20060512Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:MAY 12, 2006
SUBJECT:P ACIFICORP'S APPLICATION FOR A DEFERRED ACCOUNTING
ORDER TO DEFER RATE CREDITS ADOPTED BY THE
COMMISSION IN THE RECENT MIDAMERICAN-ACIFICORP
ACQUISITION CASE, CASE NO. P AC-06-
On April 28 , 2006, PacifiCorp (dba Rocky Mountain Power) filed an Application
requesting that the Commission issue a deferred accounting order. More specifically, Rocky
Mountain seeks an accounting order to defer the rate credits arising as a result of Commitments
127 and 131 approved by the Commission in the MidAmerican-PacifiCorp acquisition
proceeding, Case No. P AC-05-8. See Order Nos. 29973 and 29998.
BACKGROUND
In Order No. 29998, the Commission adopted numerous State-specific commitments
including 127 and 131. In Commitment 127, MidAmerican and PacifiCorp committed to reduce
the annual non-fuel costs of the West Valley lease by an expected $3.7 million in 2006, $5
million in 2007, and $2.1 million in 2008 on a total Company basis. This would reduce costs by
$417 000 per month total company and provide (subject to offset provisions) a total Company
rate credit in that amount. In addition, 127 provides that: "Beginning with the first month after
the close of the transaction. . . , Idaho s share of the monthly rate credit will be deferred for the
benefit of (Idaho) customers and accrue interest at PacifiCorp s authorized rate ofretum." Order
No. 29998 , Idaho Commitments at'i! 17.
In Commitment 132, MidAmerican and PacifiCorp commit to reduce the total
Company administrative and general (A&G) costs by $500 000 per month and to provide
(subject to offset provisions) a total Company rate credit in that amount. Id. at p. 18-19. On an
DECISION MEMORANDUM
annual basis, A&G costs would be reduced in FERC Accounts 920 through 935 by $6 million.
This commitment also provides that Idaho s share of the monthly rate credit will be deferred for
the benefit ofIdaho customers and accrue interest at PacifiCorp s authorized rate ofretum.
THE APPLICATION
In its Application, Rocky Mountain proposes to defer the rate credits beginning on
April 1 2006. The deferral relating to the West Valley Lease (I 27) will be allocated among the
six states based upon the "seasonal system generation combustion turbine" (SSGCT) allocation
factor for the 12 months ending March 31 , 2006. The amount of the deferral accounting related
to the A&G cost savings in 131 will be allocated among the six states based upon the system
overhead (SO) allocation factor for the 12 months ending March 31 , 2006. Application at 'i! 5.
Rocky Mountain proposed to account for these rate credits by charging the general
cost savings to Account 400 (Operating Revenues) with the credits being recorded in Account
254 (Other Regulatory Liabilities). The Company proposes that the amortization ofthe balances
would be accomplished by debiting Account 254 and crediting Account 400.Id. at'i! 6. Rocky
Mountain states that it will accrue interest expense on the unamortized balance at a rate equal to
its weighted average cost of capital most recently approved by the Commission. Id.
At this time, Rocky Mountain does not request a determination of ratemaking
treatment for these rate credits. Instead, the Company proposes to address issues associated with
the rate credits in the Company s next general rate case. The Company anticipates filing its next
rate case no later than May 31 , 2006.
Although the Company does not recommend a procedure for processing its request
for a deferred accounting order, Staff believes that Modified Procedure is appropriate. Staff
recommends that the Commission process this Application via Modified Procedure with a 28-
day comment period.
COMMISSION DECISION
Does the Commission find it appropriate to process this Application via Modified
Procedure? Does the Commission wish to establish ~ ~day comment period?
Don Howell
bls/M:PAC-O6-
DECISION MEMORANDUM