20110209final_order_no_32177.pdf

Office of the Secretary
Service Date
February 9, 2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY TO AMEND
ACCOUNTING ORDER NO. 30940
AUTHORIZING THE DEFERRAL OF
TRANSMISSION COSTS ASSOCIATED
WITH FERC DOCKET NO. ER06- 787
CASE NO. IPC-I0-
ORDER NO. 32177
On October 30, 2009, the Commission issued Accounting Order No. 30940
authorizing Idaho Power Company to record and to defer its unrecovered transmission-related
revenues that were disallowed in a transmission rate case before the Federal Energy Regulatory
Commission (FERC) in Docket No. ER06- 787.See Case No. IPC-09-21.That 2009
Accounting Order also directed that the Company amortize the unrecovered transmission-related
revenues over a three-year period to begin on January 1 2011. Order No. 30940 at
On October 13, 2010, Idaho Power filed the present Applicationl to change the
beginning of the three-year amortization period from January 1 , 2011 to January 1 , 2012.
Application at ~ 13. The Company also requested that the Commission approve the updated
deferral amounts contained in the Application.
On November 10 , 2010, the Commission issued a Notice of Application and Notice
of Modified Procedure in the present case. Order No. 32110. The Commission invited
interested persons to submit written comments regarding the present Application no later than
December 1 2010, with reply comments due no later than December 8 , 2010. The Commission
Staff was the only party to file written comments and Idaho Power filed timely reply comments.
Based upon our review of the record, Idaho Power s Application in this case is granted in part
and denied in part.
BACKGROUND
A. The FERC Proceeding
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
I Idaho Power initially filed the present Application using the case number from last year s case: No. IPC-09-21.In Order No. 32110, the Commission directed that this case be treated as a new docket: No. IPC-I0-28. SeeOrder No. 32110 at 5.
ORDER NO. 32177
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 ~ 61 044 (Jan. 15 , 2009). The "formula" rate methodology would use
financial data reported annually in the Company s FERC Form 1.
In the FERC proceeding, the parties were able to settle most of the issues but they
were unable to resolve the proper ratemaking treatment of three "Legacy Agreements.Id. at ~
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.2 Both companies
built and now operate transmission lines from 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 s transmission facilities until 2025. Id. at ~~ 3-9; Order No. 30940 at 2.
The FERC Administrative Law Judge (ALJ) initially determined and FERC
subsequently affirmed that Idaho Power s charges to PacifiCorp under the Legacy Agreements
were significantly lower than the OA TT rates Idaho Power proposed to charge other customers
for similar transmission services. This rate "disparity" between the lower rates in the old Legacy
Agreements and the higher OATT rates has grown over time. Id. . at 127. The AU found in his
initial decision that it was unreasonable for Idaho Power to recover its transmission costs from
other third-party transmission customers while the Legacy Agreements contain rates for
PacifiCorp that are now considered below cost. Because its revenue recovery "was locked in" by
the long-term Legacy Agreements , FERC found that Idaho Power must bear the under-recovery
of transmission costs on its own. Id. ~ 129; Order No. 30940 at 2.
In response to FERC's initial decision, Idaho Power took three actions. First, the
Company filed a Petition for Rehearing with FERC. FERC subsequently granted the rehearing
so it could consider the matter in greater detail. Docket No. ER06-787-006. Second, Idaho
Power filed an application with FERC to amend portions of two Legacy Agreements which were
subject to change or re-negotiation. FERC Docket No. ER09-1335-000. Third, on July 20
2009, Idaho Power filed an application for an accounting order requesting that this Commission
2 Idaho Power and PacifiCorp jointly own the Bridger facility.
ORDER NO. 32177
authorize the deferral of unrecovered transmission costs that were denied in FERC Docket No.
ER06-787. IPUC Case No. IPC-09-21.
B. The Commission s Prior Accounting Order
In its prior Application in the 09-21 case, Idaho Power estimated its unrecovered
transmission costs were approximately $8.084 million for the period March 2008 through May
2010. The Company noted in its 09-21 application that if it was successful in recovering its
transmission costs on rehearing at FERC or by amending its Legacy Agreements , then the
Company "will reduce the deferral" request or balance. Id.
The only comments filed in response to the Company s July 2009 request for an
accounting order were filed by the Commission Staff. The Staff noted that the FERC decision
has the effect of reducing the transmission revenue credited to Idaho customers in Idaho rate
cases.With the FERC reconsideration and Legacy Agreement actions incomplete, Staff
believes that deferral accounting for these unrecovered transmission revenues is appropriate
through May 2010 as requested by Idaho Power. The question whether the deferred amounts
should be recovered from Idaho ratepayers is a matter that should be reserved for a future
proceeding." Order No. 30940 at 4.
When it issued the accounting Order, the Commission found
it reasonable to grant the Company s request for an Accounting Order
conditioned with Staff's recommendations. We authorize the deferral of the
unrecovered transmission-related revenues through May 31 , 2010, as
requested by the Company. .
..
We find that an amortization period of three
(3) years is reasonable and that the amortization period should begin on
January 1, 2011.
. . . the Commission specifically reserves the right to determine in a future
proceeding whether Idaho Power may appropriately recover the deferred
amounts from Idaho customers. Granting the requested Accounting Order
will allow Idaho Power to pursue its two other recovery options at FERC
(rehearing and amending portions of the Legacy Agreements) while deferring
transmission-related costs/revenues.
Order No. 30940 at 6 (emphasis added).
THE CURRENT APPLICATION
In its current Application, Idaho Power reported that it has amended two of the
Legacy Agreements with PacifiCorp. Idaho Power terminated one of the Legacy Agreements
ORDER NO. 32177
(the Restated Transmission Service Agreement (RTSA), and replaced the old contract rate with
its OATT rate in a new RSTA contract effective June 13, 2009. Idaho Power asserted that this
change decreased the estimated deferral balance by approximately $2.81 million. Application at
~ 4; Atch. 2. In another Legacy Agreement (the Interconnection and Transmission Service
Agreement (ITSA), Idaho Power increased the old legacy rates to higher OATT point-to-point
service rates on August 19, 2009. Idaho Power reported that the amendment of the ITSA
decreases the deferral by approximately $2.918 million. Application at ~ 5; Atch. 3.
Idaho Power next reported that it found errors in the calculations of its OA TT formula
rate for the 2006, 2007 and 2008 test years. "The errors in the OA TT formula rate overstated the
Company s calculation of additional revenues received as a result of the termination of the
RTSA as well as the calculation of additional ITSA revenues. . ..Application at ~ 7. The
Company disclosed that it is in the process of issuing refunds for the OA TT errors. The errors in
the RTSA and ITSA calculations increased the deferral amount by $38 361 and $30 538
respectively. Id. In addition, the errors in the OA TT rates also caused the Company to
miscalculate the original deferral calculation. Id. at ~ 8. The "net change of the deferral based
on the actual OATT rates in effect is a $360 055 reduction.Id.
The Company calculates that the current deferral balance is $2 064 469, in
comparison to the initial estimate of$8.08 million. Below is a summary of the proposed changes
to the deferral balance.
DEFERRAL ITEM DEFERRAL AMOUNT
Initial Deferral Estimate 084 251
New RTSA Deferral Change 810 178)
New ITSA Deferral Change 918 448)
RTSA Revenue Correction 361
ITSA Revenue Correction 538
OATT Deferral Correction (360 055)
Total Current Deferral 064 469
Source: Application at 5
Idaho Power respectfully requests authorization of the deferral amount of $2 064,469 of
unrecovered transmission revenues.Id. at ~ 9.
3 In July 2010, FERC approved the parties' settlement that included the rate changes in the ITSA and RTSA
contracts. FERC Docket No. ER09-1335.
ORDER NO. 32177
The Company also requested that the beginning of the three-year amortization period
shift from January 1 2011 to January 1 2012. The Company maintained that prior to receiving
the Commission s accounting Order No. 30940, Idaho Power began settlement discussions "and
entered into a stipulation committing that it would not file a general revenue requirement case
which would result in a general rate adjustment to become effective prior to January 1 , 2012.
Id. at ~ 10. The Company requested a postponement in the beginning of the amortization period
(b Jecause the Stipulation4 does not allow the Company to recover the deferred transmission
costs now. . . .Id. (footnote added).
COMMENTS
A. Staff Comments
Staff commended the Company for its efforts to reduce the deferral amounts from
about $8 million to approximately $2 million. In particular, Staff noted that the re-negotiation of
the two Legacy Agreements significantly minimized the revenue shortfalls in the deferral
accounts.
Staff opposed the Company s request to postpone the beginning of the amortization
period from January 1 , 2011 to January 1 , 2012, for two reasons. First, while Staff
acknowledged that the Company began negotiating the Stipulation and the rate moratorium in
Case No. IPC-09-, Staff took issue with the implication that the Company entered into the
Stipulation prior to the issuance of the Commission s Accounting Order No. 30940. Staff noted
the deferral Accounting Order No. 30940 was issued October 30 , 2009, but the Company signed
the Stipulation on November 6, 2009. Staff Comments at 5. Staff also observed that the
Stipulation contained several exceptions to the rate moratorium. However, there is no exception
for recovery of the deferral amounts from Case No. IPC-09-21 (Exhibit 1 at ~ 5.2).
Staff noted that the Company s initial deferral request was filed in July 2009 and
proposed a three-year amortization period beginning June 1 2010. Id.Application IPC-09-
at ~ 10. Staff maintained "the Company must have been fully aware of its deferral request in
IPC-09-21 while it was negotiating the Stipulation.Id. Moreover, it was the Company that
suggested a three-year amortization period beginning June 1 , 2010 - a period of 18 months
before the end of the Stipulation s rate moratorium.
4 The Stipulation in the Company s last general rate case generally restricts Idaho Power from increasing its rates
during a "moratorium" period ending January), 20) 2, Case No. IPC-O9-, Exhibit I at ~ 5.
ORDER NO. 32177
Second, even after the Commission issued Order No. 30940 setting the beginning of
the amortization period as January 1 , 2011 , the Company did not seek reconsideration of that
Order. Staff asserted that it is simply untimely for the Company to seek to amend the
Commission s Accounting Order a year after it was issued.
In summary, Staff recommended that the Commission approve the deferral amount of
064 469 conditioned upon not changing the beginning of the amortization date. "If the
beginning of the amortization date is delayed to January 1 , 2012, Staff recommends that all
adjustments related to periods prior to July 20, 2009 be disallowed from the deferral amounts to
be recovered from Idaho customers.Id. at 6.
B. Idaho Power Reply
In its reply comments, the Company asserted that Staff's recommendation to not
postpone the beginning of the amortization period "should not be followed (because) it
effectively eliminates any possibility that at least one year of the amortization amount of
unrecovered transmission revenue could be recovered by the Company." Reply Comments at 2.
The Company maintained that the Staff's recommendation not to move the beginning of the
amortization period provides the Company with "no possibility for corresponding rate recovery
(resulting in) a disallowance of at least one year of the amortization expense.Id. at 3.
The Company argued that Staff's recommendation on the amortization period is
inconsistent with Staff's prior comments that "it is reasonable for the Company to track the
unrecovered transmission expenses in a deferral, and that the deferral (account) be subject to a
future ratemaking and recovery determination.Id. The Company maintained that Staff knew as
well as the Company that the initial deferral period set out in Order No. 30940 was "a time
during which the Company is prohibited from seeking inclusion of those potential amounts in
rates. The effect of this (Staff) recommendation is to prematurely disallow a portion of that
potential recovery." Reply at 3. The Company "reiterates its request from both Case No. IPC-
09-21 and this case that a three-year amortization be authorized to coincide with the time when
the deferral could potentially be included in rates.Id.
The Company argued that not moving the amortization period is unlawful because it
denies Idaho Power the opportunity to recover deferred amounts. The Company cited as support
two divided Orders in the PacifiCorp-Scottish Power merger case. Order Nos. 29034 at 12 and
28998 at 2-3. In those two Orders the Commission allowed PacifiCorp to defer "unanticipated
ORDER NO. 32177
and extraordinary high power costs" during a rate moratorium at the time of the energy crisis of
2000-2001. Order No. 29034 at 12 quoting Order No. 28998 at 2-
Idaho Power also takes issue with Staff's recommendation regarding calculation of
the deferral amounts. The Company asserted that Staff is inconsistent between its 09-
comments from 2009 to its current comments in 2010. For example, the Company noted that
Staff stated in the prior case that deferred accounting "is an appropriate, just and reasonable
means" of litigating future recovery of unrecovered revenues, as compared to arguing now "the
revenue change subject to deferral are for previous years and up through May 2010." Reply at
citing Staff Comments in 09-21 at 5; Staff Comments in 10-28 at 6.
The Company also argued that it was "somewhat inconsistent of Staff to both
recognize that the Company has reduced the potential deferral amount from more than $8 million
to just over $2 million but insists" that a portion of the deferral amount will be unrecovered and
disallowed. The Company concluded that an Order "to start the amortization of a deferred
amount with no possibility of inclusion in rates is the equivalent of a disallowance of those
amounts." Reply Comments at 5.
COMMISSION FINDINGS AND DISCUSSION
After reviewing the Application , prior accounting Order No. 30940 and the comments
of the parties, the Company s Application is granted in part and denied in part. First, we are
pleased that the Company has been able to re-negotiate two of its Legacy Agreements. The re-
negotiation of these two Legacy Agreements with PacifiCorp has decreased the total deferral
balance by approximately $5.728 million. As reported by Idaho Power, the revised total deferral
balance is now $2 064 469. This reduction is consistent with the Company s pledge that it
intended to amend two of its Legacy Agreements.
We next turn to the dispute between the Company and Staff about shifting the three-
year amortization period. As outlined above, Staff opposed the Company s request to move the
beginning of the amortization period from January 1 2011 to January 1 2012. Staff generally
objected to shifting the amortization period for two reasons. First, Staff notes that the
Commission s accounting Order No. 30940 was issued before the Company entered into the
Stipulation in its last rate case that generally restricts Idaho Power from increasing its rates until
January 1 , 2012. Second , Staff takes the Company to task for not seeking reconsideration of
5 The cited portions of those two Orders are attached to this memo for your review.
ORDER NO. 32177
Order No. 30940 once the Company should have realized that the first year of the three-year
amortization period would fall within the rate moratorium period.
For its part, Idaho Power asserts that the practical effect of maintaining the
amortization period as directed in our accounting Order No. 30940 would effectively limit the
Company s recovery of the deferral amount to two years of the three-year amortization period.
Reply Comments at 2. The Company maintains that it is unreasonable to not postpone the
amortization period because leaving the amortization period unchanged would deny Idaho Power
an opportunity to recover a portion of its deferral amounts. The Company cites two Commission
Orders from the PacifiCorp-ScottishPower merger case to support its position. In those two
Orders, a divided Commission allowed PacifiCorp to defer "unanticipated and extraordinary high
power costs" arising from the energy crisis of2000-2001 during a rate moratorium period. Order
No. 29034 at 12 quoting Order No. 28998 at 2-3 (Commissioner Hansen dissenting).
At the outset, we find Idaho Power s reliance on the two PacifiCorp Orders
misplaced. As quoted above, those Orders addressed "unanticipated and extraordinary" power
costs during the 2000-2001 energy crises.The transmission costs in this case are neither
unanticipated nor extraordinary. In this case, what was "unforeseen" by Idaho Power was that
FERC would not allow the Company to recover its ordinary transmission-related costs from the
OA TT customers.
However, we are not persuaded by Staff's arguments about keeping the existing
amortization period. More to the point, neither the Staff nor the Company mentioned that FERC
has not ruled on the Company s Petition for Rehearing. Until FERC has ruled on Idaho Power
Petition for Rehearing, there may yet be other developments that would reduce or otherwise
affect the total deferral amount. Consequently, we find it reasonable to not set the beginning of
the amortization period until such time as FERC issues its order on rehearing. Accordingly, we
rescind that part of our accounting Order No. 30940 that the three-year amortization period shall
start on January 1 2011. When FERC issues its order on rehearing, Idaho Power shall advise the
Commission and may renew its request for a starting date for the three-year amortization period.
In addition, the Commission specifically reserves the right to determine in a future proceeding
whether Idaho Power may appropriately recover the updated deferral amount in this case from
Idaho customers.
ORDER NO. 32177
ORDER
IT IS HEREBY ORDERED that Idaho Power Company s Application is granted in
part and denied in part. The deferral balance in this case is updated to be $2 064,469.
IT IS FURTHER ORDERED that Idaho Power shall advise the Commission when
FERC has issued its Order on Rehearing and may then request a starting date for the three-year
amortization of the deferral balance at that time.
IT IS FURTHER ORDERED that although the deferral amounts in this case have
been revised, the Commission expressly reserves the right to examine the lawfulness, prudence
and reasonableness of recovering the recorded deferral amounts from Idaho customers in a future
case.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. IPC-10-
may petition for reconsideration within twenty-one (21) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case. Within seven (7) days after any person has petitioned for reconsideration , any other
person may cross-petition for reconsideration. See Idaho Code 9 61-626.
ORDER NO. 32177
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
qf41
day of February 2011.~AI ~L~11 . KEMPTON PRES ENT
MARSHA H. SMITH , COMMISSIONER
~:
COMMISSIONER
ATTEST:
Commission Secretary
bls/O:IPC-10-28 dh2
ORDER NO. 32177