20090901notice_of_application_order_no_30890.pdf

Office ofthe Secretary
Service Date
September 1 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AN CASE NO. IPC-09-
ACCOUNTING ORDER AUTHORIZING
THE DEFERRAL OF TRANSMISSION NOTICE OF APPLICATION
COSTS ASSOCIATED WITH THE ORDER
ON INITIAL DECISION (FERC DOCKET NOTICE OF
NO. ER06-787)MODIFIED PROCEDURE
ORDER NO. 30890
On July 20, 2009, Idaho Power Company filed an Application requesting that the
Commission issue an accounting order authorizing the deferral of costs associated with the
Company s transmission services. The Company is requesting authority to record and possibly
recover in Idaho rates its unrecovered transmission costs following a recent transmission rate
case before the Federal Energy Regulatory Commission (FERC), Docket No. ER06-787. The
Company requested and Staff concurred that the Application for an accounting order
processed under Modified Procedure.
BACKGROUND
In March 2006, Idaho Power filed an application with FERC requesting an increase in
its transmission rates subject to FERC's jurisdiction. In its filing, the Company proposed to
revise its Open Access Transmission Tariffs (OA TT) from "stated" rates to "formula" based
rates. Formula rates would be updated annually based upon Idaho Power s total cost to own
operate and maintain its transmission facilities for its transmission customers. Order on Initial
Decision 126 FERC ,-r 61 044 (Jan. 15, 2009). The "formula" rate methodology would be
calculated using data reported annually in the Company s FERC Form 1.
In its FERC application, the Company noted that it had not adjusted transmission
rates since 1996. Nevertheless, several of the Company s transmission customers opposed the
FERC rate application. Although the parties settled most of the issues, they were unable to
resolve the proper ratemaking treatment ofthe "Legacy Agreements.Id. at,-r 11.
Starting in the 1960s, Idaho Power entered into three long-term transmission service
contracts (commonly referred to as the "Legacy Agreements ) with PacifiCorp to provide
transmission service from the Jim Bridger power plant in western Wyoming. Idaho Power and
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30890
PacifiCorp jointly own the Bridger facility. Both companies built and now operate transmission
power lines from Jim Bridger to their respective service territories. Under the terms of the
Legacy Agreements, Idaho Power charges PacifiCorp "use of facility fees" to use Idaho Power
transmission facilities until 2025. Id. at,-r,-r 3-
The federal administrative law judge (ALJ) initially determined and FERC
subsequently affirmed that Idaho Power s charges to PacifiCorp under the Legacy Agreement are
significantly lower than the OA TT rates Idaho Power proposed to charge other customers for
similar transmission services. This rate "disparity" between the old Legacy Agreements and the
OATT rates has grown over time. Id. at,-r 127. The ALJ further found that under the Legacy
Agreements, PacifiCorp s load accounted for 40% of the transmission lines' capacity, Idaho
Power s load accounted for 45% of the capacity, and third-party transmission customers
accounted for only 15% of the total firm capacity of the subject Idaho Power facilities. Id. at ,-r
128. Based upon the principles of cost causation and allocation, the Judge found that it was
unreasonable for Idaho Power to shift its proposed rate increase to its third-party transmission
customers. Because of the longstanding Legacy Agreements, Idaho Power is contractually
bound to provide transmission service to PacifiCorp at rates that are now considered below cost.
In affirming the ALJ, FERC found that Idaho Power cannot require its third-party
OATT transmission customers to pay more than their prorate 10ad share of Idaho Power s total
transmission revenue requirement. Id. at,-r 133. Because its revenue recovery is "locked in" by
the long-term Legacy Agreements, FERC found that Idaho Power must bear the under-recovery
of transmission revenue on its own. !d. at,-r 129.
The intervenors in the FERC docket also argued that Idaho Power has other options to
make up for the revenue shortfall. The Company could avail itself of provisions in the Legacy
Agreements that allow some transmission charges to be adjusted. Id. at,-r 163. In addition, the
ALJ observed that Idaho Power could seek to recover its revenue shortfall from its retail
customers. Id. at,-r .158. He concluded that Idaho Power "has other ways to lessen any financial
blow . . . through appropriate rate changes at the retail level or through re-negotiations of its
legacy agreements with PacifiCorp.Id. at,-r 218.
NOTICE OF APPLICATION
YOU ARE HEREBY NOTIFIED that in response to FERC's Initial Decision , Idaho
Power has taken three actions. First, on February 27, 2009, Idaho Power filed a Petition for
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30890
Rehearing with FERC. On March 18, 2009, FERC granted rehearing so it could consider that
matter in greater detail. Docket No. ER06-787-006. Second, Idaho Power has initiated actions
to amend portions of the Legacy Agreements which are subject to change or re-negotiation. See
FERC Docket NQ. ER09-1335-000. Finally, Idaho Power has filed the present Application with
this Commission for an accounting order to defer unrecovered transmission cost associated with
the above FERC Order. The cost estimate is $8 084 251 for the period March 2008 through May
, 2010. Application at ,-r 9. If Idaho Power is able to reduce its revenue shortfall in the first
two alternatives, then the Company "will reduce the deferral" request that is the subject of this
Application. Id.
YOU ARE FURTHER NOTIFIED that the Company seeks an accounting order
authorizing the deferral of the unrecovered transmission-related costs associated with the
outcome of FERC's Initial Decision. The Company proposes to amortize the unrecovered
transmission revenues on a straight-line basis over a 36-month period beginning June 1 , 2010
once these costs are included in rates. Id. at ,-r 10. Idaho Power proposes to account for the
unrecovered transmission revenues by charging them to Account 182.3 (Other Regulatory
Assets) and amortizing these amounts to Account 407.3 (Regulatory Debits) upon their inclusion
in rates. Until such time as the Company begins to recover its deferred costs, it requests that the
Commission authorize a carrying charge on the deferral balance based upon its latest authorized
rate of return on rate base (i., 8.18% per Order No. 30722). Id. at,-r 11.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission s Rules
of Procedure IDAP A 31.01.01.201 through .204.The Commission notes that Modified
Procedure and written comments have proven to be an effective means for obtaining public input
and participation.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application may file a written comment in support or opposition with the Commission within
twenty-eight (28) days from the service date of this Notice. The comment must contain a
statement of reasons supporting the comment. Persons desiring a hearing must specifically
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30890
request a hearing in their written comments. Written comments concerning this Application
shall be mailed to the Commission and Idaho Power at the addresses reflected below:
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Donovan E. Walker
Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E- Mail: dwalker~idahopower.com
bkline~idahopower.com
472 W. Washington Street
Boise, ID 83702-5918 Courtney Waites
Greg Said
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: cwaites~idahopower.com
gsaid~idahopower.com
All comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page 10cated at www.puc.idaho.gov. Click the "Comments and Questions
icon and complete the comment form using the case number as it appears on the front of this
document. These comments must also be sent to Idaho Power at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that the Application together with its exhibits
have been filed with the Commission and are available for public inspection during regular
business hours at the Commission offices. The Application and testimonies are also available on
the Commission s web site at www.puc.idaho.gov by clicking on "File Room" and then "Electric
Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and specifically
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30890
Idaho Code ~ 61-524. The Commission may enter any final Order consistent with its authority
under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAP A 31.01.01.000 et seq.
ORDER
IT IS HEREBY ORDERED that this Application be processed under Modified
Procedure, IDAPA 31.01.01.201-204. Persons interested in submitting written comments in this
matter should do so within twenty-eight (28) days of the service date of this Order. Idaho Power
Company may file reply comments no later than fourteen (14) days after the due date for initial
comments. IDAPA 31.01.01.202.01(d).
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this 3/
day of August 2009.
Jf.
JI MPTO , PR IDENT
MARSHA H. SMITH, COMMISSIONER
~~~
MACK A. REDFORD, ISS . R
ATTEST:
€iJtD~Je . D. Jewell
ission Secretary
bls/O:IPC-09-21 dh
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30890