20100402Application.pdf

~ ROCKY MOUNTAIN
POWER
A DlVlSlN OF PACACORP
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April 2, 2010 2m3 ß,PR -2 ß.H 9: 17
201 South Main, Suite 2300
Salt Lake City, Utah 84111
VI OVERNIGHT DELIVERY
Jean Jewell
Idaho Public Service Commssion
472 W. Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
RE: Case No. P AC-1 0-0 LJ Application of Rocky Mountain Power for an Accounting Order
Regardig Post-Retirment Prescription Drug Coverage Tax Benefits
Dear Ms. Jewell:
Enclosed for filing in the above captioned matter, please find the original and seven (7) copies of
Rocky Mountain Power's Application of Rocky Mountan Power for an Accounting Order
Regarding Post-Retirement Prescription Drug Coverage Tax Benefits.
Please contact Danel Solander at [phone] if you have any questions.
~=~(Jeffy K. Laen . 1A
Vice President, Regulation
Enclosures
Mark C. Moench
Danel E. Solander
201 South Main, Suite 2300
Salt Lake City UT 84111
Telephone: [phone]
Email: daei.solander~pacificorp.com
Mark.moench~pacificorp.com
R..ECEt\/
2010 APR -2 Al1 9: 17
Attorneysfor Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
ROCKY MOUNTAI POWER FORAN )
ACCOUNTING ORDER REGARING POST- )
RETIRMENT DRUG COVERAGE TAX )BENEFITS )
CASE NO. PAC-E- 10-0'-
APPLICATION
COMES NOW, Rocky Mountain Power, a division of PacifiCorp (the
"Company"), and in accordace with RP 052 and RP 201, et. seq., hereby applies to the
Idaho Public Utilties Commssion (the "Commission") for an accounting order
authoriing the Company to record a regulatory asset associated with ta benefits
previously reflected in rates that will no longer be realized for cert costs incured for
post-retirement prescription drg coverage as, the result of the Patient Protection and
Mfordable Care Act (the "Act"). In support of the Petition, the Company states:
1. PacifiCorp is an electrcal company and public service company in the
state of Idaho, subject to the jursdiction of the Commssion with regard to its rates,
service and accounting practices. PacifiCorp also provides retal electrcity service in the
states of Oregon, Californa, Uta, Washington and Wyoming. PacifiCorp's address is
201 S. Mai St., Salt Lake City, Uta 84111.
2. Ths Application is fied pursuat Idaho Code §§ 61-301, -307, -622, and-
Page 1 - Application of Rocky Mountain Power
623. In paricular, Idaho Code § 61-623 empowers the Commssion to determine the
propriety of proposed rate schedules, § § 61-307 and -622 require Commission approval
prior to any increase in rates.
3. Communcations regarding ths Application should be addressed to:
Ted Weston
Manager, Idaho Regulatory Afairs
Rocky Mountai Power
201 South Main Street, Suite 2300
Salt Lake City, UT 84140
Telephone: [phone]
E-mail: Ted.Weston~PacifiCorp.com
Danel Solander
Senior Counel
Rocky Mountain Power
201 South Mai, Suite 2300
Salt Lake City UT 84111
Telephone: [phone]
E-mail: Daniel.SolanderCÐPacifiCorp.com
In addition, PacifiCorp respectfuly requests that all data requests regarding ths
matter be addressed to:
Bye-mail (preferred):dataeguest(ipacificorp.com
By regular mail:Data Request Response Center
PacifiCorp
825 NE Multnoniah, Suite 800
Portland, OR 97232
Informal inquires may be dircted to Ted Weston at [phone].
4. On March 23, 2010, the Patient Protection and Afordable Care Act was
signed into law. The Act changes the deductibility of certn costs incured for post-
retirement prescription drg coverage. The purose of ths Application is to request
authorization for the recording of a reguatory asset for ta benefits previously reflected
in rates that will no longer be realized as the result of the Act. The Company proposes to
Page 2 - Application of Rocky Mountain Power
amortize the regulatory asset over a period of four years beginng Janua 1,2011, and
reflect the amortiz~tion expense in the Company's next general rate case.
5. Designed to encourage employers to contiue providing high quality prescription
drg coverage, the Medicar Prescription Drug, Improvement, and Modernzation Act of
2003 contans provisions for a federal subsidy for employers offering post-retirement
prescription drg coverage to its retirees that is at least as valuable as the Medicare Par D
stadard drg benefit. Under the curent rues, employers are permtted to deduct the
entire cost of providing the coverage, even though a portion is offset by the subsidy.
6. For taable years beginng after December 31,2012, the Act repeals the curent
rue permitting deduction of the portion of the expense that is offset by the subsidy.
7. The employer's promise to provide post-retirement prescription drg coverage is
recorded as a component of the other post-employment benefit ("OPEB") obligation
reflecting ths futue liability. On a gross basis, the OPEB obligation includes a pre-
subsidy liabilty for the futue benefits to retirees offset by a subsidy receivable from the
federal governent. The net amount is actually determined.
8. For ratemakg purses, the Company does not include the OPEB obligation
(liabilty) in rate base. However, the actually determined level of OPEB expense is
included in the Company's anual expenses in its revenue requirement/cost of service,
and the Company has treated the OPEB expense as deductible for income ta puroses,
including the portion that is offset by the federal subsidy.
9. With the change in law, the subsidy receivable will remai not taable, but a
corresponding amount of OPEB related costs will become non-deductible for income tax
purses, or approximately $30.0 milion on a system-wide basis. If authorized by
Page 3 - Application of Rocky Mountan Power
reguators, the Company will avoid a one-time chage for additional income tax expense
for the change in law of approximately $11.4 milion in the first quaer of the calendar
year ended December 31,2010. The establishment of the reguatory asset for the $11.4
milion on a system-wide basis grossed up for tax effects would allow for the reasonable
recovery of these costs over a four-year period.
10. The $11.4 millon reguatory asset when amortiz~d and grossed up for ta effects,
results in a revenue requirement impact of approximately $18.5 millon on a tota
company basis amortized over four year. Idao's share of the reguatory asset will be
established based on the system overhead (SO) allocation factor, resulting in
approximately $1.0 millon.
11. Rocky Mountan Power is not requesting a fi decision on rate recovery through
ths Application.
WHREFORE, PacifiCorp respectfuly requests an accounting order authorizing
it to record a reguatory asset to FERC Account 182.3 (Oter Reguatory Assets) and a
credit to FERC Account 410.1 (Deferred Tax Expense) to recover the Idao portion of
the ta benefits previously reflected in rates that will no longer be realized as the result of
the Act. Additionally, the Company requests authorization to amortize the reguatory
asset to expense over a four-year period beginnng Janua 1,2011.
DATED: April 2, 2010.
Respectfuly submitted,
~~f1~/1J
Danel E. Solander
Attorneys for Rocky Mountain Power
Page 4 - Application of Rocky Mountain Power