20150605final_order_no_33313.pdf

Office of the Secretary
Service Date
June 5,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN )CASE NOS.IPC-E-14-41
POWER AND IDAHO POWER COMPANY )PAC-E-14-11
FOR AN ORDER AUTHORIZING THE )
EXCHANGE OF CERTAIN TRANSMISSION )ORDER NO.33313
ASSETS )
On December 19,2014,PacifiCorp dba Rocky Mountain Power and Pacific Power
(collectively “PacifiCorp”),and Idaho Power Company (together,the “parties”)filed a joint
Application asking the Commission to approve the exchange of certain transmission assets.Over
the past 40 years,the parties have entered into a number of agreements (generally referred to as
“Legacy Agreements”)through which they jointly own and operate the Jim Bridger power plant
and associated transmission assets.1 On October 24,2014,the parties entered into a Joint
Purchase and Sale Agreement (JPSA)and Joint Ownership and Operating Agreement (JOOA)to
largely replace or amend three prior Legacy Transmission Agreements.The purpose of the new
agreements is to address inefficiencies caused by changes in “the regulatory landscape,the Parties’
respective load growth,and investments in system upgrades.”Application at 2-3.The new
agreements would exchange the parties’assets and re-allocate ownership interests and operational
responsibilities.Id.The parties ask the Commission for an Order approving these new
agreements and findings consistent with the requirements set forth in Idaho Code §6 1-328.Id.at
11.
On January 13,2015,the Commission issued a Notice of Application and Notice of
Intervention Deadline in which it granted the previously-filed Petition to Intervene by Industrial
Customers of Idaho Power (ICIP).Order No.33212.No other parties moved for intervention,
and on February 18,2015,the Commission issued a Notice of Modified Procedure.Order No.
33231.ICIP and Commission Staff filed written comments.Idaho Power and PacifiCorp filed a
joint reply.We approve the joint Application as conditioned below.
The Jim Bridger Plant is connected to Idaho Power and PacifiCorp’s transmission system by three 345 kV
transmission lines:(1)the Jim Bridger Three Mile Knoll —Goshen line;(2)the Jim Bridger —Populus —Borah line;
and (3)the Jim Bridger —Populus —Kinport line.Application at 3.
ORDERNO.33313 1
BACKGROUND
In 1969,the parties entered into “a series of agreements for the construction,
ownership.and operation of the Jim Bridger power plant.”Grow Direct at 4.These Legacy
Agreements include the Restated Transmission Service Agreement (RTSA),the Restated and
Amended Transmission Facilities Agreement (RATFA),and the Interconnection and
Transmission Service Agreement (lISA).Application at 2-3.Among other purposes,these three
Legacy Transmission Agreements were intended to move energy from the Jim Bridger plant in
Wyoming to PacifiCorp’s “West Balancing Area”in Oregon,Washington,and California.Id.
Since those agreements were signed,the allocation of the parties’ownership and operational
responsibilities has been rendered inefficient “with regard to each Party’s modern day load-service
and regulatory obligations.”Id.at 2.To address this inefficiency,the parties entered into the
JPSA and JOOA,dated October 24,2014,which would exchange certain transmission assets and
eliminate or amend all prior Legacy Agreements.Id.at 3.
Under Idaho Code §61-328.Idaho Power and PacifiCorp must obtain this
Commission’s approval for their proposed exchange or transfer.The Commission shall approve
the exchange only upon finding that:(a)the transaction is consistent with the public interest;(b)
the “cost of and rates for supplying service will not be increased by reason of such transaction”;
and (c)the applicant(s)have the “bona fide intent and financial ability to operate and maintain said
property in the public service.”Idaho Code §61-328(3).The Commission may condition a
transaction as required by public convenience and necessity.Id.at (4).
THE APPLICATION
The parties ask the Commission to approve their asset exchange according to the
provisions of the JPSA and JOOA,which they say will simplify and modernize their relationship
and be more consistent with culTent regulatory requirements.Application at 4.According to the
parties,the new agreements will improve their relationship by better allocating asset ownership
with load service needs.Id.at 7.Under the three Legacy Transmission Agreements,PacifiCorp
owns two of the three transmission lines connecting the parties’transmission system to the Jim
Bridger Plant;Idaho Power owns one.Id.at 3-4.The parties’new agreements would allocate
ownership in each of the three transmission lines to both Idaho Power and PacifiCorp.Id.at 4.
PacifiCorp would be provided about 1,600 megawatts (MW)of capacity across Idaho Power’s
transmission system.“consistent with the capacity PacifiCorp is provided under the Legacy
ORDERNO.33313 2
Agreements and existing Open Access Transmission Tariff (OATT)service.”Id.Idaho Power
would be provided with capacity ‘on various portions of the existing PacifiCorp transmission
system.”Id.The new agreements would not create any new available transmission capacity.”
Id.at 5.This re-allocation would better align the parties’ownership interests with their current
operational requirements.Id.at 4-5.
Under the JPSA,PacifiCorp would receive ownership in the following substations and
transmission lines to meet capacity needs:
Substations Transmission Lines
Kinport Jim Bridger —Three Mile Knoll —Goshen
Borah Goshen —Jefferson —Big Grassy
Adelaide Midpoint —Kinport
Midpoint Midpoint —Adelaide —Borah #1
Midpoint —Adelaide —Borah #2
Id.at6.
Under the JPSA,Idaho Power would receive ownership in the following PacifiCorp
substations and transmission lines to facilitate its service obligations:
Substations j Transmission Lines
Goshen Kinport —Goshen
Burns Antelope —Goshen
Summer Lake Antelope —Scoville
Jefferson American Falls —Malad
Big Grassy Midpoint —Hemingway —Summer Lake
Walla Walla Walla Walla —Hurricane
Hurricane Jim Bridger —Populus —Borah
Antelope Jim Bridger —Populus —Kinport
Id.
The parties assert the two new agreements will be more consistent with current
regulatory requirements than the Legacy Agreements which use antiquated language and practices
regarding transmission service.Id.at 4-5.The parties indicate that,under the new agreements,
purchases of transmission service will be OATT-based,using current reliability standards and
industry practices,and providing more transparency.Id.at 5,8.
Finally,the parties state the two new agreements will “[clonsolidate and modernize the
ownership and operational provisions of the Legacy Agreements into a single agreement,the
I ‘iJ1IJLI’c 1’L).ii.)L)i
JOOA.”Id.at 8.The parties indicate that,if approved,the new arrangement will replace
approximately fourteen Legacy Agreements and amend and consolidate three other Legacy
Agreements with current OATT service and ownership.”Id.The parties further assert that,under
the JOOA.they:(1)would have more operational flexibility,thus improving reliability;(2)could
“more efficiently operate the transmission system consistent with current regulatory
requirements”;and (3)could “more effectively manage required system upgrades and serve
expected load growth.”Id.
According to the parties,the transaction would be worth about $43 million to each
party “based on the net book value of the assets as of December 31,20l4.’Id.at 9.The parties
summarized the cost of the assets and the applicable depreciation reserve in the following chart:
PacifiCorp Idaho Power
Electric Plant in Service $74,148,876 $63,787,598
Accumulated Depreciation ($30,530,978)($20,522,563)
Net Plant $43617.898 $43,265,036
Id.at 9.The parties believe the asset exchange “benefits both Parties and is in the best interest of
both parties’customers.’Id.The parties request a finding by the Commission that “the costs
and rates of existing electric service in the state of Idaho will not be increased by reason of’the
asset exchange.Id.at Ii.
THE COMMENTS
A.Staff Comments
Staff reviewed the Companies’Application,the JPSA and JOOA (and exhibits
attached thereto),Idaho Power’s Direct Testimony by Lisa Grow and David Angell,and
PacifiCorp’s Direct Testimony by Richard Vail and Gregory Duvall.Staff generally supports the
parties’conclusions about the benefits of the JPSA and JOOA.Staff confirms that the agreements
would re-allocate transmission capacity,and ownership interests on the Jim Bridger transmission
system as indicated in the parties’Application.Staff Comments at 4.Based on its review,Staff
believes that the parties’transaction is consistent with the public interest.Id.
1.Reliability and Operational Benefits
Staff specifically evaluated the benefits of the JPSA and JOOA in the context of
reliability and operation requirements established by the Federal Energy Regulatory Commission
(FERC),the North American Electric Reliability Corporation (NERC),the Western Electric
ORDERNO.33313 4
Coordinating Council (WECC).and the Peak Reliability Coordinator.Ic!.at 5.Staff determined
that the proposed re-allocation of transmission would result in significantly improved reliability.
‘including an enhanced ability to allow each Party to deliver energy during line outage
conditions.”Id.In addition,the asset exchange “would improve alignment with Idaho Power’s
current operational requirements.and reduce the associated transmission expenses.”Id.Staff also
determined the exchange ‘would improve access to adjacent transmission and generation assets
while eliminating some of the additional wheeling charges”to which Idaho Power is currently
subject.Id.at 6.
As to PacifiCorp,Staff indicates that operational benefits include additional firm
delivery rights which would improve PacifiCorp’s ability to deliver power from PacifiCorp East
resources to meet loads in PacifiCoip West.Id.Finally,Staff determined the JPSA would
increase dynamic transfers —firm energy transfers that can be scheduled using a shortened time
frame.Id.The boost in dynamic transfers would improve electric load stabilization within the
hour,increase the pool of available energy services,and reduce the cost of integrating renewable
energy into energy delivery.Id.
2.Avoided Capital Investments
Staff also examined how the asset exchange would affect the need for capital
investment in transmission assets,to comply with reliability and load growth requirements.
Because transmission capital investments are included in rates for retail customers,any reduced or
avoided capital investment would be beneficial to ratepayers.Id.Staff determined the exchange
would enable both parties to reduce or avoid future capital investment.Id.
In particular,Staff found that the exchange would enable Idaho Power to avoid capital
investments to the Antelope to Goshen,American Falls to Malad,and Brady to Antelope
Transmission lines.Id.at 6-7.As to PacifiCorp,Staff was concerned that capital investments
“may be necessary to provide reliable service and accommodate load growth to the PacifiCorp
service area.’Id.at 7 (citing PacifiCorp’s response to ICIP Production Request No.3).However,
Staff believes “that substantial capital costs would be necessary ...if the transmission asset
exchange was not implemented.”Id.Staff thus determined that the reduced capital costs from the
proposed asset transfer would benefit ratepayers.Id.
ORDERNO.33313 5
3.Transmission Capacity Improvements
Staff considered whether the JPSA would require any transmission capacity
improvements.While Staff agrees with the parties that the asset exchange would not,by itself,
create any new available transmission capacity,Staff believes that the parties’planned
improvements under the agreements would result in future transmission capacity improvements.
Id.Staff notes that the parties identified improvements and upgrades between 2014 and 2016,
totaling $33,290,000 for Idaho Power,and $9,648.672 for PacifiCorp.Id.at 8.These upgrades
include replacing the Borah series capacitor,replacing the Kinport series capacitor.and various
improvements to the Goshen to Jefferson segment.Id.Staff indicated it will review the upgrades
listed in the JPSA in more detail in future general rate cases.to ensure they are prudent
investments benefitting Idaho ratepayers.Id.
4.Financial Considerations
Staff evaluated the parties’assertion that the asset exchange “benefits both parties and
is in the best interest of both parties’customers.”See Application at 9.Staff noted that the parties
have not proposed any increase in retail rates resulting from the asset exchange.Staff Comments
at 9.Staff confirmed that maintenance and operation expenses after the exchange would be
similar to those before the exchange,as the parties asserted.Id.at 9-10.Also,Staff confirmed
that the net book values of the parties’exchanged assets would be similar to each other,thus “no
acquisition premium would be paid or included in rates.”Id.Staff thus determined that retail
rates of existing service in Idaho would not be increased by the exchange.Id.
a.Financial Benefits to Idaho Power and Its Retail Customers
As to Idaho Power,Staff determined that the Company’s retail customers “would see a
significant financial benefit from the termination of the various historical legacy agreements .
under the JPSA and JOOA.”Id.at 10.Termination of the Legacy Agreements would increase
Idaho Powefs OATT tariff,resulting in higher transmission revenue,which would serve as a
revenue credit to retail customer rates.Id.at 10-1 1.As proposed,Idaho Power’s retail customers
would not receive the benefits of this revenue credit until Idaho Power files its next general rate
case.Id.at 11.However,Staff recommended that Idaho Power pass the revenue credit on to its
ratepayers when the increase in OATT rate (and associated reduction in revenue requirement)
occurs.Id.Staff proposes that the amount (the difference between revenue calculated using the
old OATT rates from the revenue calculated using the new OATT tariff)be “flowed through the
ORDERNO.33313 6
[Power Cost Adjustment (PCA)]mechanism,beginning when the OATT rates change until the
effective date when it is reflected in base rates.”Id.Alternatively.Staff recommended the
revenue amounts “be deferred in a regulatory account and flow back to customers in the next
general rate case.”Id.
b.Financial Benefits to Paci/lCorp and Its Retail Customers
Regarding PacifiCorp,Staff determined that the Company’s retail customers —like
those of Idaho Power —benefit from the replacement of the various Legacy Agreements (rather
than from the transfer of assets).Staff indicated that PacifiCorp’s wheeling and use-of-facilities
costs would be $20.8 million in 2016,escalating each year thereafter.Id.With the asset
exchange,PacifiCorp’s costs “would start at $17.1 million and there would be no use-of-facilities
costs.”Id.at 12.As proposed.PacifiCorp’s retail customers would not receive the benefits of
these avoided costs until PacifiCorp files its next general rate case.Id.But Staff recommended
the financial benefits be passed onto customers as soon as the OATT rates change,by using “the
[Energy Cost Adjustment Mechanism (ECAM)]mechanism until the changes are reflected in base
rates”through a rate case.Id.Alternatively,Staff proposes that the revenue amounts “be deferred
in a regulatory account,and flowed back to customers in the next general rate case.”Id.
c.Other Financial Benefits
Staff determined that both parties’customers would also benefit from the increased
transparency and administrative flexibility resulting from the asset exchange.Id.Although the
parties have not estimated a specific figure for costs avoided,Staff confirms that the elimination of
the Legacy Agreements (and the activities associated with them)would result in avoided
administrative costs,including time and significant legal expense in interpreting the Legacy
Agreements.Id.
5.StaffRecommendations
In summary,Staff believes that the asset exchange is in the public interest,and makes
the following recommendations:
1.Staff recommended the Commission accept the parties’proposed asset exchange
and find:(a)that it is consistent with the public interest;(b)that the costs and rates of existing
electric service in Idaho will not be increased by reason of the transaction;and (c)that the parties
have a bona fide intent and financial ability to operate and maintain the transferred assets in the
public service.Idaho Code §61-328(3).
ORDERNO.33313 7
2.Staff recommended the Commission order financial benefits to be flowed back to
Idaho Power and PacifiCorp customers via the PCA and ECAM respectively,once the OATT
rates change.Alternatively,Staff recommended that revenue amounts be deferred in a regulatory
account,and flowed back to customers in the next general rate case.
3.Staff recommended the Commission order the parties to file all final documents
pertaining to the asset transfer including:(a)documents related to the true-up at closing;(b)final
journal entries and updated list of parties’common equipment;(c)proposed common transmission
line loss methodology,2 once completed;(d)a yearly filing from Idaho Power detailing the change
in transmission revenue resulting from the change in its OATT tariff and rates (whether filed in
conjunction with the PCA or as a report on a deferral in a regulatory account);and (e)a yearly
filing from PacifiCorp reporting the change in wheeling expenses resulting from the asset
exchange and the change in Idaho Power’s OATT tariff and rates,(whether filed in conjunction
with the ECAM or as a report on a deferral in a regulatory account).Staff Comments at 13.
B.ICIP’s Comments
In its comments,ICIP notes that the parties have initiated a parallel proceeding before
FERC.ICIP Comments at 1-2,4.ICIP urges the Commission to defer action in this case until
after the FERC proceeding is resolved,arguing that a determination by this Commission is likely
to be altered by the FERC proceeding’s outcome.Id.at 2,4.In support of this “likelihood,”ICIP
asserts that other interested parties have opposed the proposed transaction before FERC.Id.at 4.
ICIP acknowledges that the issues before FERC are distinct from the issues here,3 but asserts the
opposition in the FERC proceeding includes concern “that the transaction will significantly
increase Idaho Power’s transmission formula rates without a transmission rate case.”Id.
2 Under the Legacy Agreements,the RTSA outlines how losses are repaid for services provided under the contract,
and defines loss repayment for transmission and generator main step-up transformer losses.Staff reports that the
parties are reviewing options for the loss calculations and repayment options but have yet to determine a common
methodology.Staff Comments at 12.
According to ICIP,the parties —in the FERC proceeding —“must prove that the transaction will meet FERC’s rules
barring discrimination and preferential treatment in the provision of interstate transmission services.”ICIP Comments
at4.
ORDERNO.33313 8
According to ICIP.the possible increase to Idaho Power’s transmission formula rate
would result in “economic benefits accruing to native load retail customers.”Id.ICIP maintains
that such economic benefits Thecessarily impact this Commission’s analysis of whether the overall
transaction”satisfies the requirements of Idaho Code §61-328.Id.
ICIP acknowledges that an increase in overall transmission revenues would “result in a
reduction to native load retail rates.”Id.at 3.However,ICIP contends that a “reduction in retail
rates...could cause the Commission to overlook other aspects of the transaction that are likely to
increase Idaho Power’s retail rates.”Id.at 5 (emphasis original).ICIP suggests the transaction
could lead to “increased costs of transmission upgrades”which,in turn.“could result in increased
rates for native load customers.”Id.at 34 ICIP does not discuss whether this resulting rate
increase would be “by reason of [the]transaction,”as contemplated in Idaho Code §61-328(3)(b).
or instead a more indirect result.5 ICIP concludes that the complexity of the transaction warrants
delay of Commission action “until after FERC has imposed any conditions or restrictions on the
transaction.”Id.
Alternatively,ICIP requests that the Commission condition the transaction’s approval
on an “immediate inclusion of the near-term benefits of the transaction in Idaho Power’s retail
rates.”Id.at 5.ICIP notes,with disapproval,that Idaho Power “proposes not to pass the near-
term benefits of the increased transmission revenues onto its retail ratepayers.”Id.at 6.ICIP thus
asks that the Commission require “the revenue requirement associated with Idaho Power’s
transmission rate revenues be updated to immediately pass the savings onto Idaho Power’s retail
ratepayers.”Id.at 7.
C.Idaho Power and PacfiCorp ‘s Joint Reply
1.Staff’s Recommendation to Flow Benefits Back to Customers when OATT Rates Change
In their joint reply,the parties address Staff’s recommendation that financial benefits
be flowed back to customers through Idaho Power’s PCA and PacifiCorp’s ECAM,respectively,
as soon as OATT rates change.Reply at 3.The parties state that the PCA and ECAM currently
track deviations between the parties’transmission wheeling expenses,“as compared to their
respective normalized levels of third-party transmission expenses included in base rates.”Reply at
‘ICIP argues that the parties’use of net book value (to show that the transaction will not increase rates)ignores this
possibility.ICIP Comments at 3.
ICIP notes that Idaho Power admitted the “costs associated with future upgrades were not included in the revenue
requirement analysis.”ICIP Comments at 5-6 (citing Idaho Power’s Response to ICIP Prod.Req.No.19(d)).
ORDERNO.33313 9
3.Transmission wheeling revenues,the parties assert.“are not related to third-party transmission
wheeling expenses.”Id.“Because neither Idaho Power nor PacifiCorp update[]base rates
annually for changes in transmission rate base and transmission expenses,it is inappropriate to
track only changes in transmission revenues through the parties’respective power cost
mechanisms without a corresponding tracking of changes in transmission costs.”Id.at 4.The
parties note the Commission has agreed that tracking of transmission revenues “cannot occur until
a base level of transmission revenues is established in Idaho Power’s next general rate case.”Id.
(citing Order No.32821 at 13).
The parties further note that Idaho Power’s revenue requirement analysis assumes
FERC will approve its OATT rate computation,which contemplates termination of the Legacy
Transmission Agreements to become effective October 2015.Id.at 5.If FERC does not approve
Idaho Power’s proposed OATT fonnula rate,the result —the parties caution —may be “a lower
OATT rate and under recovery of transmission system costs for Idaho Power”until the next
OATT collection period (beginning October 2016).Id.The parties thus suggest that if the
Commission “wishes to track differences in transmission revenues from some base amount as
proposed by Staff,it should allow for a symmetrical tracking of any increases or decreases.”Id.
2.Staffs Reporting Recommendations
Regarding compliance filings and documentation recommended by Staff,the parties
largely concur.The parties agree to file “all final documents pertaining to the asset transfer,
including the documents relating to the true-up at closing,the final journal entries,as well as the
updated list of the parties’common equipment.”Reply at 5.The parties also agree to submit their
transmission loss allocation methodology to the Commission,once it is completed,for
informational purposes only.Id.at 6.
As to annual filings,Idaho Power agrees to file a report within the first year after
closing showing “the changes in transmission revenues”;PacifiCorp agrees to file a report
showing “the change in wheeling expenses as a result of the asset exchange.”Id.However,the
parties assert that beyond the first year after closing,“the impact of the asset exchange on the
OATT formula rate and wheeling expenses will be more difficult to measure.”Id.Noting that
Idaho Power’s annual OATT formula rate change is publicly available,the parties contend there is
no need for ongoing annual reports.Id.
ORDERNO.33313 10
3.Reply to ICIP’s Comments
Regarding ICIP’s Comments,the parties state that ICIP has had access to “the Parties’
analyses,supporting documentation,and rationale”for the proposed transaction since December
2014.Id.at 7.The parties also note that ICIP actively participated in discovery,requesting and
receiving information and clarification about the transaction from the parties.Id.The parties
contend that nonetheless,“ICIP offered no meaningful analysis,evaluation,or other evidence in
its Comments to support its underlying contention”that the proposed transaction will,or has
potential to,adversely impact Idaho customers.Id.
About ICIP’s request that the Commission defer action,the parties point out that the
JPSA and JOOA,by their own terms,“are only effective and implemented upon [theirj approval
and closing.”Id.at 8.The parties dispute ICIP’s assertion that “significant opposition”has been
voiced in the FERC proceeding,noting that only one party formally protested the transaction,and
in that protest “raised a number of issues that demonstrate its fundamental misunderstanding”of
the transaction,Legacy Agreements,and open access principles.Id.at 8,n.2.Any deferral by
the Commission,the parties contend,“would result in unnecessary delay to the detriment of the
parties who have satisfied their burden under Idaho Code §61-328.The parties thus urge the
Commission to disregard ICIP’s request to defer action as without merit.Id.at 7-8.
As to ICIP ‘s proposal to share near-term benefits of the transaction with customers,the
parties refer to their response to Staff comments proposing the same.Id.at 8.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over Idaho Power and PacifiCorp,and the issues
raised in this matter under the authority and power granted it in Title 61 of the Idaho Code,
specifically Idaho Code §61-129,61-328,and 61-501,and the Commission’s Rules of
Procedure,IDAPA 31.01.01.000 et seq.We have reviewed the record in this case,including the
Application and its attachments,which include Direct Testimony of Lisa Grow,David Angell,
Richard Vail,and Gregory Duvall;the comments of Staff and ICIP;and the joint reply by the
parties.Based on our review of the record,we make the following findings:
1.Idaho Code sS 61-328(3)Requirements Satisfied.Under Idaho Code §61-328,to
obtain Commission-authorization for their transaction,the parties have the burden of showing that:
(1)the parties’proposed transaction is consistent with the public interest;(2)the cost of and rates
for supplying service will not be increased due to the transaction;and (3)the parties have a bona
ORDERNO.33313 11
fide intent and financial ability to operate and maintain their respective properties and assets in the
public service.Idaho Code §61-328(3).We find the parties have established these three
elements,and the results of this asset exchange are fair,just and reasonable.
On our review of the record,we are satisfied rates will not increase as a direct result of
the transaction,and that the parties have demonstrated a bona fide intent and ability to operate and
maintain their properties and assets in the public service.We find that the increased operational
flexibility resulting from the transaction will:(1)ensure more efficient management of system
upgrades;(2)facilitate service of expected load growth;and ultimately (3)improve reliability for
customers.We therefore find the transaction to be consistent with the public interest.
Accordingly,we find the parties have met their burden under Idaho Code §61-328(3),and we
authorize the proposed transaction,subject to conditions discussed below.
2.Deferred Action Unwarranted.ICIP argues that authorization of the transaction
should be deferred pending completion of the parties’FERC proceedings.Although ICIP cites the
relevant statutory provision,ICIP fails to show that the requisite elements were not satisfied.ICIP
suggests the transaction may “result in increased costs of transmission upgrades ...which could
result in increased rates for native load customers.”ICIP Comments at 3.
ICIP further contends that,due to the complexity of the parties’transaction,it is
unclear what effect the outcome of FERC proceedings may have.ICIP Comments at 4.ICIP
suggests it would be mere hypothesis to predict the impact of economic benefits -resulting from
the transaction —to native load retail customers,thus “a ruling on the transaction prior to issuance
of FERC’s determination ...will necessarily be an advisory opinion.”Id.However,ICIP does
not argue that economic benefits to ratepayers somehow represent a rate increase,as proscribed in
Idaho Code §61-328(3)(b).Nor does ICIP specifically assert that the statutory requirement is
unsatisfied.Rather,ICIP raises a general concern about the complexity of the proposed
transaction.See Id.at 3.Transmission upgrades can and will be reviewed for prudency in future
rate cases.Moreover,we are not convinced that the complexity of the transaction or
unpredictability of FERC proceedings warrants delay,Our findings are sufficiently supported by
the record and consistent with the requirements of Section 6 1-328(3).Thus we approve the
transaction subject to the following conditions.
ORDERNO.33313 12
3.Conditions to Transaction’s Approval.We find it appropriate and reasonable to
impose conditions regarding:(a)financial benefits resulting from the exchange;and (b)reporting
requirements.See Idaho Code §6 1-328(4).
(a)Financial Benefits from the Exchange.Both Staff and ICIP recommended the
Commission require the parties to flow financial benefits from the exchange to customers.Staff
Comments at 10-12;ICIP Comments at 5-8.Staff proposed that the benefits be flowed to
customers through the parties’cost adjustment mechanisms (PCA and ECAM),as soon as the
OATT rates change.Staff Comments at 10-12.Staff suggested in the alternative,that increased
“revenue amounts be deferred in a regulatory account,and flow[edj back to customers in the next
general rate case.”Staff Comments at 11.In their reply,the parties noted that this Commission
has found it “reasonable ...to include both transmission revenue and expense differences when
calculating future PCAs,”but has acknowledged that “this cannot occur until a base level of third-
party transmission revenues is established in the Company’s next rate case so that deviations may
be tracked.”Reply at 4,cuing Order No.32821 at 13.
We agree that the financial benefits of the exchange in this case should be flowed to
customers.However,consistent with our prior Order No.32821,6 we find that a base level of
third-party transmission revenues must first be established through a general rate case before
changing the PCA methodology.We also want to be consistent with Order No.32540,in which
we allowed recovery of transmission costs associated with the ratemaking treatment of three
Legacy Agreements in a FERC transmission rate case.
The Commission has wide discretion to establish accounting systems to defer and pass
benefits to customers from discrete transactions.Idaho Code §6 1-524;see Order No.33304.The
Commission also has authority to impose conditions on the transaction in this case.Idaho Code §
6 1-328(4).Thus,we find it appropriate and direct Idaho Power to establish a regulatory deferral
account for transmission revenues resulting specifically from the transaction and its resulting
change in the OATT rates.
The record is not as clear for the treatment of reduced expenses to PacifiCorp
customers.We note that PacifiCorp has not previously deferred transmission costs due to the
Legacy Agreements for future recovery.To further evaluate the reduced wheeling expenses
6 We note that Order No.32821 concerns suggested ongoing changes to the PCA method.The tracking of benefits in
this case relates to this specific transaction and thus does not apply to all other changes in transmission revenues.
ORDERNO.33313 13
associated with this transaction,we direct PacifiCorp to establish a regulatory account deferring
these reduced wheeling expenses.Proper regulatory treatment will be determined in a future rate
case when the details are known.
(b)Reporting Requirements.We direct the parties to file final documents
pertaining to the asset exchange,including:
•documents relating to the true-up at closing;
•the final journal entries;
•the updated list of the parties’common equipment;
•the parties’common transmission line loss methodology,once
completed;and
•a yearly report beginning within the first year after closing,
showing (for Idaho Power)changes in transmission revenues,
and (for PacifiCorp)the change in wheeling expenses
We direct Idaho Power to provide annual reports of the revenues going into the deferral account
ordered herein,and the deferral balance.We also require PacifiCorp to provide annual reporting
of the deferral account for reduced wheeling expenses related to the transaction.Recognizing that
these annual reports are transaction-specific,they will not be required indefinitely.Once the
change in transmission revenues and wheeling expenses are reflected in base rates,the parties may
request that these annual reports no longer be required.
ORDER
IT IS HEREBY ORDERED that Idaho Power and PacifiCorp’s Application for
authority to exchange certain transmission assets is approved subject to the conditions outlined
above.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.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.
ORDER NO.33313 14
DONE by Order of the Idaho Public Utilities Commission at Boise.Idaho this
day of June 2015.
PAUL KJEL DER.PRESIDENT
N iTh
MACK A.REDFORD,COMMISSIONER
-tJL fLk
KRI TINE RAPER.CYMMISS1ONER
ATTEST:
Jtn D.Jewell(J
C6mmission Secretary
O:IPC-E-I 4-4 IPAC-E-14-I Idh3
ORDERNO.33313 15