HomeMy WebLinkAbout20060404Application.pdfIDAHO POWER COMPANY
O. BOX 70
BOISE, IDAHO 83707
BARTON L. KLINE
l~' L: L D Senior AttorneyAn IDACORP Company
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April 4 , 2006
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- 0 fa
Application For Accounting Order Addressing
Deferral of Costs Related to Development of
Grid West
Dear Ms. Jewell:
Please find enclosed for filing an original and seven (7) copies of Idaho
Power Company s Application for an accounting order addressing the deferral of costs
related to the development of Grid West.
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:jb
Enclosures
Telephone (208) 388-2682, Fax (208) 388-6936 E-mail BKlinefiYidahopower.com
BARTON L. KLINE ISB #1526
MONICA B. MOEN ISB #5734
Idaho Power Company
O. Box 70
Boise, Idaho 83707
Phone: (208) 388-2682
FAX: (208) 388-6936
bkline ~ idahopower.com
mmoen~ idahopower.com
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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.
APPLICATION OF IDAHO
POWER COMPANY
CASE NO. IPC-06-
COMES NOW Idaho Power Company ("Company" or "Idaho Power ) and
pursuant to Idaho Code ~ 61-524 and RP 52 , hereby requests the Idaho Public Utilities
Commission ("Commission ) issue its Order (1) confirming that the Company
accounting treatment of Grid West development costs is consistent with the
Commission s Uniform System of Accounts; and (2) confirming that, in accordance with
the Uniform System of Accounts , Idaho Power is permitted to defer costs incurred in
APPLICATION , Page
association with the development of Grid West for consideration in a future ratemaking
proceeding. This Application is based on the following:
BACKGROUND AND SUMMARY OF EXPENSES
Idaho Power is one of the transmission owners participating in the
development of a new, regionally-focused independent transmission provider ("ITP"
known as Grid West, formerly known as RTO West. These activities commenced in
response to FERC Order 2000 1 and evolved to emphasize the specific problems and
opportunities of providing transmission services in the region. Unfortunately, even with
Idaho Power s best efforts , Grid West's failure appears imminent. Idaho Power believes
that Grid West is unlikely to survive the numerous transmission owner withdrawals
paralyzed decision-making and general lack of support. This rapid unwinding was not
anticipated and necessitates the filing of this Application.
II.
GRID WEST DEVELOPMENT COSTS INCURRED BY IDAHO POWER
Idaho Power s expenditures related to the development of Grid
West have fallen into two general categories of costs. The first are costs incurred in the
form of loans to Grid West under a series of funding agreements (hereinafter collectively
referred to as the "Funding Agreements ) established by the transmission owners
1 Regional Transmission Organizations , 89 FERC 61 285 (1999), order on reh'g, Order No. 2000-, 90
FERC 61 201 (2000) (hereinafter "Order 2000"). Order 2000 requires every public utility that owns
operates or controls facilities used for the transmission of electric energy in interstate commerce to file a
proposal to participate in a regional transmission organization ("RTon) or make an alternative filing
explaining the efforts made to participate in an RTO, the reasons the entity cannot make a filing to
participate in an RTO, and the specific plans , if any, the utility has to participate in an RTO. 18 C.
35.34 (d) (2004).
APPLICATION , Page 2
forming Grid West, where each of the transmission owners agreed to provide an
allocated share of its funding needs.
The Funding Agreements were entered into to enable the
transmission owners to pool resources and achieve economies of scale in financing the
development of Grid West, and the preparation of regulatory filings. Funding
Agreement expenditures broadly include contracting with consultants , experts , and
others; purchasing of small office equipment , supplies, rent for office space, and public
meeting expenses; and filing fees and incidental and administrative costs.
Under the Funding Agreements , funds provided by the transmission
owners (other than Bonneville Power Administration) are considered loaned amounts to
be repaid with interest by Grid West when sufficient third-party financing became
available, but not later than the commencement of transmission services. Interest on all
outstanding Grid West loan balances has been calculated at the same interest rates
from time to time as established by FERC for refunds pursuant to 18 C.R. ~35.19a.
The second category of Grid West development costs are the
internal incremental costs incurred directly by Idaho Power in the development of Grid
West. This category of costs consists of the disbursement of cash and the payment of
costs in addition to amounts loaned to Grid West. These expenditures relate to
incremental travel related expenses of personnel working on development and
regulatory matters (not the salaries and benefits of Idaho Power personnel themselves),
legal fees and carrying costs of the funds associated with all of the above.
To date , Idaho Power has loaned a total of $1 274 158 , including
accrued interest, to Grid West and expended a total of $2 594 318 in incremental
APPLICATION, Page 3
internal costs including carrying costs. Idaho Power believes that Idaho s share of the
loaned amounts and incremental internal costs, allocated by using Idaho s 86.62%
share of Idaho Power s total system transmission capacity, should be $3,350 874.
Attachment 1 shows how the percentage allocation of system transmission capacity
costs between Idaho Power s three jurisdictions, including Idaho s 86.62% share, was
determined.
III.
ACCOUNTING TREATMENT FOR GRID 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 of Grid West. Idaho Power has accounted for its Grid West
development costs based upon guidance provided by the federal Uniform System of
Accounts Prescribed for Public Utilities and Licensees Subject to the Provisions of the
Federal Power Act 18 C.F.R. Chi I , Part 101 (2003) (the Uniform System of
Accounts
),
which the Commission has adopted by reference. Because these
expenditures arose as a direct result of a FERC order and due to the protracted nature
of these activities and their rising costs , in 2004 Idaho Power obtained confirmation of
its accounting practices from FERC.2 FERC's Letter Order is enclosed as
Attachment 2.
Since Grid West development costs have been incurred in
response to Order 2000, Idaho Power interprets the Uniform System of Accounts
permitting its Grid West development costs to be characterized as a regulatory asset.
2 Letter Order, FERC Docket No. AC03-78-000 (Feb. 32004) ("FERC Letter Order
APPLICATION , Page 4
To date , Idaho Power has been operating with the belief that because the benefit from
these expenditures will not be realized until some future time, these expenses have
been properly deferred under the Uniform System of Accounts which permits the
deferral of these expenses over a reasonable period of time to when the benefits are
realized. Accordingly, prior to FERC's Letter Order, Idaho Power charged all Grid West
development costs identified in Section II above to Account 186 (Miscellaneous
Deferred Debits).
FERC concluded that it was proper for Idaho Power to defer (rather
than expense as occurred) its internal incremental Grid West development costs by
charging them to Account 186. However, FERC concluded that the loans to Grid West
were not a deferral. The loans should be recorded in Account 124 as a long-term notes
receivable with interest income recorded in Account 419 (Interest and Divided Income).
Idaho Power subsequently reclassified the loans to Grid West pursuant to FERC'
Letter Order. FERC's discussion of Idaho Power s account treatment is as follows:
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 final disposition is uncertain. The
Commission has approved the deferral of RTO startup costs
to Account 186 in other instances. Therefore, Idaho Power
internal RTO West development costs (including carrying
charges) are properly deferred in Account 186. Idaho
Power loans to RTO West are more appropriately
classified as long-term notes receivable that should be
recorded in Account 124. Interest income realized on the
notes should be recorded in Account 419, Interest and
Dividend Income?
3 FERC Letter Order p. 3 (internal footnotes omitted).
APPLICATION , Page 5
10.In the past few weeks, several prior Grid West participants have
announced their withdrawal from further Grid West participation. This recent lack of
continued support for Grid West has caused Idaho Power to conclude that repayment of
its Grid West development costs (either its incremental internal Grid West development
costs or loans to Grid West) is not sufficiently certain to occur. Accordingly, Idaho
Power interprets the FERC's Letter Order as requiring those amounts to be transferred
to Account 182.3 (Regulatory Assets and Liabilities) for amortization and recovery in
rates. FERC's discussion in the Letter Order is as follows:
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
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. Therefore, Idaho Power may transfer the
RTO West development costs not reimbursed by the RTO to
Account 182., if these criteria are met.
11.The confirmation sought in this request is for regulatory accounting
purposes only and is not intended to be a finding that the development costs are just
and reasonable, prudently incurred , or otherwise approved for ratemaking treatment at
this time. Idaho Power will address amortization of these deferred costs in its next
general revenue requirement proceeding.
12.Service of pleadings, exhibits, orders and other documents relating
to this proceeding should be served on the following:
4 FERC Letter Order p. 3 (citations included).
APPLICATION , Page 6
Barton L. Kline , Senior Attorney
Idaho Power Company
P. O. Box 70
Boise , Idaho 83707
bkline ~ idahopower.com
John R. Gale, Vice President
Regulatory Affairs
Idaho Power Company
O. Box 70
Boise, Idaho 83707
rqale ~ idahopower.com
NOW , THEREFORE, Idaho Power respectfully requests that the
Commission issue its order:
Confirming that Idaho Power s accounting treatment of its Grid
West development costs is consistent with the Commission Uniform System of
Accounts and , more specifically, Idaho Power seeks confirmation that:
(1 )With regard to Idaho Power s incremental internal
development costs:
It was proper for Idaho Power to record its incremental
internal Grid West development costs (inclusive of carrying costs), in Account 186
(Miscellaneous Deferred Debits); and
Since Idaho Power believes that repayment through a Grid
West tariff is not sufficiently certain to occur, it is proper for Idaho Power to transfer the
incremental internal Grid West development costs (inclusive of carrying costs) to
Account 182.3 (Regulatory Assets and Liabilities) for possible amortization and recovery
in rates in the future.
(2)With regard to Idaho Power s loans to Grid West under the
terms of funding agreements among Grid West and the participating utilities:
It was proper for Idaho Power to record the loans to Grid
West under the terms of funding agreements among Grid West and its funding
transmission owners (inclusive of interest), in Account 124 (Other Investments); and
APPLICATION , Page 7
Since Idaho Power believes the repayment of the loans to
Grid West is not sufficiently certain to occur, it is proper for Idaho Power to transfer the
notes to Account 182.3 (Regulatory Assets and Liabilities) for possible amortization and
recovery in rates in the future; and
Authorizing the Company to defer the Grid West development costs
incurred by the Company as described in this Application.
Respectfully submitted this 4th day of April , 2006.
BARTO
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Attorney for Idaho Power Company
APPLICATION , Page 8
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ATTACHMENT 2
Page 1 of 4
FEDERAL ENERGY REGULATORY COMMISSION
WASHINGTON. O. C. 20426
In Reply Refer To:
OED-DRAP
Doclcet 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
FEe 2004
Thank you for your letter dated September 29,2003, filed on behalf of Idaho
Power Company (Idaho Power), requesting confirmalion thut its accounting treatment of
RTO West development costs is consistent with the Uniform System of Accounts
(USofA). SpecificaUy, 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 trnnsfer to Account 182.3, Other Regulatory Assets, amounts not reimbursedby an RTO.
Idaho Power s accounting treatment is consistent with the USofA, provided that it
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 expen~e at that time
and Idaho Power has concluded, based upon all relevant information, that recovery in
rates in a different period is probable.
~ac~grO\lm:l
Idaho Power is one of the transmission owners participating in the development of
a regional transmission organization (RTO) known as RTO West, in response to Ord~r
No. 2000.
Z Considerable work remains to achieve a fu))y approved and operationa1 RTO
West. The work includes the development of a tariff, further refinement of the market
design, and the securing of state and federal approvals as wen as tbe approva1s of the
management and/or boards of directors of each of the filing utilities.
1 18 C.R. Part 101, Defjnitlon No. 30.
2 The Commission granted, on a conditional basis, their request to create RTO
West on ApriJ 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 as permitting its RTO
development costs to be ~haracterized as a regulatory asset. However, since the benefit
will occur largely in the f\!ture 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 carrying costs) wilt 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 Idaho Power is booking its RTO development costs as a miscellaneous
, defe.rr~d debit in Account 186 on the benef that they wiJI be reimbursed through an RTO
as 8 condition of transferring its facilities to the RTO, it believes that it Is not limited to
recovering its dc:fcITcd 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. In addition, Idaho Power believes
thai it has the authority to seek recovery of these deferred 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 (inclusive of carrying costs), separately
captured on its individual company books, in Account 186i
It is proper to defer for future recovery RTO development costs loaned to
RTO West under the tenDS of funding agreements among participating RTO
utiUties in Account 186;
As Idaho~ower receives reimbursement of deferred RTO development
costs (incremental internal costs andlor loans to RTO West) from an RTO
upon the transfer of control of its transmission facilities to the RTO, Idaho
Power may credit payment to Account 186 and debit Account 131, Cash,
for an equivalent amount; and
:. 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 a proper future fiHng
with the Commission, become a regulatory asset and be transferred to
Accounl182.3 for recovery in rates (wholesale or retail), or aUernative)y.may be written off immediately to Account 426.5, Other Deductions.
Account 186 provides for the inclusion of amounts that are not provided for
elsewhere, such as miscelIaneous work in progress and unusual or extraordinary
expenses. and items where the proper final 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) nre properly deferred in Account 186. Jdnho Power s loans to RTO West aremore appropriately classified as long-term notes receivable that should be recorded in
Account J 24. Interest income reaJized on the notes should be recorded j n Account 419Interest and Dividend Income. 5
The instructions to AceDunt 182.3 provide in part that this account shall include
specific expenses that would be included in net jncome detenrunations jn one period
under the general requirements of the USofA but for it being probable that such expenses
will be inc1uded 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. Therefore, Idaho Power may transfer the RTO Westdevelopment costs not reimbursed by the RTO to Account 182., if these criteria are met.However, if rate recovery of aJi or part of the deferred costs is later disa1Jowed, thedisaUowed costs should be charged to Account 426.5 in the year of the disallowance.
The foregoing determination h~ 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. ACO2-000, on March 14, 2002, relating to NE ITC and Northeastern RTO and Florida Power
Corporation in Docket No. ACOl-10-000. on DecemberJ4, 2000, relating to theGridFJorida RTO.
5 This is consistent with the Commission
s response to SielTa Pacific PowerCompany in Docket No. AC94-II-OOO. dated January 4, 1994.
ACO3~ 78-000
. ATTACHMENT 2
Page 4 of 4
This teller order constitutes fjnal agency action. To request that the Conunission
rehear your case, you must file a request within 30 days of the date of this letter order
(see 18 C.R. ~ 385.713).
Sincerely,
9;15/-
. "t9I,4"'
James K. Guest
Director, Division of Regulatory
Accounting Policy