20070410notice_of_application_order_no_30293.pdf

Office of the Secretary
Service Date
April 10, 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF ROCKY MOUNTAIN POWER FOR AN
ACCOUNTING ORDER FOR COSTS
RELATED TO THE FLOODING OF THE
POWERDALE HYDRO FACILITY
CASE NO. P AC-07-
NOTICE OF APPLICATION
NOTICE OF
MODIFIED PROCEDURE
ORDER NO. 30293
On March 22, 2007, Rocky Mountain Power (a division of PacifiCorp) filed an
Application seeking an accounting order related to the November 2006 flooding of the
Powerdale generating facility. Powerdale is located in central Oregon on the Hood River, south
of its confluence with the Columbia River. Rocky Mountain requests an accounting order that
authorizes the Company to: (1) transfer $8.9 million in undepreciated net investment from FERC
Account 101 (Electric Plant in Service) to FERC Account 182.2 (Umecovered Plant and
Regulatory Study Costs); (2) record $6.3 million in decommissioning costs to FERC Account
182.2; and (3) establish amortization periods for these amounts.
The Company asserts that the $8.9 million in Powerdale costs are currently being
recovered in the rates of each state where PacifiCorp operates. The Company does not seek any
particular rate treatment at this time and maintains that any incremental rate adjustments caused
by approval ofthis Application will be addressed in the Company s next general rate case.
NOTICE OF APPLICATION
A. Background
YOU ARE HEREBY NOTIFIED that Powerdale was constructed in 1922-23 and
includes a small diversion dam, a 3-mile water conveyance system, and a single 6 MW
powerhouse. The facility also contained a 19-pool fish lab and 5 vertical fish screens.
YOU ARE FURTHER NOTIFIED that after initiating the FERC relicensing process
for Powerdale in 1995 , PacifiCorp subsequently concluded that continued operation of the
1 On March 30, 2007, Rocky Mountain filed a notice pursuant to procedural Rule 122 that it intends to file for
general rate increase no sooner than 60 days and no later than 120 days.
NOTICE OF APPLICA nON
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30293
facility would not be economical. Consequently, the Company filed a decommissioning plan
with FERC in 2003. In November 2005, FERC adopted a settlement agreement and issued a
Removal Order" for Powerdale. Exh. 2, Parts 1-2. The Removal Order authorized PacifiCorp
to continue operating Powerdale until April 1 , 2010 and provided for removal of the facilities by
February 29 2012.
YOU ARE FURTHER NOTIFIED that in November 2006, the Powerdale hydro
facility was damaged by flooding and debris flow. Application at 2. Exhibit 1 to the Company
Application contains photographs showing the extensive damage to various components of the
facility. In addition, the river s channel was changed by the flood. After conducting another
economic analysis, the Company concluded that it is now more cost effective to retire the facility
than to repair the flood damage. Application at 3. On February 1 , 2007, Rocky Mountain
requested authorization from FERC to cease operations immediately and sought approval to
initiate decommissioning actions ahead of schedule. Exh. 3 , part 1.
YOU ARE FURTHER NOTIFIED that based upon the substantial damage to the
Powerdale facility and the change in the river channel, Rocky Mountain asserts that it is no
longer economical to repair the Powerdale facilities for the remaining three years of its operating
license. After comparing the total cost to repair and operate Powerdale versus the total cost to
retire Powerdale, the Company has concluded that retirement "is an overall lower cost-to-
customers alternative than repair/operation by approximately $1.611 million. Therefore, (Rocky
Mountain) intends to retire the plant assuming the Commission approves this Petition.
Application at 5; Exh. 4-
B. Accounting Request
YOU ARE FURTHER NOTIFIED that Rocky Mountain seeks an accounting order
addressing two categories of costs: (1) undepreciated investment in Powerdale plant; and (2)
decommissioning costs. If approved, the Company s decision to retire Powerdale will result in
the potential impairment of the physical and intangible assets in accordance with Financial
Accounting Standard (F AS) No. 90
, "
Regulated Enterprises-Accounting for Abandonments and
Disallowances of Plant Costs." The Company states that F AS 90 will require "PacifiCorp to
write-off its undepreciated plant investment in the absence of the requested accounting treatment
from its commissions.Id. at ~ 8. Rocky Mountain proposes to account for the costs by
NOTICE OF APPLICA nON
NonCE OF MODIFIED PROCEDURE
ORDER NO. 30293
recording the decommissioning costs and the undepreciated portion of the plant assets in FERC
Account 182.
YOU ARE FURTHER NOTIFIED that as of December 31 , 2006, Rocky Mountain
states that the unallocated net book value of the tangible and intangible plant assets equal
approximately $8.9 million. The actual amount transferred to FERC Account 182.2 "will be the
remaining undepreciated net book value as of the date of the transfer.Id. The Company
indicates that it will amortize this balance at a rate equal to the depreciation rate used for FERC
Account 101 , or 4.2% which is currently included in rates The Company estimates that the
total decommissioning cost will be approximately $6.3 million subject to final reconciliation and
true-up of actual expenditures. The Company requests a three-year amortization period for the
deferred decommissioning expenses upon inclusion in rates in the next rate case. "Absent
Commission authority, the Company would need to recognize the decommissioning as a current
period expense.Id. at 8.
YOU ARE FURTHER NOTIFIED that pursuant to Rocky Mountain s Revised
ProtocoV hydro-related costs are initially allocated ratably to each of the six state jurisdictions
served by PacifiCorp. Rocky Mountain calculates that the Idaho-allocated share of the
undepreciated investment in Powerdale is approximately $557 000, and the Idaho-allocated share
of the decommissioning cost is approximately $393 000. Id. at ~ 11. The Company further
states that
Under the Revised Protocol allocation method, subsequent to the initial
system-wide allocation, hydroelectric generation-related costs are included in
the calculation of the Embedded Cost Differential, which assigns the majority
of hydroelectric costs to the western side of the Company s system. In order
to align cost responsibility with benefits received, the costs for which this
Application seeks an order would be included in the calculation of the
Embedded Cost Differential for future rate-making purposes based on the
continued use of the Revised Protocol.
Application at 9.
2 The Company anticipates a change in this 4.2% rate after it files a new depreciation study in September 2007. The
Company anticipates that the new depreciation rate will become effective as of January 1 , 2008. The Company
intends to file a three-year amortization period for the remaining balance of the unrecovered net plant balance in that
study. Application at ~ 10.
3 The "Revised Protocol" is Rocky Mountain s inter-jurisdictional cost allocation methodology utilized in its six
state service area.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30293
In summary, Rocky Mountain requests that the Commission issue an accounting
order authorizing the Company to transfer the remaining undepreciated net book value of the
Powerdale plant to a regulatory asset account; to record the costs related to decommissioning the
Powerdale facility to the same regulatory asset account; and to establish amortization periods for
these balances.
NOTICE OF MODIFIED PROCEDURE
YOU ARE FURTHER NOTIFIED that the Commission has determined that the
public interest may not require a formal hearing in this matter and will proceed under Modified
Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission s Rules
of Procedure IDAPA 31.01.01.201 through .204. The Commission notes that Modified
Procedure and written comments have proven to be an effective means for obtaining public input
and participation.
YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this
Application may file a written comment in support or opposition with the Commission within
twenty-one (21) days from the service date of this Notice. The comment must contain a
statement of reasons supporting the comment. Persons desiring a hearing must specifically
request a hearing in their written comments. Written comments concerning this Application
shall be mailed to the Commission and the Applicant at the addresses reflected below:
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
Brian Dickman, Manager
Idaho Regulatory Affairs
Dean Brockbank, Senior Counsel
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, UT 84111
Mail: brian.dickmanifYpacificorp.com
dean. brockbankifYpacificorp. com472 W. Washington Street
Boise, ID 83702-5983
These comments should contain the case caption and case number shoWfl on the first page of this
document. Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov. Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to Rocky Mountain Power at the e-mail addresses
listed above.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30293
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the time limit set, the Commission will consider this matter on its merits and
enter its Order without a formal hearing. If written comments are received within the time limit
set, the Commission will consider them and, in its discretion, may set the same for formal
hearing.
YOU ARE FURTHER NOTIFIED that the Application and supporting workpapers
testimonies and exhibits have been filed with the Commission and are available for public
inspection during regular business hours at the Commission offices. The Application and
testimonies are also available on the Commission s Website at www.puc.idaho.gov under the
File Room" and then "Electric Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and specifically
Idaho Code ~ 61-524. The Commission may enter any final Order consistent with its authority
under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
IT JS HEREBY ORDERED that this matter be processed under Modified Procedure
pursuant to the Commission s Rules 201 through 204, IDAPA 31.01.01.201-204. Persons
interested in submitting written comments in this case must do so no later than 21 days from the
service date of this Order.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30293
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /0
+J..
day of April 2007.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~LD
D. Jewell
mission Secretary
bls/O:PAC-07-
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
ORDER NO. 30293