20060925Reply comments.pdf

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IDAHO POWER COMPANY
O, BOX 70
BOISE, IDAHO 83707
BARTON L. KLINE
Senior Attorney
An IDACORP Company
September 22, 2006
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Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise , Idaho 83720-0074
Re:Case No. IPC-06-
Application of Idaho Power Company for an Accounting Order
Addressing the Deferral of Costs Related to the Development of Grid
West
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho
Power Company s Reply Comments in the above-referenced matter.
I would appreciate it if you would return a stamped copy of this transmittal
letter in the enclosed self-addressed , stamped envelope.
Barton L. Kline
BLK:sh
Enclosures
Telephone [phone] Fax [phone] E-mail BKlineCWidahopower.com
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BARTON L. KLINE ISB #1526
MONICA B. MOEN ISB #5734
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Phone: [phone]
FAX: [phone]
bkline (g) idahopower.com
mmoen
(g)
idahopower.com
200& SEP 22 PH 4: 58
IDA-HC: PUEd.
UTILITiES COf'lH,iISSIOf\j
Attorneys 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 APPLICATION
OF IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER ADDRESSING
THE DEFERRAL OF COSTS RELATED
TO THE DEVELOPMENT OF GRID WEST
CASE NO. IPC-06-
REPLY COMMENTS OF IDAHO
POWER
BACKGROUND
In Order No. 2000 , the Federal Energy Regulatory Commission ("FE RC"
required utilities to take steps to form and participate in regional transmission
organizations ("RTOs ). Pursuant to this order, Idaho Power joined other utilities in
forming a nonprofit regional transmission organization to "manage the use and
expansion of the region s transmission grid.This RTO named RTO West and
subsequently Grid West needed funding from its utility members in order to effectuate
its mandate. Accordingly, Idaho Power and other western utilities entered into a series
1 89 FERC 61 , 285 (1999), Order on reh, 9 Order No. 2000-, 90 FERC 61 201 (2000).
REPLY COMMENTS OF IDAHO POWER, Page
of agreements under which they loaned RTO West-Grid West money (the "Funding
Agreements ). Starting in June 2000, Idaho Power loaned RTO West-Grid West a total
of $1 274 158 including accrued interest.In addition , through year-end 20041daho
Power incurred another $2 594 318 in incremental internal costs.
Both Staff and the Industrial Customers of Idaho Power ("ICIP"in their
comments recommend that the Commission accept the Company deferral of the
principal portion of the loan s made under the Funding Agreements.
In addition , both Staff and ICIP propose various downward adjustments to the
currently accrued balance of the loan amounts and limitations on the carrying charges
to be applied to the deferred balance of the loans during the deferral period. ICIP also
urges the Commission to require rapid amortization of the deferred amounts.
Finally, both Staff and ICIP urge the Commission to reject the Company
decision to defer the incremental internal expenses the Company incurred to participate
in RTO West-Grid West development activities.
While Idaho Power appreciates that both the Staff and ICIP support deferral of at
least the principal portion of the loan balance under the Funding Agreements, Idaho
Power believes that both Staff and the ICIP have incorrectly classified the loans to RTO
West-Grid West as investments, have incorrectly analyzed the basis for deferral of the
incremental internal costs and are unreasonably restricting Idaho Power ability to
recover costs it incurred in good faith to comply with FERC Order No. 2000.
Fundinq Aqreements
As noted in the Company s Application , the Funding Agreements were used to
enable the various transmission owners in the Northwest to pool resources and achieve
REPLY COMMENTS OF IDAHO POWER , Page 2
economies of scale in financing the development of RTO West-Grid West and the
preparation of regulatory filings.
Neither Staff nor ICIP oppose deferral of the principal portion of the loans made
under the Funding Agreements. Staff recommends that the interest on the loans that
has accrued and is included in the $1 274 158 balance be excluded in establishing the
deferral amount. Staff bases its recommendation that accrued interest on the loan
principal not be recovered on three arguments.
First , Staff argues that had RTO West-Grid West been successful, the interest on
the loans would have been repaid by RTO West-Grid West as a return on Idaho
Power investment in the RTO. (Staff Comments p. 4). Staff's description is incorrect.
The amounts provided under the Funding Agreements were loans and the principal and
accrued interest would have been repaid to satisfy a loan, either as a single payment or
through a series of periodic payments, but not as a return on investments. Attached as
Exhibit 1 is the first page of the May 3, 2000 Funding Agreement which , in Section 1.
describes the RTO West-Grid West loan arrangements.
Staff is correct that had RTO West-Grid West been successful , the principal and
interest on these loans would have been repaid to Idaho Power but it would not have
been in the form of a return on an investment. As will be discussed in greater detail
later in these comments, it was contemplated that when Idaho Power eventually
contributed facilities to RTO West, including an amount for its internal expenses
incurred in developing RTO West , these contributions would be treated as
investment and Idaho Power would have received a return on this investment from the
2 Section 1.1 of Exhibit 1 is similar to the language used in the other Funding Agreements.
REPLY COMMENTS OF IDAHO POWER , Page 3
RTO. This distinction between the loan and the investment is important. As noted in
Exhibit 1 the loan would have been repaid no later than commencement of RTO West-
Grid West providing transmission services.In contracts , an investment carries an
understanding that the investment amount will be returned as the enterprise achieves
earnings that allow a return of and a return on the investment amount. The Funding
Agreements were straight-forward loans and accrual of interest on a loan is consistent
with ordinary business practice and regulatory convention. If the Commission finds that
making the loans to RTO West-Grid West was consistent with the public interest , then
allowing recovery of interest on the loan would also be consistent with accepted
commercial and regulatory practice and in the public interest.
Staff's second argument in support of its recommendation to deny recovery of
accrued interest on the loans is that Idaho Power never had any cash outlay for the
interest and therefore return of principal is sufficient compensation. (Staff Comments
4).Lenders never have a cash outlay for interest accruing on the principal of a loan.
But that does not diminish the fact that lenders are entitled to receive the time-value of
the use of their money. Had Idaho Power not loaned the money to RTO West-Grid
West , the funds could have been used for other purposes and therefore the funds have
a time-value. For the Staff to argue that it is in the public interest to allow Idaho Power
to defer the principal portion of the loan but it is not in the public interest to allow the
Company to recover the interest on that principal amount is arbitrary and inconsistent
with normal business and regulatory practice.
Staff's third argument for denying recovery of the interest on the loans Idaho
Power made to RTO West-Grid West is that RTO West-Grid West was not successful
REPLY COMMENTS OF IDAHO POWER , Page 4
and therefore customers should not be required to pay Idaho Power any return on a
failed investment. (Staff Comments p. 4). Setting aside the fact that the Funding
Agreements were not investments, Staff's argument ignores the fact that these loans
were made to reduce Idaho Power s share of the cost of developing RTO West-Grid
West. If Idaho Power had not agreed to work cooperatively with other regional utilities
to pool resources to reduce the cost of responding to a federal mandate, the loans
would not have been made. If the Commission finds that Idaho Power acted prudently
in working cooperatively with other regional utilities to minimize the cost of developing
RTO West-Grid West, then the Company should not be penalized by denying recovery
of reasonable interest amounts accruing as a result of the cooperative efforts.
Finally, Idaho Power must disagree with Staff's assessment that RTO West-Grid
West has been a complete failure. Idaho Power believes that its participation in the
RTO West-Grid West formation process has created value for customers. A great deal
of insight and experience as to how an independent regional transmission system
operator would be chartered , would manage a regional transmission system and a
better understanding of the problems , risks and benefits associated with an independent
system operation regime has been gained by the RTO West-Grid West formation
efforts. Not unlike a pilot program , the Company s participation in the formation of RTO
West-Grid West will ultimately benefit customers.
Carrvinq Costs on the Deferred Balance While both Staff and ICIP
recommend that Idaho Power be allowed to defer and recover the principal portion of
the loans under the Funding Agreements, Staff recommends that Idaho Power should
REPLY COMMENTS OF IDAHO POWER, Page 5
not be allowed to accrue and recover carrying costs on the deferral balance during the
period when the deferral balance is being amortized. (Staff Comments p. 4).
ICIP recommends that if the Commission allows the Company to earn interest on
the deferred amounts, the rate of interest on the deferred balance should not exceed
the interest rate provided for customer deposits. (ICIP Comments p. 2).
Idaho Power believes that because the deferral balance is likely to be amortized
over a period of years , the carrying costs during the amortization period of the deferral
balance should be set at a level equal to Idaho Power s overall rate of return. Setting
the carrying cost on the deferral balance at the Company overall rate of return would
recognize that the deferral balance carries the same cost of money as other funds the
Company expends to comply with it statutory and regulatory requirements. In this case
the regulatory requirement was the FERC mandate for the formation of RTO's outlined
in Order No. 2000.
In essence , Staff and ICIP are arguing that Idaho Power ought to be satisfied
with only recovering the principal portion of its loans to RTO West-Grid West. Idaho
Power recognizes that RTO West-Grid West did not achieve all of its intended goals
and objectives. But that does not mean that the efforts to pursue and form this regional
entity were not made in good faith and will not provide benefits to customers. In the
Company s opinion the efforts that went into developing RTO West-Grid West will
provide benefits to customers if, in the future , it is determined that a cooperative
independent regional transmission organization should be developed and implemented
in the Pacific Northwest.
REPLY COMMENTS OF IDAHO POWER, Page 6
For these same reasons the Oregon Public Utilities Commission found that Idaho
Power and the other Oregon jurisdictional utilities should be permitted to defer the loans
they made to RTO West-Grid West. The OPUC agreed that both principal and interest
should be deferred and the carrying cost to be applied to the deferral balance should be
the three Oregon utilities respective overall rates of return. In Order No. 06-483 the
Oregon Commission found:
We find that utility efforts to assist in the development of a
northwest RTO are consistent with our regulatory policy and
will benefit rate payers. The purpose of an RTO is to
promote efficiency and wholesale electricity markets and
insure that electricity consumers pay the lowest possible
price for reliable service. (Order No. 06-483 p. 5).
If the Commission agrees with the Oregon Commission and determines that
Idaho Power s efforts to assist in the development of RTO West-Grid West were in the
public interest , then it logically follows that recovery of interest on Idaho Power s loan
principal amount is appropriate.Furthermore , if it is appropriate to defer the loan
amounts for future recovery, it logically follows that Idaho Power should be able to
recover reasonable carrying charges on the amounts deferred. Allowing one without
the other is illogical and arbitrary.
Incremental Internal Costs . Both Staff and ICIP urge the Commission to
reject Idaho Power s request that it be permitted to defer the incremental internal costs
the Company incurred in participating in the development of RTO West-id West.
No Double Recovery At the outset it is important that one
misconception be cleared up. On page 4 of its Comments the ICIP raises the specter
that allowing Idaho Power to defer its incremental internal costs into a future cost
REPLY COMMENTS OF IDAHO POWER , Page 7
recovery period could result in double recovery of expenses from customers. ICIP'
concern that Idaho Power might recover some expenses twice is groundless. Idaho
Power went to considerable lengths to limit the expenses it included in its quantification
of incremental internal costs to only those expenses that would not have been incurred
but for the efforts to develop RTO West-Grid West. As noted in the Application the bulk
of these incremental expenses were for travel expense outside legal counsel fees.
Idaho Power Properly Applied Deferral Accountinq Deferral of
expense and the creation of regulatory assets is a creature unique to regulatory
accounting. The accounting profession and utility regulators have long recognized the
unique risks prospective ratemaking imposes on regulated utilities. As a result , the
concepts of deferral and creation of regulatory assets has become well recognized in
regulatory accounting and rate-making.
The essence of deferral accounting under the Uniform System of Accounts as
adopted by the Commission , is the transfer of expenses incurred in one period to a
future period if certain criteria are met. Attachment 2 to Idaho Power s Application is a
letter order issued by the FERC on February 3, 2004 that approves Idaho Power
deferral of its incremental internal expenses associated with RTO West start-up costs
and explains the rationale for the ultimate conversion of those deferred expenses into a
regulatory asset. For the convenience of the Commission , a copy of FERC's letter
order is attached as Exhibit 2.FERC's February 3 , 2004 letter order provides, in
pertinent part, on page 3:
The instructions to Account 182.3 provide in part that this
account shall include specific expenses that would be
included in net income determinations in one period under
REPLY COMMENTS OF IDAHO POWER, Page 8
the general requirements of the USofA but for it being
probable that such expenses will be included in a different
period for purposes of developing rates. The term
probable , as used in the definition of regulatory assets
refers to that which can reasonably be expected or believed
on the basis of available evidence or logic but is neither
certain nor proved. (Emphasis added).
Both Staff and ICIP argue that Idaho Power should not have deferred amounts
for incremental internal expenses associated with RTO West-Grid West start-up costs
because at the time the expenses were incurred Idaho Power had no guarantee from
RTO West-Grid West that they would reimburse Idaho Power for those expenses. As
noted in the above-quoted language , from FERC's letter order, the Uniform System of
Accounts does not require a guarantee but only a reasonable expectation or belief
based on the available evidence or logic that it would be able to recover those costs
from RTO West-Grid West in the future. There is no requirement in the Uniform System
of Accounts that RTO West-Grid West have signed a contract or offered a guarantee.
All that is required is that Idaho Power have a reasonable expectation that its
incremental internal costs associated with RTO West-Grid West start-up would be
recoverable from RTO West-Grid West. In fact Idaho Power had such a reasonable
expectation.
RTO West was the first stage of the RTO development process.From the
earliest stages of the development of RTO West, it was contemplated that Idaho Power
would be reimbursed for its incremental internal development costs through the RTO as
a condition of Idaho Power s transfer of its transmission facilities to the RTO. Idaho
Power s legitimate belief that it would be permitted to recover its internal expenses is
evidenced by Idaho Power s Request for confirmation of accounting treatment made to
REPLY COMMENTS OF IDAHO POWER , Page 9
the FERC for the letter order. (Exhibit 2). A copy of the Company s Request to the
FERC for the letter order is attached as Exhibit 3. On page 3 of Exhibit 3 Idaho Power
describes how each of the participating utilities would execute a Transmission
Operating Agreement ("TOA") with RTO West. On page 5 of Exhibit 3 Idaho Power
explains how its internal RTO development costs (plus related carrying costs) will be
recovered from the RTO as a condition of execution of the TOA. Further, on page 6 of
the Request (Exhibit 3) Idaho Power reiterates its belief that Idaho Power s internal
expenses will be reimbursed through the RTO as a condition of transferring its facilities
to the RTO.
The above-described cost-recovery mechanisms were considered in the context
of the formation of RTO West and as a result, Idaho Power held a reasonable
expectation that its start-up costs would be reimbursed as part of the investment that
would be subject to recovery from RTO West in the form of a return paid to Idaho Power
based on Idaho Power contribution to RTO West.As a result, Idaho Power
legitimately believed it was "probable" that the incremental internal expenses would be
recovered in a different period via payments from RTO West. This expectation was
reasonable based on available evidence and logic.
Subsequently, when RTO West transitioned into Grid West, the proponents of
Grid West considered , and ultimately decided , to use a business model that did not
include transfer of ownership of utility assets to an independent entity. When that
business model was adopted, Idaho Power ceased deferring and began expensing
incremental internal expenses associated with the new Grid West business model.
REPLY COMMENTS OF IDAHO POWER , Page 10
Obviously the Company s expectations for the ultimate success of RTO West-
Grid West have not been met. If the Commission determines that it was not prudent for
Idaho Power to have participated in the start-up of RTO West-Grid West, it can
determine that Idaho Power start-up costs should not be recovered.This
disallowance will require Idaho Power, as stated on page 3 of FERC's letter order, to
immediately write off those deferred expenses with the resulting impact on the
Company earnings.
Staff argues that Idaho Power should have come to the Commission before it
began accruing RTO West-Grid West costs to request deferral of incremental internal
expenses. With 20/20 hindsight, the safest course of conduct for Idaho Power would
have been to file as Staff suggests. But the Commission should carefully consider
whether it really wants to encourage utilities to file deferral requests simply out of an
abundance of caution. In this instance Idaho Power acted on a reasonable expectation
it would recover its incremental internal costs in a future period. In February of 2004
Idaho Power obtained the letter order from the FERC confirming that start-up costs for
RTOs are legitimate candidates for deferral accounting. Consistent with the Uniform
System of Accounts , the Company utilized deferral accounting.Idaho Power had
Funding Agreements with RTO West-Grid West.Idaho Power had a legitimate
expectation that its incremental internal expenses for RTO West-Grid West start-up
costs would be reimbursed in the future by RTO West-Grid West.
In the end the Commission must determine whether or not it was prudent for
Idaho Power to actively pursue participation in the creation of RTO West-Grid West.
Recognizing the federal mandate to create an RTO and the potential impact on Idaho
REPLY COMMENTS OF IDAHO POWER, Page
Power and its customers that could flow from the creation of an RTO in the Northwest
Idaho Power believed it was acting appropriately by contributing substantial time and
resources to the development of Grid West.
Amortization.Staff recommends that the Company begin amortization of
the deferred balance of RTO West-Grid West expenses at the conclusion of its next
general rate case or on January 1 , 2010 , whichever occurs first. Staff bases that
recommendation on the fact that the expenditures were incurred in response to FERC
directives. Staff also recommends that the initial amortization period should be five (5)
years unless the Commission approves a different time-period in a subsequent general
rate case.
ICIP argues that the Company should immediately commence amortization of the
costs and the amortization should be completed over a three (3) year period.
Idaho Power believes that Staff's recommendation is reasonable. All of the
monies Idaho Power expended in support of the development of RTO West-Grid West
arose out of the federal mandate contained in FERC Oder No. 2000. As a result, a
reasonable period to commence and complete amortization is appropriate.
ICIP's recommendation that amortization begin immediately and be limited to a
three (3) year time-period is an unabashed effort to ensure that Idaho Power
shareholders bear the costs of RTO West-Grid West startup activities. Again , if the
Commission believes that Idaho Power s efforts in support of RTO West-Grid West
were in the public interest, it should allow Idaho Power a reasonable period of time to
commence and complete amortization of any deferral balance approved by the
Commission. Staff's suggested time-periods are reasonable.
REPLY COMMENTS OF IDAHO POWER, Page 12
Additional Issues.ICIP also requests that the Commission add several
other conditions to any order approving deferral and establishing an amortization
schedule. ICIP requests that the Commission (1) expressly state in the order that future
cost recovery is not automatic and depends on a demonstration of prudence and (2)
require that Idaho Power net any proceeds received from Grid West against those
amounts.
Idaho Power understands that it must ultimately demonstrate that the expenses it
incurred associated with RTO West-Grid West start-up were prudent.Of course
prudency in this instance is not a demonstration that it was in the public interest for
Idaho Power to participate in RTO West-Grid West start-up. If the Commission confirms
that deferral is appropriate it will have made that initial policy determination.
Subsequent prudency review in this case would be directed at the actual expenses
Idaho Power incurred and a determination that they were reasonable.Taking an
extreme hypothetical , if Idaho Power had traveled to Portland via Paris, France to
attend RTO West-Grid West activities , such an expense would not be prudent and
should be disallowed. Any prudency review that would be undertaken in a future rate
proceeding would be limited to assessing the reasonableness of expenses incurred and
would not be a referendum on the decision to incur expense in support of the
development of RTO West-Grid West.
As to ICIP's second item , Idaho Power certainly agrees that any proceeds
recovered from Grid West should be applied to reduce the deferral balance.
REPLY COMMENTS OF IDAHO POWER , Page 13
Respectfully submitted this 22---ay of September, 2006.
BART
~)~
Attorney for Idaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day of September, 2006, I served a true
and correct copy of the within and foregoing document upon the following named
parties by the method indicated below, and addressed to the following:
Commission Staff
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington (83702)
O. Box 83720
Boise, Idaho 83720-0074
Hand Delivered
---J:..U.S. Mail
Overnight Mail
FAX
Email
weldon .stutzman
(g)
uc.idaho.
Industrial Customers of Idaho Power
Peter J. Richardson, Esq.
Richardson & O'Leary
515 N. 2ih Street
O. Box 7218
Boise , Idaho 83702
Hand Delivered
---2LU.S. Mail
Overnight Mail
FAX
Email
eter(g) richardsonandolea com
Don Reading
Ben Johnson Associates
6070 Hill Road
Boise, Idaho 83702
Hand Delivered
---2LU.S. Mail
Overnight Mail
FAX-X Email dreadin
(g)
minds rin com
REPLY COMMENTS OF IDAHO POWER, Page 14
Exhibit 1
FUNDING AGREEMENT
THIS AGREEMENT is entered into effective as of May 3, 2000 (the "Effective
Date ) by and among Avista Corporation , the Bonneville Power Administration ("BPA"
) ,
Idaho Power Company, Nevada Power Company, The Montana Power Company,
PacifiCorp, Portland General Electric Company, Puget Sound Energy, Sierra Pacific
Power Company (together referred to as the "Transmission Owners" or "TOs ) , and
RTO West.
RECITALS:
The TOs wish to work toward filing(s) on or before October 15 , 2000 for the
creation of a Regional Transmission Organization ("RTO") pursuant to FERC Order
2000 (as amended).
The parties recognize the need to include other interested stakeholders in a
broad collaborative process for the creation of the RTO.
The TOs wish to finance the retention of experts and facilitators in order to further
this work, and to assist in preparation of the regulatory filings required for the RTO.
RTO West is a nonprofit Washington corporation , with a purpose initially of
retaining experts and facilitators to further the effort to create the RTO and to facilitate
the related collaborative process , and a purpose later (after changes to the RTO West
governing documents that among other matters conform RTO West's governance with
the independence requirements of FERC's Order 2000) of operating as the RTO as filed
with and approved by FERC.
The parties wish to set forth their agreement for the funding of the above work.
AGREEMENT:
FundinQ Subject to the terms of this Agreement, the TOs agree to provide
funding to RTO West for the purpose of enabling RTO West to retain the experts
and facilitators referenced above and to pay certain other incidental expenses.
By Non-BPA TOs Funds provided by TOs other than BPA shall be
loaned amounts that shall be repaid with interest by RTO West to the TOs
promptly when sufficient third party financing is available to RTO West, but
in any event, not later than the commencement of transmission services
by RTO West as an RTO over the transmission assets of one or more
TOs. RTO West agrees to pay interest on all outstanding loan balances at
the same interest rates from time to time as established by FERC for
refunds, pursuant to 18 CFR 935.19a.
By BPA.Funds provided by BPA shall be credited with interest against
rates payable by BPA transmission customers, in services to BPA
Page 1 - FUNDING AGREEMENT
Exhibit 2
ATTACHMENT 2 I
Page 1 of 4
FEDERAL ENEnGY REGULATORY COMMISSION
WASHINGTON. D. C.20426
11\ Reply Refer To:
OED-DRAP
Docltet No. ACO3-78-000
VanNess Feldman
Attention: Mr. Malcolm C. McLellan
Attorney for Idaho Power Company
821 Second Avenue. Suite 2000
Seattle, WA 98104-1519
FES 2004
Thank you for your letter dated September 29, 2003, filed on behalf of Idaho
Power Company (Idaho Power), requesting confinnalion thut its accounting treatment of
RTO West development costs is consistent with the Uniform System of Accounts
(USofA). Specifically, it seeks confirmation that it is proper to defer for future recovery
past and future RTO West development costs in Account 186, Miscellaneous Deferred
Debits, and tnmsfer to Account 182.3, Other Regulatory Assets, amounts not reimbursedby an RTO.
Idaho Power s accounting trealmenl is consistent with the USofA~ provided that
records the loans to RTO West in Account 124, Other Investments. Recognition of the
costs as a regulatory asset in the event that they are not reimbursed by the RTO would
only be appropriate if the amounts would otherwise be chargeable to expense at that time
and Idaho Power has concluded. based upon all relevant information, that recovery in
rates in a different period is probable.
J3ac~grO\md.
Idaho Power is one of the transm3ssion owners participating in the development
a regional transmission organization (RTO) known as RTO West, in response to Ord~r
No. 2000. 2 Considerable work remains to achieve a fu))y approved and operational RTO
, . West. The work includes the deveJopment of a tariff, further refinement of the mnrket
design, and the securing of state and federal approvals as wen as the approvals of the
management and/or boards of directors of each of the filing utilities.
1 18 C.R. Part 101, Definition No. 30.
1 The Commission granted, on a conditional basis, their request to create RTO
West on April 26, 2001,95 FERC'61,114 (2001).
ATTACHMENT 2
Page 2 of 4
ACO3- 78-000 - 2.
Since its ;RTO development costs have. been and continue to be incurred in
. response to Order No. 2000, Idaho Power interp~ets the USofA n~ pennitling its RTO
development costs to be ~haracterized as a regulatory asset. However f since the benefit
will occur largely in the f\lture from these expenditures, it further interprets the USofA as
permitting tbe deferral of these expenses over a rea~onable period of time where the
benefits are realized. Idaho Power believes that its internal RTOdevelopment costs
(including canying costs) will be recovered through RTO West s transmission tariff
within Idaho Power s Company Rate for load service, and Idaho Power s loans 3 to RTO
West will be re-paid by RTO West and recovered by RTO West in its,transmission tariff
within RTO West s Grid.Management Charge. According1y, Idaho Power is booking all
RTO development costs in Account 186.
Although Idoho Power is book,ing its RTO development costs as a miscellaneous
, deferrc:.d debit in Account t86 on the belief that they will be reimbursed through an RTO
as a condition of transferring its facilities to the RTO, it believes that it Is not limited to
recovering its deferred RTO development costs only in this manner. Idaho Power
believes that it has the authority to seek Commission approval under Section 205 for
alternative menns of recovering these deferred costs. In addition, Idaho Power believes
that it has the authority lO seek recovery of these deferretl costs through retail rates.
Idaho Power seeks conrmnation that:
It is proper to defer for future recovery past and future incremental internal
RTO West dcv~lopment costs (inc1usive of carrying costs), separately
captured on its individual company books, in Account 186;
1t is proper to defer for future recovery RTO development costs loaned to
RTO West under the te.nns of funding agreements among participating RTO
utiUties in Aecount 186;
As Idaho Power receives reimbursement of defened RTO development
costs (incremental internal costs and/or loans to RTO West) from an RTO
upon the transfer of control of jts transmission facilities to the RTO, Idaho
Power may credit payment to Account 186 and debit Account 131, Cash,
for an equivalent amount; and
3 The loans to RTO West are pursuant to funding agreements established by the
transmission owners fonning RTO West. The funding agreements were entered into to
finance the retention of experts and facilitators to further the development of RTO West.
and to assist in the preparation of the regulatory filings required for the RTO.
ATTACHMENT 2
Page 3 of 4
ACO3- 78-000 - 3-
The deferred RTO development costs (incremental costs and/or loans to
RTO West) not reimbursed by an RTO may, upon n proper future fiHng
with the Conunission. become a regulatory asset and be transferred (0
Account 182.3 for recovery in rates (wholesale or retail), or alternatively,
may be written off inunediately to Account 426.5, Other Deductions.
Account 186 provides for the inclusion of amounts that are not provided for
elsewhere, such as miscellaneous work in progress and unusual or extraordinary
expenses, and items where the proper finnl disposition is uncertain. The Commission has
approved the deferral of RTO startup costs to Account 186 in other instances.
Therefore. Idaho Power s internal RTO West development costs (including carrying
charges) are propcrJy deferred in Account 186. ldnho Power s loans to RTO West aremore appropriately classified as long.term notes receivable that should be recorded in
Account 124. Interest income reaUzed on the notes should be recorded in Account 419
Interest and Dividend Income. 5
Ghe instructions to Aceount 182.3 provide in part that this account shall include
specific expenses that would be included in net income determinations in one period
under the general requirements of the USofA but for it being probable that such expenses
wilt be inc1uded in a different period for purposes of deveJoping Tates. The termprobable, as used in the definition of regulatory assets refers to that which can
, reasonably be expected or believed on the basis of available evidence or logic but is
neither cerrain nor proved. Therefore, Idaho Power may transfer the RTO Westdevelopment costs noi-rejlnbu~ed by the RTO to Account 182., if these criteria are tne0'However, if fate recovery of aU or part of the defeITed costs is later disallowed, the
disaUowed costs should be charged to Account 426.5 in the )'ear of the djsaUowance.
The foregoing determination i$ for accounting purposes only and does not
constitute a finding that the costs are just and reasonable, prudently incurred, or otherwiseapproved for ratemaking treatment.
4 See the approval for Northeast Utilities Se~ice Company in Docket No. AC02.000, on March 14.2002, relating to NE ITC and Northeastern RTO and Florida Power
Corporation in Docket No. AC01-10-000, on DecemberJ4, 2000, relating 10 theGridPlorida RTO.
5 This is consistent with the Commission
s response to SieJTa Pacific Power
Company in Docket No. AC94.II-Q()O, dated January 4, 1994.
ACO3~ 78-000
. ATTACHMENT 2
Page 4 of 4
- 4..
This letter order constitutes final agency action. To request that the ConuJ1jssion
rehear your case, you must file a request within 30 days of the date of this Jetter order
(see 18 C.R. ~ 385.713).
Sincerely.
tfu
'-,9l,4V 't
L.:
James K. Guest
Director, Division of Regulatory
Accounting Policy
Exhibit 3
VanNessFeldman 03 SEP 29 PH \2: 02
A PROFESSIONAL CORPORATION
821 Second Avenue, Suite 2000
Seattle, Washington 98104-1519
[phone] Telephone
[phone] Facsimile
www.vnf.com
TILE.Dorrin!: THE $ECRETAR"
ATTORNEYS AT LAW fEDERAL ENERGY
~EGliLATORY COMMISSION
Washington, D,
[phone]
Malcohn C. McLellan
[phone]
mcm~vnf.com
September 29 2003
Mr. Jolm M. Delaware
Chief Accountant
Federal Energy Regulatory
Commission
888 First Street, N.
Washington, D.c. 20426
Re:Idaho Power Company
Request for Confirmation of Accounting Treatment of Costs Incurred
in the Development of RTO West
Docket No. AC03-
Dear Mr. Delaware:
Idaho Power Company ("Idaho Power ) is one of the transmission owners
participating in the development of a regional transmission organization ("RTO") known
as RTO West, 1 in response to FERC Order No. 2000? Idaho Power respectfully
requests, pursuant to 18 C.R. ~ 375.303 (2003), confmnation that its accounting
treatment of R TO West development costs is consistent with the Commission Uniform
System of Accounts and, more specifically, Idaho Power seeks confinnation that:
Avista Corps" et al.FERC Docket No. RTOl-35. The transmission owners working in a
collaborative process to develop RTO West are: Avista Corporation, the Bonneville Power Administration
Bonneville ), Idaho Power, Nevada Power Company, NorthWestern Energy (a division of NorthWestern
Corporation), PacifiCorp, Puget Sound Energy, Inc., Portland General Electric Company, Sierra Pacific
Power Company, and British Columbia Hydro and Power Authority, These transmission owners are
collectively referred to as the "Transmission Owners" or the "Filing Utilities
Regional Transmission Organizations 65 Fed, Reg. 809 (Jan, 6, 2000), FERC Stats. & Regs,
~3l ,089 (1999), order on reh '
g,
Order No. 2000-, 65 Fed. Reg. 12 088 (Mar. 8, 2000), FERC Stats. &
Regs, ~ 31 092 (2000), aff'dsub nom, Pub. Util. Dist. No.1 ofSnohomish Cty., WA v, FERC Nos, 00-1174
et al. (D.C. Cir, 2001) (hereinafter Order No. 2000"
Uniform System of Accounts Prescribed for Public Utilities and Licensees Subject to Provisions
of the Federal Power Act 18 CF.R. pt. 101 (2003) (hereinafter Uniform System of Accounts
Letter to Mr. John M. Delaware
September 29 2003
Page 2
1. It is proper for Idaho Power to defer for future recovery past and future
incremental internal RTO West development costs (inclusive of carrying
costs), separately captured on its individual company books, in FERC
Account No. 186 (Miscellaneous Deferred Debits);
2. It is proper for Idaho Power to defer for future recovery RTO development
costs loaned to RTO West under the terms of funding agreements among
participating RTO utilities, in FERC Account No. 186;
3. As Idaho Power receives reimbursement of deferred RTO development costs
(incremental internal costs and/or loans to RTO West) from an RTO upon
Idaho Power s transfer of control of its transmission facilities to the RTO,
Idaho Power may credit payment to FERC Account No. 186 and debit FERC
Account No. 131 for an equivalent amount; and
4. The deferred RTO development costs (incremental costs and/or loans to RTO
West) not reimbursed by an RTO may, upon a proper future filing with the
Commission, become a regulatory asset and be transferred to FERC Account
No. 182.3 (Regulatory Assets and Liabilities) for recovery in rates (wholesale
or retail), or alternatively, may be written off immediately to Account No.
426.5 (Other Deductions).
BACKGROUND: RTO WEST FILINGS AND FUTURE DEVELOPMENT
REQ UIREMENTS
On October 16, 2000 (supplemented on October 23 2000), the Filing Utilities
filed a proposal with FERC to create R TO West. The stage 1 filing requested approval of
the proposed governance structure, scope of operations, and contractual obligations of the
Filing Utilities and RTO West. On April 26, 2001 , the Commission granted, on a
conditional basis, the Filing Utilities ' request providing preliminary guidance on a limited
number of issues presented by the stage 1 filing, and further stated it would address
umeso1ved issues in a future order.
On March 29 2002, the Filing Utilities submitted a stage 2 filing in accordance
with Order No. 2000, The filing requested that the Commission reconfirm its prior
determinations concerning the proposed governance structure, scope and configuration
and basic operating premises ofRTO West, and that with the additional details provided
Avista Corps" et ai.95 FERC -U 61 114 (2001), order on reh '
g,
96 FERC -U 61 058 (2001),
clarified 96 FERC -U 61 265 (2001) (hereinafter April 26 Order
Letter to Mr. John M. Delaware
September 29 2003
Page 3
in the filing find that R TO West would fulfill all essential characteristics and functions
required for status as an R TO under Order No. 2000. The Filing Utilities submitted a
further filing on June 28, 2002, which contained a detailed implementation plan and a
general approach for public participation in R TO West development activities. On
September 18 , 2002, the Commission approved most aspects of the plan and requested
further details in a number of areas.
Considerable work remains to achieve a fully approved and operational RTO
West. 6 The work includes the development of a tariff, further refinement of the market
design,1 and the securing of state and federal approvals as well as the approvals of the
management and/or boards of directors of each of the Filing Utilities. Once the necessary
approvals are received, the Filing Utilities will each execute a transmission operating
agreement ("TOA") with RTO West. Upon execution of the TOA, those Filing Utilities
required to file with the Commission under the Federal Power Act will proceed. As part
of further developing RTO West, efforts also are continuing within the Seams Steering
Group ofthe Western Interconnection ("SSG-WI") to eliminate seams between the three
RTO efforts within the Western Interconnection.
ll.RTO WEST DEVELOPMENT COSTS INCURRED BY IDAHO POWER
Idaho Power s expenditures related to the development ofRTO West have fallen
into, and are expected to continue falling into, two general categories of costs. The first
are costs incUITed in the fonn ofloans to RTO West under a series of funding agreements
(collectively referred to as the "Funding Agreements ) established by the Transmission
Owners forming RTO West and RTO West.9 Each of the Transmission Owners has
agreed with RTO West to provide an allocated share of funding to RTO West.
Avista Corps., et ai.100 FERC ~ 61 274 (2002) (hereinafter September 18 Order ), order on
reh '
g,
101 FERC ~ 61 346 (2002),
6 For current RTO West development activities please refer to the RTO West web site
www.rtowestcom.
7 This includes negotiations for Bonneville s participation in the market power or price mitigation
programs ofRTO West on the same terms and conditions as other participating Transmission Owners, but
in a manner consistent with Bonneville s statutory mandates and environmental requirements.
Report of the California ISO, the RTO West Filing Utilities, and the WestConnect Applicants
Concerning Activities of the Seams Steering Group Western Interconnection FERC Docket No. ER02-
1656, RTOl-, RT02-1 and EL02-9 Attachment B (Jan. 8, 2003).
9 RTO West is organized as a Washington non-profit corporation. The corporation was created for
the purpose of retaining experts to facilitate development of the RTO, The corporation is expected to
become the entity operating "as an RTO . . . in accordance with the applicable requirements ofFERC
Letter to Mr. John M. Delaware
September 29 2003
Page 4
The Funding Agreements were entered into in order to finance the retention of
experts and facilitators in order to further the development ofRTO West, and to assist in
the preparation ofthe regulatory filings required for the RTO. Funding Agreement
expenditures broadly include contracting with consultants, experts, and others;
purchasing of equipment, supplies, office space, and public meeting expenses; and filing
fees, and incidental and administrative costs.
Under the Funding Agreements, funds provided by Transmission Owners (other
than Bonneville)10 are considered loaned amounts that will be repaid with interest by
RTO West to the Transmission Owners when sufficient third party financing is available
but not later than the commencement of transmission services by RTO West acting as an
RTO over the transmission assets of one or more of the Transmission Owners. Interest
on all outstanding R TO West loan balances will be calculated at the same interest rates
from time to time as established by FERC forrefunds pursuant to 18 CF.R 935.19a.
The second category ofRTO development costs is the internal incremental costs
incurred directly by Idaho Power in the development ofRTO West. This category of
costs consists of the disbursement of cash and the payment of costs in addition to
amounts loaned to RTO West. These expenditures include, without limitation
incremental costs incurred for: (1) meetings, facilitators, and other resources, consultant
fees and costs, conference calls, and meeting support; (2) development and regulatory
creation of the RTO West, including feasibility studies, development of the structure and
tariff, support in regulatory proceedings, and incremental expenses of personnel and other
resources working on development and regulatory matters (not the costs of Idaho Power
personnel themselves); (3) training and travel expenditures and costs; (4) legal
representation associated with all of the above; and (5) carrying costs of the funds
associated with all of the above, although, these expenditures to date have not yet accrued
carrying costs, but may in the future accrue appropriate carrying costs.
including but not limited to the applicable requirements ofFERC with respect to RTO characteristics and
functions.RTO West Bylaws, Article III FERC Docket No. RTOl-35.
10 Bonneville funds provided under the Funding Agreement shall be credited with interest against
rates payable by Bonneville transmission customers, in services to Bonneville transmission customers of
equivalent value, or in such other manner as Bonneville may direct, when sufficient third party financing is
available, but not later than the commencement of transmission services by RTO West acting as an RTO
over the transmission assets of one or more of the Transmission Owners. RTO West win provide an
allowance for interest on all outstanding Bonneville loan amounts at the same interest rates and in the same
manner as that provided to other Transmission Owners.
Letter to Mr. John M. Delaware
September 29 2003
Page 5
III.ACCOUNTING TREATMENT FOR RTO WEST DEVELOPMENT
COSTS INCURRED BY IDAHO POWER
Idaho Power has put in place an accounting procedure to separately capture on its
books and records all incremental costs directly associated with the development ofRTO
West. It has done so believing that its circumstances make deferral more appropriate than
expensing such costs and in reliance upon the Commission s recognition that in certain
circUinstances deferral is appropriate. Due to the protracted nature of these activities and
their rising costs, it is imperative that Idaho Power obtains confmnation by the
Commission that its accounting practices related to the costs of developing RTO West are
proper for its circumstances.
Idaho Power reviewed the Commission Uniform System of Accounts 18 c.F.
pt 101 (2003), particularly the definition of "regulatory assets and liabilities " which is
restated in relevant part as follows:
Regulatory Assets and Liabilities are assets and liabilities that
result from rate actions of regulatory agencies. Regulatory assets
and liabilities arise from specific revenues, expense, gains, or
losses that would have been included in net income determination
in one period under the general requirements of the Uniforrn
System of Accounts but for it being probable: A. that such item
will be included in a different period(s) for purposes of developing
rates the utility is authorized to charge for its utility services. . . L 1
Since its RTO development costs have been and continue to be incurred in
response to Order 2000, Idaho Power interprets the Uniform System of Accounts
perrnitting its RTO development costs to be characterized as a regulatory asset. However
since the benefit will occur largely in the future from these expenditures, it further
interprets the Uniform System of Accounts as perrnitting the deferral of these expenses
over a reasonable period of time where the benefits are realized. Idaho Power believes
that its internal RTO development costs (plus related carrying costs) will be recovered
through R TO West's transmission tariff within Idaho Power s Company Rate, and Idaho
Power s loans to RTO West (plus related carrying costs) will be re-paid by RTO West
and recovered by RTO West in its transmission tariff within RTO West's Grid-
II Definitions, Uniform System of Accounts 18 C.R. pt. 101 (30).
Letter to Mr. John M. Delaware
September 29, 2003
Page 6
Management Charge.12 Accordingly, Idaho Power is booking all RTO development costs
identified in Section II above in FERC AccountNo. 186 (miscellaneous deferred debits).
Although Idaho Power is booking its RTO development costs as a miscellaneous
deferred debit in Account No. 186 on the beliefthat they will be reimbursed through an
RTO as a condition of transferring its facilities to the RTO, Idaho Power believes that it
is not limited to recovering its deferred RTO development costs only in this manner.
Idaho Power believes that it has the authority to seek Commission approval under Section
205 for alternative means of recovering these deferred costs. 13 In addition, Idaho Power
believes that it has the authority to seek recovery of these deferred costs through retail
rates.
IV.IDAHO POWER BELIEVES ITS ACCOUNTING IS CONSISTENT WITH
RECENT COMMISSION RULINGS AND STATED POLICY
Idaho Power believes that its interpretation of the Uniform System of Accounts
consistent with Commission precedent as well as stated policy that a transmission owner
will not be financially or otherwise disadvantaged by its participation in an RTO. In its
letter to your office dated November 3, 2000, Florida Power Corporation ("Florida
Power ) requested authorization to defer for future recovery the costs it incurred and
expected to incur for its participation in the formation of an RTO.14 Specifically, Florida
Power proposed to defer its RTO development costs in Account 186 until the RTO
became operational and reimbursed Florida Power for these costs. IS At that time Florida
Power proposed to:
credit payment to Account 186 and debit Account 131 for an
equivalent amount. Any amounts not reimbursed by the RTO
when it becomes operational will be written off immediately to
12 It is a prerequisite that any R TO that Idaho Power would consider participating in must include
a mechanism for the recovery ofIdaho Power s RTO development costs. The stage 2 RTO West proposal
contains such a mechanism. "The key features of the (RTO West) pricing proposal are (1) consistent with
the "license-plate" approach proposed in Stage 1
, "
Company Rates" for lmid service; .,. and (4) a "Grid
Management Charge " which is the method by which RTO West will collect specified start-up and
operating costs.Stage Filing and Requestfor Declaratory Order Pursuant to Order 2000 FERC
Docket No. RT01-, at 28-29 (Mar. 1 2002).
13 Atlantic City Elec, Co. v, FERC, 329 F,3d 856 (D.c. Cir. 2003).
14 Letter from Andrea 1. Chambers, Attorney for Florida Power Corp., to 10hn M. Delaware, Chief
Accountant, Fed. Energy Reg. Comm n (Nov., 3, 2000), FERC Docket No. AC01-10-000.
15 !d. at 3.
Letter to Mr. John M. Delaware
September 29 2003
Page 7
Account 426., Other Deductions. The RTO will then seek
recovery of its start-up costs through a Commission-approved
charge. 16
In responding to Florida Power s request, your office believed that Florida
Power s R TO participation costs were examples of the types of costs appropriate to defer
citing Uniform System of Account requirements, as follows:
Account 186, Miscellaneous Deferred Debits, provides for the
inclusion of amounts not elsewhere provided for, such
miscellaneous work in pro gress, and unusual or extraordinary
expenses, not included in other accounts, . . . and items the proper
final disposition of which is uncertain.
Accordingly, your office approved Florida Power s request as follows:
We approve FPC's (Florida Power) request to defer in Account
186, Miscellaneous Deferred Debits, the costs it has incurred
during 2000 and may incur through December 15, 2001, related to
its participation in the fonnation 0 fan R TO. To the extent that
FP A continues to defer start-up costs in Account 186 subsequent to
the Commission s RTO start-up date of December 15, 2001 , it
shall make a filing with the Chief Accountant providing full
particulars concerning the nature of the costs being deferred, the
amounts involved, and the accounting basis for deferral of costs.
Additionally, we approve FPC's request to credit Account 186
with all reimbursements from GridFlordia. All amounts not
reimbursed by the RTO must be expensed immediately to Account
426., Other Deductions.
Idaho Power believes that its categories of costs and circumstances are similar to
those of Florida Power and therefore believes that its deferral of its RTO development
costs is appropriate. Furthennore, Idaho Power understands that it would be consistent
with the Uniform System of Accounts if it accounted for reimbursements received from an
16 Id. at 3-
17 Letter from James K. Guest, Director, Division of Regulatory Accounting Policy, Fed. Energy
Reg. Comm n, to Andrea Chambers, Florida Power Corp. (Dec. 14 2000),2 FERC Docket No. ACOI-IO-
000.
18 Id, at 2.
Letter to Mr. John M. Delaware
September 29, 2003
Page 8
RTO for Idaho Power s development costs, and for amounts not reimbursed by an RTO
in the manner proposed by Florida Power in its letter to your office, and your office
response to Florida Power, both quoted above.
In addition to Florida Power Corp.in Duke Energy Corp. et al. ("GridSouth"
the Commission issued a declaratory order affirming petitioner utilities' proposed
accounting treatment for an estimated $100 million in development costs relating to the
formation ofthe GridSouth RTO. As to the accounting treatment applicable to the
individual transmission owners, the Commission held that:
Start-up costs incurred by the transmission owners prior to the
formation of GridSouth should be recorded in Account 186
(miscellaneous deferred debits)?O
The development costs incurred by the parties in GridSouth are comparable in
nature to the development costs incurred by Idaho Power for participation in R TO West
particularly the amounts loaned to RTO West. As a result, Idaho Power believes that
GridSouth supports its deferral ofRTO development costs.
In another recent order, the Commission approved the request of American
Electric Power Services Corporation AEP"on behalf of its member utility operating
companies, to defer development costs associated with the failed Alliance RTO in
addition to subsequent PlM Interconnection LLC ("PJM") integration costs that would be
incurred by the parties until these costs could be recovered in retail rates.21 The
Commission agreed that AEP's request to defer all PJM "integration costs" in Account
186 complied with applicable accounting standards and would be accepted.22 More
importantly, the Commission found the Alliance RTO development costs to be
something of an anomaly because little if any direct benefit will result from the
incurrence of these costs " but it agreed that such costs "are appropriately charged to
Account 186.',23 In effect, the Commission expanded previous orders to include
19 Duke Energy Corp, et aI.94 FERC ~ 61 080 (2001) ("GridSouth"
20 Id, at 369.
21 American Electric Power Service Corp., 104 FERC ~ 61 013 (2003)("AEP") (granting AEP'
request to defer development costs and related carrying charges until AEP fully integrates into PlM
Interconnection LLC, but dismissed as premature AEP's request to record the costs as a "regulatory
asset"
22
!d. at Paragraph 25.
23 Id. at Paragraph 26.
Letter to Mr. John M. Delaware
September 29 2003
Page 9
recognition of costs expended on an unsuccessful RTO fonnation. In doing so, the
Commission further underscored its policy that companies that participate in the
fonnation ofRTOs may recover reasonable costs and will not be penalized even ifRTO
organization efforts do not succeed.
The Commission made it clear in Order No. 2000 that the development ofRTOs
is a matter of important national interest, and of the highest priority to the Commission
and continues to assure utilities that they will not be disadvantaged by joining an RTO.
The Commission affinned this view in GridSouth:
GridSouth is expending funds to further its plans to comply with
the Commission s Order No. 2000. As we noted in Order No.
2000, we want to assure utilities that they will not be
disadvantaged by participating in an RTO.z4
On sound business principles alone, a well-run utility participating in the
fonnation of an R TO is compelled to detennine a mechanism for recovery of its
investment costs, and the Commission has recognized this business reality in the policies
set forth in Order No. 2000. Moving RTO West forward from the planning stages to a
fully functioning RTO will continue to burden Idaho Power resources, without certainty
that its investment in RTO West development will be repaid. These concerns are not
unfounded, as RTO West has met with significant resistance. Moreover, RTO fonnation
efforts in other regions have failed.25 An expeditious decision confmning the accounting
treatment of Idaho Power s RTO West development costs, even though such costs cannot
be estimated with certainty, is essential to preventing Idaho Power from being
disadvantaged by participating in the fonnation of R TO West.
As the Commission has already acknowledged in other cases, the confinnation
sought in this request is not intended to affect the burden of proof in any future rate
proceeding filed by Idaho Power, other Transmission Owners or RTO West under
24 Duke Energy Corp, et a!.94 FERC at 61 369 (quoting Order 2000 at 31 172-73).
25 Eg., Alliance Companies, et a!.97 FERC ~ 61 327 (2001). The Commission conditionally
approved the development of the Alliance RTO, but subsequently concluded that the RTO lacked sufficient
scope to exist as a stand-alone RTO and ordered the participating companies to seek alternative RTO
membership. The Commission later ruled that these companies could employ deferral accounting
treatment of their development costs for the failed RTO in the Connnission s July 2 2003 Order in the
American Electric Power Services Corporation proceedings. American Electric Power Service Corp.104
FERC ~ 61 013 (2003).
Letter to Mr. John M. Delaware
September 29 2003
Page 10
Section 205 of the Federal Power Act.26 The confirmation sought is for accounting
purposes only and is not intended to be a finding that the costs are just and reasonable
prudently incurred, or otherwise approved for ratemaking treatment at this time.
REQUEST FOR RELIEF
Idaho Power respectfully requests confirmation that its accounting treatment of
RTO West development costs is consistent with the Commission Uniform System of
Accounts and, more specifically, Idaho Power seeks confirmation that:
1. It is proper for Idaho Power to defer for future recovery past and future
incremental internal R TO West development costs (inclusive of carrying
costs), separately captured on its individual company books; in FERC
Account No. 186 (Miscellaneous Deferred Debits);
2. It is proper for Idaho Power to defer for future recovery RTO development
costs loaned to RTO West under the terms of funding agreements among
participating RTO utilities, in FERC Account No. 186;
3. As Idaho Power receives reimbursement of deferred RTO development costs
(incremental internal costs and/or loans to RTO West) from an RTO upon
Idaho Power s transfer of control of its transmission facilities to the RTO
Idaho Power may credit payment to FERC Account No. 186 and debit FERC
Account No. 131 for an equivalent amount; and
4. The deferred RTO development costs (incremental costs and/or loans to RTO
West) not reimbursed by an RTO may, upon a proper future filing with the
Commission, become a regulatory asset and be transferred to FERC Account
No. 182.3 (Regulatory Assets and Liabilities) for recovery in rates (wholesale
or retail), or alternatively, may be written off immediately to Account No.
426.5 (Other Deductions).
Idaho Power appreciates your attention to this matter and requests that you
confirm its accounting practices as soon as possible, as this is critical to it meeting its
reporting obligations.
26 When RTO West or any of the Filing Utilities file to recover their development costs, the
Commission and other intervenors will have the opportunity to detennine the period over which such costs
will be recovered and examine their reasonableness.
Letter to Mr. John M. Delaware
September 29 2003
Page 11
cc;Idaho Power Company
1221 West Idabo Street
O. Box 70
Boise, Idaho 83707
Respectfully submitted
By
.fA III
Malcolm C. McLellan
Marlys S. Palumbo
Attorneys for Idaho Power Company
John R. Gale
Vice President, Regulatory Affairs
Telephone: [phone] phone
Facsimile: 208-388-6449 fax
Emai1: RGa1e~idabopower.com
James L. Baggs
General Manager, Grid Operations and Planning
Telephone: [phone]
Facsimile: 208-388-6918
Email: Jbaggs~idahopower.com
Barton L. Kline
Senior Attorney
Telephone: [phone]
Facsimile: 208-388-6936
Email: Bk1ine~idahopower.com