20180911final_order_no_34138.pdf

Office of the Secretary
Service Date
September 11,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )
COMPANY'S APPLICATION FOR AN )CASE NO.IPC-E-18-10
ORDER APPROVING THE TRANSFER )
AND SALE OF CERTAIN ASSETS TO )JAYCO,INC.)ORDER NO.34138
On June 6,2018,Idaho Power Company,("Company"),filed an Application requesting
authorityto sell and transfer certain Company-owned assets to its customer,Jayco,Inc.("Jayco"),
according to Rule M "Facilities Charge Service"in the Company's Tariff',the Asset Purchase and
Transfer of Title Agreement,Idaho Code §§61-328 and 61-524,and Rule of Procedure 052.
Application at 1-2.The Company requested that the Commission process the Application by
Modified Procedure.Id.at 4.
The Commission issued an order setting an August 14,2018,deadline for interested
persons to file comments and an August 21,2018,Company reply comment deadline.Order No.
34113.A public hearing was held August 30,2018,at which no members of the public appeared
or testified.See Notice of Telephonic Public Hearing.Commission Staff filed the only comments,
recommending that the Commission approve the Application.The Company did not reply.Jayco
filed comments stating its support of the Company's Application,commenting that it believes the
Asset Purchase and Transfer of Title Agreement represents a fair and reasonable representation of
the mutual agreements between the Company and Jayco.See Jayco's Letter of Support.
Having reviewed the record,the Commission grants the Company's Application,as
detailed below.
BACKGROUND AND APPLICATION
The Company's Application stated that it provides electric service at Jayco's
manufacturing facility in the Company's service territory.Application at 2.The Company states
that it owns and operates transformers and other facilities beyond the point of delivery("POD")----
the customer rather than utility side-for the sole purpose of meeting Jayco's specific service
i Tariffs are rules governinga particular utility,adopted by Commission Order under Idaho Code §61-622.The
Company's Rule M Facilities Charge Service can be found on the Commission's web site,at:
http://www.puc.idaho.gov/fileroom/tariff/electric/ldaho%20Power%20Company.pdf
ORDER NO.34138 1
requirements.Id.Jayco pays the Company a monthlyFacilities Charge to provide this optional
service.Id.
Jayco has requested that the Company sell the assets described in Exhibit A to the
Application to it under the Asset Purchase and Transfer of Title Agreement ("Agreement";
Attachment 1 to the Application),and according to the Company's Rule M.Id.The Application
and Agreement state that,after approval of the transfer and closing the sale,Jayco will own all
facilities installed beyond the Company's existing POD.Id.
The Company's Application stated that it used a sales price and accounting treatment
prescribed by Rule M.Under this methodology,the total purchase price of the assets is $44,582.
Id.at 5-11;and Exhibit B.The Company "provided the methodology and resulting sales price to
Jayco,and answered Jayco's inquiries prior to execution of the Agreement."Application at 5.The
methodology has five components:(1)net book value of assets to be sold ($17,574);(2)true-up
of past levelized rate of return ($7,252);(3)near-term rate of return impact resulting from the sale
($3,758);(4)near-term operational impact resulting from the sale of assets ($4,903);and (5)net
tax gross-up ($5,091).Id.at 6-8.In addition,the Company would collect $426 in estimated work
order closing costs,and $5,578 "for costs associated with a pole and three switches used to house
and operate the primary metering package located at the facility"that were installed solely for the
benefit of Jayco but that the Company will continue to own.Id.at 8.
STAFF COMMENTS
Staff recommended the Commission approve the Application.Staff stated the proposed
transaction meets the Company's Rule M requirements.Staff noted that the method for calculating
the sales price,and pole and switches compensation appropriately protect the Company's other
customers consistent with Idaho Code §
61-328.2
Staff concluded that no mixed ownership will result because Jayco would purchase the
assets and assume sole ownership.Second,Jayco would operate and maintain the facilities,and
assume all liabilities associated with the purchased assets beyond the POD after the sale.On sales
2 Idaho Code §61-328 governs an electric public utility's sale of assets that have been used to generate,transmit,or
distribute electricity "to the public or any portion thereof."In Order No.33514,the Commission found the
considerations outlined in §61-328 do not strictly apply where the property being transferred serves only a single
customer and thus is not "devoted to public service."Order No.33514 at 8-9.Nonetheless,§61-328 requires a
public hearing in these circumstances.Moreover,the Commission determined that the factors in §61-328 are "aneffectivemeansofprotectingthepublicinterestandensuringthatratepayerswillnotbeharmedbysuch
transactions,"therefore they would be used for guidance.Id.
ORDER NO.34138 2
determination costs,the Company indicated the City would pay $426 in work order closing costs,
about which Staff expressed no concern.Id.at 2.
Staff stated the Company calculated the assets'price to ensure the sale would not harm
the Company or its customers,appropriately applying the sale price methodology from Case Nos.
IPC-E-15-26,IPC-E-16-31,and IPC-E-17-17.Id.at 3-6.Staff concluded that the Company's
computation of net book value,true-up,and revenue loss component were all reasonable
components in pricing the assets and Staff acknowledged that the Company and Jayco had agreed
to the sales price and other terms in an arm's length negotiation.Id.at 6.
Staff concluded that because the Company will continue to own,operate,and maintain
the pole and switches after the sale,Jayco will no longer pay the monthly Facilities Charge on
these investments and the Company will recover its book value and the true-up for the past
levelized rate of return.Staff agreed that the Company's treatment of the pole and switches book
value,true-up of the levelized rate of return,and net tax gross-up (based on an adjusted sales price)
are appropriate and will protect other customers.Id.at 7.
Staff also analyzed the Company's accounting treatment,3 which would remove the
assets from the Company's books,record the gain on the sale of the assets,and record the impact
on the Company's income taxes.Staff opined that the proposed accounting treatment,including
the modified treatment of the pole and switches,was reasonable.Id.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over this matter under Title 61 of the Idaho Code,
specifically Idaho Code §§61-328,61-502 and 61-503 (the Commission has power to investigate
a public utility's contracts).The Commission has reviewed and considered the Company's
Application,its agreement with Jayco,and Staff Comments.The Commission also held a public
hearing according to Idaho Code §61-328(1)and (2),where no one testified.
Having reviewed the record,the Commission finds that Rule M is satisfied.The sale
will not result in mixed ownership of facilities,and Jayco will own,operate,and maintain all
facilities beyond the POD after the sale is complete,and will pay requisite engineering costs.
Using Idaho Code §61-328 as guidance,the Commission finds the sale is consistent with the
3 See Idaho Power's Corrected Journal Entry filed on August 10,2018 (correcting an error in the Applicationrelated
to the requested accounting treatment).
ORDER NO.34138 3
public interest and will not increase costs and rates of supplying service.The Commission is also
satisfied the Company appropriately determined the assets'net book value.
Further,because of the levelized payment schedule,customers underpay for the first
10 years of an asset's life but overpay the remaining period.Thus,the true-up component
appropriately accounts for decreasing net book value while allowingthe Company to fully recover
its revenue requirement over the assets'depreciable life.It is appropriate to include the revenue
loss component by way of the near-term rate of return impact,as well as the net tax gross-up,to
account for the mismatch between the straight-line depreciation method used to determine book
value,and the accelerated depreciation method used for assessing income taxes.
The Commission acknowledges Staff's concern that the asset price would have been
lower if the Company had not included near-term operational impacts associated with Operations
&Maintenance and Administrative &General expenses.But as Staff acknowledged,Jayco agreed
to the sales price "based upon its arms-length bargaining"with the Company.Id.at 6.The
Commission received no comment asserting otherwise.
For these reasons,the Commission finds the transaction satisfies Rule M.The
Commission also finds the proposed accounting treatment is reasonable and appropriate.The
Commission thus finds it reasonable to grant the Application and approve the sale,as amended on
August 10,2018.
ORDER NO.34138 4
ORDER
IT IS HEREBY ORDERED that the Company's Application is approved as set forth
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 §61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September 2018.
PAUL KJE LANDER,PRESIDENT
Ï<RISTINERAPER MIdsIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
IPCEl810 final se
ORDER NO.34138 5