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HomeMy WebLinkAbout19910419.docx Minutes of Decision Meeting April 19, 1991 - 10:30 a.m. In attendance were:  Commissioners Joe Miller, Ralph Nelson and Marsha H. Smith and staff members Scott Woodbury, Don Oliason, Madonna Faunce, Jack Taylor, Stephanie Miller and Myrna Walters. Matter to be discussed at this decision meeting was:  Meridian Gold v. IPC - Case No. IPC-E-90-14 (Scott Woodbury's April 16, 1991 Decision Memorandum). Commissioner Miller said this is a difficult case.  Don't know where we should end up. Commissioner Nelson commented it is a technical case. Commissioner Miller said we don't have a standard either. Commissioner Nelson said in general, Idaho Power Company should design their system, but that isn't to say they are always 100% right and there isn't anyother way to do it. Commissioner Miller thought it might be good to review facts before ultimate decision, there are all kinds of numbers floating around, on how much capacity there is and how much there isn't.  The capacity of the line depends on peak - 1990 and 1991. Commissioner Nelson asked who the 5% is being saved for?  Meridian Gold? Don Oliason said it is a safety margin because you cannot predict next winter's peak. Commissioner Nelson said if you got down to only 5%, it is time to build. Don Oliason said he thought it had to be tied to specific situation.  Can't count on next winter's peak being 19 mw. Commissioner Nelson asked about the Salmon dieseling? Don Oliason said it was never set up for that.  They would have to put in more storage. Commissioner Nelson said testimony was it is only for use when line went down. Don Oliason said Peterson Line was built in 80/81. -2- Commissioner Nelson said he didn't understand why they would spend all that money for 7 mws generation that didn't do any good.  Would seem to him that that should be used for power. Don Oliason said capacity of 2 units is 5.5.  Explained what peak is. Commissioner Nelson spoke to peaks within peaks. Commissioner Smith said her theory would be that since Meridian Gold is placing this new load and it is likely to be temporary, would want them to pay for it.  What makes it complicated is we have service quality problems for the area as a whole which makes her wonder about adequacy of the system.  In which case, Meridian Gold shouldn't pay for the upgrade of the whole system for all people. Commissioner Miller said he didn't know if he agreed they should pay for everything when existing system can furnish them with everything but .9.  There is a system improvement problem, etc.  If the improvements were just line extensions, then they should pay the whole thing but for a commonly-used system, they should pay their share. Don Oliason said he tried to put that service quality into some kind of prospective.  The way Idaho Power is going to serve Meridian Gold is the new line section will allow Salmon to be served out of Peterson and other line can go to Meridian Gold.  It allows them to put part of the load on Dillon and increases capacity for Salmon Valley.  In effect both Salmon customers and Meridian Gold benefit from this proposal.  It is some benefit.  Service continuity should be a little better but when you trace back to Peterson, you have 200 miles of 230 kv exposure plus about 60 miles of kv exposure all on Salmon Valley.  That is what makes the lights blink so often. Commissioner Nelson asked - is 23 1/2 mw what you can push through a 60 mw line? Don Oliason responded - when you get to 23 1/2, Salmon would be 90% of normal. Commissioner Nelson asked about capacitors along the system?  Would that help? Don Oliason said some.  Meridian Gold suggested that. -3- Commissioner Nelson asked - do you start out with 35 mws at Peterson and it drops to 23?  Still don't understand why we are limited to 23 1/2 at Salmon?  What do we start out at at Peterson? Don Oliason explained the diagram. Commissioner Miller said one thing to discuss is whether we want to think about the Meridian Gold solutions - capacitors, etc. or whether we want to simply say we basically defer to the company and it is a question of cost. Do we want to design the system or defer to the company? Commissioner Nelson said he thought Meridian Gold should pay x number of dollars and Idaho Power do the design. Commissioner Miller asked Commissioner Smith about which path to go down? Commissioner Smith said she didn't think we should be dictating to Idaho Power to design their system. Don Oliason said Meridian Gold raised so many questions, tried to decide whether Commission had jurisdiction over some of these issues - don't know the answer. Commissioner Smith said it is probably not wise to do that. Commissioner Miller asked Scott Woodbury what the legal answer was? Scott Woodbury responded - when he read through the case, thought that the Commission only gets involved in planning and specifically telling company what to do in instances where safety, health and service have been impaired and company has indicated reluctance to make an investment.  Don't think those facts are before the Commission.  Company is willing to provide service and haven't read any cases where the requesting party can dictate what the company should be putting in or how it should be designing the system.  Don't think Shoemaker's representation that it should be the lowest cost has any support.  Think the company has some overriding interest in designing the system to meet future needs, etc. Commissioner Nelson said if the company had been proposing capacitors and Meridian Gold attacked the reliability of it, we would have probably said go ahead and put it in but you are on the hook. -4- Scott Woodbury said Meridian Gold knows there may be some additional risk but their engineers are saying it is normal. Commissioner Miller said Idaho Power has to live with the risks.  If Meridian Gold's solution results in harm to others, it is Idaho Power's problem not Meridian Gold's. Scott Woodbury said he didn't know if you can implement any of Meridian Gold's proposal and insulate the oneness of the system. Commissioner Miller said his attitude is that in the first instance these design and engineering decisions have to be given to the company and Commission would intervene only if they were shown to be outside the margin of engineering reasonableness.  Kind of like the business judgement.  Initially defer to the company and only interfere in that decision if they go beyond the range of reasonableness.  We shouldn't be in a position of choosing between several competing reasonable alternatives.  This causes him to see our job is to make some decision of cost allocation between Meridian Gold and everybody else.  Was not real impressed with Mr. Angell's testimony.  Was not very helpful.  Rather than provide useful information to the Commission spent much of his time jockeying with the attorney. Don Oliason said his gut feeling is once the Commission decides on the allocation of cost, Company and Meridian Gold will have to get together and these things will have to fall into place. Commissioner Nelson said almost think we are going to have to decide if curtailability is proper. If we were to decide Meridian Gold is to pay, Meridian Gold won't accept curtailability. Discussed curtailability.  It is only during construction. Commissioner Miller reviewed what Meridian Gold proposed.  Does raise the issue of whether Meridian Gold has received a firm commitment for 2 1/2 mws.  You might look at allocation methods. Scott Woodbury asked about "firm commitment"? Commissioner Miller said one of Meridian Gold's proposals is based on that. -5- Scott Woodbury said they all seem to be geared around the benefit sharing.  Then would seem if you are going to do any allocation, would need to make decision along those lines.  Don't have much information. Commissioner Miller discussed Meridian Gold's proposal. Commissioner Smith said it looks to her like Idaho Power said we can give you up to 2.5 mw in the summer of 1990 but advised them you wouldn't want to sign up for that much until you know you need that much, it is wise you not sign up for that much.  While they said it was available, you can't tell from this the come back to say I want 2.5, or I only need 2.4 - didn't construe letter as binding. Commissioner Miller read from the letter from Idaho Power.  Though they specifically said until we sign the agreement, nothing is for sure. Commissioner Smith said Meridian Gold wasn't operating in 1990 so think all bets are off. Commissioner Nelson asked - does paralleling come under the provision of being in company's judgement? Don Oliason said yes - explained paralleling. Concluded paralleling is not a huge problem. Commissioner Nelson said it sounds like Meridian Gold needs it to start their meters. Don Oliason said they prefer starting them with a diesel. Commissioner Miller said he thought that once we decide on allocation, ought to have language that says company has duty to provide service for Tariff 19 schedule is a rule of service for a class of customers but company can't hide behind that tariff to deny service to a customer that doesn't quite fit the tariff.  Once the customer pays its fair share of the cost, then the company has an absolute duty to provide service, whether it requires a contract, whatever.   Since we don't really have evidence of benefits accruing to others, maybe the best way to do it is take the total amount of the enhancement and have Meridian Gold pay for the share or portion of the enhancement from which they will benefit.  That would the first step and maybe for them pay for some additional increment on the theory that there is not going to be a parallel benefit to everybody else. -6- Scott Woodbury said that would also bring up the reliability question we have not resolved in another case. Commissioner Smith said it was all tied together. Don Oliason said the new line section will enhance service - explained what it would do. Commissioner Miller said he did agree with Meridian Gold, the system is close to needing upgrade even without Meridian Gold.  If the trigger is 22 mws, then they may be guilty of loading the gun but not pulling the trigger. Commissioner Nelson said if this was a load growth area they may be looking at 25%. Don Oliason said without Meridian Gold, Idaho Power would with least year's peaking, go ahead with planning line if it increased next year, would budget for construction 2nd or 3rd year out. Commissioner Miller asked about company's proposed upgrade?  How much would it be? Don Oliason said it depends on the assumptions you start with.  They have been calling it a 10 mw upgrade.  Explained that 10 mw would come from Dillon but it is actually going to be from Salmon to Tendoy.  It will actually only be 8.5 capacity. Explained the calculation. Commissioner Miller said he would be inclined to take the 10 and 3.4 of that for Meridian Gold so they would pay 34%.  The next question is whether you would want to find some way to add some additional amount to Meridian Gold's share to recognize that the remaining 7 mws although they provide some benefit to remaining customers, that it is still unfair for the remaining customers to bear that whole amount because it is to some extent excess capacity.  Should Meridian Gold have some share in additional increment? There would be 7 more on Dillon line. Commissioner Nelson said 12.8 is total; 2.8 available plus 10 upgrade.  It would leave you with a smaller number.  Think it might be a fairer number if you took the whole amount available and took 34% and then number you come up with. -7-  Said there are three ways you could do it.  (1)There is 1.4 available for Meridian Gold and we will add 10 and out of that they will take 25%.  Or (2) could say add 10, Meridian Gold is going to take 34% and charge them for that or (3)if we add 10, we have 12.8 available and Meridian Gold is going to take 34% of that and they should pay for that. Commissioner Smith said Idaho Power wouldn't upgrade this without Meridian Gold.  They should pay, they are causing something to happen.  Said she liked Method 3. Don Oliason said Idaho Power made a conditional offer of 34% for Meridian Gold to pay.  Meridian Gold offered 20%.  If you take 20% plus 34 and divide by 2 that is pretty balanced way to do it. Madonna Faunce said Meridian Gold is temporary - maximum of 10 years.  Life of the line is 44 years.  Ratepayers are going to pick up healthy portion no matter how it is done. Commissioner Smith asked if it will ultimately exclude the amount of rate base of Meridian Gold? Stephanie Miller said not unless you were going to require them to close it up. That would be 64%. Number is 650,000 and million grossed up. **If Meridian Gold made some contribution it is taxable. This is a short term, temporary customer. 27% of 2.529 million is 682,000.  1.66% is gross up.  $1,135,497. Commissioner Smith explained why it should be grossed up. Didn't think she would say they are a temporary customer.  You are ignoring some of the costs if you don't take into account that it is a temporary customer. Commissioner Miller said the other 7 mws have benefit to the other customers but the tax liability of the contribution is not a benefit to the other ratepayers.  Said it that way.  Does that lead us into trouble in other places? Stephanie Miller said she didn't think so. COmmissioner Nelson asked about other schedule 19 customers now hooking up? -8- Stephanie Miller said link it to the fact that it is a extraordinarily large contribution.  If you accepted that it wouldn't have to be you could say it is because any customer could be a liability of the company.  When someone comes in with a million dollars, it really is extraordinary. Commissioner Nelson said he thought in this case it is reasonable to ask them to gross up. Commissioner Miller said review of the other approaches we have considered are for paying tax on these.  (1)  Full gross-up. Other would be to give Meridian Gold the benefit of the present value of the tax depreciation.  Maybe that would be the better way to go.   **Agreed to do that.  It is about 40%. Questions on Page 27 of the Decision Memo. Commissioner Miller said we have resolved first block.  Do think we need to discuss the curtailability, paralleling and capacitors.  Explained how the acquisition works.  Just because they wouldn't precisely fit on Schedule 19 is no excuse for not serving them so they have to work something out in the meantime regarding curtailability, etc. Scott Woodbury said we say serve them.  If in actuality it is going to take 2/3 years to construct the line, they don't have to serve right away. Commissioner Miller said they have 2.5 mw. Scott Woodbury said don't see that they have 2.5 available. Commissioner Smith said they have at least 1.4. Commissioner Miller said this is peak we are talking about.  The annual average load is more in the neighborhood of 12 mws.  On annual average there is plenty of capacity. Scott Woodbury said he didn't think during interim you should give them greater firm amount than 1.4.  Otherwise remaining customers may suffer. -9- Commissioner Nelson said it has to be subject to curtailability until the new line is built. Commissioner Miller said in terms of their duty to serve, since Meridian Gold is going to pay for construction of new facilities in the meantime there should be something parallel to run diesels or curtailability that avoids peaks. Don Oliason said the two of them can work that out.  With curtailability agreement paralleling is possible. Commissioner Smith said she didn't think they wanted a precedent set for curtailment. Commissioner Nelson said if we make that just until the line is built, is how that should be said. Don Oliason asked about extra insulation on 138 kv? No. Commissioner Smith said she though you have to leave this .95 pu up to the company engineers.  Are not in a position to tell them. Commissioner Miller said he thought we should say we can intervene if its totally off-base.   Commissioner Smith said she liked Commissioner Nelson's method of calculation.  Came out with $808,000 with taxes. Commissioner Nelson said it was $941,000. Commissioner Miller asked - under this system, Meridian Gold doesn't get refunds? No. Discrimination: Explained what Shoemaker's argument was. Commissioner Miller said he thought his reliance on a homebuilders' case is wrong because this is not what this case is. Meeting adjourned. Continued on next page ..... -10-         DATED at Boise, Idaho this       day of June, 1991.                           PRESIDENT                           COMMISSIONER                           COMMISSIONER ATTEST:                               Commission Secretary 0040M