20070716Comments.pdf

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WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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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 JOINT
APPLICATION OF FALL RIVER RURAL
ELECTRIC COOPERATIVE, INC. AND ROCKY )
MOUNTAIN POWER FOR AN ORDER
APPROVING THE SALE AND TRANSFER OF PROPERTY.
CASE NO. PAC-O7-
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
Joint Application and Notice of Modified Procedure issued in Order No. 30347 on June 25 , 2007
submits the following comments.
BACKGROUND
On June 5 , 2007, Rocky Mountain Power (RMP) and Fall River Rural Electric Cooperative
Inc. (Fall River) filed a Joint Application requesting Commission approval of the sale and transfer of
property from RMP to Fall River. RMP is an electric utility authorized to do business in the state of
Idaho and is subject to the regulation of the Commission pursuant to the public utility laws of the
state. RMP provides electric service to approximately 912 000 customers in Idaho, Utah and
Wyoming. In Idaho, RMP serves about 67 000 customers and 150 of those customers reside in Teton
STAFF COMMENTS JULY 16 , 2007
County. This proposed transaction involves the transfer of72 of those present customers in Teton
County from RMP to Fall River.
Fall River is a non-profit cooperative electric corporation incorporated under the laws of the
state ofldaho providing retail electric service to approximately 13 000 members in Idaho, Montana
and Wyoming. In Idaho, specifically Teton County, Fall River serves about 5,400 members in and
around the city of Driggs. Fall River is not subject to regulation by the Commission.
According to the Application, RMP proposes to transfer 72 of its customers, certain facilities
and a portion of its certificated service territory to Fall River. Both companies submit that this sale is
in the best interest of the public and cite a number of reasons in support of their claim. As the Teton
County Basin continues to experience growth both companies have considered their approach to
serving new customers and recognize the potential for duplication of facilities. The parties assert this
Application, if approved, would allow Fall River to more efficiently serve the transferred customers
and the expected new growth in this area.
RMP's service center, which supports the portion of Teton County it wishes to transfer, is
located in Rexburg, Idaho, about 36 miles from the customers to be transferred, whereas the Fall
River service center is located in Driggs, Idaho only 12 miles away. As stated in the Joint
Application, the closer proximity will benefit the transferred RMP customers by shortening the
response time for power restoration and other service calls.
Fall River maintains "it has the bona fide intent and financial ability to operate and maintain
the subject Service Territory in the public service." In support ofthis claim Fall River presented the
end results of the recent fiscal year in which it reported total annual revenues of $19 million, a net
operating margin of $2 million, and total assets of $70.5 million, with member equity of $20.
million. In addition, Fall River noted that it has been providing reliable electric service to its
customers for almost 70 years.
COMMISSION RESPONSIBILITIES
Pursuant to state law Idaho Code 9 61-328 requires that before the Commission approves the
sale or transfer of any public utility property it must determine if (1) the transaction is consistent with
the public interest, (2) the cost of and rates for supplying service will not increase because of the
transaction, and (3) the buyer ofthe electric utility s property has both the intent and the financial
ability to operate the property in the public service. Further Idaho Code 9 61-333(1) provides that
STAFF COMMENTS JULY 16, 2007
electric suppliers may contract for the purpose of "allocating territories, consumers, and future
consumers. . . and designating which territories and consumers are to be served by which contracting
electric supplier." Under the Electric Supplier Stabilization Act (ESSA), both RMP and Fall River
are electric suppliers as defined in Idaho Code 9 61-332A(4). In Idaho Code 961-333(1), after
notice and opportunity for hearing, the Commission may approve agreements allocating service
territories and customers between electric suppliers only upon finding that the allocation is in
conformance with the purposes of the ESSA. In addition, as set out in Idaho Code 9 61-332(4), the
purpose of the ESSA is to discourage duplication of facilities, prohibit "pirating" of consumers
stabilize service territories and consumers and promote harmony between electric suppliers.
ST AFF REVIEW
As specified in Idaho Code ~ 61-328 there are three areas the Commission must consider
prior to the approval of the sale or transfer of any public utility property. First, it must determine if
the sale and transfer of the public utility property is in the best interest of the public served. Staff
investigated this question from the standpoint of the customers being transferred to Fall River as well
as those customers remaining with RMP. For the transferred RMP customers, closer proximity to a
service center will allow a faster response time for service calls and restoration of service, and should
be considered a positive aspect of the transfer. The companies in their Application indicated that the
transfer was expected to maintain, if not improve service reliability, and the transfer would help
reduce cost for all customers by reducing duplication of facilities.
In response to Staff s Production Data Request I. I , RMP reports that Fall River has added, as
of April 2007, one four-person crew to its service office in Driggs, Idaho, which according to Fall
River and RMP, should be sufficient to provide all maintenance, outage response and new
construction for the transferred customers. Staff therefore agrees that service reliability should
improve with the additional staff and the transfer of the service center from its current location in
Rexburg to Driggs, Idaho.
Staff analyzed the rates of both utilities to determine if customer costs would increase because
of the transaction. Fall River s residential rate is 6 Yz cents per kWh plus a $30 monthly customer
service charge as compared to RMP's Residential Service Schedule No.1 rate, which is 10.4 cents in
the summer and 7.99 cents in the winter with no monthly customer charge. This is without any BP
credit. The break-even point where a customer would pay the same under either utility rate is 776
STAFF COMMENTS JULY 16, 2007
kWh during the summer and 2034 kWh during the winter months. In other words, a customer using
less than 776 kWh in the summer, or less than 2034 kWh during the winter months, will pay less
under RMP's rate.
As part of the transfer, Fall River has agreed to leave the RMP rates in place for the former
RMP customers for five years. After the five year period ends the current established rates of Fall
River members will be applied. However, Staff recommended that the 72 RMP transferred
customers be allowed to choose between keeping their current RMP rate structure and accepting the
Fall River rate structure for a period of five years, and Fall River agreed. Providing these customers
with clear information on both the Fall River rates and RMP rates along with information on any
proposed changes will help customers choose the best rate for them for the five-year transition
period.
Twenty-two of the transferred customers are billed under RMP's Schedule No. 36 time-of-day
rate structure. Some of these customers have expressed concern that Fall River does not have a time-
of-day rate structure in place and thus they will lose this rate as a result of the transfer. Further
discussion with Fall River revealed that it plans to set up a special rate to match RMP's current time-
of-day rate for these customers. In addition, the Company will have to read and record the
customer s meter readings by hand for the duration of five-year period indicated in the Joint
Application.
Staff supports the proposal to continue RMP rate availability and agrees with Fall River
proposed method of billing these twenty-two customers. These customers should receive a bill each
month that displays sufficient information to allow them to determine that they are being charged
correctly.
RMP asserts that for its remaining customers, cost of service and rates "will not increase in
any material way" as a consequence of the transfer of assets and customers from RMP to Fall River.
Further, in response to Data Request 1.5 the Company indicated that most of the load growth in Teton
County Valley is already contracted to Fall River and RMP is expecting minimal future growth that
would offset new line construction and restoration. RMP maintains that avoiding the cost of
replacing aging facilities, including the principal distribution line, and the reduction in operating
expenses associated with the construction, will benefit the remaining RMP customers.
Finally, Staff reviewed whether the buyer of the electric utility s property has both the intent
and the financial ability to operate the property in the public service.
STAFF COMMENTS JULY 16 , 2007
Fall River was formed in 1938 and is one of the oldest rural electric cooperatives in the west.
The financial statements for Fall River support the Company s claim that it has the financial ability to
operate and maintain the property in the public interest, as set forth in the Asset Purchase Agreement
and Application. Review of customer service to existing member customers and the cooperation of
Fall River during the Staff review of the sale and transfer support the claim that Fall River has the
bona fide intention to operate and maintain the property.
With respect to notice to customers, one ofRMP's customers commented that he did not
receive the notice of the public meeting hosted by Fall River until after the meeting scheduled date of
May II , 2007. The letter prepared by RMP to the affected customers is dated May 8 , 2007, and the
letter states that a public meeting will take place in the Teton Middle School auditorium and that
representatives from both companies will be on hand to answer questions and discuss the proposed
transfer. The meeting was held on May 11 , 2007, at 6 p.
Staff does not believe that RMP provided its customers with sufficient time for them to plan
to attend this meeting. Assuming the notice, dated May 8, 2007, was mailed the same day it allowed
only three days for postal service delivery prior to the day of the meeting. The only option for those
customers who were not notified in time to attend the meeting was for them to file written comments
with the Commission. Staff suggests that RMP provide better notice to customers if it enters into
similar agreements in the future.
RMP and Fall River have agreed they will continue to work with each other to resolve any
existing and future service territory alignment issues for the next twelve months.
STAFF RECOMMENDATION
Staff recommends the Commission approve the asset purchase agreement as filed by Fall
River Rural Electric Cooperative, Inc. and Rocky Mountain Power under the following conditions:
(I) the transferred customers be allowed the option to remain under the RMP rate structure for a
period of five years or at any time during the five year period, be allowed to transfer to the Fall River
rates; (2) those customers currently being billed under RMP's time-of-day rate remain at that rate for
five years (unless they choose to transfer to the Fall River rates) and that these customers receive
billing that is sufficiently detailed to enable customers to determine usage and appropriate rates.
Fall River and RMP, through their Joint Application and answers to all Staffs inquires in a
timely manner, have demonstrated that the agreement is in conformance with the provisions and
intent of the ESSA, specifically those found in Idaho Code 961-333. RMP has provided a list of
STAFF COMMENTS JULY 16, 2007
assets to be transferred. Staff recommends RMP file the final accounting entries associated with the
sale within 30 days of the closing.
Respectfully submitted this day of July 2007.
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Dan Graves
Terri Carlock
i:umisc:comments/paceO7. 1 2.wsdg.doc
STAFF COMMENTS JULY 16, 2007
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF JULY 2007
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. PAC-07-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
JUSTIN LEE BROWN
SENIOR COUNSEL
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
MAIL: iustin.brown~pacificorp.com
DATA REQUEST RESPONSE CENTER
ACIFICORP
825 NE MULTNOMAH STE 2000
PORTLAND OR 97232
MAIL: datarequest~pacificorp. com
BRIAN DICKMAN
ROCKY MOUNTAIN POWER
201 S MAIN ST STE 2300
SALT LAKE CITY UT 84111
MAIL: brian.dickman~J)acificorp.com
DEE M. REYNOLDS
GENERAL MANAGER
FALL RIVER RURAL ELECTRIC
COOPERA TNE, INC
1150 NORTH 3400 EAST
ASHTON, ID 83420
MAIL: dee.reynolds~fallriverelectric. com
S'EC RET AR Y
CERTIFICATE OF SERVICE