19900919Reply Statement.pdf

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PETER J. RICHARDSON u
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rrES COMMISSiON
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September 19, 1990
Ms. Myrna J. Walters
Commission Secretary
Idaho Public utilities Commission
472 W. Washington
Boise, ID 83702
Re: Reply Statement of the Industrial Customers of Idaho
Power to Idaho Power Company's Response
Case No. IPC-E-90-2
Dear Ms. Walters:
Enclosed is the original and seven copies of the above
referenced Reply Statement of the Industrial Customers of Idaho
Power. Would you please file the same?
If you have any questions concerning this filing, please do
not hesitate to contact Peter Richardson.
Sincerely,
2£au~
Secretary to Peter Richardson
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Enclosures
FAX: [phone]
ANCHORAGE, ALSKA . BELLEVUE, WASHINGTON . Los ANGELES, CAIFORNIA
PoRTLD, ORGON' RiCHLAND, WASHINGTON' SEATTE, WASHINGTON' WASHINGTON, D.C.
.
Grant E. Tanner
DAVIS WRIGHT TREMAINE
2300 First Interstate Bank Tower
1300 SW Fifth Avenue
Portland, Oregon 97201
[phone]Fax: [phone]
Peter J. Richardson
DAVIS WRIGHT TREMAINE
350 North Ninth Street
suite 400
Boise, Idaho 83702
[phone]
Fax: [phone]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICA- )
TION OF IDAHO POWER COMPANY )
FOR AUTHORITY TO RATE BASE )
THE INVESTMENT REQUIRED FOR )
THE REBUILD OF SWAN FALLS )
HYDROELECTRIC FACILITY )
)
CASE NO. IPC-E-90-2
REPLY STATEMENT OF THE
INDUSTRIAL CUSTOMERS OF
IDAHO POWER TO IDAHO POWER
COMPANY'S RESPONSE
COMES NOW, the Industrial Customers of Idaho Power (ICIP)
pursuant to the N()tice of Opportunity to Submit Written Comments
issued by the Commission Secretary on August 23, 1990, in the above
enti tled matter, and provide herein their Reply to Idaho Power
Company's (Idaho Power or Company) Response in this matter.
Page 1 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
..
I.
IDAHO POWER ATTEMPTS TO
IMPROPERLY BIND FUTU COMMISSIONS
Idaho Power's Application and its response to the Statement
of Position of the ICIP demonstrates a fundamental misunderstanding
of rate making principals. Idaho Power asks this Commission to
bind some future Commission to include in the Company's rate base
predetermined construction costs. The ICIP therefore respectfully
requests that the Company's Application be dismissed in its
entirety. Dismissal would not be warranted if the power company
were merely seeking a certificate of convenience and necessity for
construction work on the Swan Falls facility.Dismissal is
warranted because Idaho Power has conditioned the application on
receiving a favorable ruling on rate making treatment for its
future investment in that facility.
II.
THE COMPANY'S ATTEMPT TO LIMIT THE
METHODOLOGY BY WHICH FUTU COMMISSIONS
REVIEW INVESTMNTS MUST BE REJECTED
In its Statement of Position the Industrial CUstomers of Idaho
Power (as well as the Commission Staff) suggested alternative
methodologies for limiting the dollar amount that may be included
in Idaho Power's rate base once the Swan Falls construction is
completed.For example, the ICIP offered the following
alternative:
Idaho Power's avoided costs still provides a benchmark
as to the reasonable cost for Swan Falls. The ICIP
Page 2 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
..
submits that, as with Milner, the Company's avoided cost
should constitute the ceiling for any rate making
recognition of Swan Falls.
Statement of Position and Issues of the ICIP at page 9.
In response, Idaho Power challenges the ICIP and Commission
Staff by asserting:
Those Parties that desire to contend that the
Commission's Avoided Cost Determinations for Idaho Power
Company can be utilized to calculate Idaho Power's
investment for rate base purposes should file their
specific proposals as to how that calculation would be
performed by a date to be set by the Commission.
Response of Idaho Power Company at page 6.
Idaho Power misses the point.This Commission may not
obligate a future Commission to a particular rate making
methodology.Prior to rate basing a particular investment, the
Commission must make a determination that the facility is used and
useful and the investment was prudent. Using the published avoided
cost rates as a ceiling may be, under today's circumstances, a
valid methodology by which to judge power::ompany investment in new
generating plant. It may also be a methodology that will likely
produce a reasonable result at some time in the future. It is,
however, just one possible measure of prudency.The Idaho
Commission has the authority to find that, under today' s
circumstances, a particular methodology for determining the
reasonableness of an investment is or is not appropriate. The
Idaho Commission cannot find that a particular methodology will,
by law, be reasonable at some future date. A ruling as to the
Page 3 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
..
appropriateness of rate basing Idaho Power Company's investment in
Swan Falls would be a premature endeavor that has no legally
binding effect.
III.
IDAHO POWER CANOT ABDICATE
ITS MAAGEMNT RESPONSIBILITIES
Idaho Power is attempting to have the best of both worlds.
It is, in essence, seeking insurance that before it makes an
investment, the Commission will allow that investment to be
recovered in rate base. Idaho Power's proposal eliminates all risk
to its stockholders of imprudent or untimely decision making in the
board room. Idaho Power is attempting to move the entire risk of
such decision making to its ratepayers, many of whom do not hold
an equity interest in the power company.
The return Idaho Power recovers on its investment includes a
measurement for "risk." One of the most significant risks an
electric utility assumes is the commitment to construct new
generating facilities. Idaho law is clear that a regulated utility
may only earn a return on those facilities that actually provide
a service to its customers. If the Swan Falls facility proves to
be an imprudent investment (for whatever reasons), a future Idaho
Commission will be called upon to determine the extent that
investment should be disallowed for rate making purposes. Absent
significant amendments to the Idaho Pulic utilities Law, nothing
Idaho Power or the Commission can do today will change that
Page 4 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
, ...
fundamental fact.
The Commission's decisions concerning Idaho Power's investment
in the Valmy plant demonstrated a willingness on the part of the
Commission to require the ratepayers to share some of those risks.
In addition, the Commission has already admonished Idaho Power to
proceed with care on the Swan Falls project. In Order No. 19623
issued on April 24, 1985, the Commission warned:
We put Idaho Power on formal notice that it acts under
its own peril for costs associated with the Swan Falls
rebuild until such time as the Company is prepared to
submit its definitive cost estimate and to demonstrate
that the proj ect will be cost-effective. As we stated
in the -197 case, the year of "hell-or-high-water-
financing" is over. The ratepayer should not be at risk
if management commences construction before it receives
a definitive cost estimate, or before it has an approved
water right, or if it fails to study reasonable
alternative projects, or if the project itself is not
cost-effective compared to power that is readily
available from competitors.
Order No. 19632 quoting Order No. 19121.
As can be seen, there are a myriad of issues that must be
addressed. None of those issues, however, include a commitment by
the Commission to rate basing a facili ty that has yet to be
demonstrated to be used and useful.
IV.
DISMISSAL OF IDAHO POWER'S
APPLICATION IS THE ONLY
REASONABLE OPTION OPEN TO THE COMMISSION
Idaho Power's Application, as noted above, is tied to its
attempt to seek preapproval of rate making treatment of its
potential construction costs. Because of the conditional nature
Page 5 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
..
of Idaho Power's Application, a new application to begin
construction on the rebuild of the Swan Falls facility would be
required, leaving rate making treatment of that facility to be
considered at the appropriate time.
For the reasons set forth above, Idaho Power's application
must be dismissed in its entirety.In the al ternati ve, the
Commission must limit the scope of Idaho Power's Application to a
determination of whether authority shall be granted to Idaho Power
Company for the construction on the rebuild of the Swan Falls
facility.
DATED this I q~ day of September, 1990.
Respectfully submitted,
DAVIS WRIGHT TREMAINE
Page 6 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
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CETIFICATE OF SERVICE
I HEREBY CERTIFY that I have this I ei~ day of September,
1990, served the foregoing REPLY STATEMENT OF THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER TO IDAHO POWER COMPANY'S RESPONSE, Case
No. IPC-E-90-2, on all parties of record by hand delivering a
copy thereof, to the following:
Michael S. Gilmore
Brad M. Purdy
Idaho Public utilities Commission
472 W. Washington
Boise, ID 83720
and by mailing a copy thereof, postage prepaid, to the following:
Larry D. Ripley, Esq.
Legal Department
Idaho Power Company
P.O. Box 70
Boise, ID 83707
David H. Hawk, Director
Energy Natural Resources
J .R. Simplot Company
P.O. Box 27
Boise, ID 83707-0027
Steven L. Herndon, Esq.
Legal Department
Idaho Power Company
P.O. Box 70
Boise, ID 83707
James N. Roethe, Esq.
Pillsbury, Madison & Sutro
P.O. Box 7880
San Francisco, CA 94120
Harold C. Miles
Idaho Consumer Affairs, Inc.316 15th Ave. S.
Nampa, ID 83651
R. Michael Southcombe, Esq.
Clemons, Cosho & Humphrey
815 W. Washington
Boise, ID 83702-5590
R. Scott Pasley
Assistant General Counsel
J .R. Simplot Company
P.O. Box 27
Boise, ID 83707-0027
Afton Energy, Inc.
c/o OWen H. Orndorff
Orndorff & Peterson
1087 W. River st., Suite 230
Boise, ID 83702-7035
By
CERTIFICATE OF SERVICE - PAGE 1