Utilities allowed to defer some regional transmission expense
Idaho’s three major regulated utilities will be allowed to defer costs they incurred in attempting to form a regional transmission organization that ultimately was not created. The expenses were in the form of loans made to the transmission organization called Grid West.
Establishment of the deferred accounts does not immediately impact customer rates. The commission will determine the prudency of the expenses when each of the three regulated utilities files its next rate case.
The commission denied the utilities’ request that they also be allowed to recover interest that would accrue on the deferred accounts. And the commission denied Idaho Power’s request to defer about $2.6 million in internal business expenses associated with the Grid West effort.
In response to orders issued by the Federal Energy Regulatory Commission (FERC), utilities in the Pacific Northwest were told to develop an independent transmission operator, or Regional Transmission Organization (RTO). RTOs are designed to enable open and competitive wholesale electric markets so that potential competitors have the same access to regional transmission grids as do established utilities.
Grid West was proposed to serve as a non-profit, independent transmission operator to manage and control transmission in Washington, Oregon, Idaho, Nevada, Utah and parts of Montana, Wyoming and California. The Bonneville Power Administration, which dominates ownership of high-voltage transmission lines in the Northwest, decided to withdraw from the Grid West effort. PacifiCorp, after being acquired by MidAmerican Energy Holdings Company, also withdrew due to concern over costs, transmission operations and other issues. Several utilities expressed concerns that Grid West would mirror the experience of RTOs in other regions of the country, which have experienced higher than anticipated operational costs.
Idaho Power sought a total deferral in its Idaho jurisdiction of $3.35 million. Of that, the commission agreed to allow the utility to defer about $1,077,090. About 14 percent of that deferral will be allocated the utility’s Oregon customers. The $1.077 million excludes about $197,000 in interest accrued through March 31 on loans the company made to Grid West. The loans ceased to accrue interest after that date. Idaho Power will be allowed to amortize the deferral over a five-year period beginning Jan. 1. 2007.
Avista, which has a much smaller customer base in Idaho, loaned Grid West about $1.2 million, including $421,620 allocated to its Idaho jurisdiction. The commission allowed deferral of $356,450 in Idaho after removing interest. Avista will also begin amortization on Jan 1, 2007 over a five-year period.
PacifiCorp, which does business as Rocky Mountain Power in southeastern Idaho, loaned $2.7 million to Grid West. The commission authorized a deferral of $174,000 for PacifiCorp’s Idaho jurisdiction.
Even though the effort to form a regional transmission organization has not been successful to date, the commission said the utilities should be entitled to recovery of the amounts they loaned because they were compelled by the Federal Energy Regulatory Commission to participate in the development of an RTO. Had the RTO been created, it would have acquired control of the region’s transmission facilities and implemented a surcharge on transmission customers to repay the loans made by the utilities.
The commission agreed with the utilities’ contention that customers did benefit from the RTO formation process.
Idaho Power said it gained experience in how an independent, regional transmission system operator would be created and how it would manage a regional transmission system. Avista Utilities, as a result of the RTO process, joined five other utilities to form a non-profit organization, ColumbiaGrid, to pursue improvements to ways in which the region’s transmission providers operate and manage the system.
A full text of the commission’s orders for each of the three utilities is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to any of the above case numbers.