20060814ICIP comments.pdf

RECEIVED
2006 AUG 14 PM 12: 51+RI€iHfAIU)JS(f)N &: 01~XATTORNEYS AT LAW
Peter Richardson
IDAHO PUBLiC
UTILITiES COMil;1ISSION
Tel: [phone] Fax: [phone]
peterf8J rich. rdson and olea ty.co
O. Box 7218 Boise, 10 83707 - 515 N. 27th St. Boise, ID 83702
14 August 2006
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
POBox 83720
Boise ID 83720-0074
RE: Case No.lPC-O6-
Dear Ms. Jewell:
Enclosed please find the original and seven (7) copies of the COMMENTS OF THE
INDUSTRIAL CUSTOMERS OF IDAHO POWER TO IDAHO POWER COMPANY
in the above case.
Also enclosed is an additional copy to be date stamped for our office.
Sincerely,
~(\\\
Administrative Assistant for Peter Richardson
encl.
RECEIVEDBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
2006 AUG I 4 P~112: 54
IN THE MA TTER OF THE
APPLICATION OF IDAHO POWER
COMPANY FOR AN ACCOUNTING
ORDER ADDRESSING THE DEFERRAL
OF COSTS RELATED TO THE
DEVELOPMENT OF GRID WEST
CASE NO. IPC-O&.\dfur) 01 poJ! 'rv, ,I'~ , ",WI.. -'
UTILITIES COt/,ilSSION
COMMENTS OF THE
INDUSTRIAL CUSTOMERS
OF IDAHO POWER
Introduction
In accordance with the Commission s Order No. 30082 in the above-captioned
case, the Industrial Customers of Idaho Power (ICIP) respectfully submit these comments
on Idaho Power Company s application to the Commission for an order allowing the
deferral of costs related to the development of Grid West.
II.Costs Which Idaho Power Seeks to Defer
According to Idaho Power s application, the Company seeks to defer two
different types of costs related to Grid West: 1) costs incurred in the form of loans to Grid
West under a series of Funding Agreements, which now appear unrecoverable due to
Grid West's dissolution, and 2) internal costs incurred by Idaho Power in efforts to
develop Grid West.
A. Costs of Unrecoverable Loans
ICIP does not oppose the deferral of the first type of costs-the costs incurred in
the form of unrecoverable loans to Grid West under specific agreements. However, if the
Commission decides to allow deferral of these costs, the Commission should impose a
1 Idaho Power Application For Accounting Order Addressing Deferral of Costs Related to Development of
Grid West, Case No. IPC-06-, at p. 2-3 (April 4, 2006) ("Idaho Power Application
IPC-06-06 COMMENTS OF ICIP
few conditions on such an authorization. First, the Commission should make explicit in
its order that there will be no automatic recovery of those costs in Idaho Power s rates.
This is acknowledged in both the Commission s orders in this case 2 as well as Idaho
Power s application.3 Nevertheless, it is prudent to include such a statement in the order
in this case. Future parties in subsequent proceedings will benefit by such a declaration
in that they will have a clear understanding of the consequence of an accounting order in
this proceeding.
Second, if the Commission allows the Company to earn interest on the deferred
amounts, the rate of interest should not exceed the interest rate provided for customer
deposits. This would reasonably preserve the Company s ability to collect appropriate
amounts in the future while preventing customers from being unduly burdened by a
build-up of these costs pending a proceeding through which they are sought to be
recouped in rates. ICIP points out that in similar proceedings in other jurisdictions, some
state commissions have disallowed any interest on deferred costs of utility loans to Grid
West.
Third, any authorization for Idaho Power to defer Grid West loan costs should be
conditioned upon the Company beginning amortization of the costs immediately, over a
three-year period. This period seems reasonable given the short time period between
when the loans were made and when Grid West became insolvent.Immediate
See, e.
g.
Order No. 30082, Case No. IPC-06-, at p. I (June 29, 2006) ("An accounting order
authorizing deferral of costs does not establish reasonableness or the amount of the costs to be recovered in
rates.
See Idaho Power Application at p. 2 (requesting accounting order allowing deferral so that costs can be
considered "in a future ratemaking proceeding
See Washington Utilities and Transportation Commission Order Approving Accounting Petition, As
Modified By This Order Docket UE-060703 (July 26, 2006) (Ordering authorization to PacifiCorp
conditioned upon amortization beginning July 1 2006, without interest, over a five-year period"
IPC-06-06 COMMENTS OF ICIP
amortization of these costs by participating utilities has also been ordered by other state
commissions.
Finally, any Commission authorization to defer Grid West loan costs should
require Idaho Power to net any proceeds received from Grid West against those amounts.
Although receiving any funds from Grid West is probably unlikely at this point, if any
such funds are reasonably available to Idaho Power, it should apply those funds toward
the costs of the Grid West loans the Company seeks to defer and recover from customers.
B. Internal Idaho Power Costs Spent on Grid West-Related Efforts
In addition to the costs of unrecoverable loans to Grid West, Idaho Power seeks to
defer costs that it categorizes as "internal incremental costs incurred directly by Idaho
Power in the development of Grid West.,,6 Idaho Power explains these costs as including
things such as "incremental travel related expenses
" "
legal fees " and "carrying costs" of
those expenses. Idaho Power s request to defer internal costs related to Grid West is an
extraordinary request in the industry. None of the other utilities that participated in Grid
West have sought similar ratemaking treatment for "internal costs" from their respective
commIssiOn.ICIP opposes Idaho Power s unprecedented request. Unlike the loans
provided by Idaho Power to Grid West under the Funding Agreements, Idaho Power has
/d.6 Idaho Power Application at p. 3.
See, e.
g.,
Application of PacifiCorp to the Oregon Public Utility Commission In the Matter of
Application of Pacific Power Light (d/b/a PacifiCorp) for an Accounting Order Docket No. UM 1257
(March 23, 2006) (seeking deferral ofloans to Grid West, and noting that PacifiCorp is already recovering
other RTO expenses through its current rates); Application of Portland General Electric to the Oregon
Public Utility Commission In the Matter of the Application of Portland General Electric Company for an
Order Approving the Deferral of Certain Costs and Revenues Associated With Grid West Docket No. UM
1256 (June 16 2006) (seeking deferral ofloans to Grid West); Application ofPacifiCorp to the Washington
Utilities and Transportation Commission In the Matter of the Application of PacifiCorp for Approval of a
Deferred Accounting Order to Defer the Costs of Loans Made to the Regional Transmission Organization
Grid West, and to Defer Consideration of Amortization and Cost Recovery in a Future General Rate Case
Docket No. UE-O60703 (May 1 2006) (seeking deferral of loans to Grid West, and noting that utility is
already recovering other RTO expenses through its current rates).
IPC-06-06 COMMENTS OF ICIP
not provided any evidence in its application that it had any reasonable expectation of
recouping its incremental internal costs from Grid West if Grid West had become
operational. In other words, Idaho Power has not demonstrated that Grid West had any
obligation to repay Idaho Power for these costs. Thus, to ICIP, these costs simply look
like additional expenses the Company incurred during the current rate period. Under
these circumstances, Idaho Power should not be allowed at this point to defer these costs
for inclusion in a subsequent rate period.
The fundamental prohibition on retroactive ratemaking prevents utilities from
adjusting current rates to make up for past errors in cost projections.8 In other words, a
utility cannot adjust future rates to recoup losses that were incurred due to a utility
failure to accurately estimate its costs in a prior rate proceeding. The Commission should
therefore not allow Idaho Power to defer these costs for consideration in the next rate
proceeding. Doing so would allow Idaho Power to avoid the traditional ratemaking
principles that do not allow recovery of past costs incurred after a rate case.
Moreover, ICIP fears that allowing Idaho Power to defer its internal Grid West
costs into the next rate period could result in a double-recovery of certain expenses from
customers. ICIP cannot ascertain from Idaho Power s application whether customers are
in fact, already paying through their current rates for what Idaho Power characterizes as
its incremental internal Grid West costs.
In its application, Idaho Power seeks to transfer all of its Grid West development
costs to Account 182.3 (Other Regulatory Assets), and defer them into the next rate
See, generally, e.g, City ofPiquav. FERC 610 F.2d 950 954 (D.c. Cir. 1979) ("(A) utility may not set
rates to recoup past losses, nor may the Commission prescribe rates on that principle.) (quoting Nader
FCC 520 F.2d 182 202 (D.c. Cir. 1975)); See also Utah Power Light v. Idaho Public Utilities
Commission 107 Idaho 47, 53 (1984) (holding that PUC does not have authority to grant utilities
surcharges to make up past deficits).
IPC-06-06 COMMENTS OF ICIP
period. The Uniform System of Accounts, however, provides that it is only appropriate
for Idaho Power to include these costs in Account 182.3 if they would have been included
in the current period, but for it being probable that such items will be included in a
different period for purposes of developing rates.9 With regard to Idaho Power s internal
Grid West costs, ICIP does not believe it is probable that such items will be included in
future rates given that these costs appear to simply be past expenses that the Company
incurred, without expectation of reimbursement, and that there will be no future benefit to
customers from Grid West to which Idaho Power can match the costs.
As support for its application, Idaho Power presents the Commission with a Letter
Order it received from the Federal Energy Regulatory Commission, advising Idaho
Power that it may include Regional Transmission Organization (RTO) development costs
in Account 186 (Miscellaneous Deferred Debits) and transfer to Account 182.3 amounts
not reimbursed by an RTO. However, in FERC's Letter Order, FERC merely restates the
conditions on putting expenses into Account 182., and specifically clarifies that
inclusion of these costs in Account 182.3 is appropriate only "if these criteria are met.
It goes on to state that "(hJowever, if rate recovery of all or part of the deferred costs is
later disallowed, the disallowed costs should be charged to Account 426.5 in the year of
the disallowance.ll FERC's Letter Order, therefore, is not precedent on which the
Commission should base a decision to allow Idaho Power to defer these internal costs
and is at best, a simple recognition that these costs may be disallowed for recovery in
9 Uniform System of Accounts, 18 c.F.R. ~ 101 , Account 182.3. 10 Letter Order, FERC Docket No. AC03- 78-000, at p. 3 (Feb. 3 2004); The Letter Order states that
(r)ecognition of these costs as a regulatory asset in the event that they are not reimbursed by the RTO
would only be appropriate if the amounts would otherwise be chargeable to expense at that time and Idaho
Power has concluded based upon all relevant information, that recovery in rates in a different period is
probable./d. at p. 1.
II Id.
IPC-06-06 COMMENTS OF ICIP
rates, and that Account 182.3 may in the meantime be an appropriate place to put them
depending on if the applicable criteria are met. As stated above, it is the ICIP's position
that the criteria have not been met, since it is not probable that recovery of the costs in a
future rate period would be allowed.
III.Conclusion
ICIP will not oppose Idaho Power application to defer the costs of
unrecoverable loans made to Grid West for consideration in a future rate proceeding.
However, ifthe Commission grants Idaho Power s request, it should 1) expressly state in
the order that future cost recovery is not automatic and depends on a demonstration of
prudency, 2) not allow a rate of interest greater than the rate provided for customer
deposits, 3) condition its approval upon the Company beginning amortization of the costs
immediately, over a three-year period
, .
and 4) require Idaho Power to net any proceeds
received from Grid West against those amounts.
ICIP opposes Idaho Power s request to defer its internal costs related to Grid
West. Allowing Idaho Power to defer these costs would be inappropriate because any
future recovery would be prevented by the prohibition on retroactive ratemaking, would
be unlikely in any event, and could result in a double-recovery by the Company of those
expenses.
Respectfully submitted this 14th day of August 2006
AJ~
Peter Richardson
Attorney for Industrial Customers of Idaho Power
IPC-06-06 COMMENTS OF ICIP
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 14th day of August, 2006, I caused a
true and correct copy ofthe foregoing COMMENTS OF THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER to be served by the method indicated below, and
addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street (83702)
Post Office Box 83720
Boise, Idaho 83720-0074
( ) u.S. Mail, Postage Prepaid
(X) Hand Delivered
( ) Overnight Mail
( ) Facsimile
( ) Electronic Mail
Barton L. Kline
Idaho Power Company
1221 W. Idaho St. (83702)
PO Box 70
Boise, Idaho 83707
bkline~idahopower.com
(X) U.S. Mail, Postage Prepaid
( ) Hand Delivered
( ) Overnight Mail
( ) Facsimile
(X) Electronic Mail
John R. Gale
Regulatory Affairs
Idaho Power Company
O. Box 70
Boise, Idaho 83707
rgale~idahopower.com
(X) U.S. Mail, Postage Prepaid
( )
Hand Delivered
( ) Overnight Mail
( ) Facsimile
(X) Electronic Mail
Signed~\f) UJA ~\
Nina M. Curtis
IPC-06-06 COMMENTS OF ICIP