20040503Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA UTAH POWER & LIGHT
COMPANY FOR A DEFERRED ACCOUNTING
ORDER AND APPROVAL OF A SURCHARGE.
CASE NO. P AC-O3-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through
its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the
Notice of Public Workshops and Notice of Comment /Protest Deadline issued on March 23
2004, submits the following comments.
BACKGROUND
On March 31 2003 , PacifiCorp dba Utah Power & Light Company (PacifiCorp;
Company) filed an Application with 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.
Reference Idaho Code ~ 61-524, System of Accounts.
STAFF COMMENTS APRIL 30, 2004
On December 21 2003 , following an informal stay of proceedings, the Company
filed an amended Application with the Commission (a) removing its request for deferred
accounting authority for summer 2002 excess power purchase costs, (b) providing additional
and amended information regarding 2002-2003 tax audit payments, and (c) requesting
approval of a 16-month Schedule 93 surcharge to collect the income tax audit-related
payments and to recover a projected under-collection in the present Schedule 93 surcharge for
recovery of authorized excess power costs. Reference Order No. 29034, June 8, 2002.
PacifiCorp requests approval of deferred regulatory accounting for federal and state income
tax payments made in 2002-2003 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 $54
million. The revenue requirement associated with the 2002-2003 federal and state tax audit
determination payments attributable to Idaho is $4 198 000. See Application, Exhibit No.
(revised).
Deferred accounting treatment for regulatory purposes, PacifiCorp contends, is an
appropriate, just and reasonable means of providing the Company an opportunity to seek
recovery of the federal and state IRS audit-related income tax payments incurred by the
Company.
In its amended Application the Company includes a request for approval of
proposed electric service Schedule 93 (proposed Schedule 93) to collect the income tax audit-
related payments described in its amended Application and to address the over-collection or
under-collection of excess power costs currently being recovered under present electric
service Schedule 93 (present Schedule 93). The Company requests that the proposed
Schedule 93 be effective immediately upon the expiration of the present Schedule 93 (June 8
2004). Present Schedule 93 provides that, subject to Commission review and approval, the
surcharge may continue at a revised rate to reflect any under-collection or over-collection of
the authorized surcharge amount. Order No. 29034, June 8, 2002. Current estimates of the
power cost collection under the existing surcharge project an under-collection of
approximately $200 000 as of June 8, 2004. PacifiCorp s proposed Schedule 93 includes the
projected under-collection of power costs in addition to the requested collection of income tax
STAFF COMMENTS APRIL 30, 2004
audit-related payments. If approved, the power costs under-collection of approximately
$200 000 will be revised based on current actual data prior to implementation of proposed
Schedule 93. The deferred amounts collected through the surcharge will not include a
carrying charge.
The proposed Schedule 93 is designed to recover from tariff customers, on a
uniform percentage basis of revenue from each rate schedule, the deferred amounts over a
period of approximately 16 months. Proposed Schedule 93 would be applied to customers
bills for electric usage commencing June 08 , 2004. Utilizing a test period for the 12-months
ending March 31 , 2003, Application Exhibit No.6 shows the effects of proposed Schedule 93
by rate schedule and a worksheet containing derivation ofthe cents per kilowatt hour
surcharges for each rate schedule. For residential customers, the implementation of proposed
Schedule 93 would result in a price reduction from current prices averaging 3.3%. Excluding
special contracts, commercial and industrial customers would see a price reduction averaging
5%. Irrigation customers would see a price reduction averaging 3.6%. The overall effect on
Idaho tariff customers would be a price reduction from current levels averaging 3.5%. If the
current surcharge is allowed to expire as scheduled on June 08, 2004, a rate decrease of
approximately 5% from current levels will result. The price changes set out in the Company
Application, the Company notes, do not reflect any impact of reductions to the levels of BP A
credits that are expected to occur in 2004.
STAFF ANALYSIS
On April 21 and 22 2004, Staff held public workshops in the Idaho cities of Preston
and Rexburg to explain PacifiCorp s Application for deferral and recovery of additional tax
expenses resulting from IRS audits and to solicit input from the public. In addition to
describing the rate effects of implementing a tax surcharge, Staff described the rate changes
scheduled to automatically take effect in June 2004 and the changes in BP A credits that were
also likely this year. In conjunction with the public workshop held in Rexburg on April 22
Staff met with PacifiCorp, the Idaho Irrigation Pumpers Association and the City of Firth
represented by Tim Schurtz (parties to the case) to discuss possible settlement ofthe issues.
IDAPA 31.01.01.372
STAFF COMMENTS APRIL 30, 2004
The issues currently subject to resolution in this case are limited to determining the
appropriate amount and timing of additional tax expense incurred in 2002 and 2003 that
should be subj ect to recovery. These tax expenses result from IRS audit of Company tax
returns filed in 1994 through 1998. The Company has proposed to recover $4.2 million in
additional tax expenses over a 16-month period beginning June 8, 2004. The effective date of
June 8 is significant because the majority of the 2004 irrigation season remains and it is on
that date that the existing Power Cost Surcharge (PCS) expires. The Company indicates that
the 16-month recovery period is somewhat arbitrary but is designed to span two irrigation
seasons and limit the impact the tax surcharge will have on rates.
In addition to its Application to recover tax audit expenses, the Company filed an
application on April 21 , 2004, Case No. PAC-04-, to reduce BPA regional exchange
credits. The credit reduction reflects both the annual change in BP A credits and the recovery
of a negative credit balance booked in 2003/2004. The negative credit balance totaling
approximately $5.7 million results from PacifiCorp continuing to provide a BP A credit to its
customers in 2003/2004 in excess of the credit amount actually received from BP A. The
Company proposes to eliminate this negative balance by reducing the BP A credit provided
customers over a three-year period beginning on June 8 , 2004.
The final component of customer rates scheduled to change on June 8 , 2004 is a small
change in the Rate Mitigation Adjustment (RMA) and a PCS true-up increment reflecting
over or under recovery of power supply costs during the 2002-2004 surcharge period. These
changes were agreed to by Stipulation of the parties and approved by the Commission in Case
No. P AC-02-1 (Order No. 29034) originally establishing the Power Cost Surcharge.
Given the numerous rate and credit changes either scheduled or proposed with an
effective date of June 8, 2004, Staff believes a comprehensive settlement can be reached that
will resolve all of the issues described above and result in a single rate change in 2004. The
majority ofPacifiCorp s Idaho customers could see a slight decrease or no change compared
to rates paid during 2003/2004. 230 customers (Schedule 6A (3.6%) and Schedule 8 (2.95%))
would see a slight increase due to changes in the RMA and BP A credits.
STAFF COMMENTS APRIL 30, 2004
ST AFF RECOMMENDATION
Based on the foregoing, Staff apprises the Commission of its intent to continue
working with parties of record and the Company to develop a comprehensive settlement
addressing all of the rate and cost recovery issues incorporated in Case Nos. P AC-03-5 and
P AC-04-2. Staff expects that settlement agreement will be submitted to the Commission no
later than May 19, 2004.
Respectfully submitted this 'P" day of April 2004.
cott Woodbury
Deputy Attorney General
Technical Staff: Randy Lobb
i :umisc :comments/paceO3.5 swrl
STAFF COMMENTS APRIL 30, 2004
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 30TH DAY OF APRIL 2004
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-03-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
JOHN ERIKSSON
STOEL RIVES BOLEY ET AL
SUITE 1100
201 S MAIN ST.
SALT LAKE CITY, UT 84111
BOB LIVELY
P ACIFICORP
201 S MAIN ST. SUITE 2300
SALT LAKE CITY, UT 84111
DATA REQUEST RESPONSE CENTER
P ACIFICORP
825 NE MUL TNOMAH SUITE 800
PORTLAND OR 97232
TIMOTHY J SHURTZ
CITY COUNCILMAN
CITY OF FIRTH
PO BOX 37
FIRTH ID 83236
ERIC L OLSEN
RACINE, OLSON, NYE, BUDGE
& BAILEY, CHARTERED
PO BOX 1391
POCATELLO ID 83204-1391
ANTHONY YANKEL
29814 LAKE ROAD
BAY VILLAGE OH 44140
Jo4~
SECRET
CERTIFICATE OF SERVICE