20131009Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03 l4
BARNO.6864
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF THE APPLICATION OF
PACIFICORP DBA ROCKY MOUNTAIN
POWER TO CHANGE THE DEPRECIATION
RATES APPLICABLE TO ITS ELECTRIC
PROPERTY.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. PAC.E.T3.O2
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission (Commission), by
and through its attorney of record, Neil Price, Deputy Attorney General, and in response to the
Notice of Proposed Settlement and Notice of Modified Procedure issued in Order No. 32891 on
September 18, 2013 in Case No. PAC-E-13-02, submits the following comments.
BACKGROUND
On January 22,2013, PacifiCorp dba Rocky Mountain Power ("Rocky Mountain" or
"Company") submitted an Application seeking a Commission Order, pursuant to ldaho Code
$ 6l-525 and Rule 52 of the Idaho Public Utilities Commission ("Commission") Rules of
Procedure, for approval ofproposed 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.
STAFF COMMENTS OCTOBER 9,2013
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.
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
('oParties").
STAFF REVIEW
Staff participated in discussions with PacifiCorp, and interested Parties in Idaho and other
PacifiCorp states, to discuss Stipulation terms. Staff continued discussions with Monsanto and
PIIC to determine if the Stipulation was in the best interest of Idaho customers.
One of the terms of the Stipulation was a request for approval of the proposed accounting
treatment for the Company to establish a regulatory asset that would allow the Company to defer
any aggregate net increase or decrease in ldaho allocated depreciation expense beginning
January 1,2014. The Parties agreed that the Company should be allowed to recover the deferred
depreciation expense beginning on the effective date ofthe next general rate case, and the
depreciation of the Carbon Plant would not be included in this deferral. Commission Order
No. 32701 authorized the Company to create a regulatory asset to transfer the remaining Carbon
Plant balances upon retirement from electric plant in service and accumulated depreciation to the
regulatory assets. This regulatory asset as of the date of transfer will include the un-depreciated
book balance. The Parties in case PAC-E-13-04 also agreed to the creation of a regulatory asset
for future recovery from Idaho customers of Idaho's allocated share of the prudently incurred
Carbon Removal Costs over a reasonable period to be determined by the Commission. This case
STAFF COMMENTS OCTOBER 9,2013
is pending Commission approval.l The amortization of the removal costs will begin when rates
are set in the next general rate case.
The Stipulation Agreement Adjustments are summarized in Table 1
Table I
Staff panicipated in the discussions, reviewed and analyzed the intervening multi-state
Parties' comments and conclusions, and also reviewed all of the adjustments as presented and
agreed upon in the Stipulation. It is Staff s opinion that the Stipulation is a fair, just and
reasonable compromise of the issues. However, Staff believes the following items warrant
further explanation.
Adjustments J and K relate to Excess Reserves in the Steam Production Plants. The
issue evaluates whether the Steam Production Plant should be considered as one category
(Function) rather than as individual plants for depreciation purposes. When reviewed on an
I Case No. PAC-E-13-04 In the Matter of the Application of Rocky Mountain Power to Initiate Discussions With
Interested Parties On Alternative Rate Plan Proposals. Pages 5-6, items l0-14.
' For a complete explanation of all adjustments see Case No. PAC-E-13-02, Stipulation, pages 6-l l.
STAFF COMMENTS 3 OCTOBER 9,2013
PacifiCorp
PAC-E-13-02
filed increase
Company
PacifiCorp
PAC-E-13-02
filed increase
Idaho
Proposed
Stipulation
Adjustments
Idaho
Adjustment
Referenced
in The
Stinulation2
Stipulation
Adjusted
fncrease Idaho
Depreciation
Exoense
(b)(c)(d)(c)+(d)
Production Plant
Steam Production $80,985,729 $4,571,547 sQ40,562)A,B,F,J,K $3.830.98s
Steam-Cholla 7,327,916 413.652 (36"13 r)K 377.521
Steam-Carbon 76,952,198 4.343.8s9 (1,541,969)E,K 2.801.890
Hydro Production 6,680,139 377.086 fi25.152\o 251.934
Other Production (7.483.653\422.443\fi39.097\C.D (561.s40)
Other-Gadsby 557.941 33.1 00 (8.594)C 24"507
Sub Total $165,020,270 $9,316,801 $(2.591.505)$6,725,297
Transmission Plant $(4,794,939\$(270,669)$(183,908)G,M $@s4.s77\
Distribution Plant (10,204,120\(935,013)(1,228,603)L,H,M (2.r63.616\
General Plant 1,402,284)(24,385)(224,779)N (249.164\
Mining Plant 12,194,267 765,114 (8,083)I 757,030
Grand Total Plant
Increases
$160,813,194 $8,851,848 $(4,236,878)s4,614,970
individual basis, some plants appear to have depreciation reserve deficits and some appear to
have depreciation surpluses. This is caused by timing differences due to changes in depreciation
factors during the life of the assets. However, if you combine all plants into one function group,
offsetting the surpluses and deficits, it reduces the depreciation expense currently required.
PacifiCorp assured Staff that it had discussed this practice with the Company's Generally
Accepted Accounting Principles (GAAP) advisors and were advised that it did not violate
GAAP. Staff looked at the Uniform System of Accounts (USOA) 108c, other states' reserve
practices, and accounting publications to determine if combining reserves for depreciation
purposes was an acceptable practice. Based on Staff findings and the fact that it is a timing
difference which will correct itself in the near future, Staff accepted the Adjustments J and K as
being a fair compromise of the Parties. These two adjustments account for a reduction in Idaho
depreciation expense of approximately $432,000.
Adjustment E adjusts for a reduction in estimated Carbon Plant costs. Originally, the
Company estimated Carbon Plant removal cost of $330/kW. Existing depreciation rates include
$40/kW for removal costs. Based on Staff s calculations, the $117/kW removal cost appears to
be a fair compromise of the Parties. This amount will be reexamined as estimates are updated
and 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"). Staff
agrees with this adjustment as a fair and reasonable compromise by the Parties. This adjustment
reduces Idaho depreciation expense by approximately $l.5 million.
Adjustment L deals again with the issue of surplus and deficit reserves, as discussed
earlier regarding Adjustments J and K, only Adjustment L relates to Distribution Plant for Idaho.
Staff accepts this adjustment as being a fair compromise of the Parties. This adjustment reduces
Idaho depreciation expense by approximately $l.l million.
STAFF RECOMMENDATION
Staff believes that this Stipulation represents a fair, just and reasonable compromise of
the issues raised in this proceeding and is in the public interest. Staff cautions however, that
limiting depreciation expense for current customers, if not properly monitored, may result in
unfair expense being pushed to future customers. Staff recommends that the Commission
approve the Stipulation and all of its terms and conditions.
STAFF COMMENTS OCTOBER 9,2013
Respecttully submiued thist9 day of October 2013.
Technical Staff: Sandra Walker
Terri Carlock
i :umisc:comments/pace I 3.2nptcsw comments
Deputy Attorney General
STAFF COMMENTS OCTOBER 9,2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9T, DAY oF oCToBER 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF', IN CASE
NO. PAC-E-13-02, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
TED WESTON
ID REGULATORY AFFAIRS MANAGER
ROCKY MOTJNTAIN POWER
201 S MAIN ST STE 23OO
SALT LAKE CITY UT 84I I I
E-MAIL: [e-mail]
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datareque st@ paciflcorp. com
BRUBAKER & ASSOCIATES
16690 SWINGLEY RIDGE RD
#140
CHESTERIIELD MO 63017
E-MAIL: [e-mail]
RONALD L WILLIAMS
WILLIAMS BRADBURY PC
1015 W HAYS ST
BOISE TD 83702
E-MAIL: [e-mail]
ELECTRONIC ONLY
TIM BULLER
AGRIUM US INCATU-WEST
E-MAIL: [e-mail]
DANIEL E SOLANDER
SENIOR COUNSEL
ROCKY MOUNTAIN POWER
2OI S MAIN ST STE 23OO
SALT LAKE CITY UT 841I I
E-MAIL : daniel. solander@p_acifi corp. com
RANDALL C BUDGE
RACINE OLSON NYE BUDGE
& BAILEY
PO BOX 1391
POCATELLO ID 83204
E-MAIL: [e-mail]
ELECTRONIC ONLY
JAMES R SMITH
MONSANTO COMPANY
E-MAIL: [e-mail]
DON SCHOENBECK
RCS INC
9OO WASHINGTON ST
STE 780
VANCOUVER WA 98660
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE