20160224final_order_no_33470.pdf

Office of the Secretary
Service Date
February 24.2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY’S APPLICATION TO )CASE NO.IPC-E-15-26
APPROVE THE TRANSFER AND SALE OF )
CERTAIN ASSETS TO THE UNITED )
STATES DEPARTMENT OF JUSTICE,)ORDER NO.33470
FEDERAL BUREAU OF INVESTIGATION )
On November 25,2015,Idaho Power Company filed an Application with the
Commission for an Order approving the transfer and sale of certain assets to the United States
Department of Justice,Federal Bureau of Investigation (FBI),under Idaho Code §61-328.The
Commission now approves Idaho Power’s Application.
PROCEDURAL HISTORY
On December 15,2015,the Commission issued a Notice of Application and Notice of
Modified Procedure.Order No.33433.The Industrial Customers of Idaho Power (ICIP)filed a
Petition to Intervene and Motion to Extend Comment Deadline which the Commission granted,
extending the comment deadline to January 26,2016,and the reply deadline to February 2,2016.
Order No.33443.The Commission received timely comments from Staff and ICIP,and timely
reply comments from the Company.The Commission also received comments from the FBI on
February 2,2016.
On February 8,2016,the Commission set a public technical hearing,as required by
Idaho Code §6 1-328(2).At the hearing held on Monday,February 22,2016,representatives
from Idaho Power,ICIP,and Commission Staff appeared and gave additional comments.At the
conclusion of the hearing,the matter became fully submitted.
BACKGROUND
Idaho Power provides electric service to an FBI facility in the Company’s service
territory pursuant to Idaho Power’s Schedule 19 concerning Large Power Service.Application at
2.Idaho Power owns and operates transformers and other facilities (hereafter,the “Assets”)
beyond the Point of Delivery (POD),’to meet the FBI’s service requirements under Idaho
The Point of Delivery or POD is the point at which the customer’s power usage is measured.Facilities “beyond
the POD”are the facilities on the customer side,rather than the utility side,of the POD.
ORDER NO.33470 1
Power’s Rule M “Facilities Charge Service”in the Company’s Tariff No.101.Id.2 The FBI
pays a monthly facilities charge to Idaho Power for this optional service.Id.at 2.
At the FBi’s request,Idaho Power entered into an Asset Sale Agreement,to transfer
and convey the Assets to the FBI for a purchase price of $79,373.Id;Agreement (Redacted)at
3.Under the Agreement,the FBI agrees to obtain title to and assume ownership.operation,
maintenance,and all liabilities associated with the Assets.Application at 2.Also,“the FBI will
own all facilities installed beyond the POD upon sale and transfer of the Assets.”Id.
THE APPLICATION
Idaho Power’s Application seeks approval of its proposed Asset Sale Agreement with
the FBI,under Idaho Code §61-328,and Idaho Power’s Rule M.Idaho Power asserts that it
satisfies all the statutory and regulatory requirements.Id.In support,the Company outlines its
current facility charge arrangement with the FBI,as well as its methodology for determining the
sale price for Company-owned facilities beyond the POD under Rule M Section 3.According to
Idaho Power,this methodology “ensures that the Company and its other customers are not
negatively impacted by the transaction.”Id.at 4-6.
The Commission has authority to approve or reject the proposed Agreement under
Idaho Code §61-328.That provision requires the Company to show that the proposed
transaction is consistent with the public interest,that the cost and rates for supplying service will
not be increased because of the transaction,and that the FBI has the bona fide intent and
financial ability to operate and maintain the Assets in the public service.Idaho Code §61-
328(3).Also,under Rule M Section 3,governing the sale of Company-owned facilities beyond
the POD,the FBI must:purchase all facilities listed on the Distribution Facilities Investment
Report for that POD;provide operation and maintenance of all facilities beyond the POD after
the sale is complete;and prepay engineering costs for sales determinations taking more than 16
estimated hours of preparation.Rule M §3.Rule M Section 3 further provides that sales
determinations equal to or less than 16 estimated hours of preparation will be billed to the FBI as
part of the sales agreement,or after the engineering is completed in instances where the sale is
not finalized.Id
2 Tariffs are rules governing a particular utility,adopted by Commission order under Idaho Code §61-622.Idaho
Power Company’s Rule M Facilities Charge Service can be found on the Commission’s website,
by clicking “Approved Tariffs &Price Lists”under Laws &Rules,then “Electric
Tariffs,”then “Rules &Regulations &Rate Schedules”for Idaho Power Company.
ORDER NO.33470 2
THE COMMENTS
A.ICIP
ICIP stated it does not object to approval of Idaho Power’s contract with the FBI.
ICIP Comments at 1.However.ICIP did not endorse the methodology underlying the price
calculated by Idaho Power for the sale of facilities on the FBI-side of the POD.”Id.at 2.ICIP
noted that various utilities under the Commission’s jurisdiction “take different approaches”to the
issue of how to price facilities being sold to customers.Id.ICIP asked the Commission to
“disclaim that this docket has any precedential value in establishing any controlling rule
(explicitly or implicitly)for governing future sales”of facilities owned by Idaho Power beyond a
customer’s POD.Id.at 2-3.Finally.ICIP recommended that “the Commission open a docket
[to set]clear,transparent,ratepayer neutral and fair rules for valuing the purchase price of utility-
owned facilities that arc dedicated to,and serve only a single customer,on the customer side of
the POD.”Id.at 3.
B.Con,rnissioii Staff
Staff believes that Idaho Power’s asset transfer agreement with the FBI complies with
Rule M and Idaho Code §6 1-328.Staff Comments at 7.In reaching this conclusion,Staff
analyzed five aspects of Idaho Power’s sales price methodology:(1)net book value;(2)true-up
of past levelized rate of return;(3)near-term rate of return impact resulting from the sale of
assets;(4)near-term operational impact resulting from sale of assets;and (5)net tax gross-up.
Id.at 3-6.Staff disagreed with the Company about including the near-term operational impacts
associated with Operations &Maintenance and Administrative &General expenses,in the
Assets’sales price.Id.at 5-7.However.Staff believes the Company’s treatment of the
remaining four aspects of its sales price methodology “are appropriate and protect ratepayers as
required”by the statute.Id.at 6.
In sum,Staff noted that “the sales price [was]mutually agreed to by the parties [and]
will not harm other ratepayers or cause rates to increase.”Id.at 7.Thus,although Staffs
recommended sales price methodology would result in a lower price for the Assets,Staff
concluded that both Rule M and Idaho Code §6 1-328 are nonetheless satisfied.Accordingly,
Staff recommended that the Commission approve Idaho Power’s Application.Staff further
recommended that the Commission “not endorse the Company’s pricing methodology as
ORDER NO.33470 3
precedent going forward,”noting,“[d]ifferent circumstances may warrant different pricing
methods or contract terms.”Id.at 7.
c.FBI
The FBI —a party to the Agreement for which Idaho Power seeks approval —filed
comments on the deadline for Idaho Power’s reply.In its comments,the FBI recommended that
the Commission approve Idaho Power’s Application without modification.FBI Comments.
“The FBI worked with Idaho Power to understand the purchase price calculation and the
methodology used to determine the same.”Id.The FBI asserted it “is confident Idaho Power
carefully considered all the necessary elements for completing an equitable asset sale.”Id.The
FBI concluded it “supports Idaho Power’s Application and accepts the purchase price as fair,
reasonable and representative of a mutually agreed upon amount between Idaho Power and the
FBI.’Id.The FBI asked the Commission to approve the Agreement as filed and issue a
decision on or before February 25,2016 “to ensure the FBI’s planned expansion is not
unnecessarily delayed.”Id.
D.Idaho Power’s Reply
Idaho Power cited Staff’s and ICIP’s recommendations to approve the Company’s
Application.Reply at 2.Idaho Power agreed with Staff that each proposed sale of assets is
unique,thus “different circumstances may warrant different pricing methods or contract terms.”
Id.For this reason,the Company believes the Commission should reject ICIP’s recommendation
to initiate a docket to “set rules for valuing the purchase price of utility-owned facilities on the
customer side of the point of delivery.”Id.at 2 (citing ICIP Comments at 3).
Idaho Power asserted,“It is not necessary to open a docket that will set rules for
valuing property if a uniform methodology could result in amounts for which the utilities are not
willing to sell their assets.”In support,the Company cited the Commission’s finding in a prior
case (No.IPC-E-13-17)that its valuation of a property “is meaningless if the Company is
unwilling to sell at anything less than its stated price.”Id.at 2,quoting Order No.32940 at 6.
Idaho Power argued the Commission should “retain flexibility to value purchase amounts of
property transactions on a case-by-case basis contingent on the factual circumstances.”Id.at 3,
citing Order No.32426 at 33 (“[W]e envision that the sale of facilities will occur on a case-by-
case basis and that the purchasing price will be based upon the value of the facilities to be
transferred to the customers.”).
ORDER NO.33470 4
In conclusion,the Company noted the FBI agreed to the purchase price,and that no
party opposed approval of the sale.1(1.at 3.Idaho Power thus recommended the Commission
approve its Application as filed.Id.
DISCUSSION AND FINDINGS
1.Timing of the FBI’s Comments
As a preliminary matter,the Commission addresses the timing of the FBI’s
comments,which were filed on the reply deadline.Because the FBI is a party to the Agreement.
its interests in the Application align with Idaho Power’s interests.The timing of the FBFs filing,
submitted on the reply deadline and not the comment deadline,caused no delay in proceedings.
Accordingly,we consider the FBI’s comments as part of the record.See IDAPA 3 1.01.01.013.
2.Idaho Power’s Request to Transfer Assets to the FBI
The Commission has thoroughly reviewed and considered Idaho Power’s
Application,its Agreement with the FBI,the parties comments —including those of ICIP and
the FBI,and the record from the February 22 public technical hearing.To be approved,the
proposed Agreement must comply with Idaho Power’s Rule M,and Idaho Code §6 1-328.
We find that Rule M is satisfied.The Company asserted there will be no mixed
ownership of facilities,that the FBI will provide operation and maintenance of all facilities
beyond the POD after the sale is complete,and the FBI will prepay engineering costs.In their
filings,the FBI,Staff,and ICIP raised no objections or arguments to the contrary.Given the
record before us,we conclude that the Agreement complies with Rule M.
We also find the statutory requirements are satisfied.As to the public interest
requirement,we note that the Assets at issue serve only the FBI,thus there is no impact to
deliverability and reliability of electric service to other customers.Idaho Code §61-328(3)(a).
Also,there is no indication the FBI lacks the bona fide intent and financial ability to operate and
maintain the Assets,thus we find this provision is also satisfied.Idaho Code §61-328(3)(c).
The remaining requirement is that the transaction not increase the cost of and rates for supplying
service.Given the record before us,we find that the sales price methodology in the Agreement
protects ratepayers and does not cause rates to increase,thus satisfying §61 -328(3)(b).
In so finding,we note that Staff disagreed with the Company’s inclusion in its sales
price,of near-term operational impacts associated with Operations &Maintenance,and
Administrative &General expenses.Using Staffs methodology,the sales price for the Assets
ORDER NO.33470 5
would be lower,However,as acknowledged by Staff and the FBI,the Assets’sales price was
mutually agreed upon by Idaho Power and the FBI after careful consideration of “all the
necessary elements for completing an equitable asset sale.”FBI Comments;see also Staff
Comments at 7.The Commission received no comment asserting otherwise.Absent evidence in
the record to support a conclusion to the contrary,we find that the Agreement meets all statutory
requirements.
3.ICIP’s Recoinrnendatio,i to Opeii a Separate Docket
Finally,we consider ICIP’s recommendation that we open a separate docket to
address how to value the purchase price of utility-owned facilities in future cases.ICIP proposes
that,in such docket,we define rules to be applied to all future sales of utility-owned facilities.
We decline to do so and instead emphasize that with this Order,we do not endorse Idaho
Power’s price methodology in the Agreement approved here,as precedent going forward.The
circumstances of any given agreement between a utility and customer for the purchase of utility-
owned assets are unique.Accordingly,we find that agreements like that between Idaho Power
and the FBI here,are ill-suited to,and would not benefit from,the imposition of rules for
determining a purchase price.
As we have previously observed,the Commission lacks authority to force a particular
sale between a utility and customer.Order No.32940 at 5-6 (“Idaho Code §61-328 does not
provide the Commission with the authority to compel a utility to sell its property.”).Consistent
with our prior Orders,we are reluctant to prescribe precise rules dictating how parties should
negotiate and agree to a purchase price.Id.Rather,we will evaluate applications for the sale of
facilities on a case-by-case basis.See Order No.32426 at 33.
ORDER
IT IS HEREBY ORDERED that Idaho Power Company’s Application to Approve the
Transfer of Assets to the FBI is granted as set forth above.
TI-ITS 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.33470 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2016.
ATTEST:
——
_/—
PAULKJELLANDF&PB4ES1DENT
KRISTI RAPER,COMMI SIONER
L
Jn D.Jewell /1
COmmission Sé’cretary
O:IPC-E-1 5-26djh4
ERIC ANDERSON,COMMISSIONER
ORDER NO.33470 7