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HomeMy WebLinkAbout20130716Application.pdfPeter J.Richardson ISB #3195 Gregory M.Adams ISB #7454 RICHARDSON ADAMS,PLLC 515 N.27th Street Boise,Idaho 83702 Telephone:(20$)93$-2236 Fax:(20$)938-7904 peter@richardsonadarns .corn gregrichardsonadams.corn Attorneys for the J.R.Simplot Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER Of THE )CASE NO.IPC-E-13-11 APPLICATION OF THE J.R.SIMPLOT ) COMPANY TO PURCHASE AND )APPLICATION AND REQUEST TO ASSUME OWNERSHIP Of CERTAIN )DETERMINE PRICE AND REQUEST IDAHO POWER OWNED FACILITIES )FOR MODIFIED PROCEDURE AND TO SET A PURCHASE PRICE ) THEREFORE COMES NOW the J.R.Simplot Company (“Simplot”)and pursuant to Rule 52 of the Rules of Procedure of the Idaho Public Utilities Commission (“Commission”)and pursuant to Idaho Code §6 1-322,and applies for the approval of its purchase and acquisition of certain assets owned by the Idaho Power Company (“Idaho Power”or “Company”)that are located at Simplot’s potato processing facility at Caidwell,Idaho (the “Plant”)and to set a price for said purchase. In support of this Application,Simplot respectfully submits the following: Idaho Power provides electrical service to Simplot pursuant to Idaho Power Rate Schedule 19.Some of the service is provided with Facilities Beyond the Point of Delivery (“Company Owned Facilities”)in the Plant.The Company Owned Facilities at issue in this matter are identified on the spread sheet attached hereto as Exhibit One.Exhibit One is an inventory of each individual Company Owned Facility under discussion,its age,initial 1 2:7 •-i’.-’’-,- investment amount,and remaining book value,if any. Simplot is closing the Plant and is in the process of constructing a modem state of the art potato processing facility immediately adjacent to the existing Plant.As part of the process of closing the Plant,Simplot has offered to purchase some (listed on Exhibit 1)of the Company Owned Facilities at a price equal to net book value minus overpayments made on fully depreciated Facilities over the years.The Company and Simplot agree on the calculation of the net book value of the facilities that Simplot wants to purchase at approximately $119,725. Simplot has calculated the overpayment it has made to the Company at $33,815.Simplot therefore offered to purchase the Company Owned Facilities listed on Exhibit 1 for a price of $85,910.A copy of Simplot’s offer to purchase is attached at Exhibit Two.’ Prior to sending the offer letter to Idaho Power,Simplot and the Company engaged in several lengthy meetings in an attempt to arrive at a mutually agreeable purchase price. However,the parties were unable to agree on a price.Idaho Power offered to sell the facilities at a price of $272,928.Attached as Exhibit Three is Idaho Power’s offer showing how it arrived at a price over twice the net book value of the facilities.Regardless,however,of the value Simplot placed on the facilities or the value Idaho Power places on the facilities,the ultimate decision- maker for determining the value is this Commission.In Order No.32426,in Idaho Power’s last general rate case,the Commission made clear: We are persuaded by the testimony offered by the ICIP and other witnesses that customers ought to be provided with an option to purchase distribution facilities dedicated to their specific use and located on their premises.The Company conceded in its rebuttal testimony that customers ought to be able to purchase certain facilities in certain situations.In particular,if a customer wants to bear the responsibility of operating,maintaining and replacing such facilities,then we believe there ought to be an opportunity for the customer to purchase the assets on a case-by-case basis.Pursuant to Note that although a date was inadvertently left off the letter,it was sent to the Company on February 25,2013. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-1 3- PAGE 2 Idaho Code 6 1-328,a proceeding to determine the value of such facilities would be necessary.2 $implot has informed Idaho Power that it is willing to bear the responsibility of operating, maintaining and replacing its facilities and hence is in full compliance with the Commission’s directive. While the Commission’s order provides that a proceeding is required for determining the value of the facilities to be purchased,there is ample Commission precedent providing direction to the parties as to price when a customer seeks to purchase Company Owned Facilities. SUN VALLEY VILLAGE In the Sun Valley Village case3 Sinclair Oil Corporation (the owner of the Sun Valley Resort)purchased Company Owned Facilities Located inside the Sun Valley compound for book value plus the cost of Idaho Power’s necessary engineering work.The Commission’s order approving the sales price of $135,533 did not specifically identify that value as book value. However,Staffs Comments in that docket went into great detail as to how the purchase price was derived: Idaho Power is proposing to sell the Sun Valley Company the aforementioned facilities for $135,533,which is book value.The price is revenue neutral from Idaho Power’s point of view,and Idaho Power will realize neither a gain nor a loss on the sale.4 The Commission recognized,in the Sun Valley case,that the sale of Company Owned Facilities will result in reduced revenue due the termination of facilities charge payments by the Sun Valley Company.It ruled however,that even though the sale resulted in reduced income to Idaho Power Company,the amount of lost revenue due the sale was de minimus.It therefore 2 Docket No.IPC-E-1 1-08,at page 32.Emphasis provided. In the Matter ofthe Joint Application oftdaho Power and Sinclair Oil Corporation for the Sale and Transfer ofCertain Utility’Owned Facilities Case No.IPC-E-05-16 Order No.29864 ‘Staff Comments,Docket No.IPC-E-05-16 p 5. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 3 concluded that a de minimus loss of revenues is,in fact,a neutral event that is not in contravention of Idaho Code §6 1-328: Staff calculated that Idaho power will experience a net decrease in operating income of approximately $4,184 per month,or $50,208 per year.This reduction in annual revenue is de minimus (approximately 0.0096%of its jurisdictional revenue).5 Based on its finding that $50,208 annual lost revenues is a de minimus event,the Commission concluded that: Based upon our review of the Application and Staffs comments,we approve the sale and transfer of the identified distribution facilities.We find that this transaction meets the requirements of Idaho Code §6 1-328 The book value of the Company Owned Facilities at Simplot’s Plant,at issue in this case,is actually significantly less than the book value of the Sun Valley Village Company Owned Facilities ($1 19,000 versus $135,000).In addition,the Company’s overall revenues have substantially increased in the intervening eight years making the percentage reduction in annual revenues much smaller than the de minimum 0.0096%reduction caused by Sun Valley’s purchase of the Company Owned Facilities in that case. RAFT RIVER COOPERATIVE In the Raft River case,6 Idaho Power sold one and a half miles of distribution line to Raft River at book value.The Commission noted that Idaho Power would lose unspecified income due to the sale because Raft would be free of paying FERC-established wheeling charges on the line once the purchase was finalized.Despite that fact the Commission stated: Staff reviewed the Company’s documentation regarding the valuation [book value]of the property to be sold to Raft River and “found the valuation to be reasonable.”Staff believes that,similar to the Commission’s ultimate finding in Case No.IPC-E-00-17, Order No.29864 pp.2 —3. 6 In the Matter ofthe Application of Idaho Power Companyfor Authority to Sell to Raft River Rural Electric Cooperative,Inc.Certain Electric Distribution Facilities Currently Owned by Idaho Power Docket No.IPC-E-09- 13. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 4 “the current proposed sale of the Border 011 Feeder Line is also in the public interest as it better assigns the responsibility to maintain the line to Raft River and its customers served by the line.”7 There was no calculation of the lost revenues experienced by Idaho Power in the Raft River case, just an ultimate finding that the sale “will not have a detrimental impact on the Company’s rates.”8 LEGAL ANALYSIS Pursuant to Idaho Code §6 1-328,an electric utility must obtain approval from the Commission in order to sell or transfer ownership in any distribution (as well as generation and transmission)plant.Section 328 provides: (1)No electric public utility or electric corporation as defined in chapter 1,title 61,Idaho Code,owning,controlling or operating any property located in this state which is used in the generation,transmission,distribution or supply of electric power and energy to the public or any portion thereof,shall merge,sell,lease,assign or transfer,directly or indirectly,in any manner whatsoever,any such property or interest therein,or the operation,management or control thereof,or any certificate of convenience and necessity or franchise covering the same,except when authorized to do so by order of the public utilities commission. (2)The electric public utility or electrical corporation shall file a verified application setting forth such facts as the commission shall prescribe or require.The commission shall issue a public notice and shall conduct a public hearing upon the application. (3)Before authorizing the transaction,the public utilities commission shall find: (a)That the transaction is consistent with the public interest; (b)That the cost of and rates for supplying service will not be increased by reason of such transaction;and (c)That the applicant for such acquisition or transfer has the bona fide intent and financial ability to operating and maintain said property in the public service. The applicant shall bear the burden of showing that standards listed above have been satisfied. Is the transaction consistent with the public interest? Order No.30993 p.2. 8 Id.atp.3. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 5 As Idaho Power will be made whole with Simplot’s payment of book value,minus overpayments,the transaction is in the public interest.furthermore by facilitating the Caldwell Plant’s closure and opening of the new modern facility the public’s interest,as embodied by this Idaho Power customer,will be advanced. Will the cost of and rates for supplying service be increased by the sale? As discussed above,the lost revenue impact is well within the Commission’s de minimus test and therefore a finding that there is no revenue or service impact due to the transaction is more than warranted. Does the purchaser have the bona fide intent and financial ability to operate and maintain said property in the public service? There is no question that the J.R.Simplot Company has the “bone fide”intent to operate and maintain said property.It currently operates and maintains similar property in its many industrial facilities around the world.There also is no question that the J.R.Simplot Company has the “financial ability”to operate and maintain said property. Said facilities will not,strictly speaking,be used in public service as that term is typically used in the public utility context.Because the J.R.Simplot Company is not a public utility,the purchased facilities will be used in Simplot’s new facility or in other industrial sites owned by Simplot.That said,the “public service”requirement has been waived by this Commission in prior proceedings.9 For example in 1993,Idaho Power sold its turbine electric generator in Hailey,Idaho to Longview fiber for use in Longview’s paper mill in Longview,Washington. Clearly moving the generator to Washington State for private use in a paper mill does not meet In the Matter ofthe Application ofIdaho Power Companyfor Authority to Sell its Hailey Turbine Electric Generator IPC-E-92-9. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 6 the requirement to “operate and maintain said property in the public service”in Idaho.In that case the Commission stated: Resolution of this issue depends upon an interpretation of the phrases “bone fide intent,” “financial ability”and “in the public service.”We believe that it was not the intent of the Idaho Legislature,in drafting §61-328,that an electric utility operating in Idaho never be allowed to sell electric generating plant to a purchaser who will ultimately use that plant outside of the State... The Hailey Turbine,for all practical purposes,has been rendered economically obsolete to Idaho Power and its ratepayers.The sale of the turbine should have absolutely no effect on the quality of service customers currently receive.Therefore,we find that the statute does not require that the plant continue to be operated in Idaho Power’s service territory or within the State of Idaho.’° As in the Hailey Turbine Case,the sale of the Company Owned Facilities will have absolutely no adverse impact (either on rates or service)on Idaho Power’s other ratepayers. Furthermore in Idaho Power’s most recent rate case,as quoted earlier,this Commission clearly contemplated the sale of company owned facilities to the customer for the customer’s own private use: We are persuaded by the testimony offered by the ICIP and other witnesses that customers ought to be provided with an option to purchase distribution facilities dedicated to their specific use and located on their premises.The Company conceded in its rebuttal testimony that customers ought to be able to purchase certain facilities in certain situations.In particular,if a customer wants to bear the responsibility of operating,maintaining and replacing such facilities,then we believe there ought to be an opportunity for the customer to purchase the assets on a case-by-case basis.Pursuant to Idaho Code §6 1-328,a proceeding to determine the value of such facilities would be necessary)’ The instant application is wholly consistent with prior Commission precedent and Idaho Code §61-328. PRAYER FOR RELIEF 10 Order No.24676 at p.6 Order No.32426,supra at p.32,emphasis provided. APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 7 WHEREFORE,the J.R.Simplot Company respectfully requests this Commission process this Application under modified procedure without hearing.Should the Commission decide a hearing is required your Applicant stands ready to provide testimony and exhibits in support hereof. RESPECTFULLY SUBMITTED this 16th day of July 2013 RichardyP’> Peter J.Richardson J.R.Simplot Company CERTIFICATE OF SERVICE I hereby certify that on 17th day of May 2013,copies of the foregoing Application of the J.R.Simplot Company was delivered to: Julia Hilton Scott Wright Jean Jewel Lisa Nordstrom Gregory Said Secretary Idaho Power Company Idaho Power Company Idaho Public Utilities Com’n 1221 West Idaho 1221 West Idaho 472 West Idaho Boise,Idaho 83702 Boise,Idaho $3702 Boise,Idaho $3702 Nina Curtis Administrative Assistant APPLICATION OF THE J.R.SIMPLOT COMPANY IPC-E-13- PAGE 8 Peter J.Richardson ISB #3195 Gregory M.Adams 153 #7454 RICHARDSON ADAMS,PLLC 8I JL I 5 515 N.27th Street Boise,Idaho 83702 f Telephone:(208)938-2236 Fax:(20$)938-7904 peter@richardsonandoleary.com greg@richardsonandoleary.corn Attorneys for the I.R.Simplot Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION [N THE MATTER OF THE )CASE NO.IPC-E-13-i’l APPLICATION OF THE J.R.SIMPLOT ) COMPANY TO PURCHASE AND ) ASSUME OWNERSHIP OF CERTAIN ) IDAHO POWER OWNED FACILITIES ) AND TO SET A PURCHASE PRICE ) THEREFORE Exhibit 1;“Facilities Investment —J.R.Simplot Company —Caldwell” FA C I L I T I E S IN V E S T M E N T J R Si m p l o t Co m p a n y - Ca i d w e l l •H ? 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OH 1 PH (1 0 0 - 1 6 6 ) kV A __ _ _ _ _ _ K Tr a n s f o r m e r -O H JP H (1 0 0 - 1 6 6 ) kV A K Tr a n s f o r m e r - O H 1P H ( 1 0 0 - 1 6 6 ) k V A __ _ _ _ K Tr a n s f o r m e r - Pa d m o u n t 3P H (1 1 2 - 1 6 6 ) kV A __ _ _ _ _ Sf 3 8 K Tr a n s f o r m e r - Pa d m o u n t 3P H (1 1 2 - 1 6 6 ) kV A __ _ _ _ K Tr a n s f o r m e r - Pa d m o u n t 3P H (1 6 7 - 4 9 9 ) kV A Sf 3 7 K __ _ _ _ _ Tr a n s f o r m e r - Pa d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A __ _ _ _ _ _ S f 2 8 K — Tr a n s f o r m e r - Pa d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A ST 2 7 K __ _ _ _ _ _ Tr a n s f o r m e r - Pa d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A __ _ _ _ _ Sf 3 3 K __ _ _ _ _ Tr a n s f o r m e r - _ P a d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A Sf 2 9 K Tr a n s f o r m e r - Pa d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A Sf 4 1 K __ _ _ _ Tr a n s f o r m e r - Pa d m o u n t 3P H (5 0 0 - 1 4 9 9 ) kV A . __ _ _ _ _ Sf 3 9 __ _ _ _ ‘l O O A l O O B l O O C 3- 1 0 0 K V A P 3 9 20 1 2 2, 7 2 2 4 7 __ _ _ _ _ Tr a n s f o r m e r - 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Ma p Co m m e n t 3- 5 O K V A ON P1 4 3- 5 O K V A ON P1 4 ON P3 0 Re m a i n i n g Ne w fa c i l i t y YE A R ‘i l W e s h T l e n t Ag e bo o k va l u e ch a r g e 19 8 8 13 0 2 4 25 $ 22 $ 22 . 0 4 19 6 1 61 _ 9 8 5 2 $ - 4. 3 9 19 5 3 13 0 2 6 60 $ - 9. 2 2 27 7 , 8 9 5 . 0 2 $ 11 6 , 1 7 0 $ 43 , 1 7 7 Re m o v e / K e e o KKK To t a l Peter J.Richardson TSR #3195 Gregory M.Adams TSR #7454 RICHARDSON ADAMS,PLLC 515 N.27th Street Boise,Idaho 83702 Telephone:(202)938-2236 Fax:(208)938-7904 peter@richardsonandoleary.com greg(richardsonando1eary.corn Attorneys for the J.R.Simplot Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION E’J THE MATTER OF THE )CASE NO.IPC-E-13-___ APPLICATION OF THE J.R.SIMPLOT ) COMPANY TO PURCHASE AND ) ASSUME OWNERSHIP OF CERTAIN ) IDAHO POWER OWNED FACILITIES ) AND TO SET A PURCHASE PRICE ) THEREFORE Exhibit 2:Letter to Tami White from Don Sturtevant Re:“Facilities Charge Equipment Purchase.” CORPORATE HEADQUARTERS P.O.BOX 27 BOISE,IDAHO 83707-0027 Tami White Manager Rate Design Idaho Power Company 1221 West Idaho Street —Boise,-Idaho-$302---- RE:facilities Charge Equipment Purchase Tami, I truly appreciate the time Idaho Power has taken with regards to our facility-charge equipment.We are in receipt of your analysis for Simplot to buy out the equipment we would like to keep at our new factory in Caidwell. After lengthy analysis with both economic and financial analysis experts,I would like to counter with our analysis of $85,910. We started with the stated book value —on which we both agree is roughly $119,725.However, Simplot has been overpaying for fuily depreciated assets (those older than 31 years)for many years. My experts calculate the total overpayments on those depreciated assets at $33,815 to date. Subtracting the overpayments from the current book value yields our offer price of $85,910. We appreciate the lengths your team has gone to in order to identify potential ongoing costs or revenue impacts after Simplot assumes ownership and responsibility for the facilities.However,we struggle with the concept that Idaho Power is incapable of redeploying or reducing its workforce,in part,to service its facilities located at our CaIdwell Plant.As for the other line items in your list of revenue impacts,the amount seems to be inconsequential to Idaho Power.Our position is supported by the 2005 PUC ruling in the matter of Sun Valley’s purchase of facility charges. I look forward to Idaho Power’s formal response to this letter.In the meantime please feel free to give me a call if you have any questions or concerns.I also make my staff available to respond to any technical questions. Sincerely, Don Sturtevant Jr.,PE Director,Energy J.R.Simplot Company Bringing Earth’s Resources to Life / Peter J.Richardson ISB #3195 Gregory M.Adams ISB #7454 RICHARDSON ADAMS,PLLC 515 N.27th Street Boise,Idaho $3702 Telephone:(208)938-2236 fax:(208)938-7904 peter@richardsonandoleary.corn gre@richardsonandoleary.corn Attorneys for the J.R.Simplot Company BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE )CASE NO.IPC-E-13-___ APPLICATION OF THE J.R.SIMPLOT ) COMPANY TO PURCHASE AND ) ASSUME OWNERSHIP OF CERTAIN ) IDAHO POWER OWNED FACILITIES ) AND TO SET A PURCHASE PRICE ) THEREFORE Exhibit 3:Idaho Power memorandum “Rate 19 Facility Purchase Price.” POWER. An IDACOAPConaflv Idaho Power Company Rate 19 Facility Purchase Price Customer Name Sim plot Company Date Prepared 12/31/2012 Date Presented 2/6/2013 Facility Location Price Caldwell $272,928 Total Sales Price $272,928 Please be advised that the amount stated above is non-binding and subject to change without notice.Final quotes for buy-out of facilities are subject to an asset sales agreement between the Customer and Idaho Power Company, which requires subsequent approval from the Idaho Public Utilities Commission.Any sale of Company assets must be in accordance with both Idaho Power’s Rule M,“Facilities Charge Service”and Idaho Code Section 61- 328. This quote does not include the cost to remove any existing facilities because mixed ownership of facilities is not allowed under Idaho Power’s Rule M.A purchase agreement must contain the purchase and/or removal of all facilities by a mutually agreed upon date. Information contained herein is based upon facilities and purchase price as of the above mentioned preparation date.The sales price will be updated based on the actual date of sale. This data has been prepared for Simplot Company purposes only. Id a h o Po w e r Co m p a n y Ra t e 19 Fa c i l i t y Pu r c h a s e Pr i c e Cu s t o m e r Na m e Si m p l o t Co m p a n y Lo c a t i o n Ca I d w e l l Da t e Pr e p a r e d 12 / 3 1 / 2 0 1 2 Da t e Pr e s e n t e d 2/ 6 / 2 0 1 3 Bu y o u t Su m m a r y Sa l e s pr i c e co m p o n e n t s 1 Ne t bo o k va l u e $1 1 9 , 7 2 5 2 Tr u e up of pa s t le v e l i z e d ra t e of re t u r n $4 0 , 8 5 3 3 Ne a r - t e r m ra t e of re t u r n im p a c t re s u l t i n g fr o m sa l e of as s e t s $2 9 , 1 2 1 4 Ne a r - t e r m op e r a t i o n a l im p a c t re s u l t i n g fr o m sa l e of as s e t s $4 9 , 6 7 0 5 To t a l sa l e s pr i c e be f o r e ta x e s $2 3 9 , 3 6 9 6 Ne t gr o s s up fo r ta x $3 3 , 3 0 3 7 Sa l e s pr i c e af t e r ta x $2 7 2 , 6 7 2 8 Wo r k or d e r cl o s i n g co s t s $2 5 6 9 Sy s t e m pr o t e c t i o n es t i m a t e $0 10 To t a l sa l e s pr i c e $2 7 2 , 9 2 8 Th i s da t a ha s be e n pr e p a r e d fo r Si m p l o t Co m p a n y pu r p o s e s on l y . In f o r m a t i o n co n t a i n e d he r e i n is ba s e d up o n fa c i l i t i e s an d pu r c h a s e pr i c e as of th e ab o v e me n t i o n e d pr e p a r a t i o n da t e . Th e sa l e s pr i c e wi l l be up d a t e d ba s e d on th e ac t u a l da t e of sa l e .