20150109Decision Memo.pdf

DECISION MEMORANDUM- 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: NEIL PRICE
DEPUTY ATTORNEY GENERAL

DATE: JANUARY 9, 2015

SUBJECT: ROCKY MOUNTAIN POWER’S APPLICATION FOR APPROVAL OF A
TRANSACTION TO CLOSE DEER CREEK MINE AND FOR A
DEFERRED ACCOUNTING ORDER; CASE NO. PAC-E-14-10

On December 15, 2014, PacifiCorp dba Rocky Mountain Power (“Rocky Mountain”
or “Company”) filed an Application with the Idaho Public Utilities Commission
(“Commission”), pursuant to Idaho Code § 61-328, for approval of a transaction to close the
Deer Creek Mine located near Huntington, Utah, and for a deferred accounting order. The
Company attached the direct testimony of several witnesses, Cindy A. Crane, Seth Schwartz, and
Douglas K. Stuver, to its Application.
The mine is currently operated by Energy West Mining Company (“Energy West”), a
wholly owned subsidiary consolidated with PacifiCorp for regulatory purposes. This Application
is filed by PacifiCorp, on its own and on behalf of Energy West.
THE APPLICATION
The Company says that the closure of the Deer Creek Mine consists of four main
aspects: (1) the Company will permanently close the Deer Creek Mine and incur direct closure
costs (Closure); (2) Energy West will withdraw from the United Mine Workers of America
(UMWA) 1974 Pension Trust, incurring a withdrawal liability; (3) the Company will sell certain
mining assets as defined later in the Application (Mining Assets); and (4) the Company will
execute a replacement coal supply agreement (CSA) for the Huntington power plant and an
amended CSA for the Hunter power plant. Energy West has also settled its retiree medical
obligation related to Energy West union participants (Retiree Medical Obligation). Together, the
DECISION MEMORANDUM- 2
components of the Closure and settlement of the Retiree Medical Obligation constitute the
transaction to close the Deer Creek Mine (Transaction).
Additionally, the Company requests approval from the Commission for an accounting
order authorizing the Company to: (l) defer the costs associated with the Closure for future
recovery; (2) transfer the remaining plant balances for the Deer Creek Mine and Mining Assets
from electric plant in service and establish a regulatory asset to recover these costs for continuing
recovery; (3) defer all payments associated with the withdrawal from the 1974 Pension Trust for
future recovery; (4) defer any settlement losses associated with the Retiree Medical Obligation
for future recovery; and (5) defer the difference between the costs associated with the status quo
(operating the Deer Creek Mine) currently reflected in rates through base net power costs and the
incremental costs associated with the new Huntington power plant and amended Hunter power
plant CSAs, including any fuel costs to supply the Huntington and Hunter power plants.
The Company requests that the Commission determine that the Company’s decision
to consummate the Transaction is “prudent.” The sale of the Mining Assets and the execution of
the CSAs are contractually contingent upon regulatory approval and Transaction closure on or
before May 31, 2015. The Company requests that the Commission issue its Order by May 27,
2015, allowing the Company two business days prior to the deadline for closing the Transaction,
and Commission approval represents the last expected regulatory action needed to complete the
Transaction.
The Company states that it will promptly provide information requested by the
Commission or interested parties and will participate in technical conferences and hearings as
required by the Commission or as requested by interested parties to facilitate issuance of an order
on or prior to May 27, 2015.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and a Deadline for
Intervention in this case?

/s/ Neil Price
Neil Price
Deputy Attorney General

M:PAC-E-14-10_np