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Home My WebLink About20091013Application.pdf~~~OUNTAIN RECE. Y-,t",__i' inß~ OC1 \ 3 AM 9: 05 October 12, 2009 201 South Main, Suite 2300 Salt Lake City, Utah 84111 VI OVERNIGHT DELIVERY Idaho Public Utilties Commssion 472 West Washington Boise, il 83702-5983 ffl -t - CJ9-cØ Attention:Jean D. Jewell Commission Secreta Re:ACCOUNING ORDER AUTHORIING THE DEFERR COAL MIE STRIPPING COSTS. Rocky Mountain Power, a division of PacifiCorp, hereby submits for filing an original and seven (7) copies of its application for an accounting order for the above referenced matter. Rocky Mountain Power respectfuly requests authorition to defer coal mie strpping costs and amorze them as coal is reoved from the mine rather than expense them when incued. Any inormal inquiries related to this application should be directed to: Danel E. Solander Ted Weston Rocky Mountan Power Rocky Mountain Power 20l South Mai Strt 20l South Mai Street Suite 2300 Suite 2300 Salt Lae City, UT 84111 Salt Lake City, UT 84111 dael.solander(ßacificorp.com ted. weston~pacificorp.com In addition, the Company respectfuly requests that all data requests regarding this matter be addressed to one or more of the following: Bye-mail (preferred)dataequest(ipacificorp.com By regular mail Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 Sincerely,L/1J Enclosure Danel E. Solander Rocky Mounta Power 201 South Main Street Suite 2300 Salt Lake City, UT 84 I I I Telephone: (801) 220-4014 Facsimle: (801) 220-3798 daniel.solander(ipacificorp.com Attorney for Rocky Mountan Power RECr; Ef)"~ .. 20n9 OCT 13 AM 9: 05 ID/~J¡O UTILITIES BEFORE TH IDAHO PUBLIC UTILITY COMMSSION IN TH MATTER OF THE APPLICATION OF ROCKY MOUNTAI POWER FOR AN ACCOUNTING ORDER AUTHORIING THE DEFERR OF COSTS ASSOCIATED WITH COAL MINE STRIPING ACTIVITIES CASE NO. PAC-E-09-08 APPLICATION Rocky Mounta Power, a division of PacifiCorp ("Rocky Mounta Power" or the "Compay"') hereby applies to the Idaho Public Utilties Commssion for approval of an Accounting order authorizing the Company to record a reguatory asset associated with the costs of removal of overburden and waste materials at its afliate coal mies in accordance with Idao Code 61-524 and RP 52. In support of ths Application, Rocky Mountain Power states as follows: I. Introduction 1. Rocky Mounta Power is authrize to do and is doing business in th state ofIdaho. The Company provides retal electrc servce to approximately 69,000 customers in Page I - APPLICATION FOR ACCOUNG ORDER the state of Idaho and is subject to the jursdiction of the Commssion. 2. Rocky Mounta Power own and operates coal-fired power plants located thoughout the west. To supply coal to these plants, the Company employs a diversified strategy that includes a mix of thrd-par multi-year contracts, spot market purchases, and coal from the Company's afliate mies, which include Bridger Coal Mine, Deer Creek Mine and Trapper Mine (referrd to collectively hereafer at ties as the "Mines"). 3. Depending on cert geological ard other conditions, the Mines tyically extrct coal by utilzing varous underground and surace mining technques. Surace minng requies the removal of soil, rock or "overburden" on seams of coal which lie near the suace. After the coal is expose an fragmted, it is removed utilzing a loaer an trk fleet. The costs of removing overburden and wase materials are referred to as "strpping costs. If 4. Pusuat to Fincial Accounting Stadads Board ("FASB") Emerging Issues Task Force stadard 04-6 ("EITF 04-6"), strpping costs incured durg production are considered a component of inventory when incured, without consideration of futue potential beefits. In contrast, the coal itself must be extrcted from its original location in order to quaify as inventory. Mines were fist reuied to comply with EITF 04-6 in 2006. 5. Ths acunting reuirement signficatly increa operating cost varabilty resulting from an inherent mismatch of strpping costs with coal inventory balances. To ilustrate, activities in a given period may result in a mine removig overburden, uncovering coal, and only extrcting a mior amount of the coal uncovered durg the period. In ths ilustrtion, the entire strpping costs incured durng the period will be considered in the cost Page 2 APPLICATION FOR ACCOUNTIG ORDER of only the extrcted coal. Conversely, durg the next period the Company could extrct the remaing amount of col unvered in th prior period and only incur minial extrtion costs with ths coal. As a result, under the accounting requiement, customers could pay for the costs of uncovering coal well before it is extracted from the mie for use in the power plants to generate electrcity. 6. Ths mismatch of stpping costs to coal uncovered and extracted signficatly increases fuel cost varabilty to the Company and its customers. For example, in 2010, the Company is expected to incur strpping costs at its Bridger Coal Mine for coal that will remai in the mine and be extracted in later year. As a consquence, the cost will be higher for the coal actuly extracted in 2010 because it will include all the strpping cost. Ths sitution will be the first tie the Company ha had to deal with signficant strpping costs since the issuance of EITF 04-6. 7. As a result of Bridger Coal Mine tranitionig from a predomiantly surace mine to a suracunderground mig complex, uner the Compay's long term. lea cost mine plan there is increasing disparty between periods when strpping costs are incured and when coal is extrcted. In fue peods, the magntude of the dispaty win fluctute depending on the amount of coal extrted. 8. This Application seeks to match the costs of coal strpping with the extrtion of the coal. This will benefit customers by aligng these costs, reducing customers' exposure to the volatile natue of EITF 04-6 trtment of strpping expeses. In essence, the result of this proposed accounting order would undo the effect of EITF 04-6 and allow the Company Page 3 APPLICA nON FOR ACCOUNTIG ORDER to employ the accounting method utilzed prior to 2006 (the fist year EITF 04-6 was requied). II. Proposed Accountig Treatment 9. Rocky Mounta Power is requestig that the upfront coal strpping costs be recorded as a reguatory asset servg much like a fuel inventory account and expensed as the coa is extrcted from th mine and delivered to Rocky Mountai Power for use at its plants. Rocky Mounta Power proposes to account for these costs by recording them in Account 182.3, Other Reguatory Assets and expensing though Account 501, Fuel Expense based on "extrcted" coal delivery. 10. If authorized, the reguatory asset would eliminate the expensing of coal strpping costs when incured as requied by EITF 04-6. The purose of ths proposed accounting treatment is to match the expensing of these strpping costs with the coal usage to smooth the expense over the period based on coal delivered from the mies to the plants to generate electrcity and to achieve intergeneration equity among customers. III. Modifed Procedure 11. Rocky Mounta Power believes tht a hearng is not necessa to consider the issues presented herein and respectfly requests that ths Application be processed under Modified Proceur, i.e., by wrtten submissions rather tha by heag, in accrdance with RP 201 èt seq. 12. The Compay resectflly requess that the Commssion appve ths Application by November 30, 2009, to allow the Company to incorporate the accountig chage. Page 4 APPUCATlON FOR ACCOUNTIG ORDER iv. Communications and Service Pleadings 13. Communication and service of pleadings with reference to ths Application should be sent to the followig: Danel E. Solander Rocky Mounta Power 201 South Mai Street Suite 2300 Salt Lae City, UT 84111 dael.solanderacificorp.com Ted Weston Rocky Mounta Power 201 South Mai Street Suite 2300 Salt Lae City, UT 84111 ted. westont!acificorp.com In addition, the Company respectfly requests that all data requests regardig ths matter be addressed to one or more of the followig: Bye-mail (preferred) By reguar mail dataeguest(ipacificorp.com Data Request Response Center PacifiCorp 825 NE Multnomah, Suite 2000 Portland, OR 97232 V. Request for Relief i 4. Rocky Mountai Power respectfuly requests that the Commssion issue an accounting order: (I) authorizing that ths matter may be processed by Modified Procedure; and (2) authorizig the Company to record a reguatory asset associated with coal strpping costs at its Mines. DATED: October 12,2009.£~~(ø¡ Attorney for Rocky Mounta Power Page 5 - APPUCATION FOR ACCOUNTING ORDER