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STAFF COMMENTS 1 MAY 14, 2020
DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0312
IDAHO BAR NO. 9917
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF DEFERRED
ACCOUNTING OF INCREMENTAL COSTS
ASSOCIATED WITH THE COVID-19 PUBLIC
HEALTH EMERGENCY
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CASE NO. GNR-U-20-03
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Avista
Corporation (“Avista”), Falls Water Company (“Falls Water”), Gem State Water Company
(“Gem State”), Idaho Power Company (“Idaho Power”), and PacifiCorp dba Rocky Mountain
Power’s (“PacifiCorp”) consolidated Applications for a deferred accounting order for
incremental costs associated with the COVID-19 public health emergency.
BACKGROUND
On March 13, 2020, Idaho Governor Brad Little issued a Proclamation declaring a state
of emergency and providing directives to combat the spread of SARS-CoV-2 (“COVID-19”),
provide essential services and limit public exposure (the “Emergency”). Thereafter, several
Idaho public utilities — including Idaho Power, PacifiCorp, Falls Water, Gem State Water, and
Avista— applied to the Commission for orders authorizing them to account for certain
unanticipated, Emergency-related expenses by booking them as regulatory assets for possible
recovery through rates that would be set in future proceedings. The utilities do not seek to
increase rates at this time. See Case Nos. AVU-E-20-03 and AVU-G-20-03 (Avista electric and
RECEIVED
2020 May 14PM1:29
IDAHO PUBLIC
UTILITIES COMMISSION
STAFF COMMENTS 2 MAY 14, 2020
gas expenses); FLS-W-20-02 (Falls Water); GSW-W-20-01 (Gem State); IPC-E-20-19 (Idaho
Power), and PAC-E-20-04 (PacifiCorp).
Given the Emergency and the similarities in the utilities’ applications for an accounting
order to address Emergency-related costs (collectively, the “Application”), Commission Staff
recommended the Commission consolidate the above-cited cases into a general docket to address
whether and to what extent the utilities should be authorized to defer incremental Emergency-
related expenses in a regulatory asset account for possible future recovery. Staff recommended
the docket be processed by Modified Procedure. The Commission then decided to open this
generic docket and consolidate the above-cited cases for purposes of issuing a single order that
would apply to each of the utilities that had filed an application. The Commission also specified
that besides Avista, Idaho Power, PacifiCorp, Falls Water, and Gem State, any utility submitting
timely comments in the case requesting deferred accounting treatment would be eligible for any
deferred accounting treatment authorized by the final order in this case.
STAFF REVIEW
On a case-by-case basis, the Commission has generally allowed deferred accounting
treatment for expenses that are extraordinary and unusual in nature or mandated by a regulatory
authority and which provide benefits to customers. To date, the COVID-19 virus has infected
nearly 1.5 million Americans causing over 80,000 deaths in this country. In Idaho, there have
been more than 2,300 confirmed cases reported and 70 confirmed deaths. On March 25, 2020,
Idaho Governor Brad Little and the Director of the Idaho Department of Health and Welfare
issued an Order to Self-Isolate (“Stay-Home Order”) for the State of Idaho through April 15,
2020 which was later extend through April 30, 2020. The Emergency has caused a significant
upturn in layoffs and a record number of people filing for unemployment benefits. In response
to the emergency and recognizing the hardships faced by many customers, utilities in Idaho
suspended service disconnections for non-payment and waived late fees for customers.
The COVID-19 public health emergency is an unprecedented event that has and will
continue to cause utilities to incur significant incremental expenses while simultaneously
experiencing a decrease in revenues from lower than anticipated sales to commercial and
industrial customers. The incremental costs were not anticipated when the Commission set the
utilities’ revenue requirement and base rates. Given the unprecedented nature of the Emergency,
Staff believes the utilities should be authorized to create a regulatory asset in FERC Account
STAFF COMMENTS 3 MAY 14, 2020
182.3 (Other Regulatory Assets) to defer Emergency related costs for recovery in a future
proceeding. Separate sub-accounts should be maintained to facilitate Staff’s audit of these
expenses in a future rate case. Recovery of reasonable and prudent expenses along with the
amortization period used for recovery should be determined at that time. As the Commission has
previously noted on numerous occasions, a deferred accounting order provides the utility the
opportunity to recover prudently incurred costs. It does not automatically constitute Commission
approval to recover these costs from ratepayers, absent a determination of prudency.
At this point, utilities are unable to estimate the incremental costs that may be incurred in
responding to the Emergency. All utilities expect an increase in bad debt expense resulting from
higher than average levels of write-offs of uncollectible accounts associated with the suspension
of disconnects and late payment fees. PacifiCorp proposes using calendar year 2019 as its
baseline for bad debt expense. Application at 3. While bad debt expense can fluctuate from year
to year, Staff believes that calendar year 2019 bad debt expense is a reasonable baseline and bad
debt in excess of this baseline should be recorded into the deferral account.
Additional Operations and Maintenance (“O&M”) expenses may be incurred to protect
the health and safety of utility employees. This may include personal protective equipment,
sanitizer, cleaning supplies, and additional hardware/software and other equipment not
capitalized to allow employees to work from home in compliance with the Stay-Home Order.
When seeking recovery, it is incumbent upon the utilities to illustrate prudence of these
incremental expenditures.
Staff is aware that some cost categories have been reduced because of the Emergency,
including, but not limited to, employee training and travel and fuel expense for fleet vehicles.
Staff recommends that utilities quantify any cost reductions due to the Emergency to be used to
offset the deferral balance before seeking recovery.
Late Payment Fees
The utilities have suspended late payment fees and fees associated with disconnection
and reconnection of service. These fees are considered revenue and are used to offset a utility’s
revenue requirement during a general rate case. Staff does not believe the utilities should
recover waived fees due to the Emergency. Absent the Emergency, the utilities would not have
received any additional revenue from these fees and therefore should not be able to defer any lost
revenue associated with the suspension of these fees. However, not all waived fees would have
STAFF COMMENTS 4 MAY 14, 2020
been a result of the Emergency. Utilities generally have a base level of fees received in the
normal operations of business. Staff believes it is appropriate for the utilities to include the 2019
level of fees in the regulatory asset. Including this base level in the regulatory asset is a
reasonable method to account for the fees that have been waived not because of the Emergency,
but in the normal course of business.
Reduction in Customer Usage
Avista and Idaho Power have also requested authorization to defer, for future
amortization, costs not recovered due to a reduction in usage by its customers, specifically
commercial and industrial (“C&I”) customers, due to the statewide Stay-Home Order. See
Avista Application at 4; Idaho Power Application at 5. Both Avista and Idaho Power have Fixed
Cost Adjustment (“FCA”) mechanisms that compensate the utility for a reduction in customer
use for certain classes. Staff interprets this request from the utilities as an effort to recover lost
revenues or to implement a de facto decoupling mechanism to recover fixed costs included in the
volumetric rate for the C&I customers. Staff opposes any mechanism that would allow utilities
to collect lost revenue from the customers whose operations have been shut down due to the
Emergency. Additionally, Staff has repeatedly raised concerns in FCA cases about utilities
recovering fixed costs beyond the intended purpose of the mechanism. By allowing fixed cost
recovery associated with reduced load from C&I customers due to the Emergency, the problems
Staff identifies with the current FCA mechanisms could potentially be exacerbated.
On April 30, 2020, IDACORP, Inc. (the parent company of Idaho Power), issued its
Quarterly Report to shareholders. The report states that:
IDACORP affirms its previously reported full year 2020 earnings guidance
in the range of $4.45 to $4.65 per diluted share, also affirming that Idaho
Power does not expect to utilize in 2020 any of the additional tax credits
available under its Idaho earnings support mechanism and assuming normal
weather conditions for the remainder of the year. This guidance also
includes those considerations related to COVID-19…
In Order No. 34071, the Commission approved a settlement stipulation modifying and extending
Idaho Power’s earning support mechanism. If Idaho Power’s return on equity (“ROE”) falls
below 9.4%, Idaho Power can amortize Accumulated Deferred Investment Tax Credits
(“ADITC”) to achieve a minimum of 9.4% ROE for shareholders. Given that IDACORP’s
STAFF COMMENTS 5 MAY 14, 2020
quarterly report confirms Idaho Power does not expect to use ADITC in 2020, its shareholders
have more protection than C&I customers.
Carrying Charge
Idaho Power and PacifiCorp requested the ability to accrue interest on the deferred
balance at the customer deposit rate (currently 2%). Avista explicitly stated it did not intend to
accrue interest on the deferral balance, while Gem State and Falls Water were silent on the issue.
Absent the authority to create a regulatory asset account, these expenditures would have been
expensed as incurred and not recoverable from customers. This Commission has routinely
denied carrying charges on deferral balances that would have been otherwise unrecoverable.
Staff believes the opportunity to recover the Emergency related expenses is sufficient for the
utilities, and recommends the Commission deny a carrying charge on the deferred expenses.
Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
On March 27, 2020, President Trump signed into law the CARES Act delivering more
than $2 trillion in economic relief and stimulus to the country. The CARES Act includes a
provision that allows companies with a taxable net operating loss (“NOL”) for tax years 2018,
2019, and 2020 to carry that loss back to the five prior tax years. The NOL carryback to years
prior to 2018 will reduce taxable income that was previously taxed at the 35% corporate tax rate
(the rate in effect during those tax years). Avista has identified tax benefits of $1.89 million and
$0.21 million for its Idaho electric and gas jurisdictions, respectively. Avista has indicated it will
use that benefit to offset the regulatory asset account. Staff recommends that all utilities should
determine the applicability of this CARES Act NOL carryback provision and that any benefit be
used to offset the regulatory asset account with any remaining benefit to be returned to customers
at a later date.
Additional Comments
In Order No. 34643, the Commission directed other utilities that wished to have
Emergency-related deferred accounting authority decided in this docket to file comments
requesting that authority. On May 5, 2020, SUEZ Water Idaho, Inc. (“SUEZ”) filed comments
requesting deferred accounting authorization. On May 12, 2020, Intermountain Gas Company
(“Intermountain”) filed the same. Staff recommends that the Commission’s Order in this case
STAFF COMMENTS 6 MAY 14, 2020
also apply to SUEZ, Intermountain and any other utility filing timely comments requesting such
authority.
STAFF RECOMMENDATIONS
The COVID-19 Public Health Emergency is an unprecedented event that caused utilities
in Idaho to incur incremental costs that were not included in base rates when revenue
requirements were set. Accordingly, Staff recommends that the Commission authorize utilities
seeking authority in this docket to establish a regulatory asset in sub-account of FERC Account
182.3 to defer:
1. Incremental bad debt expense resulting from higher than average levels of write-
offs of uncollectible accounts associated with the suspension of disconnects and
late payment fees,
2. The 2019 base level of late payment fees and fees associated with disconnects and
reconnects, and
3. Any incremental O&M expenses incurred because of the Emergency.
Additionally, Staff recommends the Commission reject any proposals to defer costs
associated with decreased sales to customers, and limit the deferral to the items listed above.
Staff also recommends that utilities identify any cost reductions to offset the regulatory asset,
including the tax provision of the CARES Act. Finally, Staff recommends no carrying charge be
allowed on the deferred amounts.
Approval of the regulatory asset allows utilities the opportunity to recover prudently
incurred costs. It should not guarantee recovery, and the utilities must be able to provide
evidence that all deferred expenses are reasonable and prudent. Recovery of the deferred
expenses and the amortization period for recovery should be determined in a future preceding.
STAFF COMMENTS 7 MAY 14, 2020
Respectfully submitted this 14th day of May 2020.
________________________________
Dayn Hardie
Deputy Attorney General
Technical Staff: Donn English
Kathy Stockton
Bentley Erdwurm
i:umisc/comments/gnru20.3dhdeklsbe comments
CERTIFICATE OF SERVICE
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14th DAY OF MAY 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. GNR-U-20-03, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
DAVID J MEYER
AVISTA CORP
PO BOX 3727
SPOKANE WA 99220-3727
E-MAIL: david.meyer@avistacorp.com
PATRICK EHRBAR
AVISTA CORP
PO BOX 3727
SPOKANE WA 99220-3727
E-MAIL: patrick.ehrbar@avistacorp.com
FALLS WATER CO
PRESTON N CARTER
GIVENS PURSLEY
601 W BANNOCK ST
BOISE ID 83702
E-MAIL: prestoncarter@givenspursley.com
kendrah@givenspursley.com
ERIC W NELSON
NW NATURAL
220 NW 2ND AVE
PORTLAND OR 97209
E-MAIL: eric.nelson@nwtatural.com
GEM STATE WATER CO
PRESTON N CARTER
GIVENS PURSLEY
601 W BANNOCK ST
BOISE ID 83702
E-MAIL: prestoncarter@givenspursley.com
kendrah@givenspursley.com
ERIC W NELSON
NW NATURAL
220 NW 2ND AVE
PORTLAND OR 97209
E-MAIL: eric.nelson@nwtatural.com
LISA NORDSRTON
MATT LARKIN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: lnordstrom@idahopower.com
mlarkin@idahopower.com
dockets@idahopower.com
TED WESTON
ROCKY MOUNTAIN POWER
1407 W NORTH TEMPLE STE 330
SALT LAKE CITY UT 84116
E-MAIL: Ted.weston@pacificorp.com
adam@mrg-law.com
Jacob.mcdermott@pacificorp.com
Emily.wegener@pacificorp.com
DATA REQUEST RESPONSE CENTER
E-MAIL ONLY:
datarequest@pacificorp.com
PETER RICAHRDSON
RICHARDSON ADAMS PLLC
515 N 27TH STREET
BOISE ID 83702
E-MAIL: peter@richardsonadams.com
CERTIFICATE OF SERVICE
DR DON READING
6070 HILL ROAD
BOISE ID 83702
E-MAIL: dreading@mindspring.com
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-MAIL: botto@idahoconservation.org
RANDALL C BUDGE
THOMAS J BUDGE
RACINE OLSON PLLP
PO BOX 1391
POCATELLO ID 83204
E-MAIL: randy@racineolson.com
tj@racineolson.com
BRIAN COLLINS
MAURICE BRUBAKER
BRUBAKER & ASSOCATES
16690 SWINGLEY RIDGE RD #140
CHESTERFIELD MO 63017
E-MAIL: bcollins@consultbai.com
mbrubaker@consultbai.com
/s/ Reyna Quintero __
SECRETARY