20050228Final Order No 29718.pdf

Office of the Secretary
Service Date
February 28, 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER REGARDING THE
TREATMENT OF THE SHOSHONE-
BANNOCK TRANSMISSION RIGHT -OF-
WAY EASEMENT GRANT
ORDER NO. 29718
CASE NO. IPC-O4-
On December 27, 2004, Idaho Power Company filed an Application for an
accounting Order authorizing the Company to amortize the cost of the Shoshone-Bannock Tribe
(Tribe) Transmission Right-of-Way Easement Grant. The accounting order would allow the
Company to amortize the cost of a newly negotiated easement across tribal property. The term
of the easement extends through December 31 , 2027, but also covers the period between 1996 to
the present. The new Easement Grant results from negotiations that began in 1996 to renew four
right-of-way easements for five transmission lines that cross the Fort Hall reservation near
Pocatello, Idaho. The total amount of the Easement Grant payments is $7,490 000, of which
145 000 are the total cash payments and $345 000 are college scholarship payments over the
23-year life of the easements. Idaho Power requests confirmation from the Commission that the
net amount of the Easement Grant may be booked and amortized through 2027 with the expenses
recoverable in future rates.
On January 19, 2005, the Commission issued a Notice of Application and Notice of
Modified Procedure to process Idaho Power s Application, and which established a time period
for the filing of written comments. Only the Commission Staff filed comments. Based on the
record, the Commission approves Idaho Power s Application for an accounting order.
The Company is proposing to book the new easement expense to a unique sub
account in FERC Plant Account No. 302 - Franchises and Consents. Transmission right-of-way
costs are usually booked to FERC Plant Account No. 350 - Transmission Plant, Land & Land
Rights. The .Company maintains, however, that this Easement Grant is unique because the
easement is for the contract time period and is not a permanent easement. The Company states
there is a precedent for the requested type of accounting treatment-Idaho Power currently has
another right-of-way agreement with the Tribe that is being accounted for in a similar fashion.
ORDER NO. 29718
In its comments, Staff acknowledged that using the same accounting for similar easements is
reasonable. Staff supported the proposed accounting treatment where the Company capitalizes
the easement grant to a unique sub account in FERC Plant Account No. 302.
When negotiations for new easements began, the Tribe and the Company valued the
easements in substantially different ways. The Company used an asset approach, considering the
value of the real estate over which the easements run. The Company s standard approach is to
value the easement at 50% of the land value. Idaho Power obtained an independent appraisal of
the easements in preparation of its Application to account for the easements. The appraisal was
based on standard land valuation principles, in this case the value of the dry grazing land. Using
this methodology, the Company determined a current value appraisal for the four easements of
$448 030.
The Tribe used a market approach to value the easements. The Tribe based its
valuation using an opportunity cost valuation of $19 million. The opportunity cost is a
calculation of the cost to the Company to re-route its transmission lines to circumvent the
reservation. This approach by the Tribe is similar to the market approach used when evaluating
other amounts paid for similar items.
Negotiations between Idaho Power and the Tribe began in April 2001 when the
Company made an offer for $4.2 million for a 25-year easement. The Company ultimately
agreed to pay the Tribe a cash payment of $7 145 000 and scholarship payments of $15 000 per
year totaling $345 000 through the end of the agreement. Staff reviewed the compensation
package and stated in its comments that the easement expense is reasonable. The Tribe accepted
the negotiated offer in October 2004.
Staff is satisfied the Company made a reasonable effort to obtain the easements
across the Shoshone-Bannock Reservation at the lowest cost and recommended that the
Company be authorized to amortize the expenses associated with the Shoshone-Bannock
Easement Grant as requested. No increase in rates is requested with this filing. In the next
general rate case, the Company will propose to include the unamortized plant in the rate base and
the annual amortization in expense when determining its revenue requirement.
Based on the record in this case, the Commission finds that the accounting treatment
requested by Idaho Power is reasonable and appropriate to account for the expenses of the new
Easement Grants over the Shoshone- Bannock property.Accordingly, we approve the
ORDER NO. 29718
Application of Idaho Power. The Company Inay account for the easement expenses as proposed
in its Application.
ORDER
IT IS HEREBY ORDERED that the Application of Idaho Power Company for an
accounting order authorizing the Company to book and amortize the cost of the Shoshone-
Bannock Tribe Transmission Easement is approved.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code g 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :l.rfl-
day of February 2005.
ANDER, PRESIDENT
IDv Ii
MARSHA H. SMITH, COMMISSIONER
ENNIS S.SEN, COMMISSIONER
.....
ATTEST:
;e n'D. Jewell
Commission Secretary
bls/O:IPCE0430 ws2
ORDER NO. 29718