20050805Comments.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, ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PE TITI 0 N OF
IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER MODIFYING THE
ACCOUNTING PROCEDURES FOR
PRELIMINARY SURVEY AND
INVESTIGATION CHARGES.
COMMENTS OF THE
COMMISSION STAFF
CASE NO. IPC-O5-
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 Petition and Notice of Modified Procedure issued on
July 15 , 2005.
BACKGROUND
On June 14, 2005, Idaho Power Company filed a Petition seeking a modification of a
pnor accounting order concerning the accounting procedures for preliminary survey and
investigation (PS&I) costs. Idaho Power incurs costs or charges when it conducts preliminary
surveys or investigations during the evaluation of future generation or transmission projects. The
Company proposed a new accounting treatment for its PS&I costs. The Company requested and
the Commission found that the Petition should be processed under Modified Procedure.
STAFF COMMENTS AUGUST 5 , 2005
STAFF ANALYSIS
Current Accounting Procedures
The current accounting procedures Idaho Power follows for PS&I are addressed in Order
No. 17499, two Company letters and a Commission letter dated December 21 , 1983. Generally,
the Company separates all PS&I costs into two types of costs: in-house costs and external costs.
PS&I costs for new projects which are III internal in nature' (that is incurred in-house) will be
directly expensed in the period incurred.Conversely, PS&I costs incurred in connection with
any future projects:
which are "external in nature (that is incurred other than in-house) will be
accumulated in Account 107 (CWIP) and transferred to Account 183 (preliminary
survey and investigation charges) on a monthly basis. No AFUDC will be
accrued on these charges. At the end of each year, the applicable costs collected
in Account 183 during the year will be transferred to Account 186 and
amortization of these "external" costs will commence the following year over an
appropriate time period.
Order No. 29824 at 1-
The current accounting procedures provide that the expensIng of PS&I costs are
discontinued when the Federal Energy Regulatory Commission (FERC) issues a final
construction license:
internal or external charges incurred after receipt and acceptance of the final
construction license will be accumulated in construction work in progress
(Account 107), and the Company will commence accruing an allowance for funds
used during construction (AFUDC) on such charges. Thus, all costs incurred
from receipt and approval of a final Federal Energy Regulatory Commission
license to construct until commercial operation will be capitalized in the
traditional manner.
Id. at 2
Idaho Power asserts that the present accounting protocols for PS&I charges are
incompatible with the Commission ordered Integrated Resource Plan (IRP) process. The IRP is
a planning document that generally describes how Idaho Power intends to meet the load demands
of its customers over the next 10 years. The Company further insists that the current accounting
procedures are also out of step with the FERC relicensing process for hydroelectric facilities.
STAFF COMMENTS AUGUST 5, 2005
Proposed Accounting Procedures
Idaho Power proposes to collect both internal and external PS&I costs in Account 183 as
long as the project is considered "viable . Viability of a project will be determined based upon
whether the project is included in the Company s IRP. If the project is determined viable (i.
included in the IRP), the Company proposes that PS&I costs remain in Account 183 "without
any accumulation of AFUDC, until appropriate licenses and/or certificates of public convenience
and necessity are obtained.Petition at 5. Once licenses or certificates are obtained, the
Company would then transfer those costs to Account 182.3 (CWIP), and AFUDC will begin to
accumulate.
If the project is determined not viable (i., not included in the Company s IRP), then
Idaho Power proposes that the PS&I costs accumulated in Account 183 be transferred to Account
182.3 (Other Regulatory Assets). Expenses in Account 182.3 will be amortized over a defined
period of time. If the total amount of the project does not exceed $250 000, that amount will be
fully amortized in one year. If the accumulated project costs range from $250 000 but less than
$1 million, the costs will be amortized over three years. If the proj ect amount exceeds $1
million, the amount will be amortized over five years. Order No. 29824 at 3; Petition at 5-
Staff Discussion
Electric utilities under the jurisdiction of FERC are required to maintain their books and
records in accordance with the FERC's Uniform System of Accounts (USOA). The USOA
provides basic account descriptions, instructions, and accounting definitions. The most recent
Uniform System of Accounts, which was Revised as of April 1 , 2004, prescribes the following
directive for Account 183: Preliminary Survey and Investigation Charges.
Account 183: 183 Preliminary survey and investigation charges (Major only).
A. This account shall be charged with all expenditures for preliminary
surveys, plans, investigations, etc., made for the purpose of
determining the feasibility of utility projects under contemplation.
If construction results, this account shall be credited and the
appropriate utility plant account charged. If the work
1 Idaho Power is a "major" utility under FERC's USOA rules.
ST AFF COMMENTS AUGUST 5, 2005
abandoned, the charge shall be made to account 426., Other
Deductions, or to the appropriate operating expense account.
B. This account shall also include costs of studies and analyses
mandated by regulatory bodies related to plant in service. If
construction results from such studies, this account shall be
credited and the appropriate utility plant account charged with an
equitable portion of such study costs directly attributable to new
construction. The portion of such study costs not attributable to
new construction or the entire cost if construction does not result
shall be charged to account 182.2, Unrecovered Plant and
Regulatory Costs, or the appropriate operating expense account.
The costs of such studies relative to plant under construction shall
be included directly in account 107, Construction Work in Progress
- Electric.
C. The records supporting the entries to this account shall be so kept
that the utility can furnish complete information as to the nature
and the purpose of the survey, plans, or investigations and the
nature and amounts of the several charges.
NOTE: The amount of preliminary survey and investigation
charges transferred to utility plant shall not exceed the
expenditures which may reasonably be determined to contribute
directly and immediately and without duplication to utility plant.
18 C.R. Part 101
In essence, the Company is requesting a new accounting order from the Idaho
Commission that conforms to the current FERC USOA instructions with some mInor
adjustments.
Staff believes that it is proper to book Preliminary Survey and Investigation (PS&I)
charges in Account 183 and that amounts charged to Account 183 do not qualify for accrual of
AFUDC. The FERC USOA states that if construction results, the qualifying amounts from
Account 183 are to be transferred to the appropriate plant account, usually Account 107
Construction Work in Progress. The proper account to accrue AFUDC in is Account 107
Construction Work in Progress.
Staff does have one concern about the accrual of AFUDC.Our concern arises in
situations where the Company obtains a license or certificate, transfer the charges to Account
107 and begin accruing AFUDC, however construction will not have started or will be delayed.
Staff asserts that accruing AFUDC prior to the start of construction or during delays is not
STAFF COMMENTS AUGUST 5 , 2005
reasonable. Upon receiving a license or certificate, there is no guarantee that the Company will
or can begin construction shortly thereafter. It is this time lag, along with an excessive accrual of
AFUDC, that concerns Staff.
While PS&I costs may be booked to Account 183 and subsequently transferred to
Account 107 (Construction Work in Progress) or another appropriate plant in service account
the mere act of properly recording the expense is no guarantee of future recovery. And, although
there may be a delay in a project through no fault of the Company, the Commission should retain
the right to recommend that some or all of the AFUDC booked should not be included in rates
for recovery. Although any delay may be due to a cause external to the Company, the Company
does have a great deal of control over the construction projects, such as the timing, location, etc.
of the project. The final determination for recovery should be made at the time of a rate case or
other suitable proceeding where Idaho Power must prove that the overall expenditures for each
project were prudently incurred, regardless of the amount of AFUDC incurred.
STAFF RECOMMENDATION
Staff recommends that the Commission accept the Company s proposal to modify the
previous accounting order concerning preliminary survey and investigation (PS&I) charges.
Staff accepts the Company s proposal to account for PS&I costs including the proposed
amortization amounts and periods of amortization, for projects that are determined not to be
viable. The determination of rate recovery of any non-viable projects will be made in future rate
cases.
Staff recommends that any request for recovery of PS&I charges, including accrued
AFUDC will be determined at the time recovery is requested. The Commission should retain the
right to determine whether an adjustment of booked AFUDC is appropriate given the
circumstances.
Staff makes the following recommendations for the accounting of PS&I charges.
1. Staff recommends that the Company file detailed yearly reports with the Commission
concerning all charges booked to Account 183 , with enough detail for Staff to
properly identify each project, the initial date expenses are booked to the project, and
all additions or deletions for each project, until such time as the charges are
transferred to the proper plant in service account, or to Account 182.
STAFF COMMENTS AUGUST 5, 2005
2. Staff recommends that the Company provide the corresponding information for
Account 182.3 on an annual basis.
3. Staff further recommends that the Company provide the accounting information
for the amortization and the unamortized balances of the PS&I charges associated
with projects that are deemed non-viable as well.
Respectfully submitted this
J--
day of August 2005.
Donald L. H ell, II
Deputy Attorney General
Technical Staff: Kathy Stockton
umisc/comments/ipceO5 .21 dhkls
STAFF COMMENTS AUGUST 5, 2005
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 5TH 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
MONICA B MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
JOHN R GALE
VICE PRESIDENT REGULATORY
AFF AIRS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
CERTIFICATE OF SERVICE