20100121Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR AUTHORITY)
TO SELL TO PACIFICORP THE GOSHEN )
SERIES CAPACITOR BANK. )
)
)
CASE NO. IPC-E-09-32
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff ofthe 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. 30975 on January 5, 2010, in Case
No. IPC-E-09-32, submits the following comments.
BACKGROUND
On November 13,2009, Idaho Power Company ("Idaho Power; Company") fied an
Application requesting authority to sell to PacifiCorp the Goshen Series Capacitor Banle The Goshen
Series Capacitor Bank is a 345 kV, 3-phase, 60 Hz, 2 equal segment, outdoor series capacitor bank.l
The Goshen Series Capacitor Ban is part of the larger Jim Bridger transmission system that is owned
i It includes the control cabinets in a control building, a battery bank, three platfonns that house the Series Capacitors,
metal oxide varistors, optical current tranducers, and reactors. It also includes two independent pole bypass circuit
breakers, two combination air brake/grounding switches and one bypass switch.
STAFF COMMENTS 1 JANUARY 21, 2010
jointly by Idaho Power and PacifiCorp. The Company requests that its Application be processed by
Modified Procedure.
On July 31, 2009, Idaho Power and PacifiCorp entered into an Asset Purchase Agreement for
the sale of the Goshen Series Capacitor Ban from Idaho Power to PacifiCorp. Idaho Power requests
Commission approval of the sale pursuant to the requirements of Idaho Code § 61-328.
Idaho Power asserts that the requested transaction meets the requirements of Idaho Code § 61-
328. Idaho Power further maintains that the sale is in the public interest because it allows the
Company to receive value for an asset that is no longer required by the Company and faciltates an
upgrade to PacifiCorp's transmission system which is interconnected with Idaho Power's transmission
system. Idaho Power further asserts that customers' rates wil not increase as a result of this
transaction. The sales price for the Goshen Series Capacitor Bank is $6,698,610. Idaho Power states
that the purchase price is equal to the net book value of the asset, resulting in no after-tax gain or loss
to either Idaho Power or PacifiCorp.
STAFF ANALYSIS
The Goshen Series Capacitor Ban is part of the larger Jim Bridger transmission system that is
owned jointly by Idaho Power and PacifiCorp. Idaho Power and PacifiCorp built the Jim Bridger
transmission system to deliver electricity produced by the jointly owned Jim Bridger generating plant
("Jim Bridger Plant") to customers located in their respective service territories. Generally, this
transmission system consists of several 345 kV transmission lines and substations with series capacitor
bans located at the Goshen, Kinport and Borah Substations in Idaho; the series capacitor banks were
designed and manufactured by Westinghouse and installed in the mid-1970s. Although jointly built,
Idaho Power retained ownership of all three capacitor bans.
As par of a general upgrade to the system, Idaho Power and PacifiCorp entered into an
agreement to replace the series capacitor ban at the Goshen Substation in 2002. This provided for
spare parts needed to extend the life of the Kinport and Borah series capacitor banks.
In 2006, PacifiCorp began construction of the Thee Mile Knoll Substation that included a new
series capacitor bank in the Jim Bridger transmission system. Because construction of this substation
would make the capacitor bank at the Goshen Substation unnecessar, Idaho Power and PacifiCorp
entered into an agreement to use the Goshen Series Capacitor Bank to replace one of the capacitor
bans at either the Kinport or Borah Substation. Upon completion of the Thee Mile Knoll Substation,
STAFF COMMENTS 2 JANUARY 21,2010
the Goshen Series Capacitor Bank was de-energized until it could replace either the Kinport or Borah
capacitor ban.
However, when PacifiCorp launched its Energy Gateway Transmission project, a joint project
with Idaho Power's Gateway West Transmission Project, a new 345 kV substation at Populus needed
to be constructed. Construction of the Populus Substation requires installation of a series capacitor
ban at the Borah Substation for the Borah-Ben Lomond 345 kV line. The Borah-Ben Lomond line is
par ofPacifiCorp's transmission system, and it is not jointly owned by Idaho Power as part of the Jim
Bridger transmission system. Rather than purchase a new capacitor ban, PacifiCorp entered into an
Asset Purchase Agreement with Idaho Power to buy the Goshen Series Capacitor Ban from Idaho
Power so it could be installed as part ofthe Borah-Ben Lomond 345 kV line.
Pursuant to Idaho Code § 61-328, the Idaho Public Utilities Commission is charged with the
responsibility to review the sale of electric public utilty property to ensure that (1) the transaction is
consistent with the public interest, (2) the cost of electricity and service. rates wil not be increased
because of the transaction, and (3) the buyer of the electric utilty's property has both the intent and the
financial ability to operate the property in the public service.
The Goshen Series Capacitor Ban that Idaho Power proposes to sell to PacifiCorp has an
estimated book value of$6,698,610. Staff reviewed the valuation information provided by the
Company and found the valuation to be reasonable. Staff will review and verify the final sales price
once the transaction is complete and closing documents are available.
Staff believes that the curent proposed sale of the Goshen Series Capacitor Ban is consistent
with the public interest for two primary reasons. First, the sale allows Idaho Power to receive revenues
equal to the book value for an asset that is no longer used in Idaho Power's system. It removes the
asset from Idaho Power's rate base without a write off or loss. Second, the Goshen Series Capacitor
Ban wil be used as par of an upgrade to PacifiCorp's transmission system that wil purortedly
improve regional transmission as a whole, extend the life of the existing transmission network and
improve grid power flow. Idaho Power is interconnected to the PacifiCorp transmission network.
Staff believes use of these facilities as part of the upgrade is more economical than what otherwse
would have occurred and wil benefit both Idaho Power and PacifiCorp customers.
The Company states in its Application that customers' rates wil not increase as a result of this
,
transaction. Staff agrees that there wil be no major direct impact to customer rates that occurs as a
result of this transaction; the purchase price is equal to the net book value of the asset, resulting in no
after-tax gain or loss to either Idaho Power or PacifiCorp. However, Staff believes that the small
STAFF COMMENTS 3 JANUARY 21, 2010
reduction in rate base and reduction in the overall cost of maintenance and repair that results from the
transfer of this asset to PacifiCorp may result in a minor reduction in Idaho Power customer rates.
Lastly, PacifiCorp is a regulated utilty under the jurisdiction of six state commissions,
including Idaho. As par of this regulatory oversight, Staff affrms that PacifiCorp has the bona fide
intent and financial abilty to operate and maintain the property in the public service.
Therefore, after review of the information provided in this Application and ln conjunction with
Staff s audit and investigation, Staff believes it is reasonable for Idaho Power Company to sell the
Goshen Series Capacitor Bank to PacifiCorp.
RECOMMENDATIONS
Upon review of the Company's Application and following Staffs investigation, Staff
recommends that the Commission approve Idaho Power Company's Application to sell the Goshen
Series Capacitor Ban to PacifiCorp as proposed.
Staff also recommends that Idaho Power fie the following documents with the Commission:
(1) the anticipated related accounting entries no later than seven days prior to the closing date of the
transaction and (2) the actual closing documents and related accounting entries no later than seven
days after the closing date.
Respectfully submitted this ie/~ day of Januar 2010.
~. 1 r'..... ~l t. ~V\~A:ser ~
Deputy Attorney General
Technical Staff: Cecily Vaughn
T.J. Golo
Terri Carlock
i: umisc: commentsipce09 .32kstctjcv.doc
STAFF COMMENTS 4 JANUARY 21,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 21ST DAY OF JANUARY 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-09-32, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOV AN E WALKER
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(gidahopower.com
bkline(gidahopower .com
GREGORY W SAID
DIRECTOR OF ST ATE REGULATION
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: gsaid(gidahopower.com
CERTIFICATE OF SERVICE