20130919notice_of_proposed_settlement_order_no_32891.pdf

Office of the Secretary
Service Date
September 18,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY I’OUNTAIN )CASE NO.PAC-E-13-02
POWER TO CHANGE THE DEPRECIATION )
RATES APPLICABLE TO ITS ELECTRIC )NOTICE OF
PROPERTY )PROPOSED SETTLEMENT
)
)NOTICE OF
)MODIFIED PROCEDURE
)
______________________________
)ORDER NO.32891
On January 22,2013,PacifiCorp dba Rocky Mountain Power (Rocky Mountain”or
“Company”)submitted an Application seeking a Commission Order,pursuant to Idaho Code §
61-525 and Rule 52 of the Idaho Public Utilities Commission (“Commission”)Rules of
Procedure,for approval of proposed changes to depreciation rates applicable to Rocky
Mountain’s depreciable electric plant.The Company proposes an effective date of January 1,
2014 for its proposed changes.
On March 28,2013,the Commission issued a Notice of Application and Intervention
Deadline.See Order No.32772.Subsequently,Monsanto Company (“Monsanto”)and
PacifiCorp Idaho Industrial Customers (“PIIC”)were granted permission to intervene as a party.
See Order Nos.32773 and 32804.
On April 26,2013,the Commission issued a Notice of Public Workshop.A public
workshop was held on May 9,2013,allowing interested parties the opportunity to discuss a
possible settlement of the issues presented in this case.
NOTICE OF PROPOSED SETTLEMENT
YOU ARE HEREBY NOTIFIED that on September 10,2013,Rocky Mountain filed
a document with the Commission (“Stipulation”),including attachments,that proposes to settle
the relevant issues in this case.The Stipulation was agreed to by representatives of the
Company,Staff Monsanto,and PIIC (“Parties”).
YOU ARE FURTHER NOTIFIED that the following is a summary of the relevant
terms of the Parties’Stipulation:
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDERNO.32891
1.The Stipulating Parties agree that the proposed depreciation rates set forth
in Attachment 1,Stipulated Rates,attached and incorporated into the
Stipulation,represent just and reasonable depreciation rates for Rocky
Mountain Power in Idaho commencing January 1,2014.
2.The depreciation rates,originally proposed by the Company in its January
22,2013,filing,result in an estimated increase in annual depreciation
expense across PacifiCorp’s six jurisdictions of approximately $160.8
million ($83.9 million excluding the early retirement of the Carbon Plant),
based on estimated plant balances as of December 31,2013,before the
additional Oregon depreciation expense for shorter coal plant lives.Table
1 (see document)of the Stipulation shows the estimated impact of the
agreed-upon changes to the depreciation rates on the Company’s filed
depreciation study.In Attachment 2 —Jurisdictional Allocation,detailed
jurisdictional allocations are provided by category.As a result of the
settlement discussions,the Stipulating Parties have agreed to the following
adjustments to the Company’s filed depreciation study and proposed rates,
as described in Paragraphs 9-29.These adjustments are summarized in
Table 2 of the Stipulation (see document)and indicate the estimated
impact on depreciation expense.
3.The Stipulating Parties have agreed to extend the terminal life estimate for
the Gadsby Plant from December 31,2022,to December 31,2032.This
adjustment results in new lower depreciation rates,including the impact of
adding estimated interim retirements for the extended period.The
stipulated depreciation rates also include recognition of the excess reserve
adjustment in the calculation.The stipulated depreciation rates have been
computed using an estimated terminal removal rate of $40/kW.
(Adjustment A)
4.The Stipulating Parties have agreed to shorten the terminal life on the
James River Plant from December 31,2016,to December 31,2015,to
correct an error in the original Application,and to reduce net salvage
estimated in the calculation from -1%to zero.These changes result in
higher depreciation rates.(Adjustment B)
5.The Stipulating Parties agree that,for the Chehalis Plant,Currant Creek
Plant,Lake Side Plant,Hermiston Plant and Gadsby Peaker Plant (Units
4-6),the interim retirement curve for Account 343 Prime Movers is
changed from a 40-Ri to a 45-R25.There is no change in the proposed
terminal removal dates for each of these plants from those presented in the
study.The Stipulating Parties agree to lower the terminal removal cost for
the CCCT gas units from the Company’s proposed level of $20/kW to
$1 5/kW.(Adjustment C)
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 2
6.The Stipulating Parties agree that wind generation units will use a 30-year
terminal life.The terminal removal cost has been lowered from the
Company’s proposed level of $9/kW to $7/kW.(Adjustment D)
7.The Stipulating Parties agree that the Carbon Plant terminal net salvage
estimate is reduced from the proposed $330/kW to $1 17/kW and the
stipulated depreciation rates are calculated based on the April 2015
retirement date.This terminal net salvage estimate of $11 7/kW is used for
calculating rates in this Stipulation and will not be relied on in developing
future removal cost estimates for other generation facilities.Until actual
results are available,updated current estimates will be provided as needed
in future filings,and to the extent the updated estimates differ from the
$1 17/kW,this issue can be reexamined in those filings.The amount
ultimately deferred for the Carbon Plant will be trued up to actual
prudently incurred removal costs in accordance with the procedures set
forth in the stipulation in Case No.PAC-E-13-04 (the “GRC Stipulation”).
The remaining plant balances for Carbon Plant will be recovered through
2020 consistent with the GRC Stipulation.(Adjustment E)
8.The Stipulating Parties accept the Company’s proposed method in the
study to use Iowa Curves to determine interim retirements for production
facilities with terminal lives.The proposed depreciation rates reflect
adjustments to the retirement curves on coal generation facilities in
Account 311 Structures and Improvements from 90-R2 to l20-R1.5,
Account 312 Boiler Plant Equipment from 60-Li to 68-Se and Account
314 Turbo-generator Units from 55-Li to 57-Se.Reliance on the
Company’s Iowa Curve method for settlement purposes shall not prevent
parties from taking a different position on this issue in future depreciation
cases.(Adjustment F)
9.The Stipulating Parties agree to extend lives on transmission assets by:(1)
extending the curve for Account 353 Station Equipment from the proposed
57-Se to a 58-Se,(2)extending the curve for Account 356 Overhead
Conductors and Devices from 60-R3 to 63-R3;and (3)merging Account
353.7 Supervisory Equipment with Account 353 Station Equipment
resulting in a change to the life-curve combination and related net salvage
for those assets from the proposed 20-Ri with zero net salvage to 58-Se
with -5%net salvage.All other lives and retirement curves are accepted
as proposed by the Company.Any transmission excess reserve balance
will be amortized over the remaining life of the assets rather than on an
expedited basis.As part of calculating the stipulated depreciation rates,
the depreciation reserve has been redistributed within the transmission
function resulting in reduced rates on all accounts within the transmission
function and an overall reduction in the composite depreciation rates on
those facilities.(Adjustment G)
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 3
10.The Stipulating Parties agree to extend lives on distribution assets by
merging Account 362.7 Supervisory Equipment with Account 362
Substation Equipment,and using the appropriate state-specific lives for
Account 362 in Utah,Idaho and Wyoming.(Adjustment H)
11.The Stipulating Parties agree to amortize net salvage on specific mining
accounts as follows:(1)stipulated depreciation rates for Utah mining
assets have been established using a terminal life as established in the filed
study;(2)net salvage percentages have been adjusted for Account 399.41
Surface Processing Equipment —Preparation Plant from -7%to -6%and
for Account 399.46 Longwall Equipment from 5%to 7%;and (3)
depreciation reserves have been reallocated within the mining accounts.
As a result,the stipulated depreciation rates are lower than the Company’s
proposed rates on most of the mining accounts.(Adjustment I)
12.In order to offset the depreciation expense impacts of the shortened
remaining life at the Carbon Plant,which is calculated to be $34.7 million,
the Stipulating Parties agree to expedite the amortization of the excess
depreciation reserve at the Gadsby Plant and the Hunter Plant.The
Stipulating Parties agree that the excess reserve at the Gadsby Plant and
the Hunter Plant,calculated as of December 31,2011,will be returned on
a straight line basis.The excess reserve of $21,073,503 associated with
the Gadsby Plant will be amortized based on 9 years and the excess
reserve of $29,635,920 associated with the Hunter Plant will be amortized
based on 5 years,resulting in an annual amortization of $8.2 million.
These amounts will be recorded as a separate item by crediting
depreciation expense and debiting the depreciation reserve.The new
depreciation rates for the Hunter Plant and Gadsby Plant have been
recomputed excluding the above identified amounts of excess reserve.
This recalculation of rates produced an estimated increase in depreciation
expense of $2.4 million.Coupled with the $8.2 million excess reserve
amount,this results in a net annual decrease in depreciation expense of
$5.8 million.The Stipulating Parties agree the excess reserve amortization
will occur annually starting January 1,2014,and will continue until the
full $34.7 million is returned or ending with the implementation of new
rates resulting when new rates from the next depreciation study are
implemented.During the next depreciation case,an assessment will be
made as to the final disposition of any remaining amount of the $34.7
million which has not been returned at that time.(Adjustment 3)
13.The Stipulating Parties agree to amortize depreciation excess reserve for
two other steam generation plants with an excess reserve as of December
31,2011,the Blundell Plant with an excess reserve of $7,852,016 and the
Colstrip Plant with an excess reserve of $22,930,383,as follows:(1)the
annual amount is determined for each plant with any excess reserve by
dividing the excess reserve by 10;(2)the annual amortization will occur
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 4
beginning January 1,2014,until new depreciation rates resulting from the
next depreciation study are implemented;and (3)the stipulated
depreciation rates are determined by excluding the identified excess
reserve in the calculation.This adjustment is intended to offset the large
steam plant increase in this Stipulation and does not set precedent for any
future depreciation study.(Adjustment K)
14.The Stipulating Parties agree to amortize depreciation excess reserve on
distribution plant for Utah,Idaho and Wyoming as follows:the annual
amortization has been determined for each state by identifying the excess
reserve for each state individually in the Company’s filed study as of
December 31,2011,and then dividing the excess reserve for Utah by 6.5
years,the excess reserve for Idaho by 13 years,and the excess reserve for
Wyoming by 15 years.The stipulated depreciation rates have been
determined by excluding the identified excess reserve amounts from the
calculation.The annual amortization will occur beginning January 1,
2014,until new depreciation rates from the next depreciation study are
implemented.This adjustment is intended to offset the large steam plant
increase in this Stipulation and does not set precedent for any future
depreciation study.(Adjustment L)
15.The Stipulating Parties agree to stipulated depreciation rates calculated
using June 30,2013,actual account balances within specific functions
without terminal lives,including transmission,Utah,Idaho and Wyoming
distribution and Utah,Idaho and Wyoming general plant.(Adjustment M)
16.The Stipulating Parties agree to adjust general plant lives to be consistent
with the Oregon Settlement.Utah,Idaho and Wyoming depreciation rates
have been adjusted using the life-curve combinations agreed to in Oregon.
For Idaho,Account 390 Structures and Improvements,the life has been
changed from 55R3 to 58-R1,Account 392.09 Transportation Equipment-
Trailers from 33-L2 to 34-L2 and Account 396.03 Light Power Operated
Equipment from 8-R2 to 9-L3,Each state’s estimated salvage remains as
provided in the Company’s originally filed depreciation study.
(Adjustment N)
17.For the depreciation rates for Wyoming and Idaho,the Stipulating Parties
agree to adjust Klamath-Accelerated depreciation to an end date of
December 31,2022,consistent with the approved life in Utah.The life
may be reassessed in the next depreciation cases in Wyoming and Idaho.
If Klamath-Accelerated facilities are retired prior to December 31,2022,
return of and on any remaining balance will continue after retirement of
the facilities as though it remained in service through December 31,2022,
and the Stipulating Parties agree not to challenge this recovery based on
“used and useful”arguments.(Adjustment 0)
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 5
18.The Stipulating Parties agree to the Company’s proposal to move the
balance of communication equipment to mass asset accounting with a
consistent 24-year life and a depreciation rate of 4.3%.The depreciation
reserves will continue to be maintained on a state basis which ensures no
inadvertent jurisdictional transfer of depreciation reserve benefits created
from different depreciation rates historically being used by each state.
19.The Stipulating Parties agree that the Company will provide a section in
the next depreciation study,for informational purposes only,listing the
specific mining assets,reserve balances,and respective lives owned by its
Wyoming mining subsidiary.
20.A new depreciation study will be filed with the Idaho Public Utilities
Commission no later than five years from the date of the written order
resolving the issues in this Docket,or as otherwise ordered by the
Commission.The Stipulating Parties agree the Company will maintain
the right to file a new depreciation study sooner than five years.
21.The Stipulating Parties agree the Company will implement a reporting
system to keep the Stipulating Parties and the Utah,Idaho and Wyoming
Commissions informed regarding any matters likely to have implications
regarding potential stranded costs of generating assets.The Company will
propose a reporting method by no later than December 31,2013.
22.The Stipulating Parties agree the Company will provide updated cost
estimates regarding Carbon Plant’s terminal net salvage,including any
new third-party studies as part of the Company’s next general rate cases in
Idaho,Utah and Wyoming.
23.The Stipulating Parties agree to adhere to the depreciation study treatment
established according to paragraphs 10-14 of the Stipulation in Case PAC
E-13-04 (the “GRC Stipulation”)if approved by the Idaho Public Utilities
Commission.The parties are requesting that the stipulated depreciation
rates from this study be effective on January 1,2014 for purposes of
financial reporting.Per the GRC Stipulation,the Company will establish
a regulatory asset that will track for further recovery or refund,the
aggregate net difference between the depreciation expense that would
have been booked beginning in 2014 under the depreciation rates in effect
as of the date of the GRC Stipulation and the depreciation expense
actually booked beginning in 2014 under the depreciation rates approved
by the Commission in this Case until the new depreciation rates are
reflected in customer rates.Recovery of the deferral shall be allocated to
customers on a proportionate basis,based on the cost of service
relationships established in the next Idaho general rate case with rates
proposed to be effective on or after January 1,2016,as modified by future
cost of service studies in future rate cases.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 6
YOU ARE FURTHER NOTIFIED that any reference to other States in the
Stipulation is for illustrative purposes only and does not purport to bind other State
Commissions.
YOU ARE FURTHER NOTIFIED that the Parties agree that the Stipulation
represents a compromise of the positions of the Parties on all issues contained in the Stipulation.
YOU ARE FURTHER NOTIFIED that the Parties agree that the Stipulation is in the
public interest.The Parties agree to support the Stipulation before the Commission,and no Party
shall appeal any portion of this Stipulation or Order approving the same.
YOU ARE FURTHER NOTIFIED that the Stipulation is subject to approval by the
individual State Commissions and contains a provision allowing the Parties,upon notice and
within 15 days,to withdraw from the Stipulation if the Commission rejects,modifies or adds
additional provisions to the Stipulation.
YOU ARE FURTHER NOTIFIED that the Stipulation and the Company’s
Application in Case No.PAC-E-l3-02 has been filed with the Commission and is available for
public inspection during regular business hours at the Commission offices.472 W.Washington
Street,Boise,Idaho.The Company’s Application is also available on the Commission’s web site
at www.puc.idaho.gov.Click on the “File Room”tab at the top of the page,scroll down to
“Open Cases,”and then click on the case number as shown on the front of this document.
YOU ARE FURTHER NOTIFIED that the Commission is not bound by any
settlement reached by the parties.The Commission will independently review any proposed
settlement to determine whether the settlement is just,fair and reasonable,and in the public
interest,or otherwise in accordance with law or regulatory policy.The Commission may accept
the settlement,reject the settlement,or state additional conditions under which the settlement
will be accepted.IDAPA 31.0l.0l.274-.276.
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.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 7
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 Daniel E.Solander
Idaho Public Utilities Commission Rocky Mountain Power
P0 Box 83720 201 South Main,Suite 2300
Boise,ID 83 720-0074 Salt Lake City,UT 84111
E-mail:.com
Street Address for Express Mail:
472 W.Washington Street
Boise,ID 83702-5918
These comments should contain the case caption and case number shown 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 “Case Comment or Question
Form”under the “Consumers”tab,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 at
the e-mail address listed above.
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 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 §61-502 and 61-503.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 3 1.01.01.000 ci seq.
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 8
ORDER
IT IS HEREBY ORDERED that Rocky Mountain’s Application and Stipulation will
be processed under Modified Procedure.Persons interested in submitting written comments
regarding the Application and Stipulation reached by the Parties or protesting the use of
Modified Procedure should do so no later than 21 days from the service date of this Order.
DONE by Order of the Idaho Public Utilities Commission at Boise.Idaho this /
day of September 2013.
PAUL K.LLANL5t).PRESIDENT
c-fl
MACK A.REDFORD,O@IMISSIONER
JL4tL fLi
MARSHA H.SMITH,COMMISSIONER
ATTEST:
D.Jewell.,
Cbmmission Secretary
O:PAC-E-I 3-02np3
NOTICE OF PROPOSED SETTLEMENT
NOTICE OF MODIFIED PROCEDURE
ORDER NO.32891 9