19900919Reply Statement.pdf

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LAW OFFCES
JEFFERSON PuCE' 350 N. 9TH, SUITE 400 . BoiSE, IDAHO 83702
[phone]
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. DAVIS WRGHT TRMAE
PETER J. RICHARDSON
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 i s Response
Case No. IPC-E-90-8
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,
:lo:i~
Secretary to Peter Richardson
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Enclosures
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ANCHORAGE, ALASKA . BELLEVU, WASHINGTON . Los ANGELES, CAIFORN
PoRTLAD, OREGON' RiCHLAD, WASHINGTON' SEATTLE, WASHINGTON' WASHINGTON, D.C.
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Grant E. Tanner
DAVIS WRIGHT TREMAINE
2300 First Interstate Bank Tower
1300 SW Fifth Avenue
Portland, Oregon 97201
[phone]
Fax: [phone]
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Peter J. Richardson
DAVIS WRIGHT TREMINE
350 North Ninth street
suite 400
Boise, Idaho 83702
[phone]
Fax: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICA- )
TION OF IDAHO POWER COMPANY )
FOR CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY FOR )
THE RATE BASING OF THE MILNER )
HYDROELECTRIC PROJECT, OR IN )
THE ALTERNATIVE, A DETERMINA- )
TION OF THE EXEMPT STATUS FOR )
THE MILNER HYDROELECTRIC )PROJECT )
)
CASE NO. IPC-E-90-8
REPLY STATEMENT OF THE
INDUSTRIAL CUSTOMERS OF
IDAHO POWER TO IDAHO POWER
COMPANY · S RESPONSE
COMES HOW, the Industrial CUstomers of Idaho Power (ICIP)
pursuant to the Notice of Scheduling and Notice of Hearing issued
by the Commission Secretary on August 24, 1990, in the above
entitled matter, and provide herein their Reply to Idaho Power
Company's (Idaho Power or Company) Response.
Page 1 - ICIP' S REPLY STATEMENT TO
IDAHO POWER' S RESPONSE
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I.
IDAHO POWER ATTEMPTS TO
IMPROPERLY BIND FUTURE 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 seeks not only a
certificate of public convenience and necessity for the
construction associated with the Milner proj ect, but it 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 proposed Milner
hydroelectric facility. Dismissal is warranted because Idaho Power
has conditioned the issuance of its certificate of convenience and
necessity on receiving a favorable ruling on rate making treatment
for its future investment in that facility.
The Company's Response provides:
It is the position of Idaho Power Company . . . that the
issuance of a certificate of public convenience and
necessity for a generation facility is a determination
by the Commission that the facility, upon construction,
will be included in the rate base of the utility when
determining the revenue requirement of that utility.
Idaho Power Response to Comments at pages 1-2.
Idaho Power's arguent is irreconcilably inconsistent. The
inconsistency in Idaho Power's argument is highlighted in the next
Page 2 - ICIP' S REPLY STATEMNT TO
IDAHO POWER'S RESPONSE
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two sentences of its Response.First, Idaho Power accurately
observes:
Under Idaho law if a utility has reasonably and prudently
invested funds in a facility which is dedicated to the
public use, that investment must be included in theutili ty i S rate base for purposes of determining thatutil i ty i S revenue requirement.
Idaho Power Response to Comments at page 2.
The phrase, "facility which is dedicated" is appropriately
written in the past tense. A utility may recover its construction
and other costs from its rate payers after the facility has been
dedicated to the public use and after the utility has invested
funds for the construction of that facility. It is absurd on its
face to argue that the utility has made a prudent investment for
rate making purposes before the facility has actually been put in
service and "dedicated to the public use."Idaho Power goes on
to argue, however, that:
The issuance of a certificate of public convenience and
necessity is a determination that the facility should be
constructed and is dedicated to the public use.
Idaho Power Response to Comments at page 2. (Emphasis provided.)
It is impossible to simultaneously make a determination that
a facility both ought to be constructed at some time in the future
and that the very same facility has already been dedicated to the
public use. Idaho Power can not have it both ways.
Page 3 - ICIP l S REPLY STATEMENT TO
IDAHO POWER l S RESPONSE
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II.
THE COMPANY i S ATTEMPT TO LIMIT THE
METHODOLOGY BY WHICH FUTURE COMMISSIONS
REVIEW INVSTMNTS 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 i s rate base once construction of the Milner
hydroelectric facility is completed. For example, the ICIP offered
the following alternative:
Idaho Power i s avoided costs still provides a benchmark
as to the reasonable cost for Swan Falls. The ICIP
submi ts that, as with Milner, the Company i s avoided cost
should constitute the ceiling for any rate making
recogni tion 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:
If Staff and Parties desire to contend that the
Commission i s Avoided Cost Determinations for Idaho Power
can be utilized to calculate Idaho Power i s investment for
rate base purposes, they should be required to file
specific proposals as to how that calculation would be
performed by a date to be set by the Commission. Idaho
Power would be able to respond to such a contention.
Idaho Power Response to Comments at page 6.
Idaho Power misses the point.This Commission may not
obligate future Commissions 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 that the investment was prudent.A certificate of
Page 4 - ICIP i S REPLY STATEMNT TO
IDAHO POWER'S RESPONSE
...
public convenience and necessity does not predetermine prudency.
Using the published avoided cost rates as a ceiling may be, under
today l s circumstances, a valid methodology by which to judge power
company 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 appropriateness of rate basing Idaho Power
Company's investment in Milner would be a premature endeavor that
has no legally binding effect.
III.
IDAHO POWER CANOT ABDICATE
ITS MAAGEMENT RESPONSIBILITIES
Idaho Power is attempting to have the best of both worlds.
It is, in essence, seeking insurance that before it makes an
ivestment, 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.
Page 5 - ICIP l S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
OJ ..
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. As the Company noted, Idaho law is clear
that a regulated utility may only earn a return on those facilities
that actually provide service to its customers.If the Milner
facility proves to be an imprudent investment (for whatever
reason), 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 can do today wiii change that
fundamental fact.
It is true that there may be some sharing of the risks
associated with new plant investment that proves to be unneeded.
The Commission's decisions concerning Idaho Power's investment in
the Valmy facilities demonstrated a willingness on the part of the
Commission to require the ratepayers to share some of those risks.
The determination as to whether the ratepayers should share the
risks in an imprudent investment can only be made after the
investment is made and a prudency review has been completed.
Requiring the ratepayers to share the risks of an investment that
has yet to be made makes the ratepayer akin to an involuntary
equi ty investor.
Page 6 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
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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
of Idaho Power's application, a new application for a certificate
of public convenience and necessity to begin construction of the
Milner 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 alternative, the
Commission must limit the scope of Idaho Power's Application to a
determination of whether a certificate of public convenience and
necessi ty shall be issued to Idaho Power Company for the
construction of the Milner hydroelectric facility.
If the Commission desires, the ICIP is prepared to engage in
detailed legal briefing on this important issue.
DATED this ~ day of September, 1990.
Respectfully submitted,
DAVIS WRIGHT TREMAINE
Page 7 - ICIP' S REPLY STATEMENT TO
IDAHO POWER'S RESPONSE
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CETIFICATE OF SERICE
I HEREBY CERTIFY that I have this ~ day of September,
1990, served the foregoing REPLY STATEMENT OF THE INDUSTRIAL
CUSTOMERS OF IDAHO POWER TO IDAHO POWER COMPAN'S RESPONSE, Case
No. IPC-E-90-8, on all parties of record by hand delivering a
copy thereof, to the following:
Michael S. Gilmore
Brad M. Purdy
Idaho Pulic 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
Steven L. Herndon, Esq.
Legal Department
Idaho Power Company
P. O. Box 70
Boise, ID 83707
Harold C. Miles
Idaho Consumer Affairs, Inc.316 15th Ave. S.
Nampa, ID 83651
R. Scott Pasley
Assistant General Counsel
J .R. Simplot Company
P. O. Box 27
Boise, ID 83707-0027
CERTIFICATE OF SERVICE - PAGE 1
David H. Hawk, Director
Energy Natural Resources
J.R. Simplot Company
P.O. Box 27
Boise, ID 83707-0027
James N. Roethe, Esq.
Pillsbury, Madison & Sutro
P.O. Box 7880
San Francisco, CA 94120
R. Michael Southcombe, Esq.
Clemons, Cosho & Humphrey
815 W. Washington
Boise, ID 83702-5590
Afton Energy, Inc.
c/o OWen H. Orndorff
Orndorff & Peterson
1087 W. River st., Suite 230
Boise, ID 83702-7035
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