20031201_691.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:WELDON STUTZMAN
P A TRI CIA HARMS
DATE:NOVEMBER 25, 2003
RE:ACCOUNTING ORDER REGARDING TREATMENT OF CERTAIN
ASSET RETIREMENT OBLIGATIONS, CASE NO. IPC-03-11.
On September 26 2003, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) seeking an Accounting
Order authorizing the Company to record regulatory assets and/or liabilities associated with
implementation of Statement of Financial Accounting Standards (SFAS) 143 (Accounting for
Asset Retirement Obligations). This change, the Company states, will not affect the current level
of asset removal cost included in the Company s revenue requirement through depreciation
expense. The Company further states that nothing in the Application is intended to request any
approval regarding future ratemaking treatment. Pursuant to Idaho Code 961-524, the
Commission is empowered to establish a system of accounts to be kept by the public utilities
subject to its jurisdiction.
THE APPLI CA TI 0 N
Under the accounting method currently used by the Company for both financial reporting
and ratemaking purposes , the cost of removing a tangible long-lived asset at retirement is
included in the calculation of depreciation rates as negative salvage and is recovered over the
useful life of the asset. Under this method, the accrued removal cost is included in Account 108
Accumulated Depreciation. Under SF AS 143, entities are required to recognize and account for
certain asset retirement obligations in a manner different from the way that Idaho Power and
DECISION MEMORANDUM - 1 -NOVEMBER 25 , 2003
other public utilities have traditionally recognized and accounted for such costs. Specifically,
a legally enforceable asset retirement obligation ("ARO"), as defined by SFAS 143 is deemed to
exist, an entity must measure and record the liability for the ARO on its books. SF AS 143 was
effective for financial statements issued for fiscal years beginning after June 15 2002. The
accounting changes proposed in the Application are supported by a series of exhibits identifying
the proposedjoumal entries the Company believes are needed for compliance with SFAS 143.
Idaho Power has not requested a specific effective date in its Application.
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Application and Notice of
Modified Procedure in Case No. IPC-03-11 and establish a comment deadline of December
, 2003. This schedule should allow sufficient time for interested parties to review the
Company s Application and file their comments with the Commission. Reference Commission
Rules of Procedure, IDAP A 31.01.01.201-.204.
COMMISSION DECISION
Does the Commission find the proposed procedure and comment deadline acceptable?
CY~ ~ l I't, k1n kJ'()\ /D
Patricia Harms
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DECISION MEMORANDUM - 2 -NOVEMBER 25, 2003