20060922Decision memo.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:SCOTT WOODBURY
DATE:SEPTEMBER 19, 2006
SUBJECT:CASE NO. IPC-06-20 (Idaho Power)
REQUEST FOR AN ACCOUNTING
TREATMENT OF DSM PROGRAMS
ORDER REGARDING
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 the Company s operations. On May 13 2005, in Order No. 29784, the Commission
approved an 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
DECISION MEMORANDUM
2. As DSM program expenditures are made, the following transaction
made to record cash paid and reduces the liability account:
Dr. Account 254201 - Regulatory Liability
Cr. Account 13 1000 - 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
subaccounts 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 will be 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.
DECISION MEMORANDUM
CO MMISSI ON D ECISI
Idaho Power requests that its Application for an accounting order in Case No. IPC-
06-20 be processed under Modified Procedure, i., by written submission rather than by hearing.
Reference Commission Rules of Procedure IDAPA 31.01.01.201-204. Commission Staff
concurs in the recommended procedure. Does the Commission agree that Modified Procedure is
appropriate in Case No. IPC-06-20.
Scott Woobury
bls!M:IPC-O6-
DECISION MEMORANDUM