20140716final_order_no_33076.pdf

Office of the Secretary
Service Date
July 16,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR AN )CASE NO.IPC-E-14-08
ACCOUNTING ORDER )
)ORDER NO.33076
________________________________________________________________________________________________
)
On May 9,2014,Idaho Power Company filed an Application seeking an accounting
order regarding the recovery of $1,884,406.85 for overpayments made by Idaho Power to the
J.R.Simplot Company.Simplot operates a PURPA cogeneration facility at its Pocatello plant.
In February 2006,Idaho Power and Simplot entered into a Power Purchase Agreement (the
“2006 PPA”)whereby Simplot agreed to sell power to the utility over a seven-year period ending
on February 28,2013.See Order No.30028.Under the terms of the 2006 PPA,Simplot was
generally required to deliver no less than 90%of the contracted monthly amount of power and no
more than 110%of the monthly amount (commonly referred to as the “90-110 band”).If the
amount of the delivered power was outside of the 90-110 band,then Idaho Power was required
to adjust (e.g.,lower)the payments to Simplot.
On May 22,2014,the Commission issued a Notice of Modified Procedure inviting
interested persons to file written comments on the Application no later than June 19,2014.Only
the Commission Staff filed written comments.Idaho Power did not file reply comments.
BACKGROUND
After the termination of the 2006 PPA in February 2013,Idaho Power “discovered an
overpayment [to Simplot]had occurred”during the entire term of the expired 2006 PPA.
Application at 2.Apparently,Idaho Power did not adjust the monthly payments to Simplot for
power outside the 90-1 10 band.The parties subsequently began discussions regarding the
recovery of the overpayments made to Simplot.Id.As a result of these discussions,Idaho
Power and Simplot entered into a confidential Settlement Agreement in February 2014.
Under the terms of the Settlement Agreement,Simplot agreed to repay $1,564,503.76
of the $1,884,406.85 that was purportedly overpaid to Simplot.Id.at ¶3.Idaho Power will also
repay to customers the unrecovered balance of $319,903.09 ($1,884,406.85 -$1,564,503.76).Id.
Idaho Power proposed to record the recovery of the overpayments to the benefit of customers
through the annual Power Cost Adjustment (PCA)mechanism beginning in 2015.
ORDER NO.33076
Idaho Power proposed to record the recovery of the overpayments by debiting either
Federal Energy Regulatory Commission (FERC)Account No.143 (Other Accounts Receivable)
for funds to be received,or by debiting FERC Account No.235 (Customer Deposits)and
crediting FERC Account No.555 (Purchased Power)if the funds are already on deposit with the
Company.
The Application also contained two attachments:a confidential “Settlement
Agreement and Release”and a “Confidential Summary”of the Settlement Agreement.Idaho
Power maintained that these attachments “contain information that is a trade secret,privileged or
confidential as described in Idaho Code §9-340 ci seq.and §48-801 et seq.”See Certificate of
Attorney.
STAFF COMMENTS
A.Audit
Staff first verified that the reported overpayment of $1,884,406.85 was correct.In
response to production requests,Idaho Power reported that the overpayments made to Simplot
during the seven-year contract totaled $2,429,438.This amount was subsequently adjusted to
reflect Simplot’s planned maintenance of its cogeneration facility in May and June of every year.
Staff verified that when the May-June planned maintenance events are incorporated into the
pricing methodology,the total overpayment is reduced by $545,031.90 resulting in the reported
overpayments of $1,884,406.85.Staff concurred with the adjusted overpayment amount.
Comments at 3.
Staff also inquired about the internal controls that were presumably in place regarding
the accuracy of the monthly bills and payments made to Simplot.In response,the Company
disclosed that it reviewed all of its other 90-110 band PURPA contracts to ensure that the
contract billing terms were properly applied.The Company reported that the other contracts
were properly paid.The Company also disclosed that it had implemented additional internal
accounting controls to prevent a recurrence of this type of billing overpayment.Staff declared
that the necessary changes implemented by Idaho Power appear to adequately address the past
problem and are intended to prevent future overpayments.Id.
B.The SettlementAgreement
The Confidential Summary describes in detail the manner of the proposed recovery.
ORDER NO.33076 2
Staff noted that the Application and the parties’Settlement Agreement do not request
that the Commission approve the settlement but only request that the Commission issue an
accounting order to implement the confidential settlement.Comments at 4.Although Idaho
Power discovered the overpayments in February 2013,the parties did not execute their
settlement until February 2014.Recovery of the overpayments was not included in the 2014
PCA filing (Case No.IPC-E-14-05)because the utility asserted it did not recover overpayments
during the PCA period of April 2013 through March 2014.Id.Staff commented that the first
recovered payment from Simplot was paid to Idaho Power in April 2014,and thus,will be
reflected in next year’s PCA filing in April 2015.Under the terms of the settlement,Idaho
Power will pay its share ($319,903.09)in one lump sum in next year’s PCA filing.Staff expects
the source of Idaho Power’s contribution will be shareholder funds,not ratepayer funds.Id.
Despite the lack of request to approve the Settlement Agreement,Staff believed “the
Commission has authority to review Idaho Power’s conduct and the settlement.”Id.Staff
concurred in the proposed sharing of the overpayment costs between the parties:Simplot will
pay $1,564,503.76 and Idaho Power will contribute $319,903.09 for a total amount of
$1,884,406.85.Staff stated that Idaho Power bears partial responsibility for the overpayment by
failing to adequately monitor and adjust the contract payments.Id.
C.Recovery of Simplot Overpayinents
“Although Staff supported the agreement between the parties,Staff [opposed]Idaho
Power’s proposed accounting treatment to recover the overpayments.”Comments at 5.In
particular,paragraph 2 of the Settlement Agreement provides that Idaho Power will recover the
overpayments over a term longer than one year.2 Staff took exception to the length of the
recovery period and asserted that Idaho Power should credit the entire recovery ($1,884,406.85)
in the single 2015 PCA year for several reasons.
First,the recovery of the overpayments to Simplot does not necessarily compensate
the same customers that were overcharged when the overpayments occurred over the seven-year
period (2006-2013).Second,Staff noted that a year has already passed since Idaho Power
discovered the overpayments in February 2013,and subsequently entered into the settlement
agreement in February 2014.Finally,Staff noted that requiring the Company to record the full
2 The exact length of the recovery period is considered by the parties to the settlement agreement to be confidential
information.For purposes of this Order we will characterize the recovery period as more than one year.
ORDER NO.33076 3
amount of payments in next year’s PCA will not adversely affect the Company’s financial
position.“The overpayment amount to be recovered from Simplot is 1.2%of the total actual
PURPA expenses as included in the past two PCA filings,and the total amount is less than 1%of
the Company’s net income for 2013.”Comments at 5.Staff declared that Idaho Power’s
“failure to properly compensate Simplot under the 2006 PPA should not excuse the utility from
immediately compensating customers for the overpayments.”Id.
In summary,Staff believes the settlement between Simplot and Idaho Power (as
modified above)is fair and reasonable.Staff recommends that customers be compensated by
Idaho Power in a single year as part of the 2015 PCA case.
COMMISSION FINDINGS
The Commission’s procedural Rule 356 provides that the Commission is not bound
by the parties’Settlement Agreement.IDAPA 31.01.01.356.The Commission will
“independently review any settlement proposed to it to determine whether the settlement is just,
fair and reasonable,and in the public interest or otherwise in accordance with law or regulatory
policy.”Id.
After reviewing the parties’Settlement Agreement,the Application and Staff
comments,we find that Idaho Power overpaid Simplot under the 2006 PPA.As a result,Idaho
Power over collected PURPA power costs from its ratepayers.Based upon the parties’
agreement and Staffs comments,we find that ratepayers should be credited with the recovery of
$1,884,406.85 ($1,564,503.76 from Simplot and $319,903.09 from Idaho Power).Idaho
Power’s contributed share of the recovered funds will be from shareholder funds,not ratepayer
funds.We are pleased the parties were able to settle their differences regarding the recovery of
the overpayments.
While we will not disturb the settlement between the parties,we find it is not
reasonable for Idaho Power to spread the recovery of the overpayments for more than one year.
The recovery of all the overpayments made to Simplot should flow to the benefit of customers in
the single 2015 PCA year.Thus,Idaho Power’s application for a multi-year accounting order is
modified.Idaho Power is authorized to establish the necessary accounting and regulatory
accounts to reflect the return of the overpayments in the 2015 PCA while the settlement provides
recovery of the overpayments from Simplot over a longer period.Idaho Power shall file the
actual initial accounting entries with the Commission Staff.Resolution of this matter brings the
ORDER NO.33076 4
overpayment dispute to a reasonable conclusion,and as modified above,benefits the parties and
ratepayers.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application for an
accounting order to account for the recovery of the overpayments made to Simplot over a period
of more than one year is partially granted as modified above.Idaho Power shall credit the entire
amount of recovered overpayments to ratepayers in the amount of $1,884,406.85 in its 2015
PCA application.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutory Orders previously issued in this Case No.IPC-E-14-08
may petition for reconsideration within twenty-one (21)days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case.Within seven (7)days after any person has petitioned for reconsideration,any other
person may cross-petition for reconsideration.See Idaho Code §6 1-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /4,’
day of July 2014.
PAUL KJELL DER,PRESIDENT
MACK A.REDFORD,COMMISSIONER
L4tL
MARSHA H.SMITH,COMMISSIONER
ATTEST:
si A /I
Jean D Jewell
Commission Secretary
bls/O:JPC-E-I 4O8dh2
ORDER NO.33076 5