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Home My WebLink About20110524Reply Comments.pdfRECE\VEO HIDA~POR~ An IDACORP Company DONOVAN E. WALKER Lead Counsel dwalker(âidahopower.com May 24,2011 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-11-06 IN THE MATTER OF THE APPLICA TlON OF IDAHO POWER COMPANY FOR AUTHORITY TO IMPLEMENT POWER COST ADJUSTMENT (PCA) RATES FOR ELECTRIC SERVICE FROM JUNE 1, 2011, THROUGH MAY 31, 2012 Dear Ms. Jewell: Enclosed for filng please find an original and seven (7) copies of Idaho Power Company's Reply Comments in the above matter. (¿ Donovan E. Walker DEW:csb Enclosures 1221 W. Idaho St. (83702) P.O. Box 70 Boise, 10 83707 DONOVAN E. WALKER (ISB No. 5921) JASON B. WILLIAMS Idaho Power Company 1221 West Idaho Street (83702) P.O. Box 70 Boise, Idaho 83707 Telephone: (208) 388-5317 Facsimile: (208) 388-6936 dwalker(cidahopower.com jwilliams(cidahopower.com RECEIVED lOll HAY 24 PM 2: 24 Attorneys for Idaho Power Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-11-06 AUTHORITY TO IMPLEMENT POWER ) COST ADJUSTMENT (PCA) RATES ) IDAHO POWER COMPANY'S FOR ELECTRIC SERVICE FROM JUNE ) REPLY COMMENTS 1,2011, THROUGH MAY 31,2012. ) ) Idaho Power Company ("Idaho Powet' or "Company") respectfully submits the following Reply Comments in response to the Comments filed by the Idaho Public Utilties Commission Staff ("Staff') on May 17, 2011. I. INTRODUCTION On April 15, 2011, Idaho Power filed its annual power cost adjustment ("PCA") Application seeking approval of a total PCA revenue reduction of approximately $40.0 milion, which would result in an average rate decrease to customers of approximately 4.78 percent. On April 21, 2011, the Idaho Public Utilties Commission ("Commission") issued Notice of Application and Notice of Modified Procedure establishing a May 17, 2011, comment deadline and a May 24, 2011, reply comment deadline. Staff filed IDAHO POWER COMPANY'S REPLY COMMENTS - 1 Comments on May 17, 2011, confirming the Company's PCA calculations and recommending the acceptance of the same with the exception of one adjustment. Staff recommends an additional rate reduction of approximately $7.5 milion related to the 2010 return on equity ("ROE") determination associated with the rate case moratorium settlement agreement ("Stipulation"). See Order No. 30978. The Company appreciates Staffs confirmation of its PCA calculations and the recommendation to approve the same. However, the Company respectfully disagrees with Staffs recommendation with regard to the ROE calculation, and respectfully requests that the Commission reject Staffs adjustment in its entirety. II. DISCUSSION The Staffs adjustment of $7,462,104 is based on an incorrect understanding of the accounting treatment related to the Company's actual 2010 pension expense and should be rejected in its entirety. Staff recommends an adjustment to the Company's ROE based on an incorrect understanding of the accounting treatment for the $60 milion cash pension funding that occurred in September 2010. Staff incorrectly assumes that the $60 milion cash pension contribution in 2010 was recognized as an expense in 2010, which in turn resulted in lower earnings and a lower ROE that put the Company into the non-sharing threshold when calculating the ROE earnings test at the end of the year per the Stipulation. Staff argues that the Company made a discretionary contribution in excess of that which was required to the pension, and that the excess payment reduced net income by $33 millon, thus creating "the coincident action of not triggering any sharing with ratepayers." Staff Comments, p. 12. This is absolutely not the case. The Company's actual 2010 pension expense that impacted 2010 Idaho jurisdictional IDAHO POWER COMPANY'S REPLY COMMENTS - 2 earnings was approximately $3.2 milion, not the $60 milion cash contribution assumed to be expensed by Staff. The Company properly followed Commission orders regarding the accounting treatment for pension expense. The $3.2 millon in 2010 pension expense represents seven months of amortization of the $5.4 millon (7/12 x $5.4millon = $3.2 milion) of pension expense approved for recovery by Order No. 31091. Order No. 31003 authorized the Company to establish a "regulatory asset balancing account" for the purpose of tracking the difference between cumulative cash contributions to the pension plan and the amounts recovered in rates. Order No. 31003 requires that "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." Order No. 31003, p. 10. Consequently, until an amount is approved for recovery in rates and amortization begins, the balance is recorded as a Regulatory Asset in the Company's financial reports, and does not affect the Company's jurisdictional ROE calculation in the way portrayed by Staff. In Case No. IPC-E-11-04, the Company requested to begin recovery of the Idaho jurisdictional share of the $60 milion pension cash contribution, less amounts already recovered through rates, on June 1, 2011, and requested a three-year amortization period. On May 19, 2011, the Commission issued Order No. 32248 approving the Company's request as filed. Consequently, the Company wil begin to record the first pension expenses beyond the previously approved $5.4 millon on June 1, 2011. Staff verified the components in the ROE calculation performed by the Company and noted that the earnings on common stock and the common equity at year end used in the calculation agree with the amounts reported in the Company's 2010 10-K report to the Securities and Exchange Commission and Annual Report to Stockholders. Staff IDAHO POWER COMPANY'S REPLY COMMENTS - 3 Comments, p. 11. Based upon the Staffs conclusion that the Company otherwise correctly computed its 2010 Idaho jurisdictional ROE, coupled with the information presented above regarding the actual expense recorded by the Company, Idaho Power requests that the Commission approve its calculated Idaho jurisdictional ROE of 10.37 percent and reject the Staffs $7,462,104 adjustment in its entirety. II. CONCLUSION Staff verified that the Company's PCA calculations as filed are correct. Staff also verified the components in the ROE calculation performed by the Company. Staff's recommended adjustment of $7,462,104 is based on an incorrect understanding and assumption of the accounting treatment related to the Company's actual 2010 pension expense. The Company's actual 2010 pension expense that impacted 2010 Idaho jurisdictional earnings was approximately $3.2 millon, not the $60 milion cash contribution assumed to be expensed by Staff. The Company calculated its jurisdiction ROE correctly. In addition, the Company properly followed the Commission's Orders with regard to accounting for pension expense. Therefore, the PCA rates should be approved as filed. Idaho Power respectfully requests that the Commission reject Staffs proposed adjustment, approve its PCA calculations as filed with its Application, and issue an Order implementing the Tariff Schedule 55 PCA rates as shown in Attachment Nos. 1 and 2 to the Company's Application. DATED at Boise, Idaho, this 24th day of May 2011. &çt(ØL DONOVAN E. WALKER Attorney for Idaho Power Company IDAHO POWER COMPANY'S REPLY COMMENTS - 4 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 24th day of May 2011 I served a true and correct copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the following named parties by the method indicated below, and addressed to the following: Commission Staff Donald L. Howell, II Deputy Attorney General Idaho Public Utilties Commission 472 West Washington P.O. Box 83720 Boise, Idaho 83720-0074 -2 Hand Delivered U.S. Mail _ Overnight Mail FAX -2 Email Don.Howell(cpuc.idaho.gov Industrial Customers of Idaho Power Peter J. Richardson Gregory M. Adams RICHARDSON & O'LEARY, PLLC 515 North 2ih Street P.O. Box 7218 Boise, Idaho 83702 Hand Delivered -2 U.S. Mail _ Overnight Mail FAX -2 Email peter(crichardsonandoleary.com greg(crichardsonandoleary. com Dr. Don Reading 6070 Hil Road Boise, Idaho 83703 Hand Delivered -2 U.S. Mail _ Overnight Mail FAX -2 Email dreading(cmindspring.com c£7uJ~,Donovan E. Walker IDAHO POWER COMPANY'S REPLY COMMENTS - 5