20150721notice_of_application_order_no_33340.pdf

Office of the Secretary
Service Date
July 21,2015
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN TUE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION FOR )CASE NO.IPC-E-15-17
APPROVAL OF LONG-TERM )
MAINTENANCE PROGRAM CONTRACT )NOTICE OF APPLICATION
WITH SIEMENS ENERGY,SALE OF SPARE )
PARTS INVENTORY TO SIEMENS ENERGY,)NOTICE OF
AND DEFERRAL OF ASSOCIATED COSTS )MODIFIED PROCEDURE
)
)NOTICE OF HEARING
)
________________________________
)ORDER NO.33340
On June 5,2015,Idaho Power Company (the “Company”)applied to the Commission
for an Order approving the Company’s:(1)long-term program contract with Siemens Energy for
maintenance of the Company’s gas plants;(2)sale and transfer to Siemens of $21.9 million in
spare parts for the Company’s gas plants;and (3)proposed accounting treatment for the
transaction.The Company does not seek to change customer rates at this time.The Company
requests that the Commission process the case under Modified Procedure.
With this Order,the Commission provides notice of the Application,sets deadlines
for interested persons to file written comments about the case,and schedules a technical hearing
for the parties’witnesses to testify before the Commission.
NOTICE OF APPLICATION
YOU ARE HEREBY NOTIFIED that the Company’s Application notes that the
Company owns and operates three natural gas plants in Idaho:the Langley Gulch plant near New
Plymouth,and the Danskin and Bennett Mountain plants near Mountain Home.The Company
presently maintains its plants by contracting with the original equipment manufacturer,Siemens
Energy,to service them on a case-by-case basis.The Company’s current practice is to buy parts
from Siemens before a scheduled maintenance outage.The Company then capitalizes the parts.
During the outage,the existing parts are removed and replaced.They are then retired from the
Company’s books and sent to Siemens’service shop,where they are inspected and repaired.
Once repaired,these “initial spare parts”are returned to the Company,capitalized,and ready for
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340
future use.The Company states that this approach was the most cost-effective way to maintain
its gas fleet until the addition of Langley Gulch.Application at 2-3.
YOU ARE FURTHER NOTIFIED that the Company states that its employees do not
have the necessary technical skills to maintain the three gas plants to the level offered by
Siemens.The Company also learned that no other third-party maintenance providers can provide
services equivalent to those that Siemens has agreed to provide under the long-term program
contract with the Company.These services include scheduled maintenance on the three plants,
including parts and repairs,shipping.service,labor,engineering services,and program
management services.Because Siemens is the original equipment manufacturer for the
Company’s plants and the industry leader in gas plant maintenance,the Company believes its
only alternative to the long-term program contract with Siemens would be to continue to contract
with Siemens on a case-by-case basis for parts and technical support.The Company states that
the long-term program contract will lower overall costs to the Company and its customers by
leveraging Siemens’pool of inventory,outage resources,and technical expertise,and will save
costs over the life of the agreement when compared to the Company continuing to contract with
Siemens under the current case-by-case maintenance approach.Id.at 3-4.
YOU ARE FURTHER NOTIFIED that besides seeking approval of its long-term
program contract with Siemens,the Company also asks the Commission to approve the
Company’s transfer of its current “initial spare parts”inventory to Siemens.The Company
explains that Siemens would remove the inventory after the Commission approves the long-term
program contract,and that the contract price has been reduced to reflect the net book value of the
inventory being transferred to Siemens.Id.
YOU ARE FURTHER NOTIFIED that Idaho Code §6 1-328 governs the sale of this
property.The section provides,in summary,that an electric utility may not dispose of its
property unless authorized to do so by the Commission after a hearing in which the Company
establishes:(1)that the transaction is consistent with the public interest;(2)the cost of and rates
for supplying service will not be increased by reason of such transaction;and (3)the purchaser
has the bona fide intent and financial ability to operate and maintain said property in the public
service.The Company states that these standards are satisfied because the transfer will allow the
Company to return about $21.9 million of older spare parts to Siemens that would otherwise
NOTICE OF APPLICATION
NOTICE OF MODIHED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340 2
have a limited market,and will result in lower overall costs to the Company and its customers.
Further,Siemens has a bona fide intent and financial ability to operate and maintain the parts in
the public interest.Id.at 5-6.
YOU ARE FURTHER NOTIFIED that the Company also asks the Commission to
approve a proposed accounting treatment allowing:(1)the deferral of initiation fees (i.e.,a
prepayment towards Siemens’services under the life of the long-term program contract)to a
regulatory asset to be amortized on a straight-line basis over the length of the contract;(2)the
transfer of the parts’net book value (about $21.9 million subject to true-up at closing)and
associated tax expense (about $1.8 million)to a regulatory asset to be amortized on a straight-
line basis over the length of the contract;and (3)a carrying charge on a portion of the regulatory
asset balance,consisting of the initiation fees and $2.9 million of the initial spare parts that are
not yet included in the Company’s authorized base rate and on which the Company is not yet
earning a return.Id.at 6-7.
YOU ARE FURTHER NOTIFIED that the Application and its supporting documents
and exhibits have been filed with the Commission and are available for public inspection during
regular business hours at the Commission offices.These documents are also available on the
Commission’s web site at www.puc.idahç.gov.Click on the “File Room”tab at the top of the
page,scroll down to “Electric Cases”and then click on the case number as shown on the front of
this document.
YOU ARE FURTHER 1’OTIFIED that all proceedings in this case will be held
pursuant to the Commission’s jurisdiction under Title 61 of the Idaho Code,including without
limitation Idaho Code §61-501,-328,and -524.The Commission may enter any final Order
consistent with its authority under Title 61.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission’s Rules
of Procedure,IDAPA 31.01.01.201 through .204.The Commission notes that Modified
Procedure and written comments have proven to be an effective means for obtaining public input
and participation.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on the
Application may file a written comment in support or opposition with the Commission no later
than August 27,2015.The comment must contain a statement of reasons supporting the
comment.Persons desiring a hearing must specifically request a hearing in their written
comments.Written comments concerning the Application shall be mailed to the Commission
and the Company at the addresses reflected below:
Commission Secretary Lisa D.Nordstrom
Idaho Public Utilities Commission Idaho Power Company
P0 Box 83720 1221 West Idaho Street (83702)
Boise,ID 83720-0074 P0 Box 70
Boise,ID 83707
Street Address for Express Mail:Email:[e-mail]
dockets(iidahopower.com
472 W.Washington Street
Boise,ID 83702-59 18 Tim Tatum
Idaho Power Company
1221 West Idaho Street (83702)
P0 Box 70
Boise,ID 83707
E-mail:ttatum(à)idahopower.corn
These comments should contain the case caption and case number shown on the first page of this
document.Persons desiring to submit comments via e-mail may do so by accessing the
Commission’s home page located at www.puc.idaho.gov.Scroll to the “Consumers”tab,click
the “Utility Case Comment or Question Form,”and complete the form using the case number as
it appears on the front of this document.These comments must also be sent to the Company at
the e-mail addresses listed above.
YOU ARE FURTHER NOTIFIED that the Company shall file reply comments,if
necessary,no later than September 3,2015.
YOU ARE FURTHER OTIFIED that if no written comments or protests are
received within the time limit set.the Commission will consider this matter on its merits and
enter its Order without a formal hearing.If written comments are received within the time limit
set,the Commission will consider them and,in its discretion,may set the same for formal
hearing.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340 4
NOTICE OF HEARING
YOU ARE FURTHER NOTIFIED that the Commission will hold a technical hearing
in this matter on WEDNESDAY,SEPTEMBER 9,2015,COMMENCING AT 10:00 A.M.
IN THE COMMISSION HEARING ROOM,472 W.WASHINGTON STREET.BOISE,
IDAHO.The purpose of this technical hearing will be to allow Commissioners to question the
parties regarding the Application and the standards set out in Idaho Code §61-328.
YOU ARE FURTHER NOTIFIED that all hearings and prehearing conferences in
this matter will be held in facilities meeting the accessibility requirements of the Americans with
Disabilities Act (ADA).Persons needing the help of a sign language interpreter or other
assistance in order to participate in or to understand testimony and argument at a public hearing
may ask the Commission to provide a sign language interpreter or other assistance at the hearing.
The request for assistance must be received at least five (5)working days before the hearing by
contacting the Commission Secretary at:
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE,IDAHO 83720-0074
[phone] (Telephone)
[phone] (FAX)
E—Mail:NC1L’J]@;
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission’s Rules of Procedure,IDAPA 31.01.01.000 et seq.A
copy of the rules is available for review at the Commission’s offices during regular business
hours,and on the Commission’s website at
ORDER
IT IS HEREBY ORDERED that this case be processed by Modified Procedure.
Interested persons may file written comments no later than August 27,2015.The Company may
file a reply,if necessary,no later than September 3,2015.
IT IS FURTHER ORDERED that a hearing be convened,pursuant to Idaho Code §
6 1-328,on September 9,2015,as set out above.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /S
day of July 2015.
PAUL KJELLA LIE ,PRESIDENT
1&o_tiL&
KRI TINE RAPER,COMMISSIONER
ATTEST:
J’a D.Jewell(J
Cmmission Secretary
O:IPC-E-1 5-l7kk
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF HEARING
ORDER NO.33340 6