20090731Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
RECEIVED
2009 JUL 31 AM II: 39
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UTILlTIËS COl,~,..~lb~ì',-'"
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR AN )
ACCOUNTING ORDER AUTHORIZING THE )
DEFERRL OF COSTS RELATED TO )
REORGANIZATION AND SEVERANCE. )
)
CASE NO. IPC-E-09-15
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 30859 on July 10,2009, in Case
No. IPC-E-09-15, submits the following comments.
BACKGROUND
On May 21,2009, Idaho Power Company fied an Application for an accounting order
authorizing the deferral of costs related to the Company's plan to reorganize pars of its operations and
institute a severance program. The Company requests that the case proceed by Modified Procedure.
The Company asserts that, due to the economic downtur and slower customer growth, it is
planing a reorganization of certain Delivery Business and Corporate Services positions. As par of
the reorganization, volunta severance has been offered to all of the 200 employees within identified
positions. However, the Company maintains that it does not plan to accept more than 40 requests for
voluntar severance.
STAFF COMMENTS 1 JULY 31, 2009
Idaho Power states that the voluntary severance payment would be equal to one week of pay
per year of service with a minimum of 8 weeks and a maximum of 40 weeks. Following the volunta
severance process, the Company intends to reassess workforce needs in the affected job positions. If
necessary, involuntary severance wil be offered to any remaining employees holding "excess
positions."¡ The Company expects its involuntar severance packages to be less than its volunta
severance payments.
The Company anticipates that the cost of the severance associated with the elimination of 40
positions wil not exceed $2 milion. Payments for severance would require the Company to expense
100% of severance costs in the period that they are incured. Because there would also be a reduction
in salar costs, the Company claims that a sustained reduction in its workforce wil ultmately benefit
its customers when labor costs are reduced.
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 Stadards (SFAS) No. 71. The costs of the
severance package would then be amortized on a straight-line basis over a five-year period. The
Company believes that such an amortization is appropriate because reorganization activities will occur
during 2009 but the associated benefits will be realized over time. Recovering all reorganization costs
in the period that they are incured would unfairly burden existing customers or shareholders for a
benefit that future customers would also experience. For this reason, the Company contends that the
matching principle supports capitalizing reorganization costs and amortizing them over a reasonable
period during which the benefits of the reorganization will 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 five (5) years, beginning upon their inclusion in
rates.
The Company 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 their inclusion in rates, Idaho Power proposes to accrue
a carrying charge using the Company's most recent retur on rate base.
Idaho Power does not request a determination of ratemaking treatment of the severance costs in
this Application and emphasizes that nothing in this Application will impact customer rates at this
i Excess positions are those that are no longer needed due to a decline in new business.
STAFF COMMENTS 2 JULY 31, 2009
time. The Company proposes to address the ratemaking treatment and recovery of these costs in its
next general rate case.
STAFF ANALYSIS
Staff review included a review of employee notices, process followed, and an update of
information and status of the voluntar severance plan. The original Idaho Power plan was to accept
up to 40 employee requests for voluntar severance in specified job areas under the plan. After the
plan anouncement, additional information was obtained by Idaho Power reducing the identified
excess positions to 37 from the proposed 40. As of July 31, 2009, only three "excess" positions remain
and these employees are stil being evaluated for other positions within the Company. The remaining
employees either accepted voluntar severance or were redeployed to vacant positions within the
Company.
The voluntay severance plan realigns employee resources to meet the ongoing needs of the
Company with the least impact on employees. New business requests and customer connections are
low in the current economy making some positions unecessary. The reduction of workforce wil
reduce salares and employee costs over time. The cost of the severance was anticipated to be no more
than $2 milion. To date these costs are slightly over $1 millon. Under the Uniform System of
Accounts, severance costs are expensed when incurred absent an Accounting Order authorizing
deferraL. The reduction in salaries and related employee costs due to the reduced labor force is a
current and ongoing benefit seen on Company financial statements and a benefit that will be reflected
in futue rates charged to customers. Deferral of the severance costs will better match these benefits
with the costs. Therefore, Staff recommends the deferral request be authorized in accordance with
Statement of Financial Accounting Standards (FAS) No. 71 for severance costs incured through
December 2009 associated with the severance plan. An amortization period of five years is also
reasonable and should be approved.
Idaho Power wil experience reduced labor costs now and in the future associated with the
severance plan. Since benefits will be seen currently by Idaho Power, the amortization of the deferred
costs should begin January 1, 2010. The deferral of costs is reasonable to better match the costs with
the benefits of the reduction in workforce. To delay the amortization would also create a mismatch by
allowing the benefits to be received currently by the Company but with the costs amortized later. This
mismatch however would be to the detriment of customers. To reduce the mismatch for the Company
and customers, Staff recommends the five-year amortization begin Januay 1,2010.
STAFF COMMENTS 3 JULY 31, 2009
Idaho Power recommends the deferral be charged to Account 182.3, Other Regulatory Assets
and the amortization charged to Account 930.2, Miscellaneous General Expense. These accounts are
appropriate and Staff recommends the proposed accounting be approved.
Idaho Power also requests a caring charge be allowed at the Company's most recent return on
rate base. Absent the recommended Accounting Order for deferral, Idaho Power would not recover
any of the severance costs or receive a return on these severance costs. Deferral of the costs to match
the benefits is adequate recognition of dilgent actions by the Company. To allow a retur on the
unamortized deferral is unnecessar and will simply provide additional revenues to the Company.
Staff recommends no caring charge on the deferral be authorized.
Idaho Power recommends that the appropriate ratemaking treatment and recovery be addressed
in the next general rate case. Staff believes this is appropriate even with the differences in the
Company's request and Staffs recommendations.
RECOMMENDATIONS
Staff recommends the following:
1. An accounting order authorizing deferral of costs associated with the employee severance
plans through December 2009 should be approved.
2. An amortization period of five years should be approved.
3. The amortization should begin on January 1,2010.
4. The proposed accounts should be utilized with the severance costs charged to Account
182.3, Other Regulatory Assets and the amortization charged to Account 930.2, Miscellaneous General
Expense.
5. No carrying charge should be authorized.
6. The ratemaking treatment and recovery should be addressed in the next general rate case
application.
3/~TRespectfully submitted this . -= day of July 2009.
f!&,Il. ~Kris . ne A. Sasser
Deputy Attorney General
Technical Staff: Terri Carlock
i :umisc:commentsipce09 .6ksrl.doc
STAFF COMMENTS 4 JULY 31, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 31sT DAY OF JULY 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-E-09-15, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
DONOV AN E WALKER
BARTON L KLINE
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
COURTNEY WAITS
GREG SAID
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
J:~SECRET~ ~
CERTIFICATE OF SERVICE