20030521_478.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:MAY 19, 2003
RE:IN THE MATTER OF THE APPLICATION OF IDAHO POWER COMPANY
TO REVISE ITS DEPRECIATION RATES FOR PLANT IN SERVICE.
CASE NO. IPC-03-
Idaho Power Company filed an Application on May 6, 2003 requesting authority to
reVIse its depreciation rates for the Company s electric plant in service. Idaho Power
depreciation rates have not been significantly changed since the Commission issued Order No.
24739 in 1993. Although the Company s total annual depreciation expense would increase by
nearly $7 million under its proposal the present Application does not request a change in electric
rates
The proposed depreciation rates are based on the results of a detailed depreciation
study of Idaho Power s electric plant in service as of December 31 , 2001 that was conducted by
Gannett Fleming, Inc. Gannett Fleming identified and measured changes as well
recommended depreciation rates. The most significant rate change is in the category of General
Plant, which Gannett Fleming recommends be increased from 5.52% to 11.24%. Gannett
Fleming s study also updates net salvage percents and service life estimates for all plant assets.
Idaho Power s current depreciation rates have been applied to the investment in each
primary and subplant account. The proposed depreciation rates are based on the straight line
remaining life method, average service life procedure for all electric plant. A summary schedule
detailing the December 31 , 2001 original plant cost, depreciation accrual amount, and rate is set
forth in Attachment 1 to the Application.
Based on 900 657 420 of depreciable electric plant in service on December 31
2001 , Idaho Power s requested depreciation rate changes would increase its total annual
DECISION MEMORANDUM
depreciation expense by $6 994 021.The Company s Application states that Idaho Power
believes the proposed depreciation changes using the average service life procedure are
reasonable and appropriate. Although Gannet Fleming recommended the Equal Life Procedure
(ELG) be used, Idaho Power requested that Gannet Fleming prepare an alternative (Average
Service Life) procedure due to the large impact ELG would have on the Company s revenue
requirement. While the Company notes that it agrees with Gannet Fleming that ELG best
matches the recovery rate of capital investment with the asset service value, Idaho Power
proposes that Average Service Life procedure be used in this proceeding.
Idaho Power Company requests that its Application be processed pursuant to the
Commission s Rules of Procedure, i., by written submission rather than by hearing.
Commission Rules of Procedure IDAPA 31.01.01.201-204.The Company asks that the
Commission issue an Order approving the proposed depreciation rates effective December 1
2003.
STAFF RECOMMENDATION
Staff has no objection to Modified Procedure but recommends the Commission
schedule an intervenor deadline and workshop, the latter to be held in July. This timetable will
allow the parties to prepare and review responses to production requests (formal and/or
informal), as well as allow adequate time to review and audit the underlying depreciation study
performed by Gannett Fleming. Following the workshop, the Commission may wish to set a
written comment deadline to allow the parties to respond to the Application or possible
settlement, if one is reached at the workshop.
COMMISSION DECISION
Does the Commission wish to process this case pursuant to Modified Procedure and
schedule an intervenor deadline and workshop as recommended by Staff?
M:IPCEO304Jn
DECISION MEMORANDUM