20111215press release.htm

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Idaho Public Utilities Commission

Case No. IPC-E-11-22, Order No. 32411

December 15, 2011

Contact: Gene Fadness [phone], 890-2712

Website:
http://www.puc.idaho.govwww.puc.idaho.gov

Settlement would share earnings with Idaho Power customers

The Idaho Public Utilities Commission will take comments through Dec. 20 on a proposed settlement regarding additional tax benefit amounts to be shared with customers of Idaho Power Company. 

Idaho Power receives income tax benefits based on the level of plant investment in previous years. The accumulated deferred investment tax credits are typically spread over the book life of the associated plant investment and used to reduce income tax expense included in customer rates during that period.  However, as part of the 2010-11 moratorium on base rate increases, the company and other parties approved a settlement that allowed Idaho Power to shore up its earnings by accelerating up to $45 million of investment tax credits at $15 million a year for three years if its return on equity (ROE) falls below 9.5 percent. The settlement further stated that Idaho Power would split 50-50 with customers the portion of earnings 10.5 percent or greater. The customer benefit would be in the form of rate reductions or an offset to amounts that would otherwise be included in customer rates. 

Up until the 2010 agreement, Idaho Power had not been able to earn its authorized rate of return for the previous decade in both its Idaho and Oregon jurisdictions. While the exact amount of the 2011 year-end ROE isn’t known yet, it is above 10.5 percent, creating the sharing opportunity.  Without the one-time tax benefits received in 2011, the 2011 ROE was anticipated to be below 9.5 percent. 

The settlement now before the commission extends the ability of Idaho Power to amortize the credit through Dec. 31, 2014 and make a one-time adjustment to the sharing portion for this year. That adjustment would provide an additional benefit to customers of 75 percent of the company’s share of earnings above 10.5 percent ROE.  The settlement proposes that the customer benefit be used to offset company pension expenses that otherwise be included in customer rates.  The proposed settlement further stipulates that if ROE exceeds 10 percent in years 2012 through 2014, the customers’ 50-50 share will be a reduction applied at the same time as the annual Power Cost Adjustment (PCA) every June 1.  If ROE exceeds 10.5 percent, 75 percent of that excess amount will be shared with customers in the form of an offset in the company’s pension expense account. 

In addition to commission staff and the company, parties participating in the settlement discussions were the Industrial Customers of Idaho Power and Micron Technology, Inc.

In the 2010 order approving the accelerated tax treatment and sharing mechanism, the commission said improved earnings are important to maintain Idaho Power’s ability to finance ongoing plant investments needed to serve customers.  

“The company’s increased financial stability benefits customers by enabling the company to delay rate cases and potentially lower interest costs. It is beneficial to customers and to Idaho Power if the company can enhance its ability to stabilize earnings in the near term, strengthening the company’s position in the financial markets and enabling it to reduce the cost of borrowing funds for operations or plant investment,” the commission said. 

A commission decision must be made by Dec. 31, the final date Idaho Power must record its earnings for 2011. Comments are accepted through Dec. 20 via e-mail by accessing the commission’s homepage at
http://www.puc.idaho.gov/www.puc.idaho.gov and clicking on "Comments & Questions About a Case." Fill in the case number (IPC-E-11-22) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to [phone].

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at
http://www.puc.idaho.gov/www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to the above case number. 

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