20160609Comments.pdf

DAPHNE HUANG
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8370
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702.5918
Attorney for the Commission Staff
IN THE MATTER OF IDAHO POWER
COMPANY'S COMPLIANCE.T'ILING
REQUEST FOLLOWTNG THE COMMTSSTON'S
PRIOR APPROVAL FOR THE COMPANY TO
EXCHANGE CERTAIN TRANSMISSION
ASSETS WITH PACIFICORP.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-E.16-06
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attomey of record, Daphne Huang, Deputy Attorney General, and responds to the Notice of
Application and Notice of Modified Procedure issued on April 13,2016. The Staff submits the
following Comments in this case.
BACKGROUND
On February l9,20I6,Idaho Power Company (Company) filed a request for approval or
verification of its regulatory accounting as required under Commission Order No. 33313. Order
No. 33313, issued in June 2015, authorized the Company to exchange certain transmission assets
with PacifiCorp dba Rocky Mountain Power and Pacific Power (collectively PacifiCorp). Case
Nos. IPC-E-14-41andPAC-E-14-Il. AspartofOrderNo.333l3,theCommissionimposed
conditions so that the Company's anticipated financial benefits would be flowed back to Idaho
STAFF COMMENTS JUNE 9,2016
Power and PacifiCorp customers. The Commission directed Idaho Power and PacifiCorp
(Utilities) to establish regulatory deferral accounts for transmission revenues resulting from the
transaction and the resulting changes in the Utilities' federal Open Access Transmission Tariff
(OATT) rates.
Although the Utilities anticipated the transaction would result in an increase in Idaho
Power's OATT rate (i.e., and associated revenues), the Federal Energy Regulatory Commission
(FERC) denied Idaho Power's petition for a one-time adjustment to its transmission formula rate,
effective October 2015. FERC Docket ERl5-2292; Application at 5-7, citing "OATT Rate
Order," 153 FERC 5 61,212 (2015). According to Idaho Power, the effect of FERC's Order "will
delay the full realization of increased OATT-related revenues resulting from termination of the
Legacy Agreements until October 1,2017." Application at 7. The Company anticipates its total
cumulative transmission revenue will decrease over the next three years before turning positive in
2019. Id. at 10.
The Commission accepted the Company's request as an Application, under the new Case
No. IPC-E-16-06.
STAFF ANALYSIS
In response to the Company's Application, Staff Comments address the:
(1) approval of the assets transfer during Case No. IPC-E-14-41;
(2) transmission revenues;
(3) accounting option discussion; and
(4) Staff s preferred accounting option.
Approval Of Assets Transfer
The Commission granted the Utilities' Application to exchange certain transmission assets
based on satisfaction of ldaho Code $ 61-328(3) requirementsr and anticipated financial benefits
resulting from the exchange. OrderNo. 33313 at 13. The Commission's approval only discussed
the financial benefits and the treatment of the anticipated financial benefits during future general
I ldaho Code g 6l-328 establishes that state-regulated utilities must obtain approval from the Commission before the
sale or transfer of ownership in any generation, transmission, or distribution plant. Section 6l-328 provides the
Commission authority to authorize the sale or transfer of ownership upon the 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 for such acquisition or transfer has the bona fide intent and financial ability to
operate and maintain said property in the public service.
STAFF COMMENTS JUNE 9,2016
rate cases and, eventually, a revised Power Cost Adjustment (PCA) methodology. Symmetrical
tracking of transmission revenue increases or decreases was not requested by the Company in the
Application for transmission asset transfer approval, addressed in Staff analysis, nor allowed by
the Commission as part of Order No. 3 3 3 1 3 .
Transmission Revenues
The Company states that transmission revenues will decline for reasons other than an
OATT rate change and total cumulative transmission revenue will be negative over the next three
years before turning positive in20l9. Application at 10. The Company asserts that the financial
impact from the decrease in the first few years is significant. Id. at 15. Yet the Company made no
recommendation in its original application to defer these losses for recovery from retail customers.
Only now does the Company seek to track these losses in a deferral account for later recovery.
The Company has already sought and received deferral and amortization through customer
rates of transmission revenue losses resulting from the last FERC OATT rate proceeding.
Amortization of that deferral balance is still embedded in retail rates even though the deferral
balance was fully recovered in 2015. In this case, the reduction of transmission revenue is not a
result of a FERC change in the OATT rate, but the result of the Company-proposed transmission
asset exchange.
In the 2014 case, Staff believed that the asset exchange could have resulted in an OATT
rate increase and an associated increase in transmission revenue. It was this potential revenue
increase that Staff proposed to track in a deferral balance for the benefit of customers. However,
FERC denied the Company's request for the rate increase because the Company originally
proposed, and FERC approved, an OATT rate formula that uses a backward-looking methodology
rather than a forward-looking methodology that would have allowed the OATT rate increase and
the increased transmission revenue.
While Staff recognizes that FERC denied the Company's proposed OATT rate increase,
and that the additional transmission revenue that would have been deferred for the benefit of retail
customers is delayed, that does not mean Staff supports deferral of lost transmission revenues
from the asset exchange.
STAFF COMMENTS JUNE 9,2016
Deferral Accounting Discussion
Staff reviewed the underlying workpapers and supporting spreadsheets for the calculations
of the estimated changes in transmission revenue and accepts the Company's calculations. The
actual amounts reported in the filing seem correct and the calculation of the forecasted revenues
seem reasonable. At issue is whether the deferral account should include the negative cumulative
differences in total transmission revenue that the Company is now experiencing as a result of the
asset exchange. Staff believes that this was not the intent of the deferral account in Order No.
333 13.
In Staff Comments in Case No. IPC-E-14-41, Staff recommended that Idaho Power pass
the reduction in revenue requirement as a result of the asset transfer and subsequent change in the
OATT rates to retail customers when it occurs. Staff proposed that the amount be flowed through
the PCA mechanism, or in the alternative, that the revenue amounts be deferred in a regulatory
account and flowed back to customers in the next general rate case. The Commission, in Order
No. 33313, agreed with Staff and found it appropriate to "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." Order No. 3 3 3 I 3 at I 3.
The Commission did not accept Idaho Power's proposal from Reply Comments in Case
No. IPC-E-14-41, where the Company stated, "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." Reply Comments at 5 (emphasis added).
Staff believes the Commission should further clarify that deferral treatment as specified in Order
No. 33313 reflects only changes in the OATT rate.
It is Staff s understanding that the asset exchange with PacifiCorp was intended to alleviate
the need for any fuither deferral of unrecovered transmission expenses. Had Staff been aware that
the asset exchange, in the short term, could in fact harm retail customers, Staff may not have
recommended approval of the asset exchange. Other than in Reply Comments, the Company did
not bring forward the possibility of FERC denying a one-time change to its OATT formula rate
4STAFF COMMENTS JTINE 9,20T6
when it sought the Commission's approval for the transmission asset transfer. The Company also
did not provide estimates of potential financial consequences in the event of a FERC denial, when
seeking approval during the transmission asset transfer case.
If the Commission decides to approve the Company's filing and include the decrease in
transmission revenues in the deferral account, then the accounting information provided by the
Company is a reasonable starting point. However, under those circumstances, Staff would
recommend that the Company be required to recognize, as a credit to the deferral account, the
annual amortization amount approved in Case No. IPC-E-72-06, Order No. 32540. In Order No.
32540, the Commission allowed the Company to increase rates to arrrortize transmission costs in
the deferral account over a 3-year period beginning June l, 2012 ($688,156 annually). The 3-year
amortization would have ended June 1, 2015. Reflecting the amount that is already in rates would
recognize that retail customers are currently paying for unrecovered wholesale transmission costs.
Based on Idaho Power's forecast of the change in transmission revenues resulting from the asset
exchange, the deferral balance would turn positive in 2018, rather than 2019, from the inclusion of
these revenues in the deferral account.
Staff Recommended Accounting
Staff recommends that the Company follow the deferral accounting treatment as laid out in
Order No. 33313, i.e. that only the differences caused by a new OATT rate be captured in the
deferral account. The Commission had the opportunity to allow for a symmetrical tracking of any
increases and decreases as proposed in the Company's Reply Comments, but did not do so.
SUMMARY
Staff does not believe Commission Order No. 33313 intended the Company to defer
unrecovered transmission related revenue, nor does Staff believe these losses should be borne by
retail customers. The Company did not originally request deferral of transmission revenue losses
and Staff believes any such loss was factored in to the overall benefit of the asset exchange. Staff
further believes the Company had the option to revise the current OATT rate formula such that it
reduces the Company's unrecovered revenues. Finally, while the current request by the Company
is significantly different than the 2009 request to establish a deferral account for unrecovered
transmission revenues, umecovered transmission revenues previously approved by the
STAFF COMMENTS JUNE 9,2016
Commission are still being collected by the Company and shall continue to be collected until the
next general rate case.
RECOMMENDATION
o Staff recommends that the deferral account capture only differences caused by a new
OATT rate.
o Staff further recommends that the Commission clarify what it intended the deferral
account to capture, in Order No. 33313.
Respectfully submitted this Ltb day ofJune 2016.
Technical Staff: Kathy Stockton
Johanna Bell
i : umisc:comments/ipce I 6.6djhklsjb comments
Daphnefiuang
STAFF COMMENTS JLINE 9,2016
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9th DAY OF JUNE 2016,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
CASE NO. IPC-E-16-06, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
THE FOLLOWING:
JULIA A. HILTON
REGULATORY DOCKETS
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-mail: [e-mail]
dockets@idahopower. com
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
I4O7 WN TEMPLE STE 320
SALT LAKE CITY UT 84I16
E-MAIL : Daniel. solander@pacifi corp.com
PETER J RICHARDSON
RICHARDSON ADAMS PLLC
PO BOX 7218
BOISE ID 83702
E-mail: [e-mail]
TIM TATUM
IDAHO POWER COMPANY
PO BOX 70
BOrSE ID 83707-0070
E-mail : [e-mail]
WONNE HOGLE
ROCKY MOUNTAIN POWER
I4O7 WEST NORTH TEMPLE STE 320
SALT LAKE CITY UT 84116
E-MAIL: [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-mail: [e-mail]
CERTIFICATE OF SERVICE