20040514Decision Memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:MAY 14, 2004
RE:IN THE MATTER OF THE JOINT APPLICATION OF IDAHO POWER
COMP ANY AND TAMARACK RESORT LLC FOR APPROVAL OF AN
AGREEMENT TO PROVIDE ELECTRIC DISTRIBUTION FACILITIES.
CASE NO. IPC-04-12.
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.
BACKGROUND
Tamarack is developing a substantial four-seasons resort project ("Resort Project"
in Valley County, Idaho. Tamarack has indicated that at final build-out, 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
will have a combined electrical load of approximately 20 MW. Because final build-out is
expected to take a number of years, Tamarack has requested that Idaho Power make 7.5 Megavolt-
Ampere (MV A) of electrical capacity available to the Resort Project by November 2004.
Because the Resort Proj ect 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
(capacity) to the Resort Project site will require the construction of (1) underground and
overhead facilities and lines interconnect with Idaho Power existing
transmission/distribution system ("Interconnection Facilities ), and (2) installation of additional
DECISION MEMORANDUM
substation equipment and facilities ("the Substation Facilities ). The Interconnection Facilities
and the Substation Facilities are collectively referred to 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
Agreement 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 contribution in aid of construction ("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
DECISION MEMORANDUM
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 other customers attaching
to facilities 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 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.
DECISION MEMORANDUM
(g) Cash allowances through Rule H would not be applicable to reduce line
capacity charges.
Limit On A22re2ate Line Capacity Char2es and Vested Interest Char2es
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 would be $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 1910ad of $364 606 (5000 kW/7500 kW = 67% x $546 909)
is eligible for refund. Refunds will be available for a 1 O-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.
STAFF RECOMMENDATION
After reviewing the Application, Staff recommends that the Commission process this
case by Modified Procedure and establish a written comment deadline.
COMMISSION DECISION
Does the Commission wish to process this case pursuant to Modified Procedure as
recommended by Staff?
M:IPCEO412 In
DECISION MEMORANDUM