20091117notice_of_application_order_no_30945.pdf

Office of the Secretary
Service Date
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
November 17, 2009
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO IMPLEMENT A
TRACKING MECHANISM TO RECOVER
ITS DEFINED BENEFIT PENSION
EXPENSE
) CASE NO. IPC-09-
) NOTICE OF APPLICATION
) NOTICE OF
) INTERVENTION DEADLINE
) NOTICE OF
) MODIFIED PROCEDURE
) NOTICE OF
) COMMENT/PROTEST DEADLINE
) ORDER NO. 30945
YOU ARE HEREBY NOTIFIED that on October 20, 2009, Idaho Power Company
(Idaho Power; Company) filed an Application with the Idaho Public Utilities Commission
(Commission) requesting approval on or before February 12, 2010 of a mechanism to track and
recover annually the Company s defined benefit pension expenses. The Application does not
seek current approval of future expenses associated with the Company s qualified defined benefit
pension plan, nor is it requesting that current rates be changed at this time.
BACKGROUND
Idaho Power s defined benefit pension plan was established in 1943 and continues as
part of the Company s total compensation package for eligible employees. As of January 1
2009, Idaho Power had 2 085 active employees in the plan and a total of 3 533 plan participants.
In 1986, the Company adopted Statement of Financial Accounting Standards (SFAS)
87. That Standard addresses pension funding issues from an accrual perspective in an attempt to
better match the compensation cost of an employee s pension benefits with the time period over
which the employee earns those benefits and to provide for greater comparability between
companies from year to year. Prior to the adoption of SF AS 87, pension expense was based on
the amount a company chose to contribute to its plans during the year. Since the adoption of
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
SF AS No. 87 in 1986, the Company has filed general rate cases in 1994 and 2003 that dealt with
pension funding issues. With the Company s 1994 general rate case filing, the Company
included in test year O&M expenses pension costs based upon the SF AS 87 accrual perspective
rather than cash contributed to the plan. The amount approved was approximately $2 million per
year.
In its 2003 general rate case, Case No. IPC-03-, Idaho Power again included in
its test year defined benefit pension plan expense derived from the accrual methodology
provided for in SF AS 87. The Commission Staff recommended that the Commission reject the
accrued SF AS 87 amount to be included in the Company s revenue requirement because the
Company did not have any actual cash contribution requirements during the test year. The
Commission in Order No. 29505 denied any recovery of defined benefit pension expense.
In 2007, Idaho Power filed an application with the Commission (Case No. IPC-07-
07) seeking clarification that the Company could expect to recover pension costs based on cash
contributed to the plan and account for defined benefit pension expenses on a cash basis rather
than the accrual basis that the Company had used from 1994 until 2003. In conjunction with the
Company s request for clarification of its authority to utilize cash basis accounting for recovery
of defined benefit pension expense, the Company also requested authority to defer future cash
contributions it would make to its defined benefit pension plan and to record these future defined
benefit pension plan cash contributions as regulatory assets.
On June I , 2007, the Commission issued Order No. 30333 authorizing the Company
to account for its defined benefit pension expense on a cash basis, and to defer and account for
accrued SF AS 87 pension expense as a regulatory asset. As part of its Order, the Commission
acknowledged that it is appropriate for the Company to seek recovery in the Company s revenue
requirement of reasonable and prudently incurred defined benefit pension expense based on
actual cash contributions. To date, the Company has made no cash contributions and therefore
has not made a request for recovery. The Commission found it reasonable for Idaho Power to
defer the expense associated with the pension plan cash contributions and record them as a
regulatory asset.The Commission also stated "when the Company s actuaries notify the
Company of Employee Retirement Income Security Act of 1974 (ERISA) minimum funding
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
requirements, the Company can evaluate the circumstances for ratemaking purposes and make a
filing requesting ratemaking treatment, if needed.
Idaho Power s actuary has informed the Company that a contribution is required for
the tax year beginning January 1 2009. The required contribution will be $5 418 662 if paid by
October 15, 2009, but if not paid by October 15 , 2009, interest will accrue until the extended due
date for Idaho Power s federal income tax return of September 15 , 2010. The Company did not
make an October 15 , 2009, payment.
TRA CKIN G MECHANISM
The requirement to make cash payments, Idaho Power contends, is expected to
continue over the next several years, but may vary dramatically from year to year. Therefore, the
Company requests authorization to implement a defined benefit pension expense tracking
mechanism that has similar components to those of the Power Cost Adjustment (PCA)
mechanism. That is, the proposed mechanism would include a forecast component and true-up
component.
As reflected in its Application, the Company would recover through rates its
forecasted annual cash payments toward defined benefit pension expense based upon an actuarial
determination of those anticipated required contributions.Each year, the Company would
compare the revenue collected through the tracking mechanism s forecast component rate to the
actual cash contributions to defined benefit pension expense during the year. Any difference
would be either refunded or collected from customers over the subsequent 12-month period in
the true-up component. The Company recommends that a carrying charge equal to the
Commission-approved interest rate for deposits be applied each month based on the balance in
the regulatory asset account.
The Company proposes a March I through February 28 (February 29 in leap years)
annual test period with rate adjustments becoming effective each June I. The Company
proposes to make an annual filing under the tracking mechanism on or before April 7 of each
year with the associated rate adjustment effective June I.
Idaho Power requests that it be allowed to recover its defined benefit pension expense
as a percentage rate applied to all base revenue in a manner similar to the Energy Efficiency
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
Rider, Schedule 91. Attachment 1 to the Application contains the Company s proposed
Schedule 53 detailing the purpose and applicability of the proposed tracking mechanism.
ACCOUNTING TREATMENT
In order to qualify for deferral, SFAS 71 requires that a utility be able to demonstrate
that "future revenues will be provided to permit recovery of the previously incurred cost."
order to meet the conditions for deferring pension costs under SF AS 71 , some form of a
mechanism must be in place that assesses whether the actual costs during the recovery period
exceeded the amount in rates, tracks any shortfall or excess, and adjusts rates accordingly.
Idaho Power believes that the proposed tracking mechanism would meet that
requirement. Absent such a tracking mechanism, inclusion of pension contributions as test year
expenses in a general rate case will most likely cause pension expense to become ineligible for
deferral under SF AS 71. Derecognition of its deferred pension expense regulatory asset would
result in serious negative consequences to Idaho Power. At a minimum, the Company contends
it would be forced to write off the $33 million balance of deferred pension expense (as of
September 30, 2009). Idaho Power s equity would also likely decrease by $92 million in
addition to the retained earnings impact of derecognizing the regulatory asset for deferred
pension expense. Both of these accounting changes could have negative impacts on customers.
YOU ARE FURTHER NOTIFIED that the Company s Application together with the
supporting testimony of Company witnesses Timothy E. Tatum, Manager of Cost of Service in
the Pricing and Regulatory Services Department, and Ken W. Peterson, Corporate Controller
have been filed with the Commission and are available for public inspection during regular
business hours at the Commission offices, 472 W. Washington Street, Boise, Idaho, and at the
general business office of Idaho Power Company, 1221 W. Idaho Street, Boise, Idaho. The
Application and testimonies are also available on the Commission s web site at
www.puc.idaho.gov under "File Room" and then "Electric Cases.
NOTICE OF INTERVENTION DEADLINE
YOU ARE FURTHER NOTIFIED that persons desiring to intervene in Case No.
IPC-09-29 for the purpose of becoming a party, i., to present evidence, to acquire rights of
cross-examination, to participate in settlement or negotiation conferences, and to make and argue
motions must file a Petition to Intervene with the Commission pursuant to Rules of Procedure
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
72 and 73 of the Commission s Rules of Procedure, IDAPA 31.01.01.072 and .073. Persons
desiring to acquire intervenor rights of participation must file a Petition to Intervene on or
before Friday, November 27, 2009. Persons desiring intervenor status shall also provide the
Commission Secretary with their electronic mail addresses to facilitate future communications in
this matter.
YOU ARE FURTHER NOTIFIED that persons desiring to present their VIews
without parties' rights of participation and cross-examination are not required to intervene and
may present their comments without prior notification to the Commission or the parties.
YOU ARE FURTHER NOTIFIED that discovery is available pursuant to the
Commission s Rules of Procedure, IDAPA 31.01.01.221-234.
YOU ARE FURTHER NOTIFIED that all proceedings in Case No. IPC-09-29 will
be conducted pursuant to the Rules of Procedure adopted by the Idaho Public Utilities
Commission. IDAPA 31.01.01.000 et seq.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filings of
record in Case No. IPC-09-29. The Commission has preliminarily found that the public
interest in this matter may not require a hearing to consider the issues presented and that issues
raised by the Company s filing may be processed under Modified Procedure , by written
submission rather than by hearing. Reference Commission Rules of Procedure, IDAP
31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
protests with respect to Idaho Power s Application and the use of Modified Procedure in Case
No. IPC-09-29 is Thursday, January 14,2010.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the matter on its merits and may
enter its Order without a formal hearing. If comments or protests are filed within the deadline
the Commission will consider them and in its discretion may set the matter for hearing or may
decide the matter and issue its Order based on the written positions before it. Reference IDAP
31.01.01.204.
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
YOU ARE FURTHER NOTIFIED that written comments concerning Case No. IPC-
09-29 should be mailed to the Commission and the Company at the addresses reflected below.
Street Address for Express Mail:
Lisa D. Nordstrom
Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: Inordstrom(fYidahopower.com
bkline(fYidahopower. com
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
472 W. Washington Street
Boise, ID 83702-5918 Timothy Tatum
Gregory Said
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
E-mail: ttatum(fYidahopower.com
gsaid(fYidahopo wer. com
Street Address for Express Mail:
1221 W. Idaho Street
Boise, ID 83702
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 located 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.
ORDER
As more particularly described above, IT IS HEREBY ORDERED and the
Commission hereby issues the foregoing Notices of Application, Intervention Deadline and
Modified Procedure in Case No. IPC-09-29.
NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 17
f'1-.
day of November 2009.
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D. KE cJN, P SIDENT
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ARSHA H. SMITH, COMMISSIONER
MACK A. REDFO
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Commission Secretary
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NOTICE OF APPLICATION
NOTICE OF INTERVENTION DEADLINE
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
ORDER NO. 30945