'"1L..dBARTON L. KLINE ISB #1526 MONICA B. MOEN ISB #5734 Idaho Power Company O. Box 70 Boise , Idaho 83707 Telephone: (208) 388-2682 FAX Telephone: (208) 388-6936 iL, f/nt'!! ~et JHJ UU~ vLf , ~' j ,.hf - ,.. , .- - , -; ;; d::.:"iL UTILiTiES CGt*HJlISSION 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 AUTHORITY TO INCREASE ITS INTERIM AND BASE RATES AND CHARGES FORELECTRIC SERVICE. CASE NO. IPC-03- COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT COMES NOW , IDAHO POWER COMPANY ("Idaho Power ), and in response to the Notice of Proposed Settlement, Notice of Modified Procedure and Notice of Vacated Pre-File Dates issued on August 18 , 2004, submits the following comments: BACKGROUND In this case , Idaho Power filed its test year income tax expense based on the current statutory income tax rates. Commission Staff advocated use of an historic five-year average to calculate income tax expense. In Order No. 29505 issued on May 25, 2004, the Commission adopted the Commission Staff's position and ordered the Company to use a historic five-year average to calculate the Company s test year income COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT, Page tax expense in lieu of the statutory rates. This reduced the test year revenue requirement attributable to income tax expense by $11 ,504 677. Idaho Power filed a timely Petition for Reconsideration and, in Order No. 29547 issued on July 13, 2004, the Commission decided to reconsider that portion of Order No. 29505 relating to the Commission determination of the Company s income tax expense for revenue requirement purposes. Following the issuance of Order No. 29547 and pursuant to notice issued in accordance with RP 272, the Parties entered into settlement discussions which resulted in the execution of the Stipulation which was enclosed with the Joint Motion of the Parties requesting that the Commission approve the settlement between the Parties. The Joint Motion and Stipulation were filed with the Commission on August 16, 2004. Description of Settlement In this case Idaho Power presented evidence that the use of the historic five-year average income tax rate would cause the Company to violate the normalization provisions of the Internal Revenue Code and associated Treasury Regulations and jeopardize Idaho Power s ability to continue to obtain the benefits of accelerated depreciation. If the Internal Revenue Service were to find that Idaho Power violated the normalization requirements and Idaho Power cannot continue to claim the right to use accelerated depreciation , the result would be millions of dollars of additional annual revenue requirement. As a result, it is not in dispute that it is in the public interest for Idaho Power to continue to obtain the benefits of accelerated depreciation and that the loss of accelerated depreciation would not be in the public interest. In order to resolve the dispute and as a compromise of contested claims the Parties negotiated the Stipulation as an integrated settlement document. As noted in the Joint Motion and Stipulation filed on August 16, 2004, the Parties have agreed that COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT, Page 2 the Stipulation is in the public interest and that all terms of the Stipulation are fair, just and reasonable. The comprehensive settlement is summarized as follows: Order No. 29505 should be modified to utilize statutory income tax rates to compute test year income tax expense. Applying the statutory rates results in a federal tax rate of 350/0 (net of state benefit, 32.7950/0) and a state tax rate of 6./0. On a normalized basis, this change would increase Idaho Power s Idaho jurisdictional test year revenue requirement by $11 504 677. For the period June 1 2004 through May 31 2005, the Company will compute and record monthly in a regulatory asset account an amount equal to the additional revenue the Company would have received through its energy rates if its revenue requirement had been determined using the statutory income tax rates rather than the five-year historic average income tax rates. The energy rate to be used to . compute the additional monthly revenue to be recorded in the regulatory asset -account. The monthly entry in the regulatory asset account will be computed by multiplying actual MWh sales during the month by $0.92209/MWh. The computation of the $.92209/MWh is specifically set out in the Stipulation and will not be repeated here. The total amount recovered will include interest on the regulatory asset from June 1 2004 at the PCA carrying charge rate which is currently one percent (10/0). In addition to the recovery of the income tax expense for the June 1 2004 through May 31 2005 period described in paragraph 2 above $11 ,504 677 of additional revenue requirement will be included in the Company s base rates for ongoing recovery beginning June 1 , 2005. COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT, Page 3 The Company will not seek to recover in its revenue requirement any deficiency assessed by the Internal Revenue Service related to the one-time adjustment associated with the capitalized overhead cost tax method change for the years 1987 through 2000. The Settlement is Fair, Just, Reasonable and in the Public Interest In light of the substantial harm to customers that would ensue if the Internal Revenue Service determines that the use of the historic five-year average method to compute Idaho Power s income tax expense violates the normalization provisions of the Internal Revenue Code and associated Treasury Regulations, Idaho Power submits that it is in the public interest for the Commission to accept the settlement embodied in the Stipulation. Further, Idaho Power has contacted counsel for all of the Parties that participated in this case. All of the Parties have authorized Idaho Power to represent to the Commission that they do not object to the Commission s acceptance of the proposed settlement. Idaho Power believes that the lack of opposition to the settlement embodied in the Stipulation supports the conclusion that the overall settlement is fair, just and reasonable and in the public interest. Consequently, Idaho Power urges the Commission to issue its order granting the Joint Motion and approving the settlement Stipulation. Respectfully submitted this 1 st day of September, 2004. BARTON L. KLINE Attorney for Idaho Power Company COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT, Page4 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 1 st day of September, 2004 , I served a true and correct copy of the within and foregoing COMMENTS OF IDAHO POWER IN SUPPORT OF ACCEPTANCE OF SETTLEMENT upon the following named parties by the method indicated below, and addressed to the following: Lisa D. Nordstrom Weldon B. Stutzman Deputy Attorneys General Idaho Public Utilities Commission 472 W. Washington Street O. Box 83720 Boise, Idaho 83720-0074 Hand Delivered S. Mail Overnight Mail FAX (208) 334-3762 Randall C. Budge Eric L. Olsen Racine, Olson, Nye, Budge & Bailey O. Box 1391; 201 E. Center Pocatello, I D 83204-1391 Hand Delivered S. Mail Overnight Mail FAX (208) 232-6109 Anthony Yankel 29814 Lake Road Bay Village, OH 44140 Hand Delivered S. Mail Overnight Mail FAX (440) 808-1450 Peter J. Richardson Richardson & 0' Leary 99 East State Street, Suite 200O. Box 1849 Eagle, ID 83616 Hand Delivered S. Mail Overnight Mail FAX (208) 938-7904 Don Reading Ben Johnson Associates 6070 Hill Road Boise, ID 83703 Hand Delivered S. Mail Overnight Mail FAX (208) 384-1511 Lawrence A. Gollomp Assistant General Counsel U. S. Department of Energy 1000 Independence Avenue, SW Washington , D.C. 20585 Hand Delivered S. Mail Overnight Mail FAX (202) 586-7479 CERTIFICATE OF SERVICE , Page Dennis Goins Potomac Management Group 5801 Westchester Street Alexandria, VA 22310-1149 Conley E. Ward Givens, Pursley LLP 601 W. Bannock Street O. Box 2720 Boise, ID 83701-2720 Dennis E. Peseau, Ph. Utility Resources, Inc. 1500 Liberty Street S., Suite 250 Salem , OR 97302 Dean J. Miller McDevitt & Miller LLP O. Box 2564 Boise, ID 83701 Jeremiah Healy United Water Idaho, Inc. O. Box 190420 Boise , ID 83719-0420 William M. Eddie Advocates for the West O. Box 1612 Boise , ID 83701 Nancy Hirsh NW Energy Coalition 219 First Ave. South , Suite 100 Seattle , WA 98104 Brad M. Purdy Attorney at Law 2019 N. 17th Street Boise , I D 83702 Michael Karp 147 Appaloosa Lane Bellingham , WA 98229 CERTIFICATE OF SERVICE, Page 2 Hand Delivered S. Mail Overnight Mail FAX Hand Delivered S. Mail Overnight Mail FAX (208) 388-1300 Hand Delivered S. Mail Overnight Mail FAX (503) 370-9566 Hand Delivered S. Mail Overnight Mail FAX (208) 336-6912 Hand Delivered S. Mail Overnight Mail FAX (208) 362-7069 Hand Delivered S. Mail Overnight Mail FAX (208) 342-8286 Hand Delivered S. Mail Overnight Mail FAX (206) 621-0097 Hand Delivered S. Mail Overnight Mail FAX (208) 384-8511 Hand Delivered S. Mail Overnight Mail FAX (360) 724-5272 Michael L. Kurtz , Esq. Kurt J. Boehm , Esq. Boehm , Kurtz & Lowry 36 East Seventh Street , Suite 2110 Cincinnati , OH 45202 Kevin Higgins 39 Market Street, Suite 200 Salt Lake City, UT 84101 Thomas M. Power Economics Department , LA 407 University of Montana 32 Campus Drive Missoula, MT 59812 Richard' E. Malmgren Micron Technology, Inc. 8000 S. Federal Way Boise, I D 83716-9632 CERTI FICA TE OF SERVICE , Page 3 Hand Delivered S. Mail Overnight Mail FAX (513) 421-2764 Hand Delivered S. Mail Overnight Mail FAX Hand Delivered S. Mail Overnight Mail FAX Hand Delivered S. Mail Overnight Mail FAX ~~- BARTON L. KLINE