20060502Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOV AN E. WALKER
DATE:MAY 2, 2006
SUBJECT:INVESTIGATION OF THE APPROPRIATE RATEMAKING
TREATMENT OF IDAHO POWER'S02 ALLOWANCE SALE
PROCEEDS - CASE NO. IPC-OS-
BACKGROUND
On June 9, 2005, Idaho Power Company (Idaho Power, Company) filed an
Application requesting: (1) blanket authority to sell surplus sulfur dioxide (S02) allowances;
and (2) an accounting order to provide for recording any sale(s) of such allowances. Case No.
IPC-05-20. The Company s Application also suggested that a determination of ratemaking
treatment for the proceeds be made at a later date.
On August 22 2005, the Idaho Public Utilities Commission (Commission) approved
the Company s Application. Order No. 29852. The Commission, while reserving the review of
the reasonableness of each sale, granted Idaho Power s request for blanket authority to sell S02
emissions allowances and approved the accounting treatment proposed by the Company, on an
interim basis, until such time as the Commission determines the appropriate ratemaking
treatment of the proceeds from the sale of the S02 allowances. Id. The Company was ordered
to file a report with the Commission within 60 days of the receipt of any S02 proceeds. Id.
Additionally, the Commission ordered that a separate docket be opened for Staff to conduct
workshops and make a recommendation to the Commission regarding the appropriate
ratemaking treatment of S02 proceeds. Id.
This docket, IPC-05-, was opened and two workshops were held on November 7
and November 23 , 2005, respectively. During the workshops the parties were unable to reach
agreement upon the ratemaking treatment of the proceeds. On March 6, 2006, the Commission
issued Order No. 29989, establishing a comment deadline of March 31 , 2006 , and a subsequent
DECISION MEMORANDUM
The comments of the Northwest Energy Coalition also supported the proposed
allocation of the sale proceeds set forth in the Stipulation, but proposed that the Commission
consider some alternative uses for some of the proceeds allocated to ratepayers, such as
earmarking some of the proceeds for longer term conservation and efficiency programs. They
suggest that the Commission entertain suggestions on how some of these proceeds might be used
to help foster initiatives that further reduce carbon emissions, promote carbon-reducing
technologies, implementing more programs to reduce peak demand, leveraging funds for
investments in agricultural biodigesters, or enhancing energy-savings weatherization and other
programs for low-income ratepayers.
The Idaho Energy Education Project likewise suggested that the proceeds from the
sale of the S02 allowance be invested in programs aimed at cleaning up the Company s coal
plants, energy efficiency and conservation programs, and renewables. They also suggest that
some money be allocated to energy education programs in schools. They suggest an allocation
of 10% to Idaho Power investors, 10% to the energy education project, and the remaining 80% to
be split among the four Idaho Power ratepayer groups.
The remaining comments from Idaho Power customers all advocated returning the
money back to the public and the customers. They suggested that some money be used for
alternatives such as demand reduction and conservation, renewable energy and energy
efficiency, grants to schools and universities for research and education, as well as returning it to
ratepayers to reduce their power bills. One commenter stated that some portion should be given
to the Company s shareholders, but most should go to the customers.
COMMISSION DECISION
Does the Commission wish to approve the Stipulation filed by the parties? Does the
Commission wish to adopt the clarification suggested by DOE, Staff, and agreed to by Idaho
Power? (That the net of tax credit to ratepayers be grossed-up to recognize the tax savings that
will accrue when the credit is provided to customers through the PCA)? Anything else?
ilpDONOV AN E. WALKER
DECISION MEMORANDUM
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BARTON L. KLINE ISB #1526
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Phone: [phone]
FAX: [phone]
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Attorney for Idaho Power Company
Express Mail Address
1221 West Idaho Street
Boise , Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
INVESTIGATION OF APPROPRIATE
RATEMAKING TREATMENT OF
IDAHO POWER COMPANY'S S02
ALLOWANCE SALE PROCEEDS.
CASE NO. IPC-05-
STIPULATION
This Stipulation ("Stipulation ) is entered into by and among Idaho Power
Company ("Idaho Power" or the "Company ), the Staff of the Idaho Public Utilities
Commission ("Staff"), the Industrial Customers of Idaho Power (UICIP") and Micron
Technology, Inc. ("Micron ). These entities are collectively referred to as the "Parties.
INTRODUCTION
The terms and conditions of this Stipulation are set forth herein.
The Parties agree that this Stipulation represents a fair, just and reasonable
compromise of the issues raised in this proceeding and that this Stipulation is in the
STIPULATION , Page
public interest. The Parties maintain that the Stipulation and its acceptance by the
Idaho Public Utilities Commission ("I PUC" or "Commission ) represents a reasonable
resolution of legal and other issues identified in this matter. The Parties, therefore
recommend that the Commission , in accordance with RP 274 , approve the Stipulation
and all of its terms and conditions without material change or condition.
II.
BACKGROUND
On August 22 2005, in Order No. 29852 issued in Case No. IPC-
05-, the Commission approved Idaho Power s Application for (1) blanket authority to
sell surplus sulfur dioxide ("S02") emission allowances and (2) an accounting order to
provide for recording the sales of such surplus allowances pending a determination of
appropriate ratemaking treatment for the proceeds of such sales. The Company was
ordered to file a report with the Commission within sixty (60) days of the receipt of the
proceeds of any surplus S02 allowance sales. The Commission also ordered that this
docket be opened and directed the Staff to conduct workshops and make a
recommendation to the Commission regarding the appropriate ratemaking treatment of
any surplus SO2 allowance proceeds.
Petitions to intervene in this proceeding were filed by ICIP and
Micron. The Commission granted the intervention of the ICIP in IPUC Order No. 29978
and Micron s petition in Order No. 30005.
Pursuant to Order No. 29852, the Company has filed three Status
Reports concerning its sales of SO2 allowances. The reports were filed on
December 9, 2005 , February 3 , 2006 and March 23, 2006.
STIPULATION , Page 2
As of the date of this Stipulation, Idaho Power has sold 78 000 S02
emission allowances for a total emissions allowance sales amount of approximately
$81.6 million. After subtracting transaction fees and income taxes, the total amount of
sales proceeds to be allocated to the state of Idaho is approximately $46.8 million. This
$46.8 million amount assumes an income tax rate of approximately 39% and a
jurisdictional allocation to Idaho of 94.1 %. Attachment 1 provides a detailed
computation of the approximately $46.8 million proceeds amount.
Pursuant to notice and in accordance with RP 272, the Parties held
workshops and settlement discussions on November 7 2005, November 23,2005
February 7 2006 and March 23, 2006. Based upon the settlement discussions among
the Parties , as a compromise of the positions of the Parties in this case and for other
consideration as set forth below , the Parties agree to the following terms:
III.
TERMS OF THE STIPULATION
Inclusion of Sales Proceeds In the PCA.The Parties agree that if
the Commission issues its Order approving this Stipulation, the Company will retain
10% of the approximately $46.8 million in total emission allowance net proceeds, which
is currently approximately $4.7 million , as a shareholder benefit. The remaining 90% of
the approximately $46.8 million in total emission allowance net proceeds , which is
currently approximately $42.1 million, will be recorded as a customer benefit included as
a line-item in the PCA true-up. At the date of the Order approving this Stipulation , the
customer benefit of approximately $42.1 million , with interest computed at the PCA
interest rate , will be reflected in the Company s PCA as a credit to the PCA true-up
STIPULATION , Page 3
balance for amortization in PCA rates during the June 1 2007 through May 31 2008
PCA rate period. A more detailed description of the accounting to be used to defer and
amortize the customer benefits to the appropriate PCA account is enclosed on
Attachment 2.
Additional Sales of Surplus S02 Allowances.Idaho Power
currently anticipates needing approximately 14 500 allowances for compliance with
Clean Air Act requirements each year. Idaho Power receives allocations of SO2
allowances from the EPA each year. Idaho Power s annual allowance allocations range
from 15 524 to 28 622. As a result, it is possible that in the future Idaho Power may, in
accordance with the authority granted in Order No. 29582, sell additional surplus S02
emission allowances in a manner similar to the sales that generated the above-
described $81.6 million proceeds. Idaho Power will record any proceeds of future sales
of surplus S02 allowances, net of taxes and fees, received after June 1 2006 in the
PCA. Within future PCA true-ups the recorded amount will be jurisdictionalized and
shared.
The Parties agree that this Stipulation represents a compromise of
the positions of the Parties in this case. As provided in RP 272 , other than any testimony
or comments filed in support of the approval of this Stipulation, and except to the extent
necessary for a Party to explain before the Commission its own statements and positions
with respect to the Stipulation , all statements made and positions taken in negotiations
relating to this Stipulation shall be confidential and will not be admissible in evidence in this
or any other proceeding.
STIPULATION , Page 4
10.The Parties submit this Stipulation to the Commission and
recommend approval in its entirety pursuant to RP 274. Parties shall support this
Stipulation before the Commission , and no Party shall appeal a Commission Order
approving the Stipulation or an issue resolved by the Stipulation. If this Stipulation is
challenged by any person not a party to the Stipulation, the Parties to this Stipulation
reserve the right to file briefs and comments and put on such case as they deem
appropriate to respond fully to the issues presented, including the right to raise issues
that are incorporated in the settlements embodied in this Stipulation. Notwithstanding
this reservation of rights , the Parties to this Stipulation agree that they will continue to
support the Commission s adoption of the terms of this Stipulation.
11.If the Commission rejects any part or all of this Stipulation, or
imposes any additional material conditions on approval of this Stipulation , each Party
reserves the right, upon written notice to the Commission and the other Parties to this
proceeding, within 14 days of the date of such action by the Commission , to withdraw
from this Stipulation. In such case, no Party shall be bound or prejudiced by the terms
of this Stipulation, and each Party shall be entitled to seek reconsideration of the
Commission s order, file briefs and comments, and do all other things necessary to put
on such case as it deems appropriate. In such case, the Parties immediately will
reconvene for purposes of establishing a procedural schedule for the completion of the
case.
12.The Parties agree that this Stipulation is in the public interest and
that all of its terms and conditions are fair, just and reasonable.
STIPULATION , Page 5
13.No Party shall be bound , benefited or prejudiced by any position
asserted in the negotiation of this Stipulation , except to the extent expressly stated
herein, nor shall this Stipulation be construed as a waiver of the rights of any Party
unless such rights are expressly waived herein. Except for the agreements expressly
set out in Sections 7 and 8 herein, (a) execution of this Stipulation shall not be deemed
to constitute an acknowledgment by any Party of the validity or invalidity of any
particular method, theory or principle of law, regulation or cost recovery and (b) no
Party shall be deemed to have agreed that any method , theory or principle of law
regulation or cost recovery employed in arriving at this Stipulation is appropriate for
resolving any issues in any other proceeding in the future. No findings of fact or
conclusions of law other than those stated herein shall be deemed to be implicit in this
Stipulation.
14.The obligations of the Parties under this Stipulation are subject to
the Commission s approval of this Stipulation in accordance with its terms and
conditions and upon such approval being upheld on appeal by a court of competent
jurisdiction.
15.This Stipulation may be executed in counterparts and each signed
counterpart shall constitute an original document.
STIPULATION, Page 6
Idaho Power Company
(2J!~-Barton L. Kline
Attorney for Idaho Power Company
Dated:'1-- 0') - 0 ~
Micron Technology, Inc.
STIPULATION , Page 7
Idaho Public Utilities Commission Staff
trJ~
Donovan Walker
Cecelia A. Gassner
Attorneys for IPUC Staff
Dated: 1- 6-
~tomers of Idaho Power
I ustomers
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