20140827Comments.pdf

NEIL PRICE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720.0074
(208) 334-03t4
BAR NO, 6864
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
IN THE MATTER OF BOISE VALLEY
RAILROAD, LLC'S OBJECTION TO ITS 2014
ASSESSMENT FEE.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. BVR.R.14.O1
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission (Commission), by
and through its attorney of record, Neil Price, Deputy Attorney General, and in response to the
Notice of Objection to Assessment and Notice of Modified Procedure issued in Order No. 33045
on May 29,2014 in Case No. BVR-R-14-01, submits the following comments.
BACKGROUND
On May 15,2014, Boise Valley Railroad, LLC ("Boise Valley" or'oCompany") sent a
letter to the Commission registering its objection, pursuant to ldaho Code $ 6l-1007, to the
Company's 2014 Railroad Assessment Fee. Boise Valley included several invoices as
attachments, documenting the Commission's fee assessment as well as the Company's Gross
Operating Revenues for the calendar year 2013.
The Commission's operating budget is derived from the assessment of regulatory fees
upon utilities and railroads subject to the Commission's jurisdiction. Idaho Code $ 6l-1003
STAFF COMMENTS AUGUST 27,2014
provides that on or before April I tt of each year, each railroad corporation shall report its gross
operating revenues from its intrastate railroad business in Idaho for the preceding calendar year.
Based upon the total amount of gross intrastate revenues reported by all the railroads, the
Commission then determines the proportionate assessment applicable to each railroad to recover
the Legislature's authorized appropriation.
Once each railroad's assessment is determined, the Commission notifies the railroad of
its regulatory fee no later than May I't of each year. Such fee shall be paid to the Commission in
equal semi-annual installments. Idaho Code $ 6l-1005. Any utility or corporation may object to
the fee "on or before the time specified for payment for the first installment of the assessment
made against it." Idaho Code $ 6l-1007.
In its Objection Letter to the Commission, Boise Valley acknowledges that it committed
an elror in reporting to the Commission its gross interstate operating revenues instead of its
gross intrastate operating revenues. Allegedly, the difference between Boise Valley's 2013
Gross Interstate Revenues ($3,143,915.00 - Company Attachment B) and its 2013 Gross
Intrastate Revenues ($838,703.00 - Company Attachment C) is significant.
STAFF ANALYSIS
During its audit, Staff examined documents from the files of the Idaho Public Utilities
Commission. Staff also examined copies of documents provided by Watco, Inc., the owner of
Boise Valley Railroad, LLC, and copies of Journals and Ledgers of Boise Valley Railroad, LLC.
Among the documents examined were a Class II and III Railroad Annual Report to the
Idaho Public Utilities Commission for the operating year 2013; Assessment Invoice No.
2014-009 from the Idaho Public Utilities Commission; the Schedule of Gross Operating
Revenues of Boise Valley Railroad, LLC, for the Calendar Year 2013; and the Letter of
Objection from Paine-Hamblen.
Revenues
Staff s audit of the Journals and the Ledger of Boise Valley Railroad, LLC, reflects Total
Revenues of $3,143,913 for the year 2013. Total Intrastate Revenues for Idaho, for the Year
2013 totaled $846,598, as seen on Confidential Attachment A. Staff performed extended testing
of the Idaho Intrastate revenues and believes $846,598, as adjusted, is the correct amount of
Idaho Intrastate Revenues for 2013. Staff notes the amount of Idaho Intrastate revenues
STAFF COMMENTS AUGUST 27,2014
supported by the Ledger and Journals are different than the amount reported by the Company on
the original report to the Idaho Public Utilities Commission. In its Objection Letter dated
May 14,2014, Paine-Hamblen, acknowledged a difference and apologized on behalf of Boise
Valley Railroad, LLC. Paine-Hamblen also reported Boise Valley Railroad, LLC, is taking steps
to prevent this from recurring in the future.
The definition of revenue has been previously determined in Case No. EIR-R-01-01.
Staff commends the employees of Watco, Inc., in acknowledging the oversight events.
Confidential Attachment B shows the detailed revenue accounts and the Company's
error/oversight statement. The supporting documentation of Boise Valley Railroad, LLC,
referred Staff to a group of Deferral Accounts containing corrections.
Staff Tests
Staff performed several tests on billings. Staff reconciled all journal entries by source of
revenue, with the summary of revenue sources provided by the Company, and found no
exceptions.
During its audit Staff examined the billing method of Boise Valley Railroad. These
billings are organized with a multiple invoice reference system. Some aspects of the
documentation system are complicated. This includes a group billing method involving contract
arrangements, disputable rates and third parties undisclosed to Staff. Staff understands these
disputable rates are treated as adjustments to Accounts Receivable in the year of resolution.
Staff s concems include three items. First, extended time periods for resolution. Second, there
appears to be no way to test the reasonableness of any adjustment. Third, the need to rely on
simplified explanations, rather than documentation, to test complex transactions with interested
third parties.
RECOMMENDATIONS
Staff recommends an audit of the internal oversight/controls and intrastate revenues be
completed for the operating year 2014. The audit will determine compliance with the definition
of Intrastate Revenues described in Case No. EIR-R-01-01 for the 2014 reported revenues.
Staff recommends the Commission accept the amount of $846,598 as the Idaho Intrastate
Operating Revenue for Boise Valley Railroad, LLC for the year 2013.
STAFF COMMENTS AUGUST 27,2014
This would result in a reduction of $2,297,317 in reported Idaho Interstate Revenues,
($3,143,91 5 - $846,599).
Respecttully submitted this a X il4 Ou, of August 2014.r'/
^1\G^Neil Price
Deputy Attorney General
Technical Staff: John Nobbs
Umisc/comments/bvrr I 4. I npjn comments
STAFF COMMENTS AUGUST 27,2014
ATTACHME,NT A
N
CONFIDE,NTIAL
ATTACHME,NT B
IS
CONFIDE,NTIAL
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 27TH DAY oF AUGUST 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. BVR.R-I4-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
AUSEY H ROBNETT, III
LEGAL COUNSEL
BOISE VALLEY RAILROAD LLC
701 E FRONT AVE, STE 101
PO BOX E
COEUR D'ALENE ID 838I6
E-MAIL: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE