20030331Application.pdf

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John M. Eriksson
STOEL RIvES LLP
201 South Main Street, Suite 1100
Salt Lake City, Utah 84111
Telephone: [phone]
Facsimile [phone]
James F. Fell
STOEL RIVES LLP
900 SW Fifth Ave., Suite 2600
Portland, OR 97204-1268
Telephone: [phone]
Facsimile: [phone]
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Attorneys for PacifiCorp
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF P ACIFICORP dba UTAH POWER &
LIGHT COMPANY FOR A DEFERRED
ACCOUNTING ORDER
CASE NO. PAC-
APPLICATION
OF P ACIFICORP
Pursuant to I.C. ~61-524, PacifiCorp dba Utah Power & Light Company
PacifiCorp" or the "Company ) applies to the Idaho Public Utilities Commission
Commission ) for an accounting order allowing PacifiCorp to defer, for regulatory
purposes. (a) excess costs incurred for forward power purchases made for the summer of
2002, and (b) federal and state payments made in 2002 resulting from Internal Revenue
Service income tax audits. In support of this Application, PacifiCorp states as follows:
PacifiCorp is an electrical corporation and public utility in the state of
Idaho and is subject to the jurisdiction of the Commission with regard to its public utility
operations. PacifiCorp also provides retail electricity service in the states of California
Oregon, Utah, Washington and Wyoming.
APPLICATION OF P ACIFICORP - 1
This Application is filed pursuant to I.C. ~61-524, which authorizes the
Commission to prescribe the accounting to be used by public utilities subject to its
jurisdiction.
Communications regarding this Application should be addressed to:
Bob Lively
PacifiCorp
201 South Main Street, Suite 2300
Salt Lake City, Utah 84140
Telephone: [phone]
Facsimile: [phone]
E-mail: bob.1ively~pacificorp.com
John M. Eriksson
STOEL RIVES LLP
One Utah Center
201 South Main Street, Suite 1100
Salt Lake City, Utah 84111-4904
Telephone: [phone]
Facsimile [phone]
E-mail: jmeriksson~stoe1.com
As a normal and integral part of its operation as a public utility, PacifiCorp
purchases electricity from independent suppliers in the wholesale market. Such
purchases, as well as sales in the wholesale market, are taken into account in setting
PacifiCorp s retail rates through the inclusion of net power costs in the Company
jurisdictional revenue requirement.
Starting in April 2001 , the Company prudently bought forward
approximately 492 000 MWh of power in the wholesale market at an average price of
approximately $152 per MWh. The energy was purchased to meet expected load
requirements for July, August and September, 2002, and to protect customers from the
exceedingly high wholesale prices and volatility that were experienced in the WECC
region starting May 2000 and which were expected to continue through the 2002 summer
APPLICATION OF P ACIFICORP -
season. PacifiCorp s situation in this regard is similar to a number of other utilities in the
West which made forward purchases that afterward turned out to be above market.
The excess forward purchase costs which PacifiCorp proposes to defer are
calculated as shown in Exhibit 1 , attached hereto. Exhibit 1 shows the dollar and MWH
breakdown ofthe 2002 Summer Forward purchases and the calculation of out of market
costs. The out of market cost is $56 million on a total Company basis, and approximately
$2.5 million allocated to Idaho.
PacifiCorp proposes to account for the excess forward purchase costs in
the following manner for regulatory purposes: Excess forward purchase costs will be
credited to Account 555, Purchased Power, thereby decreasing the recorded power supply
expenses, and debiting Account 182.399, Regulatory Assets.
PacifiCorp also requests approval of deferred regulatory accounting for
federal and state income tax payments made in 2002 resulting from the conclusion of
Internal Revenue Service income tax audits for tax years 1994 through 1998, in which the
IRS made its final determination of the adjustments to the Company s income tax
obligations. Such payments attributable to PacifiCorp s regulated utility operations
amounted to approximately $68 million. These IRS audit-related payments are a
legitimate cost of doing business, as previously recognized by the Commission. (See e.
g.,
Re Utah Power Light Co.Case No. U-1009-157, Order No. 20523 (May 29, 1986), in
which the Commission determined that if the Company could show it paid a liability
arising from an IRS audit
, "
we will allow it to submit tariffs to recover this alleged
liability from its ratepayers as a legitimate expense.) The makeup of the $68 million
APPLICATION OF P ACIFICORP - 3
and the allocation to the Company s Idaho jurisdiction, is shown in Exhibit 2, attached
hereto.
PacifiCorp proposes to account for the federal and state income tax
payments, for regulatory purposes, in the following manner: Income tax payments will
be credited to Account 409, Income Taxes, thereby decreasing the recorded income tax
expense, and debiting Account 182.399, Regulatory Assets.
10.Deferred accounting treatment for regulatory purposes is an appropriate
just and reasonable means of providing the Company an opportunity to seek recovery of
the extraordinary forward purchased power costs and IRS audit-related income tax
payments incurred by the Company. PacifiCorp does not request a determination at this
time of prudency or ratemaking treatment of the costs it seeks authority to defer
hereunder. Any such determinations will be made in a future rate proceeding.
WHEREFORE, PacifiCorp respectfully requests that the Commission consider
this matter under Modified Procedure pursuant to IPUCRP 201-204 and enter its Order
authorizing the deferral of the Company s excess forward purchase costs, and the federal
and state income tax payments, as requested herein.
DATED this day of March, 2003.
Respectfully submitted
Stoel Rives LLP
Attorneys for PacifiCorp
APPLICATION OF PACIFICORP - 4
CERTIFICATE OF SERVICE
I hereby certify that on this day of March, 2003, I caused to be served
via Federal Express, a true and correct copy of the foregoing Application of
PacifiCorp to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington
Boise, Idaho 83720-0074
APPLICATION OF P ACIFICORP -
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PacifiCorp
2002 Federal and State Tax Audit Determination Payments
Total Co.Idaho Idaho
Amount Alloc.Amount (1)
(ODDs)Factor (ODDs)
Federal:
July 2002 (1994-98 tax years)570 06% $368
State:
Sep-Nov 2002 (1994-98 tax years)801 06% $
Total Audit Determination Payments:371 3,460
(1) Pre-tax amounts prior to adjustment to reflect revenue requirement impact.
Exhibit 2