20070202reconsideration_order_no_30235.pdf

Office of the Secretary
Service Date
February 2, 2007
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 ORDER NO. 30235
CASE NO. IPC-06-
This is an Order following reconsideration of the Commission s final Order No.
30157 issued in this case on October 24, 2006. In that order, the Commission authorized the
deferral of loans Idaho Power Company had made toward development of a regional
transmission organization (RTO) called Grid West. Idaho Power and other northwest electric
utilities had attempted to develop an RTO pursuant to orders issued by the Federal Energy
Regulatory Commission (FERC). After attempts to develop Grid West failed, Idaho Power filed
an Application requesting authority to establish a deferral account for costs incurred in the R
development effort. The Commission authorized deferral of the loan amounts the Company
made to Grid West under a series of funding agreements, but the Commission did not approve a
carrying charge on the amount allowed for deferral.
Idaho Power filed a Petition for Reconsideration on November 14, 2006, requesting
reconsideration "only on that portion of the Order that prevents the Company from recovering
carrying charges on the deferral balance during the period of amortization.Idaho Power
Petition, p. 1. The Commission granted the Petition for Reconsideration "to allow further
briefing or written comments on the sole issue of whether carrying costs should be allowed on
the deferral balance.See Order No. 30192, p. 1. After considering the written briefs filed by
Idaho Power and the Staff, we deny the Company s request to modify Order No. 30157 to
authorize a carrying charge on the deferral account.
Idaho Power in its Brief on Reconsideration clarified the amount it loaned to Grid
West and allocated to its Idaho jurisdiction. The Commission in Order No. 30157 identified the
principal amount authorized for deferral as $1 274 158. The Company stated in its brief that that
amount included a carrying charge the Company accrued since April 1 , 2006, as well as a small
cash distribution made by Grid West in October 2006. After performing those adjustments, and
using an allocation percentage of 86.62% for its Idaho jurisdiction, the Company advises that the
ORDER NO. 30235
Idaho jurisdictional share of the amount loaned to Grid West is $932 177. We therefore clarify
Order No. 30157 and find that the principal amount of the loans authorized for deferral by the
Commission is $932 177.
Idaho Power asserted in its Petition for Reconsideration that the decision to disallow
carrying charge "is unreasonable arbitrary, capricious, unlawful, erroneous, unduly
discriminatory, and not in conformity with the facts of record and/or the applicable law, resulting
in a revenue requirement and rates which are confiscatory.Idaho Power Petition on
Reconsideration, pp. 1-2. The Company did not provide authority for its allegation that the
Commission s denial of the Company s request for a carrying charge is "unlawful" and "not in
conformity with. . . the applicable law." The Company cited one statute Idaho Code ~ 61-
502A, for the proposition that the Legislature "has recognized that allowing utilities to receive
carrying charges or interest on deferred accounts is in the public interest." Idaho Power Brief on
Reconsideration, p. 4. The Company noted that Section 61-502A requires the Commission to
include a carrying charge on a construction account for work in progress when the construction
costs are not included in rate base.
Section 61-502A is not applicable to this case. Section 61-502A applies only to
accounts accumulated for construction work in progress when, following a rate case, the partially
completed project is excluded from rate base. The section prohibits the Commission from
including incomplete projects in rate base, unless it is short-term construction work in progress
but requires an allowance for funds used on disallowed construction to be accumulated and
computed. None of those factors are present in this case, and thus we are not persuaded by Idaho
Power s reference to that statute.
No law directs the Commission to allow a carrying charge on deferral accounts, other
than in the situation identified in Section 61-502A. The Commission thus has used its
discretionary authority in determining whether to approve a carrying charge on a deferral
account. The Supreme Court affirmed this discretionary authority of the Commission in Idaho
Power Company v. Idaho State Tax Commission 141 Idaho 316, 109 P .3d 170 (2005). An issue
in that case was the nature of a deferral account as a regulatory asset. The Supreme Court
explained that "a regulatory asset is an accounting convention designed to enable Idaho Power to
defer an otherwise current expense " and that in order for such a regulatory asset to be created, it
must be authorized by the Commission. Idaho Power Company v. Idaho State Tax Commission
ORDER NO. 30235
141 Idaho 323. The Court went on to state "the treatment of regulatory assets (i., whether or
not rates of return or carrying charges are allowed on them) is subject to the discretion of the
IPUc."
Idaho Power s Brief on Reconsideration identifies previOUS cases where the
Commission exercised its discretion to approve carrying charges on deferral accounts. The
Commission commonly approves a carrying charge where a utility requests an order authorizing
deferred accounting in advance of the expenditure, or the deferral account is related to
implementation of a program the Commission has ordered. In those circumstances, the
Commission has an opportunity to evaluate the necessity and anticipated benefit for customers
before the expense is incurred by the company.
The Commission also exercises its discretion, on occasion, to disallow a carrying
charge altogether, depending on the circumstances of the deferral account. For example, in Case
No. A VU-OO-, A vista Corporation requested authority to defer cleanup costs on property no
longer owned by the company. Prior to its acquisition by A vista in 1958, the Spokane
Washington property was used by a previous owner as a coal gasification plant. A vista
requested authority to defer investigation and cleanup costs after being notified that it might be
liable for removing hazardous materials. The Commission allowed deferral of the hazardous
cleanup expenses, but found the company s proposal for a carrying charge "to be unsupported
and unacceptable." Order No. 28512, p. 4.
The circumstances giving rise to Idaho Power s request for a deferral order in this
case justify the Commission s decision to deny a carrying charge. Unlike the usual deferral
order request, where the deferral authorization is sought in advance of the expenditure, Idaho
Power did not request a deferral order prior to making the loans to Grid West. The Commission
did not review the anticipated benefit of the loans prior to their being made because the
Company made the Grid West loans at the behest ofFERC, not the Commission. The Grid West
transactions were made primarily for the benefit of a wholesale electricity market, rather than for
the direct benefit of Idaho Power s retail customers. Idaho Power s loans, plus interest, would
have been paid with surcharges collected from Grid West customers had the R TO been
successfully developed.
In the unique circumstances of this case, the Commission exercised its discretion to
allow deferral of the loans, but denied a carrying charge on the deferral account. Weare not
ORDER NO. 30235
persuaded by the Company s Brief on Reconsideration that our decision was in error.
therefore deny Idaho Power s request to modify Order No. 30157 to authorize a carrying charge
on the deferral account authorized by the Commission.
ORDER
IT IS HEREBY ORDERED that Idaho Power s request to modify Order No. 30157
to authorize a carrying charge on the deferral account authorized by the Commission is denied.
Order No. 30157 is clarified to reflect that the principal amount of the loans authorized for
deferral by the Commission is $932 177.
THIS IS A FINAL ORDER DENYING RECONSIDERATION.Any party
aggrieved by this Order or other final or interlocutory Orders previously issued in this Case No.
IPC-06-06 may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and
the Idaho Appellate Rules. See Idaho Code ~ 61-627.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;Z
day of February 2007.
ARSHA H. SMITH, COMMISSIONER
~~~
, ENNIS S. HANS N, COMMISSIONER
ATTEST:
D. Jewell
Commission Secretary
bls/O:IPC-06-06 ws4
ORDER NO. 30235