20040910Final Order No 29589.pdf

Office of the Secretary
Service Date
September 10, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF IDAHO POWER COMPANY)
AND TAMARACK RESORT LLC FOR
APPROVAL OF AN AGREEMENT TO
PROVIDE ELECTRIC DISTRIBUTION FACILITIES.
CASE NO. IPC-O4-
ORDER NO. 29589
On May 5 , 2004, Idaho Power Company (Idaho Power, Company) and Tamarack
Resort LLC (Tamarack) jointly filed an Application requesting the Commission issue an Order
approving an Agreement dated May 3 , 2004, under which Idaho Power would provide certain
electrical distribution facilities to Tamarack pursuant to a special line installation agreement.
Idaho Power requested that this Application be processed by Modified Procedure. In the Notice
of Application and Modified Procedure issued on June 1 , 2004, the Commission solicited
comments regarding the Joint Application. Order No. 29509. The Commission received timely
comments from 11 persons, Staff, and the Company. In this Order the Commission grants the
Joint Application as set out in greater detail below.
BACKGROUND
Tamarack is developing a substantial four-seasons resort project ("Resort Project") in
Valley County, Idaho. At final build-out Tamarack indicates the Resort Project will be a
complex featuring approximately 2 000 housing units approximately 272 000 square feet of
commercial space, a golf course, ski lifts and other recreational amenities. The Resort Project
estimates a combined electrical load of approximately 20 megawatts (MW). Final build-out is
expected to take a number of years. Tamarack has requested that Idaho Power make 7.
Megavolt-Ampere (MV A) of electrical capacity available to the Resort Project by November 1
2004.
Because the Resort Project will be located in an area where Idaho Power does not have
existing facilities of adequate capacity and desired phase and voltage, the delivery of power to the
Resort Project site will require the construction of: (1) underground and overhead facilities and
lines to interconnect with Idaho Power existing transmission/distribution system
Interconnection Facilities ), and (2) installation of additional substation equipment and
ORDER NO. 29589
facilities ("the Substation Facilities ). The Joint Application refers to the Interconnection
Facilities and the Substation Facilities collectively as the "Requested Facilities.
Rule H is the Company s tariff provision that generally governs line extensions. By
its terms Rule H does not apply to all line extensions, and the Parties have agreed that this
project is not subject to or governed by Rule H. However, the Parties have agreed to use some of
the principles contained in Rule H to address refunds of a portion of the contribution in aid of
construction ("CIAC") to be paid by Tamarack under the Agreement to Provide Electric
Distribution Facilities between Idaho Power and Tamarack ("the Agreement"
).
Installation of
distribution facilities within the boundaries of the Resort Project will be made in accordance with
Rule H.
THE AGREEMENT
Construction of Facilities The Parties have agreed that the Requested Facilities will
be constructed in two phases. Phase 1 Facilities have already been constructed and will provide
not more than 2 MV A of three-phase power at a point of delivery located adjacent to the
boundaries of the Resort Project. A general description of the Phase 1 Facilities is included as
Exhibit 1 to the Agreement. Idaho Power completed Phase 1 construction in November 2003.
Phase 2 construction will be performed during the 2004 construction season and will include the
construction of the Requested Facilities to provide 7.5 MV A of electrical capacity at the
Delivery Point. A general description of the Phase 2 Requested Facilities is included as Exhibit
2 to the Agreement. Phase 2 construction is expected to be completed by Idaho Power on or
before November 1 2004.
Cost of Facilities. The total estimated cost of the design and construction of the
Requested Facilities is $2 704 886. Assuming Tamarack makes all of its required payments on
schedule, the CIAC to be paid by Tamarack will not exceed $1 891 372. Tamarack has paid
Idaho Power $1 055 375 for the Phase 1 Requested Facilities, and $764 798 for Phase 2
Requested Facilities. As provided in the Agreement, Tamarack has agreed to pay Idaho Power
an additional $191 199 on or before October 1 2004.
Vested Interest Refund Provisions.In order to supply 7.5 MW of electrical
capacity to Tamarack with the power quality specifications requested by Tamarack, Idaho Power
had to construct a portion of the Interconnection Facilities outside the Resort Project boundaries
with a capacity greater than 7.5 MV A. Tamarack will not be entitled to use more than 7.5 MW
ORDER NO. 29589
of capacity in the Interconnection Facilities. Because the Requested Facilities, funded in part by
the CIAC Tamarack is making, will create additional capacity that can be used to serve future
customer loads, the Company has agreed to collect contributions from those other customers who
utilize the Requested Facilities to receive electric service. These contributions will be in the
form of vested interest refunds and line capacity charges.Portions of the Interconnection
Facilities subject to vested interest refunds and the maximum refund dollar amounts are
described more particularly in the Agreement. Vested interest refunds will be collected for a 10-
year period following the completion of the Phase 2 Requested Facilities.
Line Capacity Chan!es. In order to equitably share the cost of the facilities for
which Tamarack is providing a substantial CIAC, Idaho Power has agreed to collect a line
capacity charge from all other customers attaching to facilities that utilize the Requested
Facilities to receive electric service. Line capacity charges would be assessed, collected and
refunded to Tamarack as follows:
(a) Idaho Power will inventory all lots that are currently being "served" but
are not connected that might attach to facilities that will utilize the
Requested Facilities to receive electrical service. These are the lots where
the customer( s) have previously paid to install facilities to receive power
on the lots, but the lots have not been connected. Capacity has previously
been reserved for these lots, and customers have been advised that power
is readily available to their lot. These lots will be exempt from paying the
line capacity charges.
(b) Schedule 01 , Residential, and Schedule 01 , Non-Residential Customers
(or their successor schedules) would pay $800 per connection.
(c) Customers receiving service under Schedules 7, 9, 19, 24, 45 and 46 (or
their successor rate schedules) would pay $40 per kW of connected load.
(d) Line capacity charges will be collected for a period ending five (5) years
after the completion of the Phase 2 Requested Facilities, currently
scheduled for November 1 2004.
(e) Line capacity charges collected by Idaho Power will be paid to Tamarack
on a quarterly basis without interest.
(f) Planned developments such as subdivisions will pay line capacity charges
at the time of the application (when the lots are "served") and not at the
time of the physical power connection to the individual lot.
ORDER NO. 29589
(g) Cash allowances through Rule H would not be applicable to reduce line
capacity charges.
Limit on A22:re2ate Line Capacity Char2es and Vested Interest Char~
Collections and refunds for both line capacity charges and vested interest payments will cease
when Tamarack has been refunded 80% of the total amount Tamarack has paid for distribution
facilities. Idaho Power will include the tax gross-up portion of Tamarack's payments in the
amount subject to refund to Tamarack. The total amount that could be refunded to Tamarack
from vested interest payments and line capacity charges is $1 075 571.
Substation Facilities Tamarack will pay Idaho Power $546 909 for substation
capacity of 7.5 MW (2.5 MW for Schedule 19 load and 5 MW for non-Schedule 19 load). The
prorated share for the non-Schedule 19 load of $364 606 (5000 kW/7500 kW = 67% x $546 909)
is eligible for refund. Refunds will be available for a 10-year period following the completion of
the Phase 2 Requested Facilities. Idaho Power will pay Tamarack $73 per kW of load (based on
estimated demand) for facilities installed within the Resort Project boundaries and taking service
under Rate Schedule 01 , 07, 09, 24, 45 and 46. The demand amount used for refunding purposes
will include a diversity factor and will be equivalent to the demand on the substation. The
estimated demand for a subdivision lot will be 10 kW per lot for a refund amount of$730 per lot.
Substation refunds to Tamarack will be made after the final 2004 payment, and only after the
completion of the individual distribution work orders have been completed. These refund
payments will be made without interest and with a maximum refund payout of $364 606.
PUBLIC COMMENTS
The Commission received 11 public comments on the Joint Application. The
comments generally requested that Idaho Power bury the overhead power lines that will serve
Tamarack Resort to preserve the environment, scenic views, recreational opportunities
customers' health , and adjacent landowners' property values. Many of the comments appeared
to refer to the construction of transmission lines north of the Requested Facilities that is not part
of this Application. Several commenters noted that burying the lines in the McCall-Donnelly-
Tamarack area would likely decrease winter outages caused by heavy snowfall.Four
commenters addressed who would pay the additional cost necessary to bury the transmission
and/or distribution lines: three suggested Tamarack pay to bury the lines and one indicated the
city who the lines are built for can cover the costs.
ORDER NO. 29589
STAFF COMMENTS
Staff has carefully reviewed the terms of the Agreement and recommends approval.
Staff believes that the uniqueness of Tamarack's situation warrants a special agreement to
provide Interconnection and Substation Facilities. The Agreement generally follows the
guidelines of Rule H (particularly within the boundaries of Tamarack), but deviates appropriately
in order to achieve greater fairness in terms of the cost responsibilities of the various customers
who will eventually utilize the facilities. Staff believes the ten-year vested interest refund period
and a five-year line capacity charge period identified in the Agreement are reasonable. Likewise
Staff believes it is appropriate for Tamarack to contribute a refundable share of costs
proportionate to only its non-Schedule 19 load.
IDAHO POWER REPLY COMMENTS
On July 22, 2004, Idaho Power filed reply comments in response to several public
comments received by the Commission that addressed the following issues:
Plannin2 for Increased Loads in Valley County The Company s 1999-2000
planning study of the Donnelly/McCall area considered existing and future loads, right-of-way
requirements, environmental considerations, the location of existing facilities and overall cost in
determining the most suitable means of providing existing and future electrical service in Valley
County. After considerable analysis, the Company determined that the West Mountain Road
corridor was part of the best route to provide the projected electrical service and that the former
railroad right-of-way would be part of the 138-kV transmission loop needed within the
Donnelly/McCall area.
Under2round Transmission Facilities:Idaho Power does not own or operate any
underground transmission facilities. Installing of underground transmission facilities is generally
five to ten times more costly than placing the same facilities overhead. To provide safe and
reliable electrical service to its customers at the least cost, Idaho Power s practice is to not bury
its transmission facilities.
Although not part of the Agreement before the Commission, the 138-kV transmission
line between Donnelly and McCall that was referred to by several commenters will be
approximately 12 miles long. According to Idaho Power, a rule-of-thumb estimate for the cost
of overhead construction of a transmission line of the type currently contemplated for the 138-
Donnelly/McCallline is approximately $250 000 per mile or a total cost of approximately $3
ORDER NO. 29589
million. Using the above-referenced five to ten-times multiplier means that constructing the
McCall/Donnelly 138-kV line underground would cost approximately $15 to $30 million
depending on the topography of the route. Idaho Power would not voluntarily incur these
additional costs, believing that it is inequitable for the Company s ratepayers as a whole to
absorb the increased cost.
Idaho Power believes overhead transmission facilities can be built between McCall
and Donnelly within the former railroad corridor that are sensitive to the natural features of the
area. The use of either wood poles or rust-colored, weathered steel poles would blend in with the
trees located along and through this corridor. Furthermore, transmission poles can generally be
placed farther apart which also reduces the visual impact.
Under2round Distribution Facilities : With respect to the distribution line on West
Mountain Road, Idaho Power occasionally builds underground facilities rather than overhead
facilities if it is more cost-effective to do so. In this specific instance, Idaho Power applied the
most cost-effective solution possible to serve the Tamarack Resort load and to enhance the
reliability of the distribution feeder circuit in the area. In a one-mile section through Forest
Service land, it was more cost-effective for the Company to bury the distribution line. In that
mile, insufficient right-of-way width existed to allow economical construction of an overhead
distribution line.
O&M Expense of Under2round vs. Overhead Lines Several of the comments
received by the Commission stated that reduced O&M expense would justify more expensive
underground construction. Underground lines have a slightly lower frequency of failures;
however, that benefit is offset by a much longer duration of an outage until the failure can be
located and repaired. Although operational expenses are generally similar, expenses incurred to
repair line failures are significantly higher for underground lines. Idaho Power noted that
accumulating evidence indicates that the life of underground line may be significantly less than
an overhead line because of the degradation of the underground line s insulation. The difference
may be a useful life of 30 years for underground facilities compared to a known useful life of 50
years or more for overhead lines.
Tree Maintenance Policies : Idaho Power also addressed the concerns raised by one
commenter regarding the Company tree and vegetation maintenance practices. After
explaining its policies and procedures, Idaho Power noted that its line-clearing and vegetation
ORDER NO. 29589
management work in the Donnelly/McCall area has been very successful and that the Company
has historically received very few complaints from customers in this area concerning its line-
clearing efforts.
DISCUSSION
The Commission has reviewed and considered the record in Case No. IPC-04-
including the comments filed by the public, Staff, and the Company. Based on our review, we
continue to find it reasonable to process this case pursuant to Modified Procedure, i., by written
submission rather than by hearing. IDAPA 31.01.01.204. We note that there were no comments
opposing the use of Modified Procedure or requesting a hearing on the Joint Application.
Given the uniqueness of the Resort Project, the Commission finds the special
agreement to provide Interconnection and Substation Facilities that is the subject of the Joint
Application to be appropriate. The new facilities will extend more than ten miles. Because of
the rural, recreational nature of the surrounding property and the likelihood that surrounding
development will not occur in less than five years, we find it is appropriate to extend the refund
period for vested interest refunds from five to ten years as proposed.
Under the circumstances in this case and where the facilities will be constructed with
funds provided by Tamarack, we find the provisions for Tamarack to receive contributions from
third parties that connect to the facilities to be fair, just and reasonable. The Commission
therefore approves the refund and line capacity provisions agreed to by Idaho Power and
Tamarack in their line extension agreement.
Because substation capacity must be increased to serve Tamarack's expected (though
uncertain) load, we find it is reasonable and appropriate to require Tamarack to contribute a
refundable share of substation improvement costs in proportion to its non-industrial load. As
Tamarack will not have contributed funds attributable to Schedule 19 load, it is reasonable that
Tamarack will not be entitled to refunds for its share of those costs.
Finally, the Commission has reviewed the public comments requesting that Idaho
Power bury the 138 kV overhead transmission lines between McCall and Donnelly and 34.5 kV
distribution lines between Donnelly and Tamarack. We note the Agreement that is the subject
this Application covers only the distribution lines between Donnelly and Tamarack, not the
transmission lines along Highway 55. Burying the transmission and/or distribution lines has
both advantages and disadvantages. The question of who would pay the additional costs is
ORDER NO. 29589
significant. Idaho Power indicated that if "a majority of Valley County residents prefer that
transmission facilities in the Donnelly/McCall area be buried, the Company is willing to do so
provided that the additional cost incurred by the Company to place those facilities underground
is borne by the residents of Valley County and not the Company s customers generally.
Company Reply Comments at 4. Indeed, the Underground Conversion of Utilities Act provides
that local governments may create local improvement districts to provide for the construction of
underground transmission lines or the conversion of overhead electric lines to underground
locations. Idaho Code 99 50-2503 and 50-2504. We encourage those who seek the burial of the
overhead lines to work with Idaho Power, Tamarack, and city/county governments to explore
methods of paying the additional expense that would result from burying the transmission and/or
distribution facilities.
ORDER
IT IS HEREBY ORDERED that the Joint Application of Idaho Power Company and
Tamarack Resort LLC requesting the Commission approve the Agreement dated May 3, 2004
and authorize the Company to implement the special line installation arrangement described
therein with Tamarack Resort, LLC, is granted.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-04-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this order or in interlocutory Orders previously issued in this
Case No. IPC-04-12. For purposes of filing a petition for reconsideration, this order shall
become effective as of the service date. Idaho Code 9 61-626. Within seven (7) days after any
person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 29589
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
-fI..
day of September 2004.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
O:IPCE0412 In2
ORDER NO. 29589