20160323Answer to ICIP.pdf

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LISA D. NORDSTROM
Lead Gounsel
I [e-mail]
March 23,2016
VIA HAND DELIVERY
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
472 West Washington Street
Boise, ldaho 83702
Re: Case No. IPC-E-15-26
Transfer and Sale of Certain Assets to the FBI - ldaho Power Company's
Answer to the lndustrial Customers of ldaho Power's Petition for
Reconsideration
Dear Ms. Jewell:
Enclosed for filing in the above matter please find an original and seven (7) copies
of ldaho Power Company's Answer to the Industrial Customers of ldaho Power's Petition
for Reconsideration.
lf you have any questions about this filing, please do not hesitate to contact me.
Very truly yours,
Lisa D. Nordstrom
LDN:csb
Enclosures
1221 W. ldaho St. (83702)
PO. Box 70
Boise. lD 83707
LISA D. NORDSTROM (lSB No. 5733)
SHELLI D. STEWART (lSB No. 7459)
ldaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
I n o rdstrom @ id a hopowe r. com
sstewart@ida hopower. com
Attorneys for ldaho Power Company
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION TO
APPROVE THE TMNSFER AND SALE
OF CERTAIN ASSETS TO THE UNITED
STATES DEPARTMENT OF JUSTICE,
FEDERAL BUREAU OF INVESTIGATION.
REC E IVED
?01$llfiR 23 Pt{ tr: l8
t1 .'..'.' i:l:;iLlc: i'i'i I ; i.:tli,{l'{lSSlON
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. !PC-E-15-26
IDAHO POWER COMPANY'S
ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO
POWER'S PETITION FOR
RECONSIDERATION
ldaho Power Company ("!daho Power" or "Company"), in accordance with ldaho
Code S 61-626 and RP 331.05, hereby responds to the lndustria! Customers of ldaho
Power's ("lClP') Petition for Reconsideration filed on March 16, 2016 ("Petition").
I. INTRODUCTION
On November 25, 2015, ldaho Power applied to the ldaho Public Utilities
Commission ("Commission") requesting an order approving the sale and transfer of
certain assets to the United States Department of Justice Federal Bureau of
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 1
lnvestigation ("FBl"). The sale and transfer of the assets (the "Sale"), which were
approved by the Commission in Order No. 33470 issued on February 24, 2016, would
result in the FBI owning, operating, and maintaining all facilities installed beyond the
point of delivery ("POD') at the FBI's facility.
ICIP explicitly did not object to the Sale in its Comments filed on January 26,
2016, or at the public technical hearing held on February 22,2016. lClP Comments at
1; Tr. at 8-9. Consequently, lClP is prohibited from taking an incompatible position
under the doctrine of judicial estoppel. A & J Const. Co. v. Wood, 141 ldaho 682, 684,
116 P.3d 12, 14 (2005). lnsofar as ICIP requests the Commission reconsider "its
decision not to initiate a proceeding to establish parameters for the price for the sale of
ldaho Power-owned assets subject to Rule M," ICIP misunderstands Rule M, Facilities
Charge Service ("Facilities Charge Service") as well as the Commission's ruling.
Petition at 9.
II. FACILITIES CHARGE SERVICE IS A
VOLUNTARY. NON-MONOPOLY SERVICE
Facilities Charse Service. Rules B (Definitions) and M (Facilities Charge
Service), as well as Schedules 9 (Large General Service) and 19 (Large Power Service)
of ldaho Power's tariff, set forth the general rule for primary and transmission service
level customers to wit: The Company provides energy to a POD at the customer's
location and the customer is responsible for the transformation of power to the voltage
at which it can be used by that customer.
Some ldaho Power customers cannot or choose not to own, operate, and
maintain facilities required beyond the POD and instead seek relief from such obligation
in exchange for payment through a Facilities Charge Service. Customers may request
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 2
the Facilities Charge Service for a variety of reasons, such as not wanting to expend
capital to construct their own facilities, and/or not having the personnel, expertise,
equipment, inventory, or desire to operate and maintain the facilities in the 2417 manner
that ldaho Power does.
When a customer requests and the Company agrees to provide the Facilities
Charge Service, ldaho Power provides the electrical facilities necessary to supply
service beyond the POD which are owned, operated, and maintained by ldaho Power in
exchange for the customer's payment of a monthly facilities charge. Customers are
required to pay a monthly facilities charge only if the Company is providing the Facilities
Charge Service. ldaho Power provides the Facilities Charge Service at the customer's
request and the Company's option to the approximately 2601 ldaho jurisdictional
customers that have requested it.
A Voluntarv Service. Customers requiring electrical facilities necessary to supply
service beyond the POD have three available options at the time of interconnection:
(1) customers may own, operate, and maintain their own facilities on the customers'
side of the POD; (2) customers may choose to contract with a third party to operate and
maintain their facilities; or (3) customers may request the Company provide a Facilities
Charge Service in exchange for customers' payment of a monthly facilities charge.
Although customers obtain Facilities Charge Service at their convenience and
ldaho Power's option, certain customers made it clear in Case No. IPC-E-11-08 that
they wanted the option to purchase those ldaho Power-owned facilities subject to the
facilities charge. As a general rule, ldaho Power is not in the business of selling
' ln 2015, ldaho Power had approximately 316 ldaho primary and transmission service level
customers.
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 3
Company-owned facilities. However, as a result of the Rule M tariff approved in Case
No. IPC-E-11-08, a customerwho no longerwishes to take Facilities Charge Service
has the option to either request ldaho Power remove its facilities or request to purchase
the ldaho Power-owned facilities from the Company. Under either scenario, the
customer can then either operate and maintain the facilities or contract with another
provider to do so.
A Non-Monopoly Service. ldaho Power strongly disagrees with lClP's statement
that "There is no question that the provision of facilities beyond the ratepayer's meter by
ldaho Power is part and parcel of the provision of utility service." Petition at 3. The
regulatory compact envisions that (1) in return for a monopoly franchise, utilities accept
an obligation to serve all customers and (2) in return for agreeing to commit capital to
the business, utilities are assured a fair opportunity to earn a reasonable return on that
capital.2 ldaho Power has no monopoly beyond the POD; a Facilities Charge Service
cannot be "part and parcel of utility service" when it is beyond the POD and provided as
a voluntary service. ldaho Power's tariff plainly states that primary and transmission
customers are responsible for owning and maintaining facilities that may be required
beyond the Company's POD. Moreover, not all primary and transmission service leve!
customers request the Company provide a Facilities Charge Service.
ldaho Power is not the only option available for customers who do not wish to
operate or maintain electric facilities on the customer side of the POD. Numerous
contractors operating in ldaho Power's service area, including but not limited to,
Anderson & Wood Construction; Quality Electric, lnc.; Andersen Construction; Track
'Phillips, Charles F. Jr.,The Regulation of Pubtic tJtitities, Theory and Practice, Public Utilities
Reports, lnc. (1993), p. 21.
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 4
Utilities, lnc.; and United Electric Co-Op, lnc., currently provide these services to ldaho
Power customers. !n short, ldaho Power does not hold a monopoly on providing,
operating, or maintaining facilities on the customer side of the POD.
III. COMMISSION OVERSIGHT OF FACILITIES SALES PROTECTS OTHER
CUSTOMERS. NOT THE INDIVIDUAL PURCHASER
Whib ldaho Power agrees with lClP that the "public service" language in ldaho
Code S 61-328(2Xc) is awkward for utility asset sales to individual customers benefitting
from the same, the Company disagrees that the statute is inapplicable to these types of
sales. ldaho Code S 61-328 broadly covers transactions involving "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 . ." (emphasis added). The
statute does not exclude sales benefitting a single customer; instead, it appears to
purposely include them.
Commission orders issued pursuant to ldaho Code S 61-328 enable the utility to
provide clear title and authorize removal of facilities from the utility's system of accounts
governed by ldaho Code S 61-524. The Company's Commission-approved facilities
charge is designed to provide a levelized rate of cost recovery from individual
customers using the same cost components included for similar facilities under the
Company's approved non-levelized determination of the revenue requirement.3 ln the
Company's non-levelized determination of class-specific base rate revenue
requirements, the Company determines the total revenue required for recovery on all
distribution facilities-related investments (including those investments beyond the POD),
as wel! as the associated operating, maintenance, and administrative expenses. This
'The Rebuttal Testimony of Michael J. Youngblood filed in Case No. IPC-E-11-08 provides a
more detailed explanation of how facilities charges are calculated. Tr. a|237-310.
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 5
determination is made for each class of customers and the Company's revenues for
providing facilities charge services are directly assigned as a revenue credit, or
reduction, to the revenue requirement of the associated class of customers. As a result,
any differences between the non-levelized revenue requirement and the levelized
revenue requirement associated with the rate of return exist as intra-class subsidies
between customers paying facilities charges and customers not paying facilities charges
within each customer class. Therefore, the Commission must ensure the price
established between two willing parties is "consistent with the public interest" under
ldaho Code S 61-528(3)(a) such that other customers are not negatively impacted.
Because the sale of facilities on the customer's side of the POD falls outside the
regulatory compact, the Commission has no obligation-statutory or otherwise-to
establish prospective parameters for determining the sale price of utility assets located
on the customer's side of the meter. The Commission's role is to protect the general
body of customers from negative impacts resulting from the sale; it is not the
Commission's duty to protect an individual in an arm's length transaction to procure
facilities or services that can be acquired from other providers. Absent the
governmental exercise of eminent domain, it is within the utility's sole prerogative to
decide at what price it is willing to enter into an asset sale transaction.
IV. CASE.BY.CASE COMMISSION REVIEW
OF FACILITIES CHARGE SALES IS APPROPRIATE
The sale of Facilities Charge Service equipment is not a service or commodity for
which the price is set by the Commission. While the sale of equipment beyond the POD
may appear simple, the impact of these sales on complicated utility ratemaking is not.
When the Commission reviews utility facility sales to customers in the context of the
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 6
circumstances present, it fulfills its statutory duty under ldaho Code $ 61-328 to
authorize only those transactions consistent with the public interest. This flexibility is
necessary to ensure the general body of customers and other facilities charge
customers are not harmed.
While the pricing methodology proposed in this case provides a reasonable
framework for evaluating facilities charge asset sales in the future and may be
applicable in subsequent facilities charge asset sales transactions, other circumstances
may warrant different pricing methods or contract terms to reflect the value proposition
present in a particular transaction. A predetermined pricing methodology could restrict
the Company from selling facilities charge assets because the resulting price could be
undesirable to the potential purchaser, even if the Company was willing to sell the
assets at a lower price than the set pricing methodology dictates. A sale that could
have resulted in operational efficiencies and improved system reliability could be
negated due to the limitations of a set pricing methodology.
While net book value may be appropriate for some transactions, usually in the
case of sales of assets between public utilities, it is a stretch for lClP to characterize the
Commission as "suddenly depart[ing] from its traditional book value approach to the
sale of utility assets . . . ." Petition at 9. Numerous examples exist where the utility and
the Commission determined something other than net book value was appropriate
under the circumstances present.
o ln 1993, ldaho Power received Commission authorization to sell the
Hailey turbine electric generator to Longview Fibre Company for $8 million when the
turbine became redundant and was no longer economically viable to operate. The net
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 7
book value for revenue requirement purposes was approximately $1.9 million; more
than $3.2 million of the gain was allocated to Idaho customers in the next general rate
case. Case No. IPC-E-92-09, Order No. 24676.
o ln order to avoid conflicts between the location of the Sun Valley
Company's recreational facilities and ldaho Power's distribution facilities, the
Commission approved the sale of Bald Mountain distribution facilities to the Sun Valley
Company. Because salvaging the facilities or leaving them in place would be more
costly to customers than the sale, the Commission placed the accounting loss of
$124,058 into a regulatory asset accountto be amortized over 10 years as part of the
Company's revenue requirement but did not permit the Company to earn a return in rate
base. Case No. IPC-E-93-20, Order No.25241.
o ln 2007, United Water sold a non-contiguous system serving three
subdivisions to the City of Kuna for $375,000. While the net book value for the
depreciable assets was $135,255, the net proceeds at closing were expected to be
$212,255. Case No. UWI-W-07-05, Order No. 30481.
o Rocky Mountain Power sold a hydroelectric facility in Fremont County
to St. Anthony Hydro in 2013 because the cost to restore or decommission it would be
cost prohibitive. After restoring the plant, St. Anthony Hydro would then enter into a
power purchase agreement with Rocky Mountain Power for its generation. Rocky
Mountain Power sold the facility "as is," which resulted in a sale below the remaining
book value. Case No. PAC-E-13-06, Order No. 32864.
ln light of changes implemented after Case No. IPC-E-11-08, if a customer in a
Facilities Charge Service agreement requests the Company sell Idaho Power-owned
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 8
facilities on the customer's side of the POD, ldaho Power wil! prepare a buyout quote
pursuant to Rule M that reflects a price at which (1) the Company is willing to sell its
assets and (2) does not negatively impact customers or shareholders. As evidenced by
its agreement to sell facilities to the FBI covered by the Facilities Charge Service, it is
possible to achieve an outcome acceptable to the customer and ldaho Power.
However, ldaho Power is not required to sell facilities charge assets, especially
not at a price less than what ldaho Power believes their value to be. A tenant renting a
home lor 20 years cannot reasonably expect or insist the homeowner sel! the home for
the principal remaining on the mortgage regardless of value to the landowner or in a
competitive market. !ClP's insistence on net book value pricing is similarly
unreasonable.
V. CONCLUSION
lClP's request for a generic pricing methodology is not necessary or required to
establish facilities charge asset pricing between a utility and a customer that ensures (1)
the rates and charges of other customers are not negatively impacted and (2) that the
sale is in the public interest. Consequently, and pursuant to the reasoning set forth
above and in ldaho Power's previous filings in this matter, ldaho Power respectfully
requests the Commission deny lClP's Petition for Reconsideration.
Respectfully submitted this 23'd day of March 2016.
IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 9
LISA D. NORDSTR
Attorney for ldaho Power Company
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 23d day of March, 2016, I served a true and
correct copy of IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION upon the
following named parties by the method indicated below, and addressed to the following:
Gommission Staff
Daphne Huang
Deputy Attorney General
ldaho Public Utilities Commission
472 W esl Washington (83702)
P.O. Box 83720
Boise, ldaho 83720-007 4
lndustrial Customers of ldaho Power
Peter J. Richardson
Gregory M. Adams
RICHARDSON ADAMS, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, ldaho 83707
Dr. Don Reading
6070 Hill Road
Boise, ldaho 83703
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g reg@richardsonadams. com
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IDAHO POWER COMPANY'S ANSWER TO THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER'S PETITION FOR RECONSIDERATION - 1O