20030613Final Order No 29265.pdf

Office of the Secretary
Service Date
June 13, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
ACIFICORP FOR AN ORDER AUTHORIZING
A CHANGE IN DEPRECIATION RATES
APPLICABLE TO ELECTRIC PROPERTY
) CASE NO. P AC-O2-
ORDER NO. 29265
On October 1 , 2002, PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application for a change in its current depreciation rates applicable to
PacifiCorp s depreciable electric property. This change, the Company states, is for accounting
purposes only. PacifiCorp intends to seek approval of the requested changes for ratemaking
purposes in a future rate case. The accounting changes proposed by the Company in its
Application are supported by a Depreciation Study based on March 31 , 2002 plant balances
prepared by Deloitte & Touche, LLP and the pre-filed testimony of three PacifiCorp witnesses.
Pursuant to Idaho Code ~ 61-525 , the Commission is empowered to determine the property
depreciation rates of property used to provide retail electric service. The net effect of the
Company s Application would be to increase depreciation expense allocated to Idaho by $0.
million annually.
On May 7, 2003, Commission Staff and PacifiCorp filed a Stipulation (dated
April 28, 2003), a Joint Motion for Approval of Stipulation and separate letters in support of the
Stipulation. The Stipulation is offered as a compromise settlement of the issues raised in Case
No. PAC-02-5. Reference IDAPA 31.01.01.274. Under the terms of the negotiated
Stipulation and Settlement, the depreciation expense currently booked by the Company will
decrease approximately $0.9 million annually. This is a $1.5 million difference in annual
depreciation expense from the Company s original request for an increase of$0.6 million.
On May 16, 2003 , the Commission issued a Notice of Stipulation and Proposed
Settlement and Notice of Modified Procedure in Case No. PAC-02-05. The deadline for filing
written comments or protests was May 30, 2003. The Commission Staff was the only party to
file comments. Staff, by way of comment, adopted its previous May 6, 2003 Letter of Support of
Stipulation and Proposed Settlement. Staff in its Letter of Support notes that it conducted an
analysis of the Company s filing and performed an audit of the physical plant located in Idaho.
ORDER NO. 29265
Staff believes that the Settlement is a just and reasonable resolution of the depreciation issues
raised in the Company s filing and is fair to both the Company and its customers.
The consensus reached between the Staff and the Company imposes changes to the
Company s original proposal. A general description is set forth below:
1. The terminal net salvage value for steam production plant demolition will
be computed at the rate of $25.00/KW instead of the requested
$50.00/KW. This rate reflects the possibility of a sale of a steam
production plant at a book-value gain. While the sale is not likely, the
Company did acknowledge that it is possible.
2. Depreciation of water rights will cease as of April 1 , 2003.
3. Cost recovery for the Condit hydro plant shall be extended from 3.5 years
to a 7-year recovery period. This reduces the annual depreciation expense
and allows for more certainty to be achieved before accelerating the
depreciation.
4. Proposed depreciation expense for the Naches hydro plant will be removed
because the plant is subject to a pending sale.
5. Net salvage levels for various transmission and distribution plant accounts
will be changed.
6. It appears that all states are considering approval of the depreciation rates
for system assets as proposed by this Settlement. By using the same rate
in all jurisdictions, the depreciation expense will be easier to calculate and
track.
In addition to the above changes, the Company has agreed to immediately begin a
process to resolve the discrepancies identified by Staff between the Company s continuing
property records and its on-site property records. The development and implementation of this
accounting process will be open to Staff for evaluation and input. Finally, the Company has
agreed to perform another depreciation study within the next five years.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case
No. PAC-02-, including the Company s original Application to change its depreciation
rates, the Deloitte & Touche Depreciation Study that accompanied the Application and the
subsequent Stipulation and proposed Settlement. We continue to find it reasonable to process
ORDER NO. 29265
this case pursuant to Modified Procedure, i., by written comment rather than by hearing.
IDAPA 31.01.01.204.
Pursuant to Rule 276 of the Commission s Rules of Procedure, the Commission is not
bound by settlements. IDAPA 31.01.01.276. The Rules indicate that the Commission will
independently review any settlement proposed to determine whether the settlement is just, fair
and reasonable, in the public interest, or otherwise in accordance with law and regulatory policy.
The Commission has considered the Stipulation and proposed Settlement and finds its terms and
proposed changes to PacifiCorp electric property depreciation rates to be reasonable and in the
public interest. Reference Stipulation, Schedule 1.
The Commission shares Staff s concern regarding discrepancies between continuing
property records and on-site property records for PacifiCorp plant located in Idaho.The
Company is directed to prepare a revised accounting process reconciling its property records and
present a plan for implementation of same for Staff review within 90 days.
The Commission notes that approval of an accounting change does not constitute
approval of the proposed changes in depreciation rates for ratemaking purposes. The proposed
depreciation rate adjustments are solely for booking and accounting purposes, and will have no
impact on customer rates unless and until the Company files a general rate case.
The effect of the Stipulated change in depreciation rates is to decrease PacifiCorp
overall average depreciation rate from 3.11 % to 2.94%. This will decrease depreciation expense
from approximately $20 597 405 to $19 698 788 annually based on March 31 2002 depreciable
plant balances. The Company is directed to begin booking depreciation expense at the rates set
forth in the Stipulation--Schedule 1 effective April 1 , 2003.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over PacifiCorp dba Utah
Power & Light Company and the issues raised in Case No. P AC-02-05 pursuant to Idaho Code
Title 61 Idaho Code 61-525 , and the Commission s Rules of Procedure, IDAPA 31.01.01.000
seq.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED that PacifiCorp s depreciation rates are revised as set forth in Schedule
to the Stipulation and proposed Settlement submitted in this case, which is incorporated herein
ORDER NO. 29265
by reference. Commission approval of the change in depreciation rates for accounting purposes
does not constitute approval of the depreciation rates for ratemaking purposes.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) may petition for reconsideration within twenty-one (21) days of the
service date of this Order with regard to any matter decided in this Order. Within seven (7) days
after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ~ tI--
day of June 2003.
t21
PAUL KJEL ANDER, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
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Je D. JewellCo isslOn Secretary
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ORDER NO. 29265