20090522Application.pdf

esIDA~POR~
DONOVAN E. WALKER
Cprporate Counsel
An IDACORP Company
May 21,2009
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-09-15
IN THE MATTER OF THE APPLICA TlON OF IDAHO POWER COMPANY
FOR AN ACCOUNTING ORDER AUTHORIZING THE DEFERRAL OF COSTS
RELA TED TO REORGANIZA TlON AND. SEVERANCE
Dear Ms. Jewell:
Enclosed for filing please find an original and seven (7) copies of Idaho Power
Company's Application in the above matter.
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Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise, ID 83702
DONOVAN E. WALKER (ISB No. 5921)
BARTON L. KLINE (ISB No. 1526)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: 208-388-6936
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bkline(âidahopower.com
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Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR AN ) CASE NO. IPC-E-09-15
ACCOUNTING ORDER AUTHORIZING )
THE DEFERRAL OF COSTS RELATED TO ) APPLICATION
REORGANIZATION AND SEVERANCE. )
)
Idaho Power Company ("Idaho Power" or the "Company"), in accordance with
Idaho Code § 61-524 and RP 52, hereby respectfully makes Application to the Idaho
Public Utilities Commission ("IPUC" or the "Commission") for an accounting Order
authorizing the deferral of costs related to the Company's reorganization and severance
payments.
In support of this Application, Idaho Power represents as follows:
i. INTRODUCTION
1. On May 6, 2009, and May 14, 2009, Idaho Power notified employees of a
planned reorganization of certain Delivery Business Unit and Corporate Services
APPLICATION - 1
positions in response to the economic downturn and slower customer growth. The
Company has initially identified certain job families within the Delivery Business Unit
and Corporate Services that support new customer requests for service as having
excess positions. Excess positions are those that are no longer needed due to a
decline in new business and wil not need to be backflled or replaced. There are
approximately 200 employees in the identified job families where the Company has
identified 40 excess positions. Additional job families are being reviewed to determine if
additional excess positions exist.
2. As part of this reorganization, voluntary severance has been offered to all
of the 200 employees within the identified job families. However, the Company does
not plan to accept more than 40 requests for voluntary severance. The voluntary
severance payment would be equal to one week of pay per year of service with a
minimum of eight weeks and a maximum of 40 weeks. Following the voluntary
severance process, the Company wil reassess workforce needs in the identified job
families. The result may be a redeployment of individuals into certain vacated positions
in order to align remaining resources with the ongoing needs of the Company. For
example, the Company may accept more voluntary requests from one job family in a
particular area of the Company than identified as in excess, which would require the
Company to redeploy other excess resources to fill those work load needs. The
Company wil also redeploy individuals into current vacant positions within the
Company. After redeployment, if determined necessary, involuntary severance wil be
offered to any remaining excess employees and is expected to be less than the amount
APPLICATION - 2
offered to those who accept voluntary severance. As stated above, this reorganization
process is initially seeking to eliminate no more than 40 excess positions.
II. ACCOUNTING TREATMENT
3. Idaho Power currently accounts for payroll expenses in accordance with
the Code of Federal Regulations ("CFR") Uniform System of Accounts Prescribed for
Public Utilities. The cost of the severance associated with this initial identification of
surplus positions is anticipated to be no more than $2 millon, although the amount
cannot be determined with specificity until the time that the Company receives offers to
accept voluntary severance or is required to implement involuntary severances. A
payment for severance would require the Company to expense 1 00 percent of
severance costs in the period they are incurred, in this instance June 2009. While there
would also be a reduction in salary costs, that salary savings would occur in the
capital/construction accounts rather than in expense accounts as the severance costs
would under Generally Accepted Accounting Principles ("GAAP"), absent approval of
this request. Because of current economic conditions, the Company does not wish to
take any actions that would reduce current earnings. A sustained reduction in
workforce wil ultimately benefit the Company's customers as capital labor costs are
reduced, creating a downward force on future rates.
4. In order to better match the costs of the severance package with the
resulting benefits received over time, Idaho Power requests authorization to capitalize
the severance costs associated with the Delivery Business reorganization, and any
subsequent 2009 reorganizations, in accordance with paragraph 9 of Statement of
Financial Accounting Standards ("SFAS") No. 71. The costs of the severance package
APPLICATION - 3
would then be amortized on a straight-line basis over a 5-year period. Such an
amortization is appropriate because reorganization activities wil occur during 2009 but
the associated benefits would be realized over time. Charging all reorganization costs
in the period they are incurred would unfairly burden existing customers (provided the
Company received rate relief) or shareholders (provided the Company received no rate
relief) for the benefit of future customers (who would pay rates lower than what would
be experienced absent a reduction in force). For this reason, the matching principle
supports capitalizing reorganization costs and amortizing them over a reasonable period
during which the benefits of the reorganization wil be realized. Therefore, the Company
seeks an accounting order authorizing the deferral of costs associated with the
severances through December 2009 and amortization of these costs over a period of 5
years, beginning upon their inclusion in rates.
5. Idaho Power proposes to account for the severance costs by charging
them to Account 182.3, Other Regulatory Assets, and amortizing these amounts to
Account 930.2, Miscellaneous General Expense, upon their inclusion in rates. Prior to
inclusion in rates, Idaho Power proposes to accrue a carrying charge using the
Company's most recent return on rate base.
6. Idaho Power does not request a determination of ratemaking treatment of
the severance costs with this filing and nothing in this Application wil impact the rates
Idaho Power charges to customers at this time. Instead, Idaho Power proposes to
address the ratemaking treatment and recovery of these costs in the Company's next
general rate case application.
APPLICATION - 4
III. MODIFIED PROCEDURE
7. Idaho Power believes that a hearing is not necessary to consider the
issues presented herein and respectfully requests that this Application be processed
under Modified Procedure; i.e., by written submissions rather than by hearing. RP 201
et seq. If, however, the Commission determines that a technical hearing is required, the
Company stands ready to present its testimony and support the Application in such
hearing.
IV. COMMUNICATIONS AND SERVICE OF PLEADINGS
8. Communications and service of pleadings with reference to this
Application should be sent to the following:
Donovan E. Walker
Barton L. Kline
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
dwalker(âidahopower.com
bkline(âidahopower.com
Courtney Waites
Greg Said
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
cwaites(âidahopower.com
gsaid(âidahopower.com
V.REQUEST FOR RELIEF
9. Idaho Power respectfully requests that the Commission issue an Order:
(1) authorizing that this matter may be processed by Modified Procedure; and (2)
authorizing the deferral of costs and accounting treatment related to the Company's
reorganization and severance payments as set forth above.
DATED at Boise, Idaho, this 21st day of May 2009.tL
DO OVAN E. WALKER
Attorney for Idaho Power Company
APPLICATION - 5