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HomeMy WebLinkAbout20100316Application.pdfl \, Ri:r.E\Vl .'" ".,.." ...J '.."- esIDA~POR~ An IDACORP Company LISA D. NORDSTROM Lead Counsel Inordstromtmidahopower.com March 15,2010 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-10-08 IN THE MA TTER OF THE APPLICA TlON OF IDAHO POWER COMPANY TO INCREASE ITS RA TES FOR ELECTRIC SERVICE TO RECOVER ITS 2010 CASH CONTRIBUTION TO DEFINED BENEFIT PENSION EXPENSE Dear Ms. Jewell: Enclosed for filing please find an original and seven (7) copies of Idaho Power Company's Application in the above matter. In addition, enclosed are nine (9) copies of Jeannette C. Bowman's testimony filed in support of the Application. One copy of Ms. Bowman's testimony has been designated as the "Reporter's Copy." In addition, a disk containing a Word version of Ms. Bowman's testimony is enclosed for the Reporter. Very truly yours, ~.~£/'t~ Lisa D. Nordstrom LDN:csb Enclosures P.O. Box 70 (83707) 1221 W. Idaho St. Boise, ID 83702 Pc"i '~,¿,_ \.... LISA D. NORDSTROM (ISB No. 5733) DONOVAN E. WALKER (ISB No. 5921) Idaho Power Company P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5825 Facsimile: (208) 388-6936 Inordstrom((idahopower.com dwalker((idahopower.com ZÛlûM~P I,. "'11"\ j r-H 5= 12 iM 111- it',..IILiI _. 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 TO INCREASE ITS RATES FOR ELECTRIC SERVICE TO RECOVER ITS 2010 CASH CONTRIBUTION TO DEFINED BENEFIT PENSION EXPENSE. ) ) CASE NO. IPC-E-10-08 ) ) APPLICATION ) ) ) Idaho Power Company ("Idaho Powet' or the "Company" or the "Applicant"), in accordance with Idaho Code §§ 61-502, -503, -524, and RP 052, hereby respectfully makes Application to the Idaho Public Utilties Commission ("I PUC" or the "Commission") for an Order approving revised schedules of rates for electric service in the state of Idaho, to become effective June 1, 2010, for service to customers provided on and after that date. The requested rate increase wil permit the recovery of the Company's 2010 cash contributions to Idaho-allocated defined benefit pension expenses. APPLICATION -1 In support of this Application, Idaho Power represents as follows: I. BACKGROUND 1. On October 20, 2009, Idaho Power filed an Application with the Commission in Case No. IPC-E-09-29 seeking authority to implement a tracking mechanism to recover its defined benefit pension expense. In its January 141 2010, Comments, the Commission Staff did not support the Company's proposed pension tracker. As an alternative, Staff stated: Recovery of pension expense continues to be appropriately dealt with during the course of a rate case. Staff wil support a reasonable amortization of actual deferred cash contributions. This recovery method wil meet the requirement of SFAS 71 to recover the deferral balance in future rates. The amortization can change as needed to recover the remaining deferral balance of actual cash contributions. Staff Comments at 5. 2. On January 21,2010, Company representatives met with the Staff to seek clarification on a number of issues raised by the Staff in its Comments. Afterwards, in its Reply Comments filed on January 29, 2010, the Company noted its evaluation of Staffs suggestions and concurrence that the aggregate recommendations met all requirements for continued pension cost deferral under SFAS 71. 3. On February 17, 2010, in its Order No. 31003, the Commission chose to adopt Staffs recommendations and authorized the following treatment of deferred pension expense: 1 . The Company wil establish a balancing account that would track, on a cumulative basis, the difference between cash amounts contributed to the pension plan and amounts included in rates. APPLICATION - 2 2. An appropriate amortization period for deferred cash contributions wil be evaluated during a revenue requirement proceeding and wil begin simultaneously with the approved period for recovery. 3. There may be circumstances where the Company could choose to contribute in excess of the minimum amount required by ERISA or prior to the final due date of the minimum payment; such contributions, while potentially subject to longer amortization, wil not be disallowed solely because they are made sooner than legally required. 4. The Company wil not be expected to expense its prudently incurred cash contributions prior to the Commission's review during a revenue requirement proceeding and inclusion in rates. 5. As part of a revenue requirement proceeding, the Company may request the inclusion of imminent, but as yet unpaid, contributions that have been finally determined by the Company's actuary as "known-and- measurable" expenses to be incurred. 6. The Company should earn a carrying charge on the unamortized balance of deferred cash contributions at the Commission-approved interest rate for deposit. 4. In the same Order, the Commission chose to adopt the four points of clarification requested by the Company in its Reply Comments: 1. The regulatory asset account previously authorized for the deferral of cash contributions wil be considered a balancing account for the purpose of tracking the difference between cumulative cash contributions to the pension plan and amounts recovered in rates; and 2. The timing of the amortization of the deferred cash contributions as well as the amounts wil be matched to the collection of those costs in rates; and 3. The amounts contributed in excess of the ERISA minimum, while potentially subject to longer amortization, wil not be disallowed solely because they are made sooner than they are legally required to be paid; and APPLICATION - 3 4. The unamortized balance of deferred cash contributions wil earn a carring charge at the Commission-approved interest rate for deposit. II. PENSION COST RECOVERY 5. For a number of expense categories delineated in the Stipulation filed in Case No. IPC-E-09-30 and adopted in the Commission's Order No. 31003, the Company is authorized to make filings with the Commission to adjust its revenue requirement and change rates prior to January 1, 2012. Annual pension cost recovery is one of those specified expense categories. Stipulation, p. 3, 1f 5.2(d). 6. The Commission's Order also authorizes the Company to request the inclusion of imminent, but as yet unpaid, contributions that have been determined by the Company's actuary as "known-and-measurable" expenses to be incurred. 7. Idaho Powets actuary, Miliman, Inc., has informed the Company that a contribution is required for the plan year beginning January 1, 2009. The required contribution would have been $5,092,774 if paid on January 1, 2009. From that date, the contribution increases at an annual effective rate of 8.15 percent until payment. Therefore, additional required contributions wil accrue until the extended due date for Idaho Powets federal income tax return of September 15, 2010. On that payment date, the minimum required contribution is expected to be $5,822,145. 8. Within the required $5,822,145 pension contribution total, $46,078 has been reimbursed from a separate IDACORP subsidiary, IDACORP Financial Services ("IFS"), thereby reducing the amount to $5,776,067. The allocated portion of this reduced amount to Idaho retail customers is $5,416,796. APPLICATION - 4 9. As described more fully in the testimony of Ms. Jeannette C. Bowman that accompanies this Application, the Company is requesting recovery through retail rates for the Idaho-allocated portion of its 2010 cash payments toward the defined benefit pension expense using a one-year amortization period of June 1, 2010, through May 31,2011. 10. At this time, Idaho Power is seeking only the Commission's approval of $5,416,796 in pension cost recovery over a one-year amortization period that wil allow for rate recovery contemporaneous with the Company's 2010 cash contributions to the defined benefit pension plan. Approval of defined benefit pension cash contributions in prospective years wil be included in future revenue requirement filings. The appropriate amortization period for recovery of prospective defined benefit pension cash contributions wil also be decided in future revenue requirement filings. II. IMPACT ON INDIVIDUAL RETAIL RATES 11. As more fully described in the testimony of Ms. Bowman, the Company proposes to proportionately divide the Idaho-allocated share of the 2010 cash pension payments by total Idaho base revenues forecast for the period June 2010 through May 2011. In addition, the Company requests that each retail rate class also be allocated its share of pension cost recovery responsibilty by its proportional contribution to the total forecast Idaho base revenues. 12. The Company proposes to recover the 2010 contributions to defined benefi pension expense as an equal percentage rate applicable to all base biling components (except Service Charges for all Residential and Small General Service Schedules) within each individual retail rate schedule. This approach wil maintain the APPLICATION - 5 same relationships among billng components within each rate schedule as approved by the Commission in its Order No. 30829, effective June 1, 2009, which established the Company's most recent base rates. Applying an equal percentage rate to all biling components does not address the Company's ongoing efforts to move all biling components closer to cost of service. However, the Company wil postpone addressing those disparities until its next general rate case. In the meantime, by not limiting the application of pension costs to only the energy component of the bil, it wil ensure cost recovery is not disproportionately assigned to high load-factor customers. Attachment No. 1 to this Application is a copy of Idaho Powets proposed tariff sheets and the Company's Calculation of Revenue Impact documents detailng the impact of 2010 pension cost recovery on each billng component within each retail class schedule. iv. ACCOUNTING PROVISIONS 13. To qualify for deferral, SFAS 71 requires that a previously incurred cost satisfy two criteria: (1) it must be "probable that future revenue in an amount at least equal to the capitalized cost wil result from inclusion of that cost in allowable costs for rate-making purposes" and (2) "future revenues wil be provided to permit recovery of the previously incurred cost rather than to provide for expected levels of similar future costs. . .." The use of a balancing account that tracks the difference between cumulative cash contributions and amounts collected in rates provides evidence for the Company to conclude that it expects future revenue equal to the amount capitalized. Recovery that is derived from amortization of the deferred cash contributions provides recovery of previously incurred costs and satisfies the second requirement. APPLICATION - 6 14. Commission Order No. 31003 states: We authorize the clarified treatment of defined pension expense as detailed (through a balancing account) . . .. We find this approach satisfies the SFAS 71 requirements. . .. It is further ordered that the Company's cash contributions to its defined benefit pension plan wil be deferred and the amortization of those costs wil be reflected in rates. . . . 15. The Company's recommended accounting entries to be utilzed within the balancing account approach to deferred pension cost recovery are included in Attachment NO.2 to this filng. They include: (1) how the regulatory asset is created and amortized for the Idaho portion of the Company's pension plan contributions, (2) how cost recovery (and matching expenses) attributable to the pension cost amortization are recorded, and (3) how carring charges are recorded. V. MODIFIED PROCEDURE 16. Idaho Power believes that a hearing may not be necessary to consider the issues presented herein and respectully requests that this Application be processed under Modified Procedure, i.e., by written submissions rather than by hearing. RP 201, et seq. However, in support of this Application, Idaho Power has contemporaneously filed the direct testimony of Ms. Jeannette C. Bowman. The Company stands ready to present her testimony in support of this Application in a technical hearing if the Commission determines such a hearing is required. VI. COMMUNCIATIONS AND SERVICE OF PLEADINGS 17. This Application wil be brought to the attention of Idaho Powets customers by means of both a press release to media in the Company's service area and a customer notice distributed in customers' bils, both of which are included herein as Attachment NO.3. The customer notice wil be distributed over the course of the APPLICATION - 7 Company's current billng cycle, with the last notice being sent on April 21, 2010. In addition to describing this filing, these customer communications also describe proposed rate changes associated with the Fixed Cost Adjustment ("FCA") and the recovery of Advanced Metering Infrastructure ("AMI") expenses. Idaho Power wil also keep its Application, testimony, and exhibits open for public inspection at its offices throughout the state of Idaho. The above procedures are deemed by Idaho Power to satisfy the Rules of Practice and Procedure of this Commission; however, the Company wil, in the alternative, bring the Application to the attention of its affected customers through any other means directed by this Commission. 18. Communications and service of pleadings with reference to this Application should be sent to the following: Lisa D. Nordstrom Donovan E. Walker Idaho Power Company P.O. Box 70 Boise, Idaho 83707 Inordstrom((idahopower.com dwalker((idahopower.com Tim Tatum Greg Said Idaho Power Company P.O. Box 70 Boise, Idaho 83707 ttatum((idahopower.com gsaid(Çidahopower.com Vi. REQUEST FOR RELIEF 19. Idaho Power respectfully requests the Commission approve revised schedules of rates for electric service as described above. The Company further requests the Commission use its best efforts to provide a final Order on or before May 25, 2010, so revised retail rates including pension recovery can go into effect on June 1, 2010. APPLICATION - 8 DATED at Boise, Idaho, this 15th day of March 2010. ~fJ.tf~išNordstro . Attorney for Idaho Power Company APPLICATION - 9 BEFORE THE IDAHO PUBLIC UTiliTIES COMMISSION CASE NO. 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IPC-E-10-08 IDAHO POWER COMPANY ATTACHMENT NO.2 ACCOUNTING ENTRIES DEFINED BENEFIT PENSION PLAN JOURNAL ENTRIES Debit Credit Entry 1 228321 Accumulated provision P&B - accrued pension liability aaa.aa 131XXX Cash aaa.aa (To record a contribution to IPC's pension plan) Entry 2 1823XX Other regulatory assets - deferred cash contribution bbb.bb 182321 Other regulatory assets - SFAS 87 deferral bbb.bb (To record a regulatory asset for the Idaho portion (after IFS reimbursement) of pension plan contribution) Entry 3 142XX Customer accounts receivable ccc.cc 44XXXX General Business Revenue ccc.cc (To record revenues attributable to the pension amortization) Entry 4 926200 Employee pensions & benefits - Idaho pension expense ccc.cc 1823XX Other regulatory assets - deferred cash contribution ccc.cc (To record amortization of the pension contributions to match revenues) Entry Sa 1823XX Other regulatory assets - deferred cash contribution ddd.dd 421XX Miscellaneous nonoperating income ddd.dd (To record the carrying charge on deferred pension contributions) Entry 5b431XXX Other interest expense eee.ee 254XXX Other regulatory liabilties - accrued cash contribution eee.ee (To record the carrying charge on recovery in excess of cumulative pension contributions)