20050418_1149.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:ERIC R. JOHNSON
TERRI CARLOCK
DATE:APRIL 12,2005
RE:IDAHO POWER LETTER REGARDING THE EXCHANGE OF
PROPERTY IN AND AROUND HELLS CANYON COMPLEX.
BACKGROUND
On March 8, 2005, Idaho Power Company filed a letter with the Commission regarding
the exchange of property in and around the Hells Canyon Complex. In the letter, Idaho Power
states, " the purpose of the exchange is to allow for future expansion of McCormick Park." The
book value of the lands to be exchanged is approximately $265 000. The Company stated that it
does not believe that the exchange of these land parcels falls within the provisions of Idaho Code
~ 61-328. This statute prohibits an electric utility from selling or exchanging property used in the
generation, transmission, distribution or supply of electric power "except when authorized to do
so by order of the public utilities commission." The Company seeks a letter stating that Idaho
Code ~ 61-328 is not applicable to this transaction.
STAFF ANALYSIS
Description of Transaction
While evaluating this proposed transaction, Staffhas learned the following: The two
properties being exchanged are land parcels known as Barber Flats, which is a 640 acre dryland
graze property including approximately 15 acres around Blue Creek Road, and OX Ranch, a 15.
acre river front property adjacent to the northerly boundary of McCormick Park, plus, 40 acres of
riparian habitat land traversed by the Wildhorse River and located up stream from McCormick
Park.
DECISION MEMORANDUM - 1 -APRIL 12, 2005
Purpose and Valuation of Transaction
The primary reasoning behind this parcel exchange is to acquire additional land in the
Hells Canyon vicinity to expand the McCormick Park recreational area. These actions are being
undertaken in conjunction with Idaho Powers relicensing efforts for Hells Canyon.
The values of the exchanged parcels were originally based upon appraisals done in April
of 1994. The 15.7-acre parcel on Oxbow Reservoir was appraised at $200 000 and the 640-acre
Barber Flats site was appraised at $144 000. The value of the land has changed significantly
since these appraisals were performed. To determine the new land values, Idaho Power used the
average of comparable properties in the market area to estimate a reasonable price per acre. One
of the properties used was on the Oregon side of the river for $300 per acre, and the other
property on the Idaho side of the river was $500 per acre. Using an average of $400 per acre to
value the 640 acres at Barber Flat, a value of $256 000 was calculated. Since the book value of
the land parcels on the IERCO books is $265 115., Idaho Power believes that it is reasonable
to transfer the Barber Flat property at the value of$265 115.67.
Previous Case
A previous case (Case No. IPC-03-4) delt with the question of whether or not Idaho
Code ~ 61-328 applied to the disposal of utility buildings no longer used in utility operations.
The Commission closed this case by issuing a letter, written by Donald L. Howell, II, Deputy
Attorney General, stating that under Idaho Code ~ 61-328 the Commission approved of the
Company s intent to dispose of the buildings in question. The letter also stated that the
regulatory treatment for the sale of the buildings should be determined at the time of the sale or
other final disposition.
STAFF AND LEGAL RECOMMENDATION
Staff is not opposed to the exchange of these land parcels. Staff recommends that the
ratemaking treatment be determined in a subsequent case when relicensing costs are analyzed.
Given the facts of the land exchange and the outcome of the prior case, it is Staff s
opinion that Idaho Code ~ 61-328 does not apply here. The land parcels are not used in the
generation, transmission, distribution or supply of electric power to the public. Staff
recommends that its attorney issue a letter affirming that under Idaho Code ~ 61-328 this land
exchange does not necessitate approval by the Commission.
DECISION MEMORANDUM - 2-APRIL 12, 2005
COMMISSION DECISION
1. Based upon the facts presented, does Idaho Code ~ 61-328 apply in this case?
2. Does the Commission approve of this land exchange?
3. Should Idaho Power Company be directed to advise the Commission Staff of the final
terms for exchange of these land parcels?
4. Should a letter affirming this decision be sent to Idaho Power Company from a
Deputy Attorney General?
5. If not, how should this parcel exchange be handled?
6. Should the ratemaking analysis be completed with the relicensing cost review?
Eric R. J oMson
I: OM HeUs Canyon
DECISION MEMORANDUM - 3 -APRIL 12, 2005