20180828Comments.pdf

SEAN COSTELLO
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 8743
THE APPLICATION OF ROCKY MOUNTAIN
POWER FOR APPROVAL OF THE ASSET
PURCHASE AGREEMENT WITH THE CITY
OF IDAHO FALLS (NINA, CHARLA, AND
MERLTN DRrVE).
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Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. PAC.E.18.O4
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Sean Costello, Deputy Attorney General, submits the following comments.
BACKGROUND
On May 3,2018, Rocky Mountain Power, a division of PacifiCorp ("Company") filed an
Application requesting authority to sell and transfer certain electric facilities to the City of Idaho
Falls, Idaho ("City";, to supply electric service to locations at or near Nina Drive, Charla Drive,
and Merlin Drive, Idaho Falls, Bonneville County. On June 8, 2018 the Commission issued
Order No. 34082, Notice of Application and Notice of Modified Procedure with a comment
deadline of August 28,2018.
Pursuant to provisions of the Electric Stabilization Act ("ESSA"), Idaho Code $ 6l-328
and 333, the Company now applies for approval of the Asset Purchase Agreement between
Rocky Mountain Power and the City of Idaho Falls, both electric suppliers under the ESSA, to
purchase certain electric facilities currently owned and utilized by the Company to supply
ISTAFF COMMENTS AUGUST 28,2018
electric service to locations at or near Nina Drive, Charla Drive, and Merlin Drive, Idaho Falls,
Bonneville County.
On October 9,2017, the Company and City entered into an Allocation Agreement ("2017
Agreement") "to reduce duplication of service and promote stability in their respective service
areas." Applicationat2. The2017 Agreement was approved by the Commission on December
5,2017, findingthatitcomplieswiththeESSA. See CaseNo. PAC-E-17-12; OrderNo.33943.
Under the terms of this agreement (see Attachment A to the Application), the Company
agrees to transfer the service territory described in Exhibit B. The City agrees to serve the load
of customers located within that service territory, to pay the Company for assets being
transferred, to reimburse the Company for lost revenue, and to pay legal and transactional costs.
In the 2017 Agreement, "[t]he Company and the City have agreed to transfer service and
the City has agreed to pay 167 percent of the customers'previous twelve months electric bills in
addition to purchasing the facilities described in Exhibit A to the Asset Purchase Agreement."
Application at 3. Under this provision in the present case, the Company and City have agreed to
a total asset sales price of $92,713. The Company's accounting treatment is also set forth in the
Application. See Exhibit A to the Asset Purchase Agreement.
STAFF ANALYSIS
Staff analyzedthe asset sale and determined that it conforms to the provisions of ESSA
and prior Commission orders. Staff determined that funds from the sale are sufficient to offset
the undepreciated rate base of assets being transferred to the City, and that the Company's
accounting treatment assures that the value of these assets are removed completely from rate
base.
Sales Price and Accounting Treatment
The $92,713 sales price includes the value of existing assets, an income tax gross up, lost
customer revenue, separation costs, and legal/transaction costs. These costs, and the method
used to calculate them, are consistent with the methodology prescribed in the 2017 Agreement
and approved in Commission Order No. 33493. Staff believes that the Company's accounting
treatment of funds derived from the sale will assure that other rate payers are not harmed.
2STAFF COMMENTS AUGUST 28,2018
Sale Component Sales Price
$17,996
$63,1 96
$ 9,048
$ 2,474
$92,713
The existing asset price was calculated using the replacement value of each asset less
depreciation. Replacement value was determined using the Company's Retail Construction
Management System, and depreciation was determined using a straight-line methodology
consistent with prior Commission orders. Lost customer revenue was calculated using 167
percent of revenues from the 12 most recent months of service for each customer in the affected
area.
The Company explained that the income tax gross up corrects for the difference in
straight-line depreciation used by the Commission to determine asset value, and accelerated
depreciation used for income tax purposes. The Company also explained that separation costs
are expenses incurred to physically separate the assets being sold from the Company's
distribution system, and that legal/transaction costs include the costs of estimation, accounting,
finance, regulation, and legal expenses related to the sale.
Customer Notification
In its responses to Stafls Production Request Nos. 7, 11, and 72, and supplemental
responses to Staff s Production Request Nos. 7 and 11, the Company explained that the request
to change service from the Company to the City was initiated by the residents of Prestwich
Estates, a subdivision that had been annexed by the City. The Company further explained that
all customers in Prestwich Estates agreed to the transfer.
STAFF RE,COMMENDATION
Staff recommends that the Commission approve the Asset Purchase Agreement
provided as an attachment to the Company's Application.
Sale of existing assets
Lost customer revenue
Tax gross up
Separation costs
Total sales price
JSTAFF COMMENTS AUGUST 28,2018
Respectfully submitted this 2C d*
day of August 2018.
Deputy Attorney General
Technical Staff: Kevin Keyt
Brad lverson-Long
Mike Morrison
i:umisc/comments/pace I 8.4sckkblmm comments
4STAFF COMMENTS AUGUST 28,2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 28th DAY OF AUGUST 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO, IN
CASE NO. PAC-E.18-04, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
TED WESTON
DANIEL E SOLANDER
ROCKY MOUNTAIN POWER
1407 WEST NORTH TEMPLE STE 330
SALT LAKE CITY UT 84I16
E-MAIL: ted.weston@pacifi corp.com
Daniel. solander@pacifi corp.com
DATA REQUEST RESPONSE CENTER
E.MAIL ONLY:
datarequest@paci fi corp.com
JANICE FLOWERS
IDAHO FALLS CITY POWER
I4O S CAPITAL AVE
BOX 50220
IDAHO FALLS ID 83405
CERTIFICATE OF SERVICE