Loading...
HomeMy WebLinkAbout19930111.docx MINUTES OF DECISION MEETING January 11, 1993 - 1:30 p.m. In attendance were: Commissioners Marsha H. Smith, Joe Miller and Ralph Nelson and staff members Mary Friddle, Scott Woodbury, Lori Mann, Syd Lansing, Terri Carlock, Belinda Anderson, Dave Schunke, Gary Richardson, Tonya Clark, Jim Long, Bill Eastlake, Randy Lobb, Joe Cusick, Lynn Anderson, Birdelle Brown, Eileen Benner, Tom Faull and Myrna Walters.  Also in attendance were:  John Souba of U. S. West and Woody Richards, Attorney at Law. Items from the January 11, 1993 Decision Meeting Agenda were considered as follows. 1.  Regulated Carrier Division Agenda dated January 11, 1993. Approved. 2.  Scott Woodbury's December 18, 1992 Decision Memorandum re:  WWP-E-92-5 and WWP-G-92-2 (FAS 106 accounting treatment of retirement benefits other than pensions); also discussion of record augmentation and related comments. Discussion of the matter is summarized as follows. Commissioner Smith said she would propose that we acknowledge the appropriateness for ratemaking purposes, applying accrual accounting to post-retirement benefits (PBOPs). Commissioner Miller said after study, seemed to him that even though 106 has been adopted for financial purposes, the question we have is - is it the best... for ratemaking purposes?  Ultimately the argument that pension costs are earned while they are employed is the appropriate treatment.  The total amount of cost for the company is going to be the same whatever method is decided upon.  Question is - is allocation to ratepayers while it is being earned the right method? Commissioner Nelson said it was. Commissioner Smith asked - do you want them to be recognized for the interim, ...., or combination or deferral?  Said personally she was leaning towards deferral of the three years or less with amortization up to 20.   -2- Commissioner Nelson said he thought that was where he was also.  Five years piles them up a little more than he would like.  Think 3 years gives them choice of rate case or beginning to charge those expenses below the line depending on where they think they are financially.  Originally, thought amortizing over a shorter period was the way to go, think that because you were getting into the next generation of ratepayers when you go out into 20 years, since we are playing catchup, think it is fair to take it over a longer period of time and reduce the credit burden. Commissioner Miller asked about the point other people have made, the decision to permit deferral should be in conjunction with the examination of costs, ability to absorb without deferral. Commissioner Nelson said he thought that was partly addressed by having the deferral time be 3 rather than 5. Commissioner Smith said she would even go two.  Don't think the company would like two, though. Commissioner Nelson said there are other things going on with the company.  We are nearing the end of the rate moderation period so don't think right now is the appropriate time for a case unless there are other factors involved.  They may prefer to wait until the end of the fuel switching period.  So, guess by going three years you are giving them some flexibility without making huge change in how costs are divided up. Commissioner Miller said he was attracted to the staff agreement that deferral ought to depend on the company's ability to absorb, but once beyond that, had difficulty seeing how you could choose between companies. Then the idea of somehow a retroactive eyeballing of rate of return for the tax was not appealing. Commissioner Nelson said he agreed.  You would be putting yourself in mini-type rate case without either staff or company having the chance to prove their case. Commissioner Miller asked Commissioner Nelson what he thought about the WWP proposal to have an earnings cap? Commissioner Nelson said he didn't object to that.   Commissioner MIller said under our proposal the rate of return would stay the same.  Staff's proposal was you go up or down or impute. -3- Commissioner Nelson asked who was going to make that determination? Scott Woodbury asked - you are rejecting the earnings text out of hand? Commissioner Nelson said - when you start making adjustments in the rate of return or how its defined, you are limiting someone's ability to make a case, either the company or staff. Scott Woodbury said that is why staff recommended no deferral, just have company come in. Commissioner Miller said if you are going to permit deferrals, what you are doing is giving the company a lot of ratepayer money before it has to be paid out.  Second point is whether the money should be in a separate fund like decommissioning fund so the money is there when you need it.  Those seem to be the two questions that have to be faced if you are going to permit deferrals. Commissioner Nelson asked - isn't the deferral just a small piece of the total amortization when you are using a few years. Syd Lansing said you would have 1.6 and you would amortize that for 17 years if you piled it up for 3 years.  That is $100,000 per year. Commissioner Nelson asked - how much do you estimate the ongoing expenses is that you are building up the next 6-8-10 years? Syd Lansing said the total expense is going to be 6 million a year.  2/3rds is actual and 27% of that is Idaho. Commissioner Nelson said - so you are building a fund of $4,000,000 here that is current expense? Syd Lansing said yes. Commissioner Nelson said on accrual basis, you probably fund quite a bit less if you plug in company's cost of capital instead of money fund. Commissioner Miller said he was persuaded by the FERC approach.  Reason they require separate funding vehicle was persuasive. -4- Scott Woodbury asked - do we want to discuss the Motion to Augment and Comments filed first?  We have the comments of the utilities.  Went over the comments briefly.  Only one supporting ELCON was Peter Richardson.  Staff did not submit any comments. Commissioner Smith asked about FERC comments? **Was an exhibit attached to Idaho Power comments. Commissioner Miller said he had a copy of their policy statement. **Discussed the tax question. Scott Woodbury spoke to VIBA.  Main part of that defense Idaho Power says is in that particular vehicle they don't allow any inflation for medical costs.  The way some states have handled this is they only allow company to allow tax-deductible portion of the rates.  That provides incentive to the utility to obtain maximum.  Think there will be some change in vehicles so don't think we should designate one. Commissioner Smith asked if company just eats the difference? Scott Woodbury said yes. Commissioner Nelson said that sounded good but they have too much liability involved from unions, etc. Commissioner Miller said - maybe we don't have to fully decide this question now, particularly if we are going to have a 2/3 year get yourself in here rule.  Funding methodology will be specified in more detail.  Can still roll them over. Said he wanted to agree with Syd Lansing.  Question is - do we have to decide that now or can we decide it in the next rate case... if we defer and have rate case in 2/3 years, can we do it then? Syd Lansing said if it were only an income tax question there is a 3 year lag.  If it is a rate question you can decide it in a rate case. Terri Carlock said you could put the burden on the company to show that the funding mechanism is in the best interest of the ratepayer.   -5- Syd Lansing commented - right now it is only cash basis. Commissioner Nelson said if we defer for 3 years and say we want separately-funded vehicle, can they roll the accumulated funds in there? Syd Lansing said yes, they can.  They are saying cash right now.  It shouldn't be a problem. **Will come back to that. Commissioner Smith said it sounded like all were in agreement that we don't want staff to choose its own rate of return capping.  Think it would be entirely appropriate to have the company refrain from deferral if it is making its last rate of return. Commissioner Miller said he didn't mind a floating rate of return if we had FERC benchmark rate of return.  Would have to have a rate of return case...just seems an inefficient way to do it.  If there was a benchmark system, would be receptive to that.  To have a rate of return squabble every time is difficult. Commissioner Nelson said - and you would have to do it for every utility.   Decision was yes, we are going to augment the record and accept comments.  Two votes to one - Commissioner Nelson did not vote yes. Commissioner Smith asked about the three year deferral? Commissioner Miller said he would like to talk through the whole thing.  Intuitively the staff proposal has some appeal but don't know how to get any further than that. Commissioner Smith said the only practical way to do this is the company's proposal.  If you use anything else we can't do it now because we either don't have the information or its going to require another case. Commissioner Miller said - or you could have other tests.  You could say if in deferring these costs you will be unable to pay dividends, you could defer.  If we could come up with an easy to apply test on whether to defer or not defer that would be applied company to company, that is something he would consider. Commissioner Smith asked - how can you determine causation? -6- Commissioner Miller said he liked the staff idea in some respects but worry about making those case by case judgements without some standard to be applied in each circumstance. Commissioner Nelson said he didn't have trouble with deferral because it is being expensed differently because of accounting change.  It is not anything that was alleged they were doing wrong.  Gave example.  When we had settlement with U. S. West we allowed change in separation account.  Think this is close to that.  It is a normal business expense because of an accounting change. Commissioner Miller spoke to PPL... do you think what we are really doing is taking cost beyond rate stability... we are pushing them beyond July? Commissioner Smith said in effect that is what you are doing. Commissioner Nelson said you are pushing a portion of the expenses beyond July. We are deferring the catch-up part. Syd Lansing said in the catch-up part there is a small piece that would be cash in the first year no matter what. Commissioner Nelson asked about '93, would it be deferred? Commissioner Miller said there are two deferrals - the catch-up that is part of 106.  Second is incremental difference between pay as you go and accrual. Syd Lansing agreed that was right.  The question is what do you do with the incremental difference between pay as you go and accrual for the period between now and the next rate case. Commissioner Miller said by adopting 106 the company gets the transition amount and the ratepayers are paying for costs incurred in a prior period.  Is the other piece of it, it is the going-forward difference between the methods over and above the transitional obligation? Syd Lansing said yes. Commissioner Nelson said he didn't know why we would treat PPL any differently. -7- Commissioner Smith said it is their choice not to come in. Commissioner Miller said on Commissioner Nelson's last point, for the purpose of this case we have to decide if FAS 106 is correct?  We can decide that for all companies?  I can go with that.  Second question is:  Three year-deferral?  Said question that is unclear in his mind is are we saying this is okay for all utilities or are we saying it is utility-specific?  Then what will be subsequent criteria? Commissioner Smith said if we say you cannot defer based on your rate of return.. would defer 2 years.. Commissioner Miller said administration of that test does require to have in place a system like we did in Utah where they bring in a proforma filing. Terri Carlock said she thought that is what Washington Water Power envisions.  They filed in Washington. Commissioner Miller said or we could say that since WWP has earnings test, we will allow it here but not others. Commissioner Smith said - or we could allow them to defer for 2 years. Commissioner Miller said he would prefer keeping earnings there. Commissioner Nelson asked - if you want to include the earnings test, would you go 3 years? Commissioner Smith said maybe it would be better to decide earnings separately. Commissioner Miller said - or we could say you can only defer if we take the staff's approach and keep open mind for deferral but put the burden on the company to show financial need for it. Scott Woodbury said it seems a better test is whether they are exceeding their authorized rate of return.   Commissioner Miller said we can draft language that keeps this WWP specific. Prefunding Vehicles. Commissioner Smith said it seemed to her they were not ready to choose. -8- Commissioner Nelson said at this time he was opposed to that.  Don't think there is much selection out there.  Don't see that at $4,000,000 here on a $400,000,000 revenue company that we are putting a lot of money at risk at this point.  The obligation shows up on the books as part of their capital. Commissioner Miller said if you keep the money inside the company, do you think the company should compensate customers for cash flow you are giving the company free?  Should rate of return be computed back? Commissioner Nelson said that becomes part of working capital in rate case.  If they are free to use that money in their business, it is a ratebase benefit. Commissioner Miller said he would like to see a quantification of that.  Idea of handing all this money over to a utility when they have to pay it out on a cash basis, doesn't seem to be a huge ratebase benefit. Commissioner Nelson said it is a revolving fund.  There are pay outs. Syd Lansing asked - are you intending to have this fund as a reduction of ratebase?  If so, the ratepayers are getting a benefit on equity rate of return.  It is is not a ratebase item company can use it as working capital. Commissioner Miller said - then the ratepayers get a benefit on that. Syd Lansing said they are on the hook if the company goes bankrupt. Commissioner Miller said Water Power's case he could do that.  Make sure it is a ratebase reduction.  **Any unfunded amount. Commissioners agreed. Scott Woodbury said - but you are not saying the Commission will not allow them to fund a refunding vehicle? No. Commissioner Miller said the refunding vehicles mechanism may expand. Discussed time period. -9- Commissioner Miller said he agreed on earnings test. Commissioner Nelson and Commissioner Smith are to choose the time period - 2.5 or 3 years. **Three years. **In attendance at this time were two people from the public who were interested in Item 7 from the Agenda.  Commissioners went to that item at that time. 7.  Lynn Anderson's January 8, 1993 Decision Memorandum re:  Marsh Valley-Pocatello Petition for EAS. Commissioner Miller said he thought after reading Lynn Anderson's memo that things have changed in 7 years and Commission should take another look at this.  Would be in favor of having at least the public hearings. Commissioner smith said she would too.  Asked Commissioner Miller if he thought it should be public and technical hearing or just public hearing? Commissioner Miller said he had mixed feelings.  Would defer to Lynn Anderson or whatever staff recommendation is. Commissioner Smith said based on the call volumes, can assume need. Lori Mann said since it is intra-company, thought technical information would be easier to get. **Decision was to have public and technical hearing. Lori Mann said she was already setting a Springfield EAS hearing.  Could schedule this also. **Discussed delaying Springfield to accommodate both hearings. **Will go to McCammon in March. Commissioner Miller said he would alert the staff that in his opinion that for EAS proceedings in south Idaho there has to be some analysis on competition or potential competition by eliminating toll route.  Think generally an EAS proceeding in south Idaho has some extra burden because of competitive services. -10- 3.  IPUC-E-92-28 - FAS 106 - Idaho Power Company - Discussion of Procedure. Scott Woodbury said question now is do Commissioners feel this is appropriate for modified procedure comments? Commissioner Smith asked if Idaho Power requests deferrals? Scott Woodbury said yes. Commissioner Smith asked about an earnings test - do we want it? Scott Woodbury said no. Commissioner Miller suggested having a hearing. **IPC-E-92-28 will be set for hearing. 4.  Scott Woodbury's January 7, 1993 Decision Memorandum re:  Case No. IPC-E-92-32 - Firm Energy Sales Agreement - Magic West Cogeneration Project, Glenns Ferry, Idaho. Commissioner Nelson asked about the size of the project? Scott Woodbury said the company is going to take steps to insure that it is not more than 10mws. Tom Faull said equipment is rated at 10 mw but it could be run at higher (110%).  It would cost too much to do that, though. Commissioner Nelson said he couldn't find any problem with this. Commissioner Miller said it looked fine to him except for the K factor question.  Wondered if in this case we should leave it to Idaho Power Company to decide whether or not to spend or not spend, leave it to their discretion?  Or if we should revisit the K factor toward trying to say when it should apply or shouldn't apply.  Perhaps for the near term, we should allow it to be worked out case by case. Tom Faull said if Commission decided to list specifics, it could be endless and you would get bogged down. Commissioner Nelson said he was satisfied at least to date that Idhao Power Company has been zealous to get as much security as they can. -11- Okayed. 5.  IPC-E-92-27 - Bell Rapids Conservation Project. Commissioner Smith said that in last week's decision meeting, decision was made to approve the Project but Commissioners asked that the order contain cautionary language.  Commissioner Miller had second thoughts about putting that language in.  So asked that the matter be brought back to the decision meeting for further discussion since the decision may be different from the one made at the last decision meeting. Commissioner Miller said he thought there should be some more discussion.  After going back through prior decisions, thought we were rewriting history a little bit.  We started this deferral process knowing there was a rate case coming up.  We should find some way to address it but don't think this is the proper vehicle.  Thought we should approve this and staff can think of a way to get the question to the Commission more generically.  Do that instead of this looking like a change in policy.  Would prefer approving this, recognizing that this is a question that has to be addressed and do it in another case. All Commissioners agreed. Commissioner Smith said we have already started to express our concern.  Think the company is aware we are getting nervous about what is "not" going on. COmmissioner Miller said staff comments in the decision memo got that out to the Company. 6.  Jim Long's January 7, 1993 Decision Memorandum re:  Toll Discount Plan as Possible Alternative to EAS for Elk City/Grangeville Subscribers - Case No. GNR-T-92-5. Discussed what action Commission should be taking - wait for now? Lori Mann asked if this was the kind of programs the Commissioners want to see? **Matter will come back to the Commissioners in a decision meeting to see what the ultimate final decision in this case will be. Meeting adjourned. Dated at Boise, Idaho, this 14th day of January, 1993. Myrna J. Walters Commission Secretary 0137M