20130131Lay Errata Replacement Page.pdf

ROCKY MOUNTAIN
POWER
A DMSION OF PACIFICORP 201 South Main, Suite 2300
21113 JAN 31 AM 9: 52 Salt Lake City, Utah 84111
January 3l,2013 JTiLTE3 OMMi.,Z,R
VIA OVERNIGHT DELIVERY
Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Re: Case No. PAC-E-13-02
In the Matter of Rocky Mountain Power's Application for an Order Authorizing
Changes in Depreciation Rates Applicable to Electric Property.
Dear Ms. Jewell:
Rocky Mountain Power, a division of PacifiCorp, hereby submits for filing an original and
nine (9) copies of errata page 5 of Company witness Mr. Henry Lay's direct testimony.
Page 5 of Mr. Lay's testimony refers to a "depreciation rate of 4.18 percent" that should have
read "depreciation rate of 3.05 percent" a clean and legislative copy of the errata page is
provided. The Company respectfully requests that the original filed copies of page 5 of Mr.
Lay's testimony be replaced with the errata page.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager at (801) 220-
2963.
Very truly yours,
eA'frey K."tarsen
Vice President, Regulation and Government Affairs
I depreciation rate of 3.05 percent as set in the 2007 depreciation study and used for
2 setting rates in the last general rate case. Any difference between the current rate
3 of 3.05 percent and the new rate used by the Company for depreciation expense
4 (currently estimated at 67 percent) will be recorded as a regulatory asset with
5 recovery through 2020.
6 The Carbon removal costs will also be excluded from the depreciation rate
7 and recorded as part of the regulatory asset. The removal costs will be included in
8 the next general rate case and the estimate will be updated based on the best
9 available removal cost projections at that time. The Company will request
10 recovery of the removal costs through 2020 in the next general rate case
11 consistent with the depreciation.
12 Depreciation Study Background
13 Q. Please explain the concept of depreciation.
14 A. There are many definitions of depreciation. The following definition was put
15 forth by the American Institute of Certified Public Accountants in its Accounting
16 Research Bulletin #43:
17 Depreciation accounting is a system of accounting which aims to
18 distribute the cost or other basic value of tangible capital assets,
19 less salvage (if any), over the estimated useful life of the unit
20 (which may be a group of assets) in a systematic and rational
21 manner. It is a process of allocation, not of valuation.
22 The actual payment for an electric utility plant asset occurs in the period in
23 which it is acquired through purchase or construction. Depreciation accounting
24 spreads this cost over the useful life of the property. The fundamental reason for
25 recording depreciation is to provide for accurate measurement of a utility's results
Lay, Di - 5
Rocky Mountain Power
I depreciation rate of 444305 percent as set in the 2007 depreciation study and
2 used for setting rates in the last general rate case. Any difference between the
3 current rate of 4443.05 percent and the new rate used by the Company for
4 depreciation expense (currently estimated at 67 percent) will be recorded as a
5 regulatory asset with recovery through 2020
6 The Carbon removal costs will also be excluded from the depreciation rate
7 and recorded as part of the regulatory asset. The removal costs will be included in
8 the next general rate case and the estimate will be updated based on the best
9 available removal cost projections at that time. The Company will request
10 recovery of the removal costs through 2020 in the next general rate case
11 consistent with the depreciation
12 Depreciation Study Background
13 Q. Please explain the concept of depreciation.
14 A There are many definitions of depreciation The following definition was put
15 forth by the American Institute of Certified Public Accountants in its Accounting
16 Research Bulletin #43
17 Depreciation accounting is a system of accounting which aims to
18 distribute the cost or other basic value of tangible capital assets,
19 less salvage (if any), over the estimated useful life of the unit
20 (which may be a group of assets) in a systematic and rational
21 manner. It is a process of allocation, not of valuation.
22 The actual payment for an electric utility plant asset occurs in the period in
23 which it is acquired through purchase or construction Depreciation accounting
24 spreads this cost over the useful life of the property. The fundamental reason for
25 recording depreciation is to provide for accurate measurement of a utility's results
Lay, Di - 5
Rocky Mountain Power