20050901Response to staff comments.pdf

BARTON L. KLINE ISB #1526
MONICA B. MOEN ISB #5734
Idaho Power Company
O. Box 70
Boise , Idaho 83707
Phone: [phone]
FAX: [phone]
E-mail: BKline (g) idahopower.com
E-mail: MMoen
(g)
idahopower.com
Idaho Public Utilities
Office of the
CommISSIon
A E eEl v~~tary
AUG 2 2 2005
Boise, Idaho
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 PETITION OF
IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER MODIFYING
THE ACCOUNTING FOR PRELIMINARY
SURVEY AND INVESTIGATION CHARGES.
CASE NO. IPC-05-
IDAHO POWER COMPANY'
RESPONSE TO STAFF'
COMMENTS
Idaho Power Company (Idaho Power/Company) submits the following
response to the comments of the Commission Staff.
Since this proceeding was initiated to obtain an accounting order, Idaho
Power s response is a request to clarify accounting requirements to ensure that the
order issued by the Commission will precisely state required ongoing financial reporting
procedures. Idaho Power proposes clarification of two technical accounting procedures
referred to in Staff's comments , responds to Staff's comments concerning the booking
IDAHO POWER COMPANY'S RESPONSE TO STAFF COMMENTS , Page
of AFUDC , and suggests a date for the submission of any reports to be filed with the
Commission.
Minor Clarification Points
(a)At Page 3, Paragraph 1 , of Staff's Comments, Staff states:
Once licenses or certificates are obtained, the Company would
then transfer those costs to Account 182.(CWIP), and AFUDC
will begin to accumulate.
Technically, Idaho Power Company would transfer the costs to Account
107 (CWIP). With this correction , Staff's comments would state:
Once licenses or certificates are obtained, the Company would
then transfer those costs to Account 107 (CWIP), and AFUDC
will begin to accumulate.
(b)At Page 5, Paragraph 2 , under Staff's recommendation No., Staff
recommends the filing of yearly reports:
. . .
until such time as the charges are transferred to the proper
in service account, or to Account 182.
Again , technically, the charges would be transferred to Account
(CWIP), with subsequent transfer to the proper plant in service account upon project
completion, or to Account 182.3. With this correction, Staff's comments would state:
. . .
until such time as the charges are transferred to Account 107
(CWIP)
),
with subsequent transfer to the proper plant in service
account upon project completion, or to Account 182.
The Booking of AFUDC
Staff, at Page 5 of its comments, appears to contend that even though
through no fault of the Company, a project has been delayed , the Commission should
retain the discretion to disallow AFUDC (Allowance for Funds Used During
Construction) which has been previously booked but not included in rates. If this is the
IDAHO POWER COMPANY'S RESPONSE TO STAFF COMMENTS, Page 2
Staff's position , the Company does not concur with Staff's recommendation. The
Company submits that there are two points which the Commission should consider in
reviewing any recommendation concerning the disallowance of previously booked
AFUDC:
When AFUDC is calculated, there is an income statement effect
which increases earnings for the Company during that period. At a future date during a
rate case proceeding, if the previously booked AFUDC is disallowed , the carrying
amount of the asset is reduced by that amount and a negative effect upon income
occurs which reduces earnings. These actions result in the Company increasing
earnings in one period only to reduce them in a future period. Financial accounting
standards for regulated industries address this issue by denying inclusion of income
unless the Company can demonstrate that it has been substantially assured by
regulators that the Company will be allowed recovery of the AFUDC amount at the time
it is originally booked.
Idaho Code, ~ 61-502A prohibits the inclusion of construction work
in progress in rate base except under extraordinary conditions. The statute in
prohibiting the inclusion of such property provides , however:
When construction work in progress is excluded from the rate
base, the commission must allow a just, fair and reasonable
allowance for funds used during construction or similar account
to be accumulated , computed in accordance with generally
accepted accounting principles. (Emphasis added)
The legislature has provided that although construction work in progress
cannot be included in ratebase, the Commission must allow AFUDC. Clearly, this
requirement is not discretionary on the part of the Commission.
IDAHO POWER COMPANY'S RESPONSE TO STAFF COMMENTS , Page 3
The Company recognizes that the requirement for allowing AFUDC is not
without reasonable limitation. If the Company has willfully, without justification
intentionally or negligently delayed a project, the Company would concede it would be
reasonable for the Commission in such an instance to consider disallowing a portion of
the AFUDC. The Company would emphasize, however, that any disallowance of
AFUDC would be unreasonable , under the requirements set forth above , if the delay in
the project was caused through no fault of the Company and due to a cause external to
the Company.
Date For Submission of Reports
Staff has recommended the filing of certain PS&I reports. If it is the desire
of the Commission to require such reports, the Company would recommend that the
reports be due for the annual period ended December 31 by July 1 of the succeeding
year. This would permit the Company to have available its annual report information
which is filed on or before March 15th for the succeeding year before filing any PS&I
report with the Commission.
Summary
In summary, the Company requests that the accounting modifications
submitted in Paragraph IV of its original Petition , including the accounting for the
Shoshone Falls PS&I expenditures, be approved by the Commission, and that any PS&I
reports that the Commission believes should be filed in the future , be filed annually by
July 1 of the succeeding year.
IDAHO POWER COMPANY'S RESPONSE TO STAFF COMMENTS , Page 4
Dated at Boise , Idaho , this 22nd day of August, 2005.
Barton L. Kline
Monica B. Moen
Attorneys for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO STAFF COMMENTS , Page 5
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 22nd day of August , 2005, I served a
true and correct copy of IDAHO POWER COMPANY'S RESPONSE TO STAFF
COMMENTS upon the following named parties by the method indicated below , and
addressed to the following:
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
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CERTIFICATE OF SERVICE