20090424Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF

FROM: DON HOWELL
DEPUTY ATTORNEY GENERAL

DATE: APRIL 21, 2009

SUBJECT: DISPOSITION OF IDAHO POWER’S SO2 PROCEEDS, CASE NOS. IPC-
E-08-14 AND IPC-E-09-08

On March 27, 2009, the Commission issued a Notice of Modified Procedure
requesting public comments regarding the appropriate disposition and ratemaking treatment for
Idaho Power’s sulfur dioxide (SO2) revenues from CY 2008 and 2009 (to the present). In
response to the Commission’s Notice, comments were submitted by the Commission Staff, the
Idaho Energy Education Project (IEEP), and one customer from Shoshone. These comments are
outlined in greater detail below.
BACKGROUND
A. SO2 Proceeds
On March 18, 2009, Idaho Power Company filed a report disclosing that the
Company recently recorded the sale of surplus sulfur dioxide (SO2) emission allowances. The
Company reported that it has either sold or entered into contracts for the sale of 16,500 SO2
allowances. After deducting its brokerage fees of $4,125, Idaho Power anticipates booking SO2
proceeds of $2,341,375. The Company’s report also noted that during calendar year 2008, it sold
10,000 SO2 allowances. After deducting brokerage fees, the Company reported net SO2
revenues in 2008 of $2,958,500. See Case No. IPC-E-08-14 (report filed July 24, 2008).
B. Proposed Accounting Adjustment
In its report, Idaho Power noted that it had made two accounting adjustments to SO2
proceeds. First, Idaho Power observed that the 90/10 percent PCA sharing mechanism was
changed in Order No. 30715. Beginning in February 2009, revenues from SO2 sales are subject
DECISION MEMORANDUM 2
to the new 95/5 percent sharing methodology. Second, Idaho Power’s jurisdictional allocations
were adjusted in the Company’s 2008 rate case. More specifically, the Idaho jurisdictional
percentage increased from 94.70% to 94.79% effective in February 2009. Order No. 30722.
Consequently, the $559,500 in net SO2 proceeds booked in February 2009 are subject to these
two adjustments. Staff verified that these two Commission-approved adjustments were made.
THE COMMENTS
The Commission received three comments in response to its Notice. One customer
recommended that the Commission set aside at least $500,000 per year from the sale of SO2
credits to further energy education. In addition to energy education programs, the customer
urged the Commission to consider allocating some of the SO2 revenues for conservation and
residential weatherization programs designed to assist low-income and senior homeowners.
The IEEP suggested that some of the monies from the sales of SO2 credits “be
invested in energy education or some other form that enhances energy efficiency and
conservation.” More specifically, IEEP recommended the Commission consider using a
percentage of SO2 proceeds equal to that amount in the energy education in Case No. IPC-E-08-
11. This amount would then be set aside in an account “similar to the telephone trust funds” to
promote energy education following completion of the two-year pilot program in the 08-11 case.
The Staff verified that the SO2 sales transactions were booked accurately. In
addition, Staff calculated that the SO2 proceeds have accrued interest through March 31, 2009,
in the amount of $47,578 ($43,983 for 2008 sales and $3,595 for 2009 sales). Staff Comments at
2.
Staff recommended that the proceeds from the sale of SO2 allowances should be used
to offset costs in Idaho Power’s Power Cost Adjustment (PCA) case this year. Staff noted that
the PCA costs through the end of March 2009 were estimated to be nearly $200 million. Id. at 3.
“Passing the customers’ share of funds through the PCA will reduce the current PCA costs
subject to recovery and mitigate the impact of what will likely be a very large [PCA] surcharge
for 2009.” Id. Given the Commission’s recent Order No. 30760 allocating $500,000 of SO2
proceeds to fund the energy education program, Staff believed that the current SO2 proceeds
should be applied to the PCA rather than reserved for energy education programs. Consequently,
Staff recommended that the SO2 proceeds of $5,347,453 ($5,299,875 plus interest of $47,578 as
of March 31, 2009) be included in this year’s PCA. Id. at 4.
DECISION MEMORANDUM 3
COMMISSION DECISION
Based upon the comments of the parties, what does the Commission find is the
appropriate disposition of Idaho Power’s 2008 and 2009 SO2 proceeds?

bls/M:IPC-E-09-08_IPC-E-08-14_dh2