20070103final_order_no_30211.pdf

Office of the Secretary
Service Date
January 3 , 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
APPROVAL OF AN EXECUTORY SALE
AND TRANSFER OF UTILITY PROPERTY
PURSUANT TO A TRANSFORMER
SHARING AGREEMENT
CASE NO. IPC-O6-
ORDER NO. 30211
On November 14, 2006, Idaho Power Company filed an Application requesting that
the Commission approve a Spare Transformer Sharing Agreement ("Transformer Agreement"
with nearly 50 of the nation s other electric utilities. The Transformer Agreement provides that
in the event of a deliberate act of terrorism disabling one or more utility substations, the
participating utilities may be called upon to provide/sell spare electric transformers to the
affected utility. Application at 1-2. In essence, the Transformer Agreement creates an industry-
wide pool of spare electric transformers that can be transferred from one utility to another utility
in the event of a terrorist attack upon the nation s electric infrastructure.The Company
requested that this Application be processed under Modified Procedure.
On November 28, 2006, the Commission issued its Notice of Application and
Modified Procedure. The Commission invited interested persons to file comments regarding the
Application. The Commission received two comments: one from a customer and the other from
the Commission Staff. After reviewing the Application and the comments, we approve the
Application as set out in greater detail below.
BACKGROUND
On July 18, 2006, the Edison Electric Institute (EEl) on behalf of more than 40
participating utilities filed an application with the Federal Energy Regulatory Commission
(FERC) seeking authorization for jurisdictional public utilities to engage in the future transfers of
transformers. Order on Application for Blanket Authority for Transfers of Jurisdictional
Facilities and Petition for Declaratory Order 116 F.C. R. 61 280 at ~ 3 (September 22
2006), hereinafter the Declaratory Order.In its FERC application, EEl indicated that 43
entitiesl have executed the Transformer Agreement. EEl stated these participating utilities own
1 A vista Utilities is one of the signatories to the Agreement.
ORDER NO. 30211
more than 60% of the interstate bulk-power transmission system. Id. EEl asserted that the
Transformer Agreement is "a prudent approach to making efficient use of the industry s existing
spare transformers and fairly allocating the responsibility to acquire a limited number of
additional spares, while minimizing duplicative purchases of these costly assets.Id. at ~ 4
citing Application at 8-
EEl submitted its FERC application under Section 203 of the Federal Power Act. 16
c. ~ 824b. This section requires that FERC approve the transfer of jurisdictional
transmission facilities when the value of such facilities exceeds $10 million. Although the cost
of many transformers is less than $10 million, EEl expressed concern that the jurisdictional
threshold may be met when a public utility disposes of a large transformer or when several
smaller transformers collectively cost more than $10 million. Declaratory Order at ~ 18.
On September 22, 2006, FERC approved the request for blanket authorization of the
Transformer Agreement. The FERC applauded the efforts of EEl and the participating utilities
to pool and share spare transformers. FERC noted that:
Without the (Transformer) Agreement, utilities would have to purchase
substantially more transformers to achieve the same recovery capability,
incurring substantially higher costs, or experience the inherent time delay
associated with finding, negotiating for, ordering, transporting, and testing a
replacement transformer. Furthermore, the Agreement establishes the
obligation to share spare transformers with Participating Utilities if there is a
Triggering Event. Accordingly, we find that the sharing arrangement in the
Agreement is prudent.
Declaratory Order at ~ 39.
THE APPLICATION
Under the Transformer Agreement each participating utility is required to maintain
and if necessary, acquire a specific number of transformers in each voltage class in which it
participates. At present, the Agreement designates 20 classes of transformers. The Agreement
requires participating utilities to sell their spare transformers to another participating utility in its
voltage class if there is a triggering event. Idaho Power anticipates that it will commit 400
megavolt-amperes (MVA) of spare transformers to the sharing pool in the 230 kV-138 kV
equipment class. Application at ~ 7.
2 A "triggering event" is defined as an act of terrorism that destroys or disables one or more substations and results
in a declaration of a state of emergency by the President. Agreement at ~ 1.
ORDER NO. 30211
Idaho Power asserted that participating in the Agreement will lower its overall future
costs to maintain spare transformers in its inventory, thereby benefiting ratepayers. Idaho Power
will receive the benefit of access to transformers in a national emergency without the added costs
and risks of buying and carrying large surpluses of spare transformers in its inventory. Id. at ~ 6.
Although Idaho Power believes the risk of having to sell a spare transformer under
the Agreement to be very low, the possibility of such a sale would require this Commission
approval under Idaho Code ~ 61-328. This section provides in pertinent part that no electric
utility may sell or transfer "any property located in this state which is used in the generation
transmission, distribution or supply of electric power and energy to the public or any portion
thereof. . . except when authorized to do so by order of the public utilities commission." Before
authorizing such a transaction, the Commission must find that: (1) the transaction is consistent
with the public interest; (2) the costs of and rates for supply and service will not be increased by
reason of such transaction; and (3) the transaction will not adversely affect the financial ability of
Idaho Power to operate and maintain its facilities. Idaho Code ~ 61-328(3). The Commission
may condition its authorization with such terms and conditions as in its judgment the public
convenience and necessity may require. Idaho Code ~ 61-328(4).
Idaho Power stated that because the possible transfer and sale of transformers is
executory, "appropriate bookkeeping entries will be made at the time of any future transfer and
sale" of transformers. Application at ~ 9. At this time, the Company does not seek approval of
any ratemaking treatment for the Transformer Agreement fees and any new inventory required
by the terms of the Agreement. Id.
THE COMMENTS
The Commission received two comments in response to its Notice of Modified
Procedure. Peter Humm fully supported the Company s request to participate in the Transformer
Agreement. He suggested that the Transformer Agreement should be expanded to include the
shared pooling of other transmission equipment including phase shifters, tower structures
conductors, insulators, etc. He indicated that the Company s participation in the Agreement
would assist Idaho Power in making quick repairs to its transmission network in the event of an
outage.
The Staff also recommended the Commission approve the Transformer Agreement.
The Staff maintained that the pooling agreement reduces the risk of long-term outages due to
ORDER NO. 30211
transformer shortages. In essence, this Agreement would provide for a more timely restoration
of service in the event of a terrorist attack. Staff Comments at 3. Echoing comments provided
by Mr. Humm, Staff recommended that the Company participate in all classes where it can
appropriately mitigate risks and the length of outages. Id. at 5. Finally, Staff concluded that the
Transformer Agreement meets the criteria of Idaho Code ~ 61-328. Staff stated that the
Transformer Agreement is in the public interest and will not increase the cost of providing
service.
DISCUSSION
After reviewing the Application and the two comments, we find it appropriate to
authorize Idaho Power to participate in the Transformer Agreement. The pooling of essential
transformers will make spare transformers more readily available and likely reduce the length of
outages resulting from a terrorist attack. . We further find that this Agreement meets the
requirements of Idaho Code ~ 61-328. This section generally prohibits the transfer of electric
equipment unless authorized by this Commission. We find that Idaho Power s participation in
the Transformer Agreement is in the public interest and will not increase the Company s rates
for electric service because the Company does not seek ratemaking treatment. We further find
that participating in the Transformer Agreement will minimize the acquisition of spare
transformers.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company s Application to participate
in the Spare Transformer Sharing Agreement is approved.
IT IS FURTHER ORDERED that the Company advise the Commission if it is
required to purchase additional transformers or if it expands the number of voltage classes in
which it participates.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-06-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case. Within seven (7) days after any person has petitioned for reconsideration, any other
person may cross-petition for reconsideration. See Idaho Code ~ 61-626.
ORDER NO. 30211
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this J-eJ..
day of January 2007.
ATTEST:
D. Jeweil
lSSlOn Secretary
bls/O:IPC-06-27 dh2
ORDER NO. 30211