20101202Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03 12
IDAHO BAR NO. 3366
nCt" r: l\f
f\I,,~V L~ ¡ ·
"tn, '0 r¡rc - I PM 4: 54iHìJ vi-
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 TO AMEND )
ACCOUNTING ORDER NO. 30940 )
AUTHORIZING THE DEFERRL OF )
TRANSMISSION COSTS ASSOCIATED WITH )
FERC DOCKET NO. ER06 - 787. )
)
CASE NO. IPC-E-IO-28
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of Record, Donald L. Howell II, Deputy Attorney General, and submits the following
comments in response to Order No. 32110 issued on November 10,2010.
BACKGROUND ,','" "
On October 13,2010, Idaho Power Company fied the present Application to change the
beginning of a three-year amortization period set out in accounting Order No. 30940 (Case No.
IPC-E-09-21) from Januar 1,2011 to January 1,2012. In Order No. 30940 issued October 30,
2009, the Commission authorized the Company to record and defer its unecovered transmission-
related costs that were disallowed in a transmission rate case before the Federal Energy Regulatory
Commission (FERC) in Docket No. ER06-787. In the present Application, the Company also
requests that the Commission approve the deferral amounts as adjusted in the Application.
STAFF COMMENTS I DECEMBER 1,2010
The FERC Proceeding
In March 2006, Idaho Power fied an application with FERC requesting an increase in its
transmission rates subject to FERC's jurisdiction. Iii its fiing, the Company proposed to revise its
Open Access Transmission Tariffs (OATT) 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 facilties for its transmission customers. Order on Initial Decision, 126 FERC ~
61,044 (Jan. 15,2009). The "formula"rate methodology would use financial data reported
anually in the Company's FERC Form 1.
In the FERC proceeding, the paries were able to settle most of the issues but they were
unable to resolve the proper ratemakng treatment of three "Legacy Agreements." Id. at ~ U.
Staing 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 PacifiCorp
jointly own the Bridger facilty. Both companies built and now operate transmission lines from
Bridger to their respective service terrtories. Under the terms of the Legacy Agreements,
PacifiCorp was charged "use of facilty feès" to use Idaho Power's tninsmission facilties until
2025. Id. at ~~ 3-9; Order No. 30940 at 2.
The FERC Administrative Law Judge (ALJ) initially determined and FERC subsequently
affrmed that the Idaho Power charges to PacifiCorp under the Legacy Agreements were
significantly lower than the OATT 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 OATTrates has grown.dver time. ~ at 127. The ALJ found in his
initial order that it was uneasonable for Idaho Power to recover its transmission costs from other
third-pary 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 at2.
In response to FERC's initial decision, Idaho Power took three actions. First, the
Company fied 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
fied 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
STAFF COMMENTS 2,DECEMBER 1,2010
Power fied an application for an accounting order requesting that this Commission authorize the
deferral of unecovered transmission costs that were denied in FERC Docket No. ER06-787. In
July2009 the unecovered transmission costs were approximately $8.084 milion for the period
March 2008 through May 31, 2010. The Company noted in its prior application that ifit is
successful in recovering its transmission costs on rehearng at FERC or by amending its Legacy
Agreements, then the Company "wil reduce the deferral" balance that it may seek to subsequently
recover from Idaho Power customers. Id.
The Commission's Prior Accounting Order
The only comments fied in response to the Company's July 2009 request for an
accounting order from this Commission were filed by the Staff. The Staff noted that the FERC
decision has the effect of reducing the transmission revenue credited to Idaho customers in Idaho
Power rate cases. "With the FERC reconsideration and Legacy Agreement actions incomplete,
Staff believer d at that time) that deferral accounting for these unecovered transmission revenues
is appropriate through May 2010 as requested by Idaho Power. The question whether the deferred
amounts should be recovered from Idaho ratepayers isa matter that should be reserved for a future
proceeding." Order No. 30940 at 4.
In issuing its Accounting Order, the Commission found
it reasonable to grant the Company's request for an Accounting Order
conditioned with Staffs 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, 201 1.
. . . 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 wil, allow Idaho Power to pursue its two other
recovery options at FERC (rehearng and amending portions of the
Legacy Agreements) while deferring, transmission-related, costs/revenues.
Order No. 30940 at 6 (emphasis added).
THE CURRNT APPLICATION
In its curent Application, Idaho Power states that it has amended two of the Legacy
Agreements with PacifiCorp. Idaho Power terminated one of the Legacy Agreements (the
STAFF COMMENTS 3 DECEMBER 1,2010
Restated Transmission Service Agreement - RST A) and replaced the old contract rate with its
higher OATT rate in a new RSTA contract effective June 13,2009. Idaho Power asserts that this
change decreased the estimated deferral balance by approximately $2.81 milion. 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 reports that the amendment to the ITSA contract
decreases the deferral by approximately $2.918 milion. Application at ~ 5; Atch. 3. i
Idaho Power also reports in its curent Application that it found errors in the calculation of
its OATT formula rate for the 2006, 2007 and 2008 test years. "The errors in the OATT 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 of ITS A revenues. . . ."
Application at ~ 7. The, Company also noted that it is in the process of issuing refuds for the
OATT errors. In addition, the errors in the OATT 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 curent deferral balance is $2,064,469. Below is a
summar of the proposed changes to the deferral balance.
DEFERRL ITEM -DEFERRL AMOUNT
Initial Deferral Estimate $ 8,084,251
New RTSA Deferral Change (2,810,178)
New ITSA Deferral Change (2,918,448)
RTSA Revenue Correction ,38,361
,
ITSA Revenue Correction i 30,538
OATT Deferral Correction (360,055)
Total Curent Deferral $2,064,469
Source: Apphcation at 5
The Application states that "Idaho Power re~pectfully requests authorization of the deferral
amount of $2,064,469 of unecovered transmission revenues." Id. at ~ 9.
i In July 2010, FERC approved the paries' settlement that included the rate changes in the ITSA and RTSA contracts.
FERC Docket No. ER09-1335.
STAFF COMMENTS 4 DECEMBER 1,2010
The Company also requests that the beginning of the three-year amortization period shift
from January 1,2011 to January 1,2012. The Company maintains 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 is requesting a postponement in the ,beginning of the amortization period
"(b )ecause the Stipulation does not allow the Company to recover the deferred transmission costs
now. . . ." Id.
STAFF ANALYSIS
Staff acknowledges the efforts of Idaho Power to re-negotiate two of the old Legacy
Agreements to minimize the revenue shortfalls. This process was anticipated and expected by the
Commission when it authorized deferred accounting in Order No. 30940, Case No. IPC-E-09-21.
These actions result in a significant reduction of the deferral amount. Staff has reviewed and
verified these deferral amounts.
Idaho Power also requests a postponement in the beginning amortization date from
Januar 1,2011 to January 1,2012. The Company's rationale for seeking the delay was because
Order No. 30940 was issued after the negotiations leading to the rate stabilty Stipulation in Case
No. IPC-E-09-30 were underway. The Stipulation generally restricts Idaho Power from increasing
its rates during a "moratorium" period ending January 1,2012, Case IPC-E-09-30, Exh. 1 at ~ 5.1.
The Company argues that beginning the amortization period in Januar 201 1 wil prevent the
Company from recovering one year of the three-year deferral amounts.
The Staff opposes moving the staring date of the amortization period. The fiing in Case
No. IPC-E-09-21 was made on July 20,2009. The Company's initial deferral request in July 2009
included a three-year amortization period beginIing June 1,2010. Application IPC-E-09-21 at ~
10. The deferral Accounting Order No. 30940 was issued on October 30, 2009.
The Stipulation on rate stabilty in Case No. IPC-E-09-30 was signed by Idaho Power on
November 6,2009. Despite the rate moratorium, the Stipulation recognizes several exceptions to
the moratorium. However, there is no exceptiönforrecovery of the deferral amounts from Case
No. IPC-E-09:'21 (Exh. 1 at ~ 5.2). Staff maintains the Company must have been fully aware of its
deferral request in IPC-E-09-21 while it was negotiating the Stipulation.
STAFF COMMENTS 5 DECEMBER 1,2010
The following sequence of events ilustrates that the Company did not avail itself of
opportities to modify the amortization period.
Date
July 20, 2009
Event
Company files amortization request in
IPC-E-09-2I
September 3, 2009 Paries first meet to discuss issues in IPC-E-09-30
including rate stabilty
October 30, 2009 Order No., 30940 issued with Januar 1,2011
beginnirig amortization date in IPC-E-09-21
November 6, 2009 Rate Stabilty Stipulation in IPC-E-09-30
signed by Idaho Power
Januar 13,2010 Commission approved Stipulation in Order No. 30978
The Company did not seek reconsideration of the January 2011 sta date in Order
No. 30940. Moreover, Order No. 30940 was issued before the Company signed the Stipulation.
The Commission in Order No. 30940 states: "Finally, 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
wil 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." Staff
notes that the revenue changes subject to deferral are for previous years and up through May 2010.
The transmission revenue estimates were reflected ihi prior Idaho rate cases for corresponding test
years and proforma periods. Rather than requiring the Company to present a detailed analysis to
distinguish retroactive dates compared to going-forward periods (along with any other analysis to
determine recoverabilty), Staff proposes the Commission simply maintain the original
amortization period beginning Januar 1, 201 i. Stat'f believes this provides a sharng of the risks
and cost recovery between the Company and its customers for changes made by FERC when
Idaho Power made its FERC filing to change OATT rates.
In summar, Staff has reviewed the updated deferral amounts, These updates are accepted
by Staff as accurate based on the curentinformation available. Staff recommends acceptance of
these amounts for amortization conditional upon not changing the beginning amortization date. If
STAFF COMMENTS 6 DECEMBER 1,2010
the beginning amortization date is delayed to January 1, 2012, Staff recommends all adjustments
related to periods prior to July 20, 2009 be disallowed from the deferral amount to be recovered
from Idaho customers.
STAFF RECOMMENDATION
Staff recommends the Commission deny the Company's request to postpone the sta of
the amortization period and maintain Januar 1, 20U as the beginning amortization date as
previously ordered in Order No. 30940.
Staff recommends the deferral amount of $2,064,469 be accepted for amortization if the
beginning amortization date of January 1, 2011 is maintained.
Respectfully submitted this j~ f day of December 2010.
Donald L. Ho ell, II
Deputy Attorney General
Technical Staff: Terri Carlock
i:umisc/commentslipceIO.28dhtc comments
STAFF COMMENTS 7 DECEMBER 1,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1ST DAY OF DECEMBER 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-IO-28, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DONOV AN E WALKER
LISA D NORDSTROM
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: dwalker(ßidahopower.com
Inordstrom(ßidahopower .com
COURTNEY WAITES
GREGORYW SAID
MICHAEL J YOUNGBLOOD
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: cwaites(ßidahopower.com
gsaid(ßidahopower .com
myoungblood(ßidahopower.com
PETER J RICHARDSON
GREGORY MADAMS
RICHARDSON & O'LEARY
POBOX 7218
BOISE ID 83702
E-MAIL: peter(ßrichardsonandolear.com
greg(ßrichardsonandoleary.com
DR DON READING
6070HILLRD
BOISE ID 83703
E-MAIL: dreading(ßmindspring.com
C)~.~~SECRETARY
CERTIFICATE OF SERVICE