20061024final_order_no_30156.pdf

Office of the Secretary
Service Date
. October 24, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF P ACIFICORP FOR A DEFERRED
ACCOUNTING ORDER TO DEFER THE
COST OF LOANS MADE TO GRID WEST,
THE REGIONAL TRANSMISSION
ORGANIZATION
ORDER NO. 30156
CASE NO. P AC-06-
On March 31 , 2006, PacifiCorp dba Rocky Mountain Power filed an Application
requesting an accounting order from the Commission authorizing the deferral of costs the
Company incurred relating to the development of a regional transmission organization (RTO).
PacifiCorp participated in efforts to develop an RTO, called Grid West, pursuant to orders issued
by the Federal Energy Regulatory Commission (FERC). PacifiCorp states it provided initial
funding for the development of the RTO starting in June 2000, and since that date has loaned a
total of $2.7 million to Grid West, including accrued interest. PacifiCorp estimates that the
Idaho jurisdiction portion of the total deferred amount is approximately $174 000. Because
Grid West now appears unlikely to function in a manner that would permit it to repay
PacifiCorp s loan " PacifiCorp requests authorization to defer the amount it loaned to Grid West
with interest, in the development process. Application p. 3. PacifiCorp also requested
authorization of a carrying charge at a rate equal to its weighted cost of capital.
On June 29, 2006, the Commission issued a Notice of Application and Notice of
Modified Procedure, establishing a deadline for filing written comments. Only Commission
Staff filed comments.
Staff reviewed the Company s Application as well as relevant FERC Orders. Staff
stated that PacifiCorp s participation in Grid West complied with FERC Orders and FERC'
attempt to develop a market for wholesale electric energy, which ultimately might provide a
benefit to retail customers. Staff recommended that the Commission authorize PacifiCorp to
book the principal amount of the funding agreements with Grid West to account 182.3 (Other
Regulatory Assets), and that a separate sub-account be maintained to provide details on the total
system cost, as well as the amount of $174 000 allocated for PacifiCorp s Idaho jurisdictional
services. Staff also recommended that the Company begin amortization of the deferred balance
ORDER NO. 30156
at the conclusion of its next general rate case or on January 1 , 2010, whichever occurs first, and
that the amortization period should be five years.
The Commission finds, on the record presented, that it is appropriate to approve
PacifiCorp s Application insofar that it requests authorization to defer the principal amount that
it loaned to Grid West. As Staff noted in its comments, FERC orders placed a requirement on
utilities that owned transmission facilities to develop an RTO or explain why an RTO could not
be created. PacifiCorp s response to FERC's orders, and its participation in the development of
Grid West and the loans it made to that effort, are prudent and in the public interest. It would be
unfair to disallow deferral of the amount PacifiCorp loaned to Grid West.
The Commission also finds, however, that PacifiCorp is not entitled to defer for
future recovery interest charges on the loans, nor is the Company entitled to a carrying charge on
the deferral account. As PacifiCorp notes in its Application, one of the purposes of a deferral
order is "to appropriately match the costs borne by and benefits received by ratepayers.
Application p. 3. PacifiCorp s Application does not identify how its retail customers benefited
from the Company s effort to develop an RTO, especially now that the effort was unsuccessful.
The Application states only that PacifiCorp "has been seeking to develop an independent
regional electric transmission entity that would manage certain operational functions of the
transmission grid and plan for necessary expansion " and that Grid West was "established as a
non-profit corporation to serve the public interest." Application p. 2. Regulatory accounting
principles provide that expenditures, to be included in customer rates, must be used and useful;
that is, beneficial to customers. The expenditures must also be incurred for a reasonable purpose
at a reasonable amount. PacifiCorp s assertions are not enough for the Commission to conclude
that its retail customers should pay interest and carrying charges for the Company s participation
in the Grid West effort.
PacifiCorp was compelled to participate in the RTO development process by FERC
and under the circumstances it would be unfair to disallow deferral of the principal amount
PacifiCorp loaned to the project. The Commission does not find it reasonable to allow deferral
of anticipated interest on the loans or a carrying charge on the deferral account. We also find
Staffs recommendation of a five-year amortization period to be reasonable, and direct that the
amortization begin as of January 2007.
ORDER NO. 30156
ORDER
IT IS HEREBY ORDERED that PacifiCorp is authorized to defer in a separate sub-
account the principal amount that it loaned to Grid West, specifically the amount attributable to
its Idaho jurisdiction. PacifiCorp is authorized to amortize the deferral over a five-year period
beginning January 1 2007.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code g 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this :lLJ-#..
day of October 2006.
MARSHA H. SMITH, COMMISSIONER
ENNIS S. HANSE , COMMISSIONER
ATTEST:
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Barbara Barrows
Assistant Commission Secretary
O:PAC-O6-03 ws2
ORDER NO. 30156