20231229Final_Order_No_36045.pdf

ORDER NO. 36045 1

Office of the Secretary
Service Date
December 29, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On August 21, 2023, Rocky Mountain Power, a division of PacifiCorp (“Company”),
applied for authority to defer incremental costs associated with the Company’s commercial
insurance coverage (“Application”). According to the Company, recent increases in insurance
premiums due to wildfires not only exceed anticipated costs embedded in rates, but also could
exceed reasonable business risk of third-party wildfire claims.
On September 7, 2023, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 35913. Commission Staff (“Staff”) submitted comments to which
the Company replied. The Idaho Conservation League intervened but did not file comments. One
untimely public comment was received, urging the Commission to deny the Company’s
Application and impose a public safety shutoff requirement on the Company.
Having reviewed the record, the Commission issues this Order approving the
Company’s Application as follows.
BACKGROUND
The Company asserts that liability insurance, including liability coverage for third-
party claims arising from wildfires, is a prudent business expense. However, according to the
Company, costs of such wildfire coverage have increased significantly due to increasing wildfire
risk throughout the western United States, making it impossible to obtain coverage at previous
premiums.
THE APPLICATION
The Company represents that, under current rates, it recovers $32.7 million from
customers for commercial insurance premiums for a policy covering liability claims by third
parties over $10 million. However, the Company estimated the premiums for a commercial
insurance policy beginning August 15, 2023, or later, to be approximately $125 million, resulting
in incremental insurance costs of $92.3 million. The Company seeks authority to defer Idaho’s
share of such incremental costs. The Company proposes recording Idaho’s share of such
IN THE MATTER OF ROCKY MOUNTAIN
POWER’S APPLICATION FOR A
DEFERRED ACCOUNTING ORDER
RELATED TO INSURANCE COSTS
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CASE NO. PAC-E-23-18

ORDER NO. 36045
ORDER NO. 36045 2

incremental costs as a regulatory asset in Federal Energy Regulatory Commission (“FERC”)
Account 182.3 – Other Regulatory Assets.
STAFF COMMENTS
After reviewing the Company’s Application, responses to Production Requests, and
other similar concluded cases, Staff recommended partial approval of the Application.
Specifically, Staff recommended the Commission allow the Company to defer, without a carrying
charge, only Idaho’s jurisdictional share of incremental insurance premiums above those already
booked to FERC Account 925—Injuries and Damages and included in base rates. Staff further
recommended this deferral continue until the earlier of the following: 1) the effective date of the
Company’s next general rate case; or 2) December 31, 2026. Additionally, Staff recommended
that the Commission order the Company to submit, as a separate filing, a completed version of its
Idaho Wildfire Mitigation Plan (“WMP”) within 30 days of its completion.
Staff noted that the Commission generally allows deferral of certain mandatory
expenses that are extraordinary, unusual, and carry significant financial impact for the Company.
Staff believed that carrying liability insurance is a best practice for utilities, but increasing wildfire
risk has driven up insurance premiums. Additionally, Staff indicated that denial of the Application
could undermine the Company’s ability to obtain financing necessary to provide safe, reliable
service. Furthermore, Staff indicated that it would review prudence of any incremental insurance
costs incurred in a subsequent rate proceeding and expects the Company to provide evidence that
it has mitigated these costs as much as possible.
However, Staff recommended against allowing deferral of insurance costs for third-
party claims under federal or state emergency declarations. Rather, Staff believed that such third-
party claims should have separate filings with the Commission to address accounting treatments
individually.
Despite generally supporting the Company’s requests presented in the Application,
Staff’s recommendations differed in a few ways. After reviewing the documents the Company
submitted to support the estimated $125 million in incremental insurance costs, Staff determined
that invoices for insurance premiums totaled $113,414,663. Staff opined that it is not currently
appropriate to book insurance costs other than premiums actually incurred as a regulatory asset.
Staff then used the $113 million figure and Idaho’s 5.6057% system allocation factor
to calculate Idaho’s jurisdictional share of the incremental insurance costs the Company seeks to
ORDER NO. 36045 3

defer. According to the Company’s calculations, Idaho’s jurisdictional share of the $113,414,663
total insurance costs is $6,367,253, which exceeds the $1,833,063 currently embedded in rates by
$4,534,190. Staff notes that the Company currently records liability insurance expenses in FERC
Account 925. Staff does not object to the Company continuing this practice and agrees with the
Company that the proper accounting procedure for the deferred insurance costs is to debit FERC
Account 182.3 and credit FERC Account 925. However, as the amounts deferred may vary
substantially year to year, Staff believes the deferral period should be limited to avoid rate
pancaking. Accordingly, Staff recommended allowing the Company to defer the incremental
insurance costs until the Company’s next general rate case or December 31, 2026, whichever
occurs first.
COMPANY REPLY
The Company urged approval of Staff’s recommendations with three modifications.
First, the Company opposed Staff’s recommendation to deny a carrying charge on the deferred
amounts, arguing they reflect costs of doing business. Accordingly, the Company recommended a
two percent carrying charge, which is equal to the 2023 interest rate for customer deposits.
Second, the Company opposed Staff’s recommendation to deny the Company’s request
to include insurance costs for third-party claims under state and federal emergency declarations,
asserting that such a determination is unnecessary. According to the Company, it did not request
recovery for any third-party claims in this case. Rather, the Company sought deferral only of
incremental costs for insurance covering third-party claims under federal and state emergencies—
not the actual costs of such claims.
Third, the Company disagreed with Staff’s recalculation of the estimated insurance
costs. The Company represented that it is not seeking to defer anything other than incremental
insurance costs and that it has received additional invoices for insurance since September 2023
when it provided those resulting in the $113,414,663 figure Staff calculated. Accordingly, the
Company recommended the Commission authorize deferral of the incremental insurance costs
without capping the amount of the deferral as all deferred amounts would be subject to a prudence
review in a future case.

ORDER NO. 36045 4

DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company’s Application and the issues in
this case under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, 502, and -503. Based
on our review of the record, we find it reasonable to grant the Company’s Application in part.
The Commission believes that liability insurance is a prudent expense that protects both
utilities and their customers. Indeed, the Company currently recovers approximately $32.7 million
from customers for commercial insurance coverage. However, the Company has shown that its
liability insurance premiums have increased significantly beyond that currently embedded in base
rates, which is likely due at least in part to extraordinary liability risks wildfires pose within the
insurance industry. See Joel Rosenblatt, Utility Investors Wary of Exposures After Buffet’s
PacifiCorp Held Liable for Wildfires, INSURANCE JOURNAL (July 19, 2023),
http://www.insurancejournal.com/news/national/2023/07/19/731224.htm (last accessed Dec. 18,
2023) (noting the increasing threat of wildfires in the United States).
Additionally, although allowing the Company to defer incremental insurance costs
above those already included in rates would not guarantee their future recovery, outright denial of
the Application at this point could undermine the Company’s ability to obtain financing in the
future necessary to provide safe, reliable service. Accordingly, we find it just, fair, and reasonable
to grant the Company authority to defer, without a carrying charge, Idaho’s jurisdictional share of
incremental liability insurance premiums actually incurred that exceed the amount already
included in base rates. However, prior to authorizing their recovery in base rates, the prudence of
these incremental costs will be reviewed in a future case. Additionally, as the amounts deferred
may vary annually, the authority to defer these incremental insurance costs shall extend only until
the earlier of the Company’s next general rate case or December 31, 2026.
Additionally, the Commission expects the Company to take steps mitigating its wildfire
exposure and insurance expenses. One such step is development of the Company’s wildfire
mitigation plan for Idaho. Although development of the plan is ongoing, timely completion and
execution of such a plan could benefit both the Company and its customers. Accordingly, we find
it fair, just, and reasonable to order the Company to submit, as a separate filing, a final copy of its
Wildfire Mitigation Plan for Idaho within 30 days of completing the plan’s development, but no
later than April 15, 2024.

ORDER NO. 36045 5

O R D E R
IT IS HEREBY ORDERED that the Company is authorized to defer without a carrying
charge Idaho’s jurisdictional share of incremental liability insurance premiums incurred that
exceed the amount already included in base rates until the earlier of the Company’s next general
rate case or December 31, 2026.
IT IS FURTHER ORDERED that the Company shall defer these expenses into FERC
Account 182.3—Other Regulatory Assets.
IT IS FURTHER ORDERED that the Company shall submit as a separate filing a final
copy of its wildfire mitigation plan for Idaho within 30 days of completing the plan’s development,
but no later than April 15, 2024.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 29th day
of December 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Monica Berrios-Sanchez
Interim Commission Secretary

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