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Home My WebLink About2000128Decision Memo.docDECISION MEMORANDUM TO: COMMISSIONER HANSEN COMMISSIONER SMITH COMMISSIONER KJELLANDER JEAN JEWELL RON LAW BILL EASTLAKE LOU ANN WESTERFIELD TONYA CLARK DON HOWELL RANDY LOBB DAVE SCHUNKE TERRI CARLOCK BEVERLY BARKER WORKING FILE FROM: JOHN R. HAMMOND DATE: DECEMBER 8, 2000 RE: IN THE MATTER OF THE APPLICATION OF PACIFICORP dba UTAH POWER & LIGHT COMPANY FOR A DEFERRED ACCOUNTING ORDER. CASE NO. PAC-E-00-5. On November 1, 2000, PacifiCorp filed its Application for a deferred accounting order. Commission authorization of this request would allow PacifiCorp, starting on November 1, 2000, to defer excess net power costs. The Company alleges that deferred accounting treatment is the appropriate, just and reasonable means of providing it an opportunity to seek recovery of the extraordinary excess purchased power costs which it may incur in the future. BACKGROUND PacifiCorp states that as a normal and integral part of its operation as a public utility it purchases electricity from independent suppliers in the wholesale market. The Company contends that these purchases, as well as sales in the wholesale market, are taken into account in setting its retail rates through the inclusion of net power costs in its jurisdictional revenue requirement. PacifiCorp alleges that since May of this year it has incurred extremely high wholesale purchased power costs which are substantially above the wholesale market prices upon which its net power costs in rates are based. The Company claims that to this date it has absorbed these costs. PacifiCorp also expects that the annual average market price of power during 2001 will be approximately three times higher than what is currently reflected in rates. PacifiCorp claims that it will continue to experience these high costs until the following underlying circumstances have been addressed: high gas prices; significant growth in the demand for electricity; and the lack of new generation capacity coming on line. For example, the Company estimates that for the period from January 1 through December 31, 2001 its actual costs will exceed Idaho’s allocated share of costs by $8 million. Accordingly, PacifiCorp requests authority to defer excess net power costs incurred during the period from November 1, 2000 to October 31, 2001 or until such date as new rates are implemented which provide for their recovery. PacifiCorp proposes to calculate its deferred excess net power costs by using data from an Oregon rate case. See, In the Matter of the Revised Tariff Schedules Applicable to Electric Service Filed by PacifiCorp., Docket UE-111, (Oregon Public Utilities Commission; filed November 5, 1999). The Company claims that the net power costs from this case are a reasonable surrogate for the “in-rates” net power costs in Idaho because there has been no post-merger Utah Power/PacifiCorp rate case where its net power costs were addressed. Specifically, PacifiCorp states: The [deferred] excess net power costs . . .will be calculated as the product of (a) the difference between the net power costs implicit in the stipulation approved by the Oregon Public Utility Commission in Docket UE-111, on a per MWh basis, and the Company’s actual net power costs during the deferral period, on a per MWh bases, and (b) the retail load included in rates. Such excess net power costs will be calculated on a monthly basis. Application at p. 5, ¶ 8 (footnote omitted). In addition PacifiCorp also proposes to use the 1998 normalized Idaho retail load which conforms to the load included in the power costs study used in the Oregon rate case. PacifiCorp proposes to account for these costs in the following manner: Excess net power costs will be credited to Account 557, thereby decreasing the recorded power supply expenses, and debiting Account 182.3. Deferred income taxes would be recorded by debiting Account 410.10, and crediting Account 283. The amortization of the balance in Account 182.3 would be accomplished by crediting Account 182.3 and debiting Account 557. Deferred income taxes would be amortized by debiting Account 283 and crediting Account 411.10. Application at pp. 5-6, ¶ 9 PacifiCorp also requests that it be allowed to accrue a carrying charge on the unamortized balance at a rate equal to the weighted average costs of capital most recently recommended by Commission Staff in its audit of PacifiCorp’s results of operations. Finally, PacifiCorp proposes that it will initiate discussions with the Commission Staff to develop a mechanism by the end of March 2001 for the recovery of the deferred amount and when such mechanism will be employed. Accordingly, PacifiCorp does not request a determination of ratemaking treatment at this time and that any such determination will be made in a later case. The Company requests that this Application be processed under Modified Procedure. Staff agrees that Modified Procedure would be appropriate for this case. 1. Petitions to Intervene On December 7, 2000, Monsanto Company and the Idaho Irrigation Pumpers Association, Inc., filed petitions to intervene into this case pursuant to the Commission’s Rules of Procedure. See IDAPA, 31.01.01.71-76. Although these petitions are not ripe for Commission decision they still must be kept in mind for purposes of granting or denying a request to process this case by Modified Procedure. These petitions will be brought before the Commission at the next decision meeting. Commission Decision: Should PacifiCorp’s Application for a deferred accounting order be processed by Modified Procedure? If this case should be processed by Modified Procedure, should the Commission establish a schedule for reply comments? John R. Hammond Staff: Terri Carlock M:pace005_jh See, IDAPA 31.01.01.075, DECISION MEMORANDUM 3