20051017_1355.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:DONOVAN E. WALKER
DATE:OCTOBER 13, 2005
SUBJECT:IDAHO FALLS POWER AND P ACIFICORP'S ELECTRIC CONSUMER
ALLOCATION AGREEMENT (ESSA) - CASE NO. P AC-05- 7
On September 6, 2005 , Idaho Falls Power and PacifiCorp dba Utah Power & Light
Company (PacifiCorp) filed an Amended Joint Application for approval of an electric Consumer
Exchange Agreement. The Amended Application is submitted for the Commission s review and
approval pursuant to the provisions of the Electric Suppliers Stabilization Act (ESSA). Idaho Code
9 61-332 et seq.
BACKGROUND
On June 20, 2005 , Idaho Falls Power and PacifiCorp filed their original Joint
Application for approval of an electric Consumer Exchange Agreement dated May 27, 2005.
During its review Staff determined that the Agreement could lead to duplication of facilities, which
is contrary to the purposes of the ESSA. Staff discussed its concerns with Idaho Falls Power and
PacifiCorp and both parties agreed to further discuss changes to the Agreement to alleviate Staffs
concerns.
On July 29, 2005, Staff filed a Motion to extend the comment period for an additional
14 days to facilitate these discussions. The Commission granted Staff s Motion at its August 1
2005 decision meeting. Staff hoped that the discussions would lead to an amended or new
agreement. At the end of the extended comment period, no additional filing had been made by
Idaho Falls Power or PacifiCorp. Consequently, on August 19 2005, Staff filed comments with the
Commission that did not support approval of the Agreement as originally submitted.
On September 6, 2005 , Idaho Falls Power and PacifiCorp filed an Amended Joint
Application seeking the Commission s approval of a revised electric Consumer Allocation
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Agreement between the parties (Revised Agreement) dated August 26, 2005. The Amended Joint
Application incorporates all of the representations and assertions made in the original Joint
Application filed on June 20, 2005.
On September 15 , 2005 , the Commission issued Order No. 29869 Notice of Amended
Application and Second Notice of Modified Procedure, which commenced an additional 21-day
comment period on the Amended Application. Only the Commission Staff filed comments and it
recommended that the Commission approve the Revised Agreement.
THE REVISED AGREEMENT
Idaho Falls Power is the electric department of the City of Idaho Falls (City), a
municipal corporation duly organized under the laws of the State of Idaho. Idaho Falls Power
serves over 22 000 electric consumers, primarily within the municipal boundaries of the City.
However, Idaho Falls Power also provides electric service to some consumers outside the municipal
boundaries of the City. PacifiCorp is a public utility providing electric service to over 50 000
customers in eastern Idaho, including the area immediately surrounding Idaho Falls. However
PacifiCorp provides electric service to some customers within the municipal boundaries of the City.
To divide and identify service responsibility, Idaho Falls Power and PacifiCorp propose
to define their service areas and provide for circumstances under which an existing customer may
seek to change suppliers. Under the Revised Agreement, Idaho Falls Power will continue to serve
existing customers outside the City and PacifiCorp will continue to serve existing customers within
the City. However, PacifiCorp will not provide electric service to a new service entrance within the
municipal boundaries of the City, and Idaho Falls Power will not provide electric service to a new
service entrance outside the City s municipal boundaries.
The Revised Agreement also addresses potential requests from existing customers
desiring to change electric service providers. Specifically, in the event that a PacifiCorp customer
living within the City s boundaries desires Idaho Falls Power service, Idaho Falls Power may
provide electric service to such a customer provided that the customer makes a written request to
the City for electric service, and the City pays PacifiCorp just compensation as determined under
the Revised Agreement. Similarly, an Idaho Falls Power customer living outside the City limits
may change to PacifiCorp service by making application to PacifiCorp and upon PacifiCorp paying
the City just compensation. Pursuant to the Agreement, in order to provide just compensation, the
acquiring utility shall:(1) pay the other utility an amount equal to 167% of the exchanging
DECISION MEMORANDUM
customer s total electric bills from the previous 12 months; and (2) purchase all poles, wires, cross
arms, insulators, guys, and other facilities no longer needed by the other utility. See Idaho Code
61-333B. If this standard for just compensation cannot be reasonably applied, the parties agree to
negotiate in good faith to determine other just compensation.
THE ESSA
The ESSA allows electric suppliers to contract with one another for the purpose of
allocating territories, consumers, and future consumers; however, all such contracts must be filed
with the Commission for approval. Idaho Code 9 61-333. The Commission shall approve such
contracts only upon finding that the allocation or transfer is consistent with the purposes of the
ESSA. The purposes of the ESSA are: (1) promote harmony among and between electric suppliers;
(2) prohibit the "pirating" of consumers; (3) discourage the duplication of electric facilities; (4)
actively supervise the conduct of electric suppliers; and (5) stabilize the territories and consumers
served with electricity by such electric suppliers. Idaho Code 9 61-332(2)
Pursuant to the ESSA, the Commission has authority to approve or reject a contract
between a municipality and a public utility. Idaho Code 9 61-333. However, the Commission has
jurisdiction only over the public utility in such a proceeding. Id.
The ESSA also provides for the extension of a municipality s electric services to
annexed areas that are served by a public utility. Idaho Code 9 61-333B. The municipality may
extend such service upon payment of just compensation to the public utility. Id. Idaho Code 9 61-
333B states
, "
In the event the annexing municipality has been furnishing electric service to its
residents at the time of such annexation
...
nothing in this chapter shall prevent such municipality
from extending its service to the annexed or incorporated area, upon the payment of just
compensation... to such public utility....Just compensation is to be paid for "any property, real
or personal, including damages to the remainder of the system, if any, of such. .. public utility, used
in distribution, transmission or supply of electrical energy to such area prior to annexation.Id.
ST AFF COMMENTS
After reviewing the Application and the accompanying Revised Agreement, Staff
recommends that the Commission approve the Revised Agreement. Staff believes that the Revised
Agreement is consistent with the purposes of the ESSA. Staff noted that the Revised Agreement
incorporates the compromises that are necessary and foreseen by the ESSA at the boundary between
a public utility and a growing city supplying electric service to its residents. Staff states that the
DECISION MEMORANDUM
Agreement promotes order, fairness and harmony in the growth area near the boundaries of the City
and conforms to Idaho Code 961-333B.
At Staff s request, Section 6 of the original Agreement was changed. The original
Agreement required PacifiCorp customers annexed into the City to petition the City if they wanted
to receive service from Idaho Falls Power. Staff was concerned that this process increased the
probability of duplicate electric distribution facilities. Some customers may have petitioned the
City for the change in service while others may not have. Section 6 in the Revised Agreement
requires Idaho Falls Power to hook up all customers in an annexed area if it hooks up any
PacifiCorp customer in the annexed area. Staff believes that this requirement reduces the likelihood
of duplicate distribution facilities.
Staff believes that the Revised Agreement promotes harmony between the City and
PacifiCorp and prohibits the "pirating" of consumers. Staff also believes that the Commission
review of this contract demonstrates active supervision. The Revised Agreement also minimizes
the duplication of facilities while allowing the City of Idaho Falls to grow and provide electric
service to city residents. The Revised Agreement also defines service territories and stabilizes them
to the extent possible around a growing city that may under Section 61-333B of the ESSA, extend
electric service to its residents upon payment of just compensation to the serving public utility.
Staff believes that the Revised Agreement conforms to Section 61-333B.
Staff has reviewed the just compensation provisions of the Revised Agreement and
believes them to be adequate to cover any PacifiCorp stranded investment or other damages or costs
that may foreseeably be associated with the loss ofPacifiCorp customers to Idaho Falls Power.
COMMISSION DECISION
Does the Commission wish to approve the electric Consumer Exchange Agreement
between Idaho Falls Power and PacifiCorp? Does the Commission find that the Revised Agreement
comports with the purposes of the ESSA and meets the requirements of Idaho Code 961-333B?
Donovan E. Walker
M:P ACEO507 dw
DECISION MEMORANDUM