HomeMy WebLinkAbout20061101Comments.pdfSCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0320
BARNO. 1895
RECEIVED
2006 Nay PH 3: 32
UT IDAHO !JUI" .
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR AN
ACCOUNTING ORDER FOR TREATMENT OF
THE DEMAND SIDE MANAGEMENT PROGRAMS.
CASE NO. IPC-O6-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on
September 28, 2006, submits the following comments.
BACKGROUND
On September 11 , 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) for an accounting order
authorizing the Company to track its transactions for demand side management (DSM) programs.
As reflected in the Company s Application, since the 2002 approval of the Energy Efficiency Rider
(Rider) by the Commission in Order No. 29026, DSM programs have been an integral part of the
Company s operations. On May 13 2005, in Order No. 29784, the Commission approved an
STAFF COMMENTS NOVEMBER I , 2006
increase in the funding and program expenditures associated with the Rider by authorizing the
collection of 1.5% of customers ' base revenues.
According to Generally Accepted Accounting Principles (GAAP), Statement of Financial
Accounting Concept (SFAC) No. 6, ~~ 70 78-215, money collected and expended as part of a
company s standard business needs to be reflected on the company s income statement.
Presently Idaho Power utilizes the following accounting entries to track rider funds:
1. As funding is received from customers, the following transaction is made to
record cash received and set up the obligation to spend the money in the
future on specific programs funded through the Energy Efficiency Rider:
Dr. Account 131000 - Cash
Cr. Account 254201 - Regulatory Liability
2. As DSM program expenditures are made, the following transaction is made
to record cash paid and reduce the liability account:
Dr. Account 25420 I - Regulatory Liability
Cr. Account 131000 - Cash
These accounting entries, the Company contends, accurately track DSM-related regulatory
liabilities by recording all transaction activity exclusively through the Company s balance sheet
accounts.
The Company in this Application, however, in addition to continuing the above mentioned
balance sheet accounting entries, to be consistent with GAAP standards, proposes to implement an
automatic "monthly voucher" to parallel the balance sheet activity in the Company s income
statement. At the end of each month, the Company would make a set of accounting entries to
recognize the expenditures made in serving the regulatory obligation along with an equal, offsetting
entry to recognize the proceeds from Energy Efficiency Rider funds. To accomplish this objective
the proposed accounting entries are:
Dr. Account 908.xxx - Customer Service Operating Expense
Cr. Account 456.xxx - Other Operating Revenue
Because the incoming and outgoing dollars recognized in the income statement sub accounts
will be of equal amounts, the net result of the Company s net income will be zero. Idaho Power
contends therefore that there are no current economic tax liability changes or any other net financial
effects from the inclusion of these income statement accounting entries. However, for external
reporting purposes, the accounting trail of specific DSM related funding and expenditures would be
STAFF COMMENTS NOVEMBER I , 2006
much easier to track through income statement detail rather than relying solely on cumulative
balance sheet activity.
In summary, the Company states that it is not proposing to change its current balance sheet
accounting procedures regarding Energy Efficiency Rider funding. The Company seeks only to
make parallel accounting entries to the income statement in an attempt to more closely comply with
GAAP standards and auditing efficiencies. If the Company s proposed accounting entries are
approved, it states that there will be no effect on the Company s net income. Nor, it states, are there
any ratemaking implications associated with its proposal.
ANALYSIS
Staff conducted an audit of the Company s current accounting treatment ofthree DSM
categories: Irrigation Efficiency, Commercial Building Efficiency and AC Cool Credit
determine how the Company accounts for DSM expenditures now and how the proposed
accounting treatment, if approved, will be used to track expenditures in the future. Staff also
verified bookkeeping entries to the three referenced Balance Sheet accounts and tested offsetting
expenditures between the assigned liability account and cash accounts. Staff traced sample
bookkeeping entries to ensure that future accounting ofDSM related expenses are easily identified
for compliance with GAAP requirements.
Staff is concerned that using Account 908 to track the monthly DSM amounts provides a
potential for double recovery during a rate case since Account 908 is used to record allowable
expenses. In this regard, Idaho Power provided Staff with its intended adjustment methodology and
the separate sub-account information. For ratemaking purposes an adjustment will be made to
remove the separate revenue and expense sub-accounts (456131 and 908131). These two sub-
accounts will offset each other (zero out the balance) so income shown in the income statement will
not change. These sub-accounts and adjustment methodology for rate cases will provide the ability
to ensure that any expenses associated with the Rider programs or funding will not be commingled
or receive double recovery for ratemaking purposes. Idaho Power also delineated the 908 sub-
account to be used to record DSM expenses and provided an explanation addressing Staff s concern
for using the 908 account. The Company s use of Account 908 is based on the Code of Federal
Regulations' (CFR) definition which states that "this account shall include the cost oflabor
STAFF COMMENTS NOVEMBER 1 , 2006
materials used and expenses incurred in providing instructions or assistance to customers, the object
of which is to encourage safe, efficient and economical use of the utility s service.
Additionally, the Company provided Staff with a detailed list of sub-account numbers and
titles to be used for DSM accounting purposes:
908000 - OPR CUST SRV - CUST ASSIS EXP
908131 - OPR CUST SRV - ID DSM RIDER
456131 - OPR REV OTHR EL REV - ID DSM RDR
254201 - OTHR REG LIAB - ID DSM RDR 29026
ST AFF RECOMMENDATION
The proposed DSM expenditure bookkeeping and accounting changes requested by the
Company provide Idaho Power with the ability to be consistent with GAAP accounting
requirements. It also allows all parties to accurately track DSM rider revenues, expenditures and
related regulatory liabilities. The proposed changes in accounting treatment will have no impact on
the Company s net income and will make it easier to track the DSM detail in the income statement.
Staff recommends approval of the Application and proposed accounting changes.
Respectfully submitted this /-sr- day of November 2006.
Scott Woodbury
Deputy Attorney General
Technical Staff: Tom McKeown
Terri Carlock
i:u misc:commentslipceO6.20swtmtc.doc
STAFF COMMENTS NOVEMBER 1 , 2006
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 1ST DAY OF NOVEMBER 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
BARTON L KLINE
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
JEANNETTE C BOWMAN
SENIOR ANALYST
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
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0. \(Ocl-
CRETARY
CERTIFICATE OF SERVICE