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Home My WebLink About20111220Comments.pdfWELDON B. STUTZMAN DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTILITIES COMMISSION PO BOX 83720 BOISE, IDAHO 83720-0074 (208) 334-0318 IDAHO BAR NO. 3283 R El\ìF 201 ! OEe 20 Pr'1 2: 55 tJ Street Address for Express Mail: 472 W WASHINGTON BOISE ID 83702-5918 Attorney for the Commission Staff BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF ) IDAHO POWER COMPANY TO EXTEND AND ) MODIFY ACCOUNTING ORDER TO ) AMORTIZE ADDITIONAL ACCUMULATED ) DEFERRD INCOME TAX CREDITS (ADITC). ) ) ) CASE NO. IPC-E-1l-22 COMMENTS OF THE COMMISSION STAFF COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the Notice of Modified Procedure and Notice of Comment Deadline issued in Order No. 32411 on December 15,2011, submits the following comments. BACKGROUND On November 2,2011, Idaho Power Company filed an Application requesting an Order "(1) authorizing the Company to extend its ability to amortize additional accumulated deferred investment tax credits (ADITC) through December 31,2013, and (2) approving a one-time adjustment applied in 2011 to a sharing provision of the stipulation approved in Order No. 30978 to allow one-half of the Company's share of the Idaho jurisdictional retur on equity (ROE) in excess of 10.5 percent to be provided as a customer benefit in the form of a reduction in rates or an offset to amounts that would otherwse be collected from rates." Application, p. 1. ADITC STAFF COMMENTS 1 DECEMBER 20,2011 are income tax benefits the Company receives based on the level of plant investment in previous years. ADITC is normally amortized over the book life of the associated plant investment and is used to reduce customer income tax expense during the amortized period. Order No. 30978 was issued January 13,2010 in Case No. IPC-E-09-30 approving a stipulation that specifies Company use of ADITC during 2009,2010 and 2011, including a potential for revenue sharing in those years. Idaho Power's Application stated it is necessary to have a signed settlement agreement regarding its proposal on or before December 31, 2011, in order to faciltate the timely recording of the Company's 2011 earings for financial reporting puroses. The Company requested that its Application be processed by Modified Procedure, and also proposed that a workshop be convened at the offices of the Commission on November 30,2011, so that interested paries could discuss the Company's proposaL. The Commission subsequently issued a Notice of Application, Notice ofIntervention Deadline, and Notice of Public Workshop to process the Company's Application. On November 30, 2011, the paries convened a workshop to discuss Idaho Power's Application. On December 12,2011, a Stipulation signed by Idaho Power, Micron Technology, and Commission Staff was fied with the Commission. STAFF REVIEW Staff analyzed what it believed to be the pros and cons of extending the ADITC/Revenue Sharing mechanism. Benefits from the existing agreement have accrued to customers, the Company and shareholders. Generally rating agencies and shareholders view the earnings stabilty provisions of the past agreement as positive. To extend the benefits into the future, Staff believed there should be greater value received by customers. Discussions around the triggers and the percentage of sharing were held between the parties. Staff believes the proposed Stipulation provides for the greatest level of sharing to benefit customers that could be achieved. Sharing under the existing mechanism wil occur for 2011 as a result of one-time tax benefits. The tax benefits improved cash flow and earnings. When the 2011 books close, the actual amount of sharing will be known and a filing wil be made to provide 50% of the earings above 10.5% ROE to customers, estimated to be $20 milion. The proposed Stipulation in this case provides for additional benefits to be provided to customers. The Company wil set aside STAFF COMMENTS 2 DECEMBER 20, 2011 75% of its share of the 2011 year-end ROE in excess of 10.5% as a customer benefit in the form of an offset in the pension balancing account. This estimated $15 milion is a benefit customers wil not receive without the proposed Stipulation and it reduces amounts that would otherwse be collected in customer rates. For the years 2012, 2013 and 2014 the proposed Stipulation provides for greater sharing provisions that benefit customers. For actual year-end eared returns greater than 10% up to and including 10.5%, the earings will be shared equally between Idaho customers and the Company. The customer share of this benefit will be received as a reduction to rates at the same time as the Power Cost Adjustment (PCA) becomes effective. Under the existing mechanism, sharing does not begin until a ROE of 10.5% is achieved. Also under the proposed Stipulation, Idaho earings above 10.5% ROE wil be shared, with the customers receiving 75% of the earings applied as an offset in the pension balancing account. This wil provide customers an additional 25% of sharing potential. The proposed Stipulation also benefits Idaho Power because the ADITC provisions help level earings. The proposed Stipulation extends the mechanism through December 31, 2014. For the years 2012, 2013 and 2014 the proposed Stipulation permits the Company to utilze ADITC when actual Idaho year-end eared ROE falls below 9.5%. Up to $45 milion may be used over the three-year period. The 9.5% ROE trigger level and the $45 milion cap are the same as the current mechanism. A new term in the proposed Stipulation adjusts the ADITC and the ROE thresholds if the Company seeks a general rate case rate change effective before Januay 1,2015. If a new ROE level is established by the Commission in a general rate case effective before January 1,2015, the thresholds will be automatically adjusted proportionally on a prospective basis. The proposed Stipulation uses a 10% ROE as the ROE level for the threshold adjustments. The new ADITC threshold wil be 95% of the newly established ROE. The sharing thresholds wil be set at the new ROE for 50% sharing and at 105% of the new ROE for 75% sharing. Staff believes this provision is a serious deterrent for Idaho Power when evaluating when to file a general rate case. STAFF COMMENTS 3 DECEMBER 20,2011 STAFF RECOMMENDATION Staff believes the proposed Stipulation provides benefits to customers that would not have been received without it. Staff recommends the Stipulation be approved. Respectfully submitted thisiÓ~ day of December 2011. Q~ Weldon B. Stutzman Deputy Attorney General Technical Staff: Terri Carlock i:umisc:commentsipceI 1.22wstc comments STAFF COMMENTS 4 DECEMBER 20, 2011 CERTIFICATE OF SERVICE I HEREBY CERTIFY THAT I HAVE THIS 20TH DAY OF DECEMBER 2011, SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO. IPC-E-11-22, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWING: LISA D NORDSTROM JASON B WILLIAMS IDAHO POWER COMPANY PO BOX 70 BOISE ID 83707-0070 E-MAIL: InordstromCiidahopower.com jwiliams(ßidahopower .com PETER J RICHARDSON GREGORY MADAMS RICHARDSON & O'LEARY PO BOX 7218 BOISE ID 83702 E-MAIL: peter(ßrichardsonandolear.com greg(ßrichardsonandoleary.com RICHARD E MALMGREN SR ASST GEN COUNSEL MICRON TECHNOLOGY INC 800 S FEDERAL WAY BOISE ID 83716 E-MAIL: rmalmgren(ßmicron.com TIMOTHY E TATUM IDAHO POWER COMPANY PO BOX 70 BOISE ID 83707-0070 E-MAIL: tttum(ßidahopower.com DR DON READING 6070 HILL ROAD BOISE ID 83703 E-MAIL: dreadingCimindspring.com THORV ALD A NELSON FREDERICK J SCHMIDT BRIAN T HANSEN MARY V YORK HOLLAND & HART LLP 6380 S FIDDLERS GREEN CIR STE 500 GREENWOOD VILLAGE CO 80111 E-MAIL: tnelson(ßhollandhar.com fschmidt(ßhollandhar.com bhansen(ßhollandhart.com myork(ßhollandhar.com Inbuchanan(ßhollandhar.com ~.~ SECRETARY CERTIFICATE OF SERVICE