20050609Application.pdf

BARTON L. KLINE ISB #1526
LARRY D. RIPLEY ISB #965
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Phone: [phone]
FAX: [phone]
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iDAHO PUBLiC
UfiLiTJES COMMiSSION
Attorneys for Idaho Power Company
~ress Mail Address
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN
ORDER AUTHORIZING THE BLANKET
SALE OF AIR EMISSION ALLOWANCES
AND FOR AN ACCOUNTING ORDER.
CASE NO. IPC-05-
APPLICA TION
Idaho Power Company ("Idaho Power" or "the Applicant) hereby applies
for (1) an order of the Idaho Public Utilities Commission ("the Commission ) providing
Idaho Power with blanket authority to sell surplus sulfur dioxide ("S02") allowances
obtained by Idaho Power under the provisions of the Federal Clean Air Act ("CAA" or
Act") amendments of 1990; and (2) for an Accounting Order to provide for the recording
of the proceeds from the future sales of surplus S02 emission allowances on the
Applicant's books pending issuance of subsequent orders as to the final disposition of
the proceeds from any such sales. This Application is based on the following:
APPLICATION , Page
The ARJ)licant.
The exact name of Applicant and the address of its principal business
office are: Idaho Power Company, 1221 West Idaho Street, P.O. Box 70 , Boise, Idaho
83707-0070.
The Applicant is an electric public utility engaged principally in the
generation , purchase, transmission , distribution and sale of electric energy in an
approximately 24 000 square mile area over southern Idaho and in the counties of
Baker, Malheur and Harney in eastern Oregon. Applicant is subject to the jurisdiction of
this Commission , the Public Utility Commission of Oregon, and the Federal Energy
Regulatory Commission ("FERC"). Applicant, in addition to supplying general retail
electric service to the public in southern Idaho and eastern Oregon, also provides
wholesale requirements services to FERC jurisdictional customers.
502 Allowances Under Title IV of the Clean Air Act
Under Title IV of the Clean Air Act ("CAA" or "Act") Amendments of 1990
thermal power plant owners are issued allowances for the plant's sulfur dioxide ("S02"
emissions. 42 USCS 99 7651 et. seq. Idaho Power has an ownership interest in five
thermal power plants in the western United States. Three of the power plants (1) Jim
Bridger Units 1 through 4 (coal-fired) (1/3 interest); (2) North Valmy Units 1 and 2 (coal-
fired) (1/2 interest); and (3) Boardman (coal-fired) (1/10 interest) receive allocations of
S02 allowances from the U.S. Environmental Protection Agency ("EPA"
The Danskin Power Plant (gas-fired) (1000/0 interest) and Bennett
Mountain Power Plant (gas-fired) (1000/0 interest) were constructed after Congress
APPLICATION, Page 2
enacted the 1990 amendments to the CAA. Accordingly, pursuant to Title IV, they
receive no allocation of S02 allowances from the EP
An S02 allowance authorizes a utility generating unit to emit one ton of
S02 during a given year or any year thereafter if the S02 allowance is not used during
the given year. At the end of each year, the utility generating unit must hold allowances
at least equal to its annual S02 emissions as measured by its Continuous Emissions
Monitoring System ("CEMS") and reported to EP A. A utility that holds a sufficient
quantity of allowances over its annual requirement is considered to have surplus S02
allowances. Pursuant to the CAA, and underlying regulations, S02 allowances are fully
marketable commodities. Utilities may sell S02 allowances to other utilities on the open
market or through EPA-sponsored auctions.
A centerpiece of the CAA amendments is the provision that S02
allowances under the CAA cannot be considered property. The salient provision of the
CAA is as follows:
An allowance allocated under this subchapter is a limited
authorization to emit sulfur dioxide in accordance with the
provisions of this subchapter. Such allowance does not
constitute a property right. Nothing in this subchapter or in any
other provision of law shall be construed to limit the authority of
the United States to terminate or limit such authorization.
42 USCS 9 7651 b(f)
Through an open and dynamic market, bi-Iateral contracts for sales and
purchases of allowances are common. Idaho Power believes that after retaining
sufficient allowances, including a reasonable "cushion" for change and contingencies, it
can make surplus S02 allowances available for sale. However, Idaho Power cannot
APPLICATION , Page 3
effectively participate in the allowance trading market unless it has regulatory approval
prior to the sale of surplus S02 allowances.
502 Allowances For Revenue Requirement Purposes
Idaho Power financial statements carry no value for S02 emission
allowances. As such , the emission allowances values are not accounted for in Idaho
Power s rate base. In addition , the value of the allowances are not contained in Idaho
Power s income statement as an expense item. As a result, the allowances value have
no ratemaking impact upon Idaho Power. In effect, the allowances have zero value for
rate base and a zero value for expenses in computing Idaho Power s revenue
requirement.
AQ,plication For An Order Providing Idaho Power With Blanket
Authority To 5ell 502 Allowances
Idaho Power is cognizant of the provisions of Idaho Code 9 61-328 which
addresses Commission approval needed prior to disposal of public utility property.
Idaho Power submits that as provided in 42 USCS 9 7651 b(f), S02 allowances are not
property. In addition, Idaho Power submits that surplus S02 allowances are not used in
the performance of Idaho Power s utility service obligations. Accordingly, Idaho Power
does not believe that Idaho Code 9 61-328 is applicable to the sale of surplus S02
emission allowances. Nonetheless , in exploring the advisability of selling any surplus
emission allowances, Idaho Power must be able to advise prospective purchasers that it
has the requisite regulatory authority to sell its surplus emission allowances and that
there is no regulatory "cloud" over the sale.
APPLICATION , Page 4
In summary, Idaho Power believes that it is not selling property and that
the surplus S02 allowances it may sell are not necessary or useful in providing utility
service. However, to avoid any potential cloud on the marketability of the S02
allowances , Idaho Power requests an order from the Commission providing Idaho
Power with blanket authority to sell surplus S02 allowances. Idaho Power recognizes
that the Commission has jurisdiction over Idaho s allocable share of the proceeds from
the sale of surplus emission allowances.
AQplication For An Accounting Order.
Idaho Power recognizes, as set forth above, that the Commission has
jurisdiction over Idaho s allocable share of the proceeds from the sale of surplus S02
emission allowances. Idaho Power acknowledges that receipt of blanket authority to
sell S02 emission allowances and the Commission s initial accounting treatment are not
a determination of the appropriate ratemaking treatment of the proceeds from the sale
for revenue requirement purposes. Idaho Power will file a report with the Commission
within sixty (60) days after receipt of any proceeds from the sale of any S02 emission
allowances. A determination of ratemaking treatment for the proceeds can be made at
a later date.
~uested Accountinq
Idaho Power submits that the initial proposed accounting is established
per Code of Federal Regulations No. 18, in accordance with paragraph H of General
Instructions No. 21. That regulation states that if there is uncertainty as to the
regulatory treatment , the gain shall be deferred in Account 254 , Other Regulatory
APPLICATION, Page 5
Liabilities, pending resolution of the uncertainty. The following is the proposed
accounting for the initial transactions:
131 Cash $XXX.
236 T axes Accrued254 Other Regulatory Liabilities
$XXX.
$XXX.
To record the Idaho allocable share of the proceeds from the sale of surplus S02
emission allowances (net of income taxes) pending a resolution as to the disposition of
the proceeds.
Modified Procedure.
The Company requests that this Application be processed under RP 201
et seq.allowing for consideration of issues to be processed under Modified Procedure
i.e., by written submissions rather than by an evidentiary hearing, and that this
application be processed on an expedited basis.
Service of PleadinQ!
Service of pleadings, exhibits, orders and other documents relating to this
proceeding should be served on the following:
Barton L. Kline
Larry D. Ripley
Idaho Power Company
O. Box 70
Boise, I D 83707 -0070
bkline ~ idahopower.com
John R. Gale
Vice President, Regulatory Affairs
Idaho Power Company
O. Box 70
Boise, I D 83707 -0070
.male ~ idahopower.com
Prayer
WHEREFORE, Applicant Idaho Power Company requests that the Idaho
Public Utilities Commission issue its order:
APPLICATION , Page 6
Providing Idaho Power with blanket authority to sell surplus sulfur
dioxide allowances obtained by Idaho Power under the provisions of the Federal Clean
Air Act amendments of 1990; and
Authorizing Idaho Power to record the proceeds from the potential
sale of surplus S02 emission allowances in Account 254, Other Regulatory Liabilities
(net of income taxes) pending the issuance of subsequent orders as to the final
disposition of the proceeds from any sales of surplus S02 emission allowances.
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Respectfully submitted this day of June , 2005.
Barton L. Kline
Larry D. Ripley
Attorneys for Idaho Power Company
APPLICATION , Page 7