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Home My WebLink About20060424DOE comments.pdfDepartment of Energy Washington, DC 20585 " ,. ; \"\3 April 21 , 2006 , ", . :~i , i , ;~' ,) ; ' VIA FEDERAL EXPRESS Jean D. Jewell, Secretary Idaho Public Utilities Commission 472 West Washington Street Boise, Idaho 83702-5983 Re: Case No. IPC-05- Comments of the United States Department of Energy Dear Ms. Jewell: Please find enclosed for filing the original and seven (7) copies of the Comments of the United States Department of Energy in the above-captioned proceeding. I would appreciate it you would return a stamped copy of this transmittal letter to me in the enclosed self-addressed envelope. Thank you for your assistance. Lawrence A. Gollomp Assistant General Counsel United States Department of Energy Enclosure Printed with soy ink on recycled paper BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION , '.. ,.. .. \ j 0 ,'. ' IN THE MATTER OF THE INVESTIGATION OF APPROPRIATE RATEMAKING TREATMENT OF IDAHO POWER COIMPANY'S S02 ALLOWANCE SALE PROCEEDS ,.. (, '.. ! :. ' ,,"': '. ,.., '' .. CASE. NO. IPC-O5- COMMENTS OF THE UNITED STATES DEPARTMENT OF ENERGY The United States Department of Energy (DOE) on behalf of the Federal Executive Agencies (FEA) submits these comments on the Stipulation as it affects the disposition of revenue received by Idaho Power Company (IPC) for the sale of S02 emission credits. DOE supports the Stipulation Settlement, but is concerned that the Stipulation appears to understate the credit to be given to ratepayers through IPC' PCA. Based upon the figures in Attachment 1 to the Stipulation , DOE finds that the correct amount to be credited to the PCA is $69 126,518. This corresponds to the $42 101 506 in Attachment 1 , grossed up to eliminate the effect of income taxes. The essence of the Stipulation is that IPC's ratepayers would receive a 90 percent share of the sale of S02 emission credits (allocable to the Idaho Jurisdiction) with shareholders receiving 10 percent of the benefits of the sale. The analysis in Attachment 1 assumes that the entirety of the net proceeds of the sale of emission credits , $81 ,623,000 is subject to income taxes. While that is correct for shareholders 10 percent share of this revenue, it is not correct for the 90 percent share that is to be returned to ratepayers. At the margin, any increase in revenue from the sale of these credits that is returned to ratepayers is a non-taxable event. On the one hand, IPC receives revenues from the sale of emission credits; on the other hand, IPC's operating revenue is reduced on a one-for-basis when the sales credits are flowed through as reduction in the PCA. The net impact, of course, is that the transaction produces no tax liability for IPC or its ratepayers. A perfect analogy to this situation occurs when utilities receive additional revenue from pole rentals. Under standard ratemaking procedures, those additional revenues are used in their entirety to reduce the ratepayer s electric charges. In this situation there is no reduction of the pole rental revenue for income taxes , because all of the pole rental revenue has been flowed through to benefit ratepayers. For these reasons, DOE requests that the Commission accept the Stipulation with the clarification that the net of tax credit of $42 101 506 will be grossed up to reflect the tax savings when that credit is flowed through the PCA. Ratepayers will then receive the $69 126 518 to which they are entitled for their 90 percent share of the net before tax proceeds. K::eLawrence A. Gollomp Assistant General Counsel United States Department of Energy 1000 Independence Avenue , SW Washington, D. C. 20585 lawrence .gollomp~hq .doe.gov April 21 2006