HomeMy WebLinkAbout20060814Comments.pdfWELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0318
IDAHO BAR NO. 3283
-RECEIVED
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Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
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. )
CASE NO. PAC-O6-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 30080 on June 29
2006, submits the following comments.
BACKGROUND
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 alleges it participated in efforts to develop an RTO, now called Grid West, pursuant
to Orders issued by the Federal Energy Regulatory Commission (FERC). The Application states
that Pacific Northwest electric utilities have been involved in the RTO development process
since 2000, and that the costs incurred by the utilities were to be repaid through surcharges on
STAFF COMMENTS AUGUST 14, 2006
customers after the R TO became operational. It now appears the development of Grid West is
unlikely, and PacifiCorp requests authorization to defer the amounts it loaned to Grid West, with
interest, in the development process. An accounting Order authorizing deferral of costs does not
represent the final determination of reasonableness or the amount of the costs ultimately
recovered in rates.
PacifiCorp states it provided initial funding for the development of the RTO beginning in
June 2000, and since that date PacifiCorp has loaned a total of $2.7 million to Grid West.
PacifiCorp estimates that the Idaho jurisdiction portion of the total deferred amount is
approximately $174 000.
STAFF REVIEW
Staff has reviewed the Company s Application as well as FERC Order No. 888 and
FERC Order No. 2000. FERC Order No. 888 instructs utilities to open their transmission lines
to competitors in an effort to reduce wholesale electricity prices and ultimately bring lower
prices to ratepayers. FERC Order No. 2000 placed the impetus on transmission owners to
develop an RTO or explain why such an organization could not be created. Staff believes
PacifiCorp s participation in Grid West was compliant with the intentions ofFERC.
One a case-by-case basis, this Commission has generally allowed deferred accounting
treatment for expenses that are extraordinary and unusual in nature, mandated by regulatory
authority and which provide benefits to customers. Though ultimately Grid West provided no
benefits to customers, the expenses were extraordinary and unusual in nature and were mandated
by FERc. For those two reasons, Staff recommends that the Commission authorize PacifiCorp
to book the principal amount of the funding agreements with Grid West to account 182.3 (Other
Regulatory Assets). A separate sub-account should be maintained, facilitating Staffs audit of
these expenses in a future rate case. Staff also recommends that the recovery of these costs and
the amortization period used for recovery be addressed in the Company s next general rate case
filing. As the Commission has previously noted on numerous occasions, a deferred accounting
Order does not constitute Commission approval to recover these costs from ratepayers. The
interest on the funding agreements, carrying charges on deferred balances, and the amortization
period absent a rate case are discussed separately below.
STAFF COMMENTS AUGUST 14 2006
Interest on Funding Agreements
PacifiCorp has accrued interest on the loan amounts provided to Grid West at the rates
established by FERC for refunds, pursuant to 18 CFR 35 .19a, though the Application did not
segregate principal balance from interest accruals. Staff believes that PacifiCorp should not be
allowed to defer for future recovery the amount of interest accrued on the promissory notes to
Grid West. First, had Grid West been successful, the interest on these loans would have been
paid by Grid West as a return on PacifiCorp s investment in the RTO. Since Grid West was not
successful, customers should not be expeced to pay for a return on a failed investment.
Furthermore, PacifiCorp never had any cash outlay for the interest portion, and the return of the
actual expenditure is sufficient recovery for the utility without interest accrual.
Carrying Charges
In its Application, PacifiCorp requests, without justification, authorization to accrue
interest on the unamortized deferred balance at a rate equal to its weighted cost of capital.
Absent deferral treatment, the opportunity to recover these costs is not allowed. Staff believes
that by authorizing deferred accounting treatment for PacifiCorp, the Commission is granting the
Company significant opportunity to recover these costs, and thus recovery of interest is not
necessary. If the deferral were not approved, no interest would accrue and the recovery of any
underlying costs would be questionable. The deferral method facilitates later recovery of the
amortization of these costs in rates. If the Commission determines a carrying charge is required
the rate should be at the PCA customer deposit rate and not the Company s weighted cost of
capital.
Amortization Period
To prevent excessive deferrals from building up on the balance sheet, Staff recommends
that the Company begin amortization of the deferred balance at the conclusion of its next general
rate case or on January 1 , 2010, whichever occurs first. Amortization beginning no later than
January 1 2010 is warranted since the expenditures were incurred in response to FERC
directives. Immediate amortization would be appropriate for expenditures directly under the
Company s control. An amortization period beginning no later than 2010 will also allow any
continued efforts for an RTO to be better known. Staff believes that the initial amortization
STAFF COMMENTS AUGUST 14 2006
period should be five years unless a different time period is supported by a party in a general rate
case and is approved by the Commission.
STAFF RECOMMENDATIONS
1. Staff recommends that the Commission authorize PacifiCorp to book the principal
amount of the funding agreements for the Grid West start up costs into account 182.
(Regulatory Assets and Liabilities), utilizing a separate sub-account specifically for
these amounts.
2. Staff recommends the Commission not allow the deferral of accrued interest on the
Grid West loans.
3. Staff recommends the Commission not approve any carrying charges on the amounts
deferred.
4. Staff recommends that the Commission order amortization of the deferred amounts to
begin no later than January 1 , 2010 absent a rate case Order establishing different
treatment.
Respectfully submitted this \ day of August 2006
Weldon B. Stutzman
Deputy Attorney General
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Technical Staff: Donn English
i :umisc:comments/paceO6.3 wsde
STAFF COMMENTS AUGUST 14 2006
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF AUGUST 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. PAC-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID , TO
THE FOLLOWING:
BRIAN DICKMAN
P ACIFICORP
DBA ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
DEAN S BROCKBANK
SR. COUNSEL
ACIFICORP
DBA ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2200
SALT LAKE CITY UT 84111
DATA REQUEST RESPONSE CENTER
ACIFICORP
825 NE MULTNOMAH STE 800
PORTLAND OR 97232
Joa~-
SECRET Af1
CERTIFICATE OF SERVICE