20020412Order No 28998.pdf

ORDER NO. 28998 1
Office of the Secretary
Service Date
April 12, 2002
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA UTAH POWER & LIGHT
COMPANY FOR APPROVAL OF CHANGES
TO ITS ELECTRIC SERVICE SCHEDULES.
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CASE NO. PAC-E-02-1

ORDER NO. 28998

On November 15, 1999, the Commission issued final Order No. 28213 in
PacifiCorp/ScottishPower merger Case No. PAC-E-99-1. The Commission approved the merger
transaction subject to terms and conditions. The following was one of those conditions:
Merger Approval Condition No. 2

At a minimum, ScottishPower shall not seek a general rate increase for its
Idaho service territory effective prior to January 1, 2002.

Case No. PAC-E-99-1, Order No. 28213 p. 8.

Commission Findings

As a final and irrefutable measure to ensure that rates will not increase as a
result of the merger, we hereby impose the additional condition (Merger
Approval Condition No. 2) that following the merger, PacifiCorp shall not
seek a general rate increase effective prior to January 1, 2002. This literally
guarantees that PacifiCorp’s customers will see an immediate rate reduction
lasting at least two years through the combination of the merger rate credit
and the moratorium on general rate increases imposed herein.

Order No. 28213 p. 31.

On March 20, 2002, Intervenor Timothy Shurtz filed a Petition for Clarification
requesting that the Commission clarify, explain and enunciate the meaning of Merger Condition
No. 2. Reference IDAPA 31.01.01.325. Mr. Shurtz asks that the Commission “clarify how the
proposed retroactive or ‘deferred excess net power costs’ recovery sought now are not in reality
an attempt to avoid the ‘moratorium’ agreed to in inducing this Commission to accept the merger
then being considered.”

ORDER NO. 28998 2
Included in his Petition for Clarification, the Petitioner also cites the following Order
language “PacifiCorp/ScottishPower shall not subsidize its non-regulated businesses with its
regulated businesses.” Order No. 28213 p. 14.
Commission Findings
On November 15, 1999, after nearly a year of investigation and numerous hearings,
the Commission issued Order No. 28213 approving the merger of PacifiCorp with Scottish
Power. Many issues and concerns were raised in the course of that proceeding, notably service
quality and rates. Approval of the merger was subject to 46 conditions to address the concerns
raised and ensure that the public interest was served by approval of the merger. Merger
Condition No. 2 set forth above was included to prevent the Company from increasing customer
rates for any reason prior to January 1, 2002. Thus customers were guaranteed a two-year period
of rate stability, and Commission oversight to prevent any merger related increases was
enhanced.
On November 1, 2000, PacifiCorp filed an Application for a deferred accounting
order. Extraordinarily high wholesale market prices outside the control of the Company were
resulting in actual costs for the Idaho jurisdiction that greatly exceeded Idaho’s allocated share.
Intervenors in that case argued that the application should be dismissed because its approval
would violate conditions imposed by the merger Order. The Commission found that
authorization of deferred accounting for these expenses was only a mechanism to preserve them
for future consideration, not a guarantee of future recovery and would not result in a rate increase
prior to January 1, 2002. Approval of PacifiCorp’s request for a deferred accounting order, we
found, was not a violation of the merger condition that no rate increase should be requested to be
effective prior to that date. Our decision simply provided PacifiCorp the opportunity to request
and litigate the recovery of such costs in the future.
On January 2, 2002, PacifiCorp filed this case. One of the matters now at issue is the
recovery of the costs that were deferred pursuant to our earlier Order. Intervenor Shurtz has
requested that we clarify why consideration of the deferred amounts is not a violation of the
Merger Conditions prohibiting rate increases before January 1, 2002. The answer is clear from
an examination of the language of the condition imposed. PacifiCorp was prohibited from
seeking a general rate increase effective prior to January 1, 2002. It did not seek any increase in
rates to be effective before 2002, therefore the Company has fulfilled that condition. The

ORDER NO. 28998 3
Commission specifically found in Order No. 28630 that deferred accounting was appropriate for
the unanticipated and extraordinarily high power costs experienced as a result of the wholesale
market. That deferral preserved those expenses for consideration now. We do not decide
whether, or how much, if any, of those expenses should be passed on to customers. We do find
that there is not and can not be a violation of Merger Condition No. 2 if those costs are approved
for recovery, either as part of a settlement or otherwise.
CONCLUSIONS OF LAW
The Commission has jurisdiction over the issue raised in Intervenor’s Petition for
Clarification and over PacifiCorp dba Utah Power & Light Company, an electric utility, pursuant
to Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et
seq.
O R D E R
In consideration of the foregoing and as more particularly described above IT IS
HEREBY ORDERED and the Commission by way of clarification of its prior Order No. 28213
in PacifiCorp/ScottishPower merger Case No. PAC-E-99-1 states that consideration in the instant
case of recovery of excess power costs incurred from November 1, 2000 through October 31,
2001 is not precluded by PacifiCorp/ScottishPower Merger Approval Condition No. 2 (Case No.
PAC-E-99-1, Order No. 28213).

ORDER NO. 28998 4
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 12th
day of April 2002 .

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

bls/O:PACE0201_sw5

DISSENTING OPINION
COMMISSIONER DENNIS S. HANSEN
CASE NO. PAC-E-02-1, ORDER NO. 28998

When the Commission approved the ScottishPower merger, two important conditions
were approved for the benefit of the ratepayers. First, “the rates will not increase as a result of
the merger” and secondly, “at a minimum, ScottishPower shall not seek a general rate increase
for its Idaho service territory effective prior to January 1, 2002.”
In my opinion, these conditions imposed a “rate freeze” for two years. It provided
ratepayers a tangible benefit in the form of a belief and expectation of no rate increase for two
years. I believe that this prevents PacifiCorp, under Merger Condition No. 2, from requesting
recovery of excess power costs that occurred during the moratorium period.
Granting PacifiCorp the opportunity to recover the deferred costs that were incurred
during part of the rate moratorium period undermines the benefits of this agreement to the
ratepayers.
PacifiCorp is not asking for a rate increase, but it is asking for the ratepayers to
reimburse it for costs of doing business during the time period that the rate moratorium was in
place. In other words, the Company wants to recover costs incurred during the rate moratorium.
What good is a two-year rate moratorium if the Company is allowed to go back over a year’s
time to November 1, 2000 and assess the customers additional costs based on a year in which the
rate moratorium freeze was in place? I believe ratepayers would not have supported the merger
condition if they had known that PacifiCorp could petition this Commission for reimbursement
of costs incurred during the rate moratorium freeze.
Granting PacifiCorp the right to defer these costs then and collect them now from the
ratepayers circumvents the prohibition against rate increases prior to January 1, 2002.
Allowing the deferred cost requested by PacifiCorp allows rates to increase based on
an isolated look at wholesale power costs while ignoring all other revenue and expenses of
PacifiCorp. These concerns are further magnified by the fact that there has not been a rate case
in Idaho addressing PacifiCorp’s net power costs in over 12 years.
I believe for the reasons stated above that the Commission should dismiss this case
because it truly violates a condition of the agreement.

DENNIS S. HANSEN, COMMISSIONER