20050823Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
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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 SINCLAIR
OIL CORPORATION FOR THE SALE AND
TRANSFER OF CERTAIN UTILITY OWNEDFACILITIES.
CASE NO. IPC-O5-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Donald L. Howell, II, Deputy Attorney General, and submits the following
comments in response to the Notice of Application and Waiver Request in Order No. 29837
issued on August 2, 2005.
BACKGROUND
On May 2, 2005, Idaho Power Company (Idaho Power) and Sinclair Oil Corporation dba
Sun Valley Company (Sun Valley) filed a Joint Application requesting that the Commission
approve the sale and transfer of certain utility distribution property to Sun Valley. The
distribution facilities subject to the proposed transfer are located on the grounds of the Sun
Valley Resort. Idaho Power would also remove its existing service meters for those customers
within the resort that are directly billed by the utility.
On July 13 , 2005, the Applicants amended their Application. In particular, the parties
requested that the Commission grant Idaho Power a waiver of the Company s Master Metering
STAFF COMMENTS AUGUST 23, 2005
tariff found in Section 4 of Rule E. Idaho Power s Master Metering tariff is nearly identical to
the Commission s Master Metering Rule 103. IDAPA 31.26.01.103. Rule 103 prohibits utilities
from removing individual service meters in shopping centers where the tenants control their own
electric space heating, water heating, or air-conditioning appliances.
Idaho Power and Sun Valley executed a Memorandum of Understanding (MOU)
regarding the proposed sale and transfer of utility distribution property. As set out in the MOD
Idaho Power proposes to sell and transfer its distribution facilities that serve portions of the Sun
Valley Resort including the Lodge, the Inn, stores in the mall area, the skating rinks, the Opera
House, and Moritz Hospital.
The parties assert that transfer of the facilities to Sun Valley will enable Sun Valley to
more efficiently operate and manage its facilities within the resort complex. The parties have
agreed that Sun Valley will pay the sum of$135 533 to Idaho Power. Application at 2. This
amount includes Idaho Power s costs of removing the meters and reconfiguring the system
(estimated at $7 500). If the actual reconfiguring costs are lower or higher, the parties have
agreed to adjust the transaction price accordingly. MOU at ~ 3. They represent that this
transaction will be revenue neutral to Idaho Power (there is neither a gain nor loss on the sale).
The rates of other customers will not be affected by the sale. Application at 2.
Several tenants in the Sun Valley Mall currently receive metered electric service directly
from Idaho Power. Once the meters are removed and the service lines reconfigured, electric
service to the tenants will be provided under the master meter arrangement between Idaho Power
and Sun Valley. Sun Valley intends to recover the cost of electric service provided to tenants in
the Sun Valley Mall by means of a "monthly charge included as part of the lease arrangement
between Sun Valley and the individual tenants." Amended Application at 2-3. Sun Valley
stated that it has advised all of its affected tenants of the proposed transaction. MOD at ~ 5.
Both the utility s tariffs and the Commission s Master Metering Rule 103 prohibit the
conversion of individual tenant meters to master meters. In particular, Rule 103 provides that no
unit contained within "commercial buildings and shopping centers shall be master metered for
electric service after July 1 , 1980, if the (tenant) units. . . contain an electric space heating, water
heating, or air-conditioning (appliance) that is not centrally controlled and over which the unit's
tenants individually control electric usage.IDAPA 31.26.01.103. Given this prohibition
against new master metered arrangements, the parties request that the Commission grant a
ST AFF COMMENTS AUGUST 23, 2005
waiver of the Company s tariff and Rule 103. MOD at ~ 6. To comply with the spirit of the
Master Metering Rule, Sun Valley asserts that within 60 days of the transfer, it "will retrofit the
individual thermostats for each of its tenants" so that each thermostat in the mall units will be
centrally controlled by Sun Valley. Id. ~ 5(a). Once the retrofits are completed, Sun Valley will
provide the Commission with a certification that the retrofits have been completed and that Sun
Valley personnel centrally control the space heating and air-conditioning appliances for the
tenants in the Sun Valley Mall.
Idaho Code ~ 61-328 prohibits Idaho Power from selling any distributing facility without
the written authorization of the Commission. Before authorizing such a transaction, the
Commission must find that: (1) the transaction is consistent with the public interest; (2) the
transaction will not cause the costs of or rates for supplying electricity to increase; and (3) Sun
Valley has the intent and financial ability to operate and maintain the property so that its tenants
will continue to receive electric service.
STAFF ANALYSIS
Effects on Customers and Master Metering Issues
Currently, Idaho Power serves 19 tenants of the Sun Valley Mall through 20 individually
metered service points. If the sale of facilities is approved, these tenants will be served under a
master metered arrangement between Idaho Power and Sun Valley. Of these 19 tenants, 15 do
not receive bills directly from Idaho Power. Sun Valley is the customer of record for these
locations (and not the individual tenants). The remaining four tenants are directly billed
customers of Idaho Power. After the conversion to master metering, these four tenants will no
longer be billed by Idaho Power for the electricity they use.
In the Joint Application filed on May 2 2005 , Sun Valley and Idaho Power represented
that all of the affected tenants had been contacted and that agreement had been reached on how
those tenants would be billed for electricity after the sale. However, Staffwas subsequently
advised that neither Sun Valley nor Idaho Power had notified tenants of the Application as of
June 22, 2005. In response to Staffs inquiry, Sun Valley indicated that it would notify its
tenants of the proposed change. In order to assure that the four tenants who are direct-billed
customers of Idaho Power were aware of the Application and had an opportunity to comment
Staff mailed a copy of Order No. 29837 along with a brief cover letter to each of them on
STAFF COMMENTS AUGUST 23 , 2005
August 4 2005. The letter advised recipients of the comment deadline (August 23 2005) and
provided them with the name and telephone number of a Staff member (Beverly Barker) to call if
there were any questions. To date, Ms. Barker has not been contacted.
From a technical viewpoint, the conversion of a directly metered customer to a master
metered service arrangement will be simple and should present few, if any, service problems.
However, as noted previously, such a conversion is prohibited by both Commission Rule and
Idaho Power tariff. In its Order No. 15556, the Commission stated that its decision to adopt the
Master Metering Rules was "based not only upon the conservation goals of PURP A, but also upon
goals of fostering and maintaining direct relations between electric utilities and their customers
and of equitable treatment of the ultimate consumers of electricity." Order at page 1.
In the Motion to Amend Application to include a Request for Waiver of Master
Metering Rule, Sun Valley stated its intent "to take certain steps to assure that the spirit of the
master-metering rules is maintained after the Company-owned facilities are transferred from
Idaho Power to Sun Valley." Motion at page 3 , paragraph 5. Sun Valley committed to retrofit
(replace) individually controlled thermostats with centrally controlled thermostats for space
heating and air conditioning. Sun Valley represents that individual water heaters are used
primarily for hand washing purposes . Motion at page 3 , paragraph 5.b. Staff assumes that at
least one of the affected customers, a deli, uses water for other purposes as well. Sun Valley has
also indicated that energy costs will be factored into tenants' lease payments.
Staff does not oppose granting Idaho Power a waiver of the Master Metering Rules in
this particular case. Only 4 of the 19 tenants directly pay Idaho Power for the electricity they
use. After the conversion, space heating and air conditioning will no longer be individually
controlled by any tenants of the Sun Valley Mall. Sun Valley intends to allocate electric costs to
its tenants by adjusting rental amounts to reflect each tenant's prior 12-month consumption on
the Idaho Power rate schedule under which the tenant previously took service. Sun Valley will
not impose any additional service charge or overhead factor associated with the provision of
electric service. Although the price signals and historical usage data provided on individual bills
will be lost for the four tenants who currently are direct billed customers of Idaho Power, all
tenants will have an indirect incentive to be conscious of usage since the cost of electricity will
affect lease rates.
STAFF COMMENTS AUGUST 23, 2005
Accounting Issues
Idaho Power is proposing to sell to Sun Valley Company the aforementioned facilities for
$135 533 , which is book value. The price is revenue neutral from Idaho Power s point of view
and Idaho Power will realize neither a gain nor a loss on the sale. As provided in the
Memorandum of Understanding, Sun Valley Company will reimburse Idaho Power for the costs
of reconfiguring the metering and other reasonable costs associated with the sale. As such, the
ratepayers will not be harmed by the sale price of this proposed transaction.
Idaho Power estimates the current monthly revenues from the facilities in question to be
$45 129 and the corresponding estimated monthly expenses to be $1 080. After the proposed
sale of the facilities, Idaho Power estimates its monthly revenues will decrease by $5 264 to
$39 865 and it's monthly expenses will decrease to zero. Overall , the net decrease in operating
income would be about $4 184 per month or a yearly decrease of $50 208.
In response to Audit Request 26, which asked the Company to explain why Idaho Power
is willing to give up the future revenue stream associated with the facilities in this proposed sale
transaction, Idaho Power stated that "Over the past several years Sun Valley has expanded its
facilities as part of its development plan. A consequence of this expansion is that Sun Valley
facilities are in certain circumstances built around Idaho Power s electrical facilities, making
access for maintenance difficult. Idaho Power is willing to sell these facilities to Sun Valley to
eliminate the difficulties associated with this intermingling of facilities.
Staff was initially concerned by the effect this sale could have on the existing metered
Idaho Power customers, other than Sun Valley Company, that are located in the Mall area.
However, the yearly revenue decrease is minimal and would not affect the current rate structure.
Staff asserts that the decrease in annual operating income ($50 208 or 0.0096% of the total
authorized Idaho jurisdictional revenues) resulting from this proposed sale of facilities is not a
significant factor in approving the sale of the facilities. There are no compelling accounting
concerns that would preclude this sale from going forward.
TECHNICAL REVIEW
This sale presents no difficult technical issues to either Idaho Power or Sun Valley.
There are two sets of facilities included in the sale that currently serve two separate areas off of
Idaho Power s primary equipment. At one location, No.3 on the Company Feeder Map
(provided with the initial Application), there is a transformer and single-phase overhead service
STAFF COMMENTS AUGUST 23, 2005
to the Sun Valley Mall serving the four direct-billed Idaho Power customers. Additionally, there
is overhead service and an Idaho Power transformer (located at point No.9 on the Idaho Power
feeder map) serving in another area of the Mall from an adjacent Idaho Power feeder.
After the sale, all tenants of the Sun Valley Mall will be served directly from transformers and
overhead service lines owned by Sun Valley.
Idaho Power will remove its meters and make any other wiring or equipment changes
necessary to complete the conversion. The sale agreement provides for compensation to Idaho
Power for this work. There should be no technical difficulty in completing the conversion, and
the changes can be completed quickly enough that proper scheduling will allow work to be
performed with little disruption of service to customers.
Idaho Power has stated that it will not be solicited to provide contract maintenance
services for the equipment Sun Valley is buying. Since Sun Valley is currently maintaining the
electrical system being used to serve its other tenants within the mall area, there is no reason to
believe that Sun Valley will not be able to provide adequate maintenance, either directly or
through contract services, for the equipment purchased from Idaho Power. Sinclair Oil
Company, as the owner of the Sun Valley Company, appears to have the financial resources to
insure continued services to its tenants.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Application as amended. Staff also
recommends that the Commission grant Idaho Power a waiver of the Commission s Master
Metering Rule 103 and Idaho Power s Master Metering tariff found in Section 4 of Rule E.
t:f;
Respectfully submitted this c:2; day of August 2005.
V- , Deputy Attorney General
Technical Staff:Kathy Stockton
Harry Hall
Beverly Barker
i:umisc:comments/ipceO5.16dhklshh
STAFF COMMENTS AUGUST 23 , 2005
CERTIFICA TE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 23RD DAY OF AUGUST 2005
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE
NO. IPC-05-, BY MAILING A COpy THEREOF POSTAGE PREPAID TO THE
FOLLOWING:
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
MAIL: bkline~idahopower.com
DEAN J MILLER
McD EVITT & MILLER LLP
PO BOX 2564
BOISE ID 83701
MAIL: joe~mcdevitt-miller.com
CERTIFICATE OF SERVICE