20040716Comments.pdf

LISA NORDSTROM
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5733
ECEfVED
iLED
"'f',f't
' ~,
tHHu ,, f r ,.,i'~~
Utt i ...i,iL '
.' "
1 "
iu/\iiu i~UBLjC
: ,
'T ''"f"r, "
'~-"""-
U i I J i iLJ Lur~IP':J~
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 JOINT
APPLICATION OF IDAHO POWER
COMPANY AND TAMARACK RESORT LLC
FOR APPROVAL OF AN AGREEMENT TO
PROVIDE ELECTRIC DISTRIBUTION
FACILITIES.
COMMENTS OF THE
COMMISSION STAFF
CASE NO. IPC-O4-
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Lisa Nordstrom, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment Deadlines issued in Order
No. 29509 on June 1 , 2004, submits the following comments.
BACKGROUND
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 between Idaho Power and Tamarack ("the Agreement") to provide
electric distribution facilities to the Tamarack resort. The Agreement is dated May 3, 2004.
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
STAFF COMMENTS JULY 16 2004
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 megawatts (MW). Because 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 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 to interconnect with Idaho Power s existing
transmission/distribution system ("Interconnection Facilities ), and (2) installation of additional
substation equipment and facilities ("the Substation Facilities
).
The Interconnection Facilities
and the Substation Facilities are collectively referred to as the "Requested 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.
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.
STAFF ANALYSIS
Line extensions are generally governed by Rule H, Idaho Power s line extension tariff.
However, by its terms Rule H does not apply to all line extensions, and the parties have agreed
that this Agreement is not subj ect to or governed by Rule H. Nevertheless, 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. For
the most part, the parties have applied Rule H principles wherever possible; however, there are
several terms of the Agreement that deviate from Rule H.
ST AFF COMMENTS JULY 16 2004
The line extension requested by Tamarack is considerably more complex than those
typically requested by other developments. In this instance, construction of a substantial amount
of new distribution facilities is required due to Tamarack's relatively remote location, the
unusual geography around Cascade Lake and the size of Tamarack's expected load. The new
facilities span a distance of several miles and construction has been spread over two construction
seasons. Unlike most line extensions, service to Tamarack will also require significant upgrade
and capacity additions to a nearby substation. Tamarack is also unique in that it will ultimately
include a diverse mix of residential, commercial and industrial loads. The rate of development
within Tamarack will likely be slower than developments in more urban areas, and the
uncertainty of whether expected development will actually materialize is perhaps greater than
usual. A large quantity of subdivided but undeveloped lots will be subject to development as a
direct result of the line extension. For these reasons, Staff believes that a special line installation
agreement is appropriate and that deviation from some of the terms of Rule H is reasonable in
this case.
Installation of distribution facilities within the boundaries of Tamarack will be made in
accordance with Rule H. Staff believes this is appropriate because Rule H should function
satisfactorily within the Resort Project boundaries.
The Agreement
The ultimate goal of the Agreement is to fairly apportion the costs of the Interconnection
Facilities and Substation Facilities amongst Idaho Power and those customers who benefit from
the facilities. In reaching that goal, the Agreement seeks to place the financial risk, should
development not occur, on Tamarack rather than on Idaho Power. Under terms of the
Agreement, Tamarack is required to pay nearly all of the initial cost of the Requested Facilities
but is eligible for refunds over time as additional customers begin taking service and begin
generating revenue, a part of which goes to satisfy the revenue requirement for these facilities.
The total estimated cost of the design and construction of the Requested Facilities is
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
STAFF COMMENTS JULY 16, 2004
in the Agreement, Tamarack has agreed to pay Idaho Power an additional $191 199 on or before
October 1 , 2004.
Idaho Power will own, operate and maintain the Requested Facilities constructed
pursuant to this Agreement. Tamarack recognizes that it is paYing a proportionate share of the
total costs of improving a portion of Idaho Power s utility system. Tamarack also understands
that Idaho Power will utilize the improvements to the system to provide service to other
customers, and that the improvements will be a part of Idaho Power s electrical transmission and
distribution system. In recognition of the fact that Idaho Power (and other new and existing
customers) will benefit as a result of the Interconnection Facilities, the parties have agreed that
Tamarack will pay the majority of the project costs with a portion subject to refund as other
customers utilize the facilities paid for by Tamarack. Idaho Power has agreed to pay a small
portion of the cost of Interconnection Facilities not required by Tamarack.
In order to supply 7.5 MV A 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.
MV A. Tamarack will not be entitled to use more than 7.5 MW of capacity in the
Interconnection Facilities.
Vested Interest Refunds and Line Capacity Charges
Because the Requested Facilities will create additional capacity that can be used to serve
future customer loads, Idaho Power has agreed to collect contributions from other customers who
utilize the Requested Facilities to receive electric service. In turn, these contributions will be
refunded to Tamarack because its CIAC funded most of the construction cost initially. These
contributions will be collected in two forms: vested interest refunds similar to those provided for
under Rule H, and "line capacity charges" as defined in the Agreement. Both refund
mechanisms are proposed so that proportionate refunds can be received from small and large
customers alike, thus fairly spreading the cost burden of the facilities onto all customers deriving
benefit from the facilities.
Under the Agreement, vested interest refunds are designed to address cost sharing with
large customers who may eventually connect and use the Interconnection Facilities. Portions of
the Interconnection Facilities subject to vested interest refunds and the maximum refund dollar
STAFF COMMENTS JULY 16, 2004
amounts are described more particularly in the Agreement. Vested interest refunds generally
will follow the concepts contained in Rule H with one major exception. Under this Agreement
vested interest refunds will be collected for a ten-year period following the completion of the
Phase 2 Requested Facilities. Under Rule H, the refund period for vested interest refunds is five
years. Staff believes, however, that a ten-year refund period is reasonable in this case because of
the rural, recreational nature of property in the area and the likelihood that surrounding
development will not occur in less than five years. The Commission has allowed a ten-year
vested interest refund period in instances in the past, most recently for the line extension made in
2000 to serve the Bogus Basin Recreational Area (see Case IPC-00-, Order No. 28403). The
parties have agreed that vested interest payments will only be collected from up to four
customers, each connecting a load of not less than 400 kW.
In order to equitably share the cost of the Interconnection Facilities with smaller
customers who interconnect, Idaho Power has agreed to collect a line capacity charge. 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.
STAFF COMMENTS JULY 16, 2004
(g) Cash allowances through Rule H would not be applicable to reduce line capacity
charges.
The basis for the $800 per connection line capacity charge for Schedule 1 customers is
that $800 is the same amount refunded to developers when a residential customer connects
within a subdivision. The basis for a $40 per kW line capacity charge for non-residential
customers is that $40 was the amount of the refund for new commercial and industrial customers
under a previous Rule H tariff.l Idaho
Power and Tamarack have agreed that a five-year period
the same as allowed under Rule H, will be used in assessing line capacity charges. Staff believes
that these line capacity charge amounts and the other proposed rules pertaining to line capacity
charges as described above are reasonable.
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. This is consistent with Rule H. 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 Costs
As stated previously, service to Tamarack will require that a substation be significantly
upgraded. Substation costs are normally not charged directly to non-industrial customers (non-
Schedule 19), and instead are recovered by Idaho Power through the revenue generated by
energy sales. In this case, Tamarack will include Schedule 19 load as a result of ski lifts, as well
as residential and commercial loads. Furthermore, the substation capacity will be increased by
20 MW but Tamarack will only utilize 7.5 MW of that capacity. Consequently, the Agreement
requires that Tamarack contribute a share of the Substation Facilities cost proportionate to what
it needs, and be eligible for refunds for Tamarack's non-Schedule 19 load that might ultimately
be served by the substation.
1 Idaho Power relied on a previous Rule H tariff as the basis for establishing the $40 per kW line capacity charge for
commercial and industrial customers because the version of Rule H currently in effect provides no refund amount
for these customers. Instead, the current Rule H provides an adjusted allowance amount that effectively
accomplishes a similar result.
STAFF COMMENTS JULY 16, 2004
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 ten-year period following the completion of the Phase 2
Requested Facilities. Idaho Power will pay Tamarack $73 per kW of load ($364 606/5000 kW)
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.
Because Tamarack's expected load will require a substantial increase in substation
capacity, and because Tamarack's load is speculative, Staff believes it is reasonable to require
Tamarack to contribute a refundable share of costs proportionate to its non-Schedule 19 load. It
is also reasonable for Tamarack to not be entitled to refunds for its share of substation costs
associated with Schedule 19 load. In summary, Staff believes the terms in the Agreement
pertaining to substations are fair and reasonable.
RECOMMENDATIONS
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, 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
has carefully reviewed the terms of the Agreement and recommends approval.
STAFF COMMENTS JULY 16 2004
Respectfully submitted this
Technical Staff: Rick Sterling
i :umisc:comments/ldaho PowerlipceO4. 1 21n.rps
STAFF COMMENTS
day of July 2004.
Lisa Nordstro
Deputy Attorney General
JULY 16, 2004
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS DAY OF JULY 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-04-, 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
GREGORY W SAID DIRECTOR
REVENUE REQUIREMENT
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
STEVEN J MILLEMANN
MILLEMANN PITTENGER McMAHON
& PEMBERTON LLP
706 N FIRST ST
PO BOX 1066
McCALL ID 83638
JEAN PIERRE BOESPFLUG
TAMARACK RESORT LLC
475 S CAPITAL BLVD
SUITE 200
BOISE ID 83702
CERTIFICATE OF SERVICE