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HomeMy WebLinkAbout10 Sierra Pacific Power increase rates Agenda Item # 10 TRUCKEE . * ; Memorandum To: Board of Directors From: Stephen Hollabaugh Date: November 28, 2007 Subject: FERC Docket Nos. ER07-1371, EL08-6-000; Sierra Transmission Rate Case Settlement Conference , Authority to accept or approve Settlement terms. Background Sierra Pacific Power Company has filed under Section 205 of the Federal Power Act to increase its transmission rates. Truckee Donner PUD filed a "Motion to Intervene, Protest, and Request for Suspension and Hearing". (Attached) I have not attached Sierra Pacific's filing (about 3 inches thick) but I have a copy if any of the Board would like to review it. Below is a description of the filings to date that are attached; • September 14, 2007; Sierra Pacific Resources Operating Company file for change in transmission rates (not attached) • October 5, 2007; Truckee Donner PUD's Motion to Intervene, Protest, and Request for Suspension and Hearing. (Attached) • November 6, 2007; Answer or , Alternatively, Motion for Leave to Answer and Answer of Truckee Donner PUD, Newmont Mining Corporation, and the City of Fallon Nevada. (Attached) • November 13, 2007; FERC Order Accepting and Suspending Proposed Rates, Instituting Section 206 Proceeding, Establishing Refund Effective Date, and Establishing Hearing and Settlement judge Procedures. (Attached) • November 20, 2007; FERC Order of Chief Judge Designating Settlement Judge and Scheduling Settlement Conference. (Attached) In the November 20, 2007 order from FERC, an initial settlement conference with Judge Dring is scheduled to convene at 10:00 am on December 3, 2007, in a hearing room of the Federal Energy Regulatory Commission, 888 First Street, NE Washington, DE 20426. My guess is this initial meeting will be attended by lawyers from each side to discuss and set a date for the next settlement conference and talk about discovery process to occur before the next meeting. In the next meeting after some discovery process, FERC has directed the parties to have persons present at the settlement negotiations with authority to negotiate and accept or approve settlement terms. Page 1 of 2 Fiscal Impact The transmission rates proposed by Sierra Pacific are about an $80,000 increase per year from the rate outlined in Truckee Donner PUD's intervention. Recommendation: The Board of Directors assigns a Board Director the authority to negotiate and accept or approve settlement terms or assign the Assistant General Manager if the Board Director is unable to attend settlement negotiations. i I im Gener a ger jAsistant General M ager John Ulrich ephen Hollabaugg Page Page 2 of 2 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Sierra Pacific Power Company and Nevada Docket Nos. ER07-1371-000 Power Company EL08-6-000 ORDER OF CHIEF JUDGE DESIGNATING SETTLEMENT JUDGE AND SCHEDULING SETTLEMENT CONFERENCE (Issued November 20, 2007) 1. The Commission by order issued on November 13, 2007, 121 FERC¶61,160, directed the Chief Judge to appoint a Settlement Judge to assist the parties in pursuing settlement negotiations. The Commission gave the parties the opportunity to request the Chief Judge to appoint a specific judge mutually agreed by all parties. The parties unanimously requested that Judge John P. Dring be appointed the settlement judge. 2. Accordingly, the Chief Judge hereby appoints Judge John P. Dring as the settlement judge in this case to convene a settlement conference, to explore the possibility of settlement, to discuss the differences between the parties, and in general to conduct the settlement negotiations. Participants are directed to have persons present at the settlement negotiations with authority to negotiate and accept or approve settlement terms. 3. Settlement Judge Dring is available to talk with the parties individually or in groups. Any party wishing to meet with Judge Dring may call Judge Dring's law clerk, Ms. Rebecca Sterzinar, at 202-502-6033 to arrange for a meeting. 4. A settlement conference with Judge Dring is scheduled to convene at 10:00 a.m., on December 3, 2007, in a hearing room of the Federal Energy Regulatory Commission, 888 First Street,NE, Washington, DC 20426. 5. The Chief Judge strongly encourages electronic filings. See, 18 C.F.R. § 385.2001(a)(1)(iii) and the instructions on the Commission's web site under the "Documents & Filing" tab. Curtis L. Wagner, Jr. Chief Administrative Law Judge 121 FERC¶ 61,160 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff. Sierra Pacific Power Company and Nevada Power Docket Nos. EL07-1371-000 Company ORDER ACCEPTING AND SUSPENDING PROPOSED INSTITUTING SECTION 206 PROCEEDING, ESTABLISHING REFUND EFFECTIVE DATE AND ESTABLISHING HEARING AND SETTLEMENT JUDGE PROCEDURES (Issued November 13, 2007) 1. In this order, we accept for filing Sierra Pacific Power Company's (Sierra) and Nevada Power Company's (Nevada) (collectively, the SPR Operating Companies) proposed transmission service rates for SPR Operating Companies' Zone A and suspend them for five months to become effective April 15, 2008, subject to refund. We accept the proposed change to the Schedule 1 - Scheduling System Control and Dispatch Service (Schedule 1) rate and suspend it for one day to become effective November 16, 2007, subject to refund. We also institute a section 206 proceeding and establish a refund effective date. Finally, we establish hearing and settlement judge procedures. The Filiny- 2. On September 14, 2007, SPR Operating Companies filed to revise the Zone A transmission rates for point-to-point service and network service under SPR Operating Companies' open access transmission tariff(GATT). Specifically, the rate for network and point-to-point service increases from $2.88/kW/month to $2.97/kW/month. SPR Operating Companies also filed to increase the rates under Schedule 1 of the OATT from $158.81/MW/month to $246.27/MW/month. According to SPR Operating Companies, the increase in transmission rates reflects the costs of the construction of new transmission facilities, as well as increases in capital expenditures and transmission operation and maintenance expenses. SPR Operating Companies also seek a return on common equity of 11.5 percent for use in computing the cost of transmission service. These proposed changes will result in an increase in point-to-point and network rates of 3.1 percent. Docket Nos. ER07-137 1-000 and EL08-6-000 - 2 - 3. SPR Operating Companies state that the increased rates are being filed in compliance with the settlement in Docket No. ER05-14-000, which obligated them to file cost justification for either the existing Zone A base rates or new rates by September 15, 2007.1 4. SPR Operating Companies initially requested that the proposed rates be made effective November 15, 2007, without further investigation or hearing. However, SPR Operating Companies, in its October 22 Answer, requests that the Commission suspend the effectiveness of the Zone A rates for a nominal period and allow them to go into effect subject to refund. In its October 22 Answer, e SPR a settlementOperating Companies also request the initiation of settlement proceedings before Notice of Filing and Responsive Pleadings 5. Notice of SPR Operating Companies' filingbefore October Stember 20,2007 Timely , with interventions, protests and comments due on o motions to intervene raising no substantive comments were filed by the California Electricity Oversight Board, and Plumas Sierra Rural Electric Cooperative. Timely motions to intervene and protest were filed by the City of Fallon, Nevada and Truckee Donner Public Utility District (collectively, protesters). A motion to intervene out-of- time was filed by Barrick Goldstrike Mines Inc. and Barrick Turquoise Ridge Inc., as manager of Turquoise Ridge Joint Venture 1 filed an answerd to as the addressi g the cost-of- ck Mines). On October 22, 2007, SPR Operating Companies service issues raised in the protests. SPR Operating Companies requests that the Commission order a nominal suspension of the proposed rates and initiate led settlementan answer to proceedings (October 22 Answer). On November 6, 2007, protesters SPR Operating Companies' October 22 Answer. Discussion Procedural Matters 6. Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R. § 385.214 (2007), the timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding. 7. Pursuant to Rule 214(d) of the Commission's Rules of Practice and Procedure, 18 C.F.R. § 385.214(d) (2007), the Commission will grant Barrick Mines' motion to 1 The Commission approved the settlement on May 6, 2006. See Sierra Pacific Resources Operating Companies, I I I FERC¶ 61,173 (2005). Docket Nos. ER07-1371-000 and EL08-6-000 - 5 - Suspension 16. Our preliminary analysis indicates that SPR Operating Companies' proposed transmission rates have not been shown to be just and reasonable, and may be unjust, unreasonable, unduly discriminatory or preferential or otherwise unlawful. In West Texas Utilities Company,5 the Commission explained that when its preliminary examination indicates that the proposed rates may be unjust and unreasonable, and may be substantially excessive, as defined in West Texas, the Commission would generally impose a five-month suspension. In the instant proceeding, we find that the proposed rates may be substantially excessive. Therefore, we will suspend SPR Operating Companies' proposed rate increase for the maximum five month period. 17. Additionally, should it be determined that SPR Operating Companies' present transmission rates are unjust and unreasonable, and that lower rates would be just and reasonable, the Commission would need to institute an investigation of the SPR Operating Companies' present transmission rates pursuant to section 206 of the FPA. Accordingly, the Commission will institute a proceeding in Docket No. EL08-6-000, and it will establish a refund effective date. When the Commission institutes a section 206 proceeding on its own motion, section 206(b) of the FPA, as recently amended by section 1285 of the Energy Policy Act of 2005,6 requires the Commission to establish a refund effective date that is no earlier than publication of the notice of its initiation of the investigation, but no later than five months after that date. The Commission will establish a refund effective date in this proceeding to be the date of publication of the notice of the initiation of the investigation in the Federal Register. 18. Section 206(b) also requires that, if no final decision is rendered by the refund effective date or by the conclusion of the 180-day period commencing upon initiation of a proceeding pursuant to section 206, whichever is earlier, the Commission shall state the reason why it has failed to do so and shall state its best estimate as to when it reasonably expects to make such a decision. To implement that requirement, we will direct the presiding judge to provide a report to the Commission no later than 15 days in advance of the refund effective date in the event the presiding judge has not, by that date: (1) certified to the Commission a settlement which, if accepted, would dispose of the proceeding; or (2) issued an initial decision. The judge's report, if required, shall advise the Commission of the status of the investigation and provide an estimate of the expected date of certification or a settlement or issuance of an initial decision. 5 18 FERC ¶ 61,374-75 (1982) (West Texas). 6 Energy Policy Act of 2005, Pub.L. No. 109-58, § 1285, 119 Stat. 594, 580-81. Docket Nos. ER07-137 1-000 and EL08-6-000 - 6 - Proposed Schedule 1 Rate Increase 19. SPR Operating Companies have filed to increase the Schedule 1 rate from $158.81/MW/month to $246.27/MW/month. The protesters have not specifically taken issue with this proposed rate. Commission Determination 20. Our review indicates that SPR Operating Companies' proposed Schedule 1 rate has not been shown to be just and reasonable, and may be unjust, unreasonable, unduly discriminatory or preferential or otherwise unlawful. Suspension 21. As defined in West Texas, the Commission would generally impose a five-month suspension. The Commission recognizes, however, that shorter suspensions may be warranted in circumstances where suspension for the maximum period may lead to harsh and inequitable results. Such circumstances exist here. Accordingly, the Commission will exercise its discretion to suspend the proposed Schedule 1 rate for a one day period and permit the rate to become effective November 16, 2007, subject to refund, and the outcome of the hearing and settlement judge procedures established in this order. Consolidation 22. Because Docket No. ER07-1371-000 and Docket No. EL08-6-000 raise common issues of law and fact, we will consolidate them for purposes of hearing and decision. Hearing and Settlement Judge Procedures 23. SPR Operating Companies' filing raises issues of material fact that cannot be resolved based on the record before us, and that are more appropriately addressed through the hearing and settlement judge procedures. 24. Accordingly, among the issues to be examined at hearing are: (1) the proposed return on equity; (2) the transmission system load; (3) transmission revenue credits; (4) cash working capital requirements; (5) the prepayments component of rate base; (6) allocations of other prepayments to transmission; and (7) general and intangible plant functionalization and allocation. 25. While we are setting these matters for a trial-type evidentiary hearing, we encourage the parties to make every effort to settle their disputes before hearing procedures are commenced. To aid the parties in their settlement efforts, we will hold the Docket Nos. ER07-1371-000 and EL08-6-000 - 9 - (J) The refund effective date established pursuant to section 206(b) of the Federal Power Act will be the date of publication in the Federal Register of the notice discussed in Ordering Paragraph (I) above. By the Commission. ( SEAL ) Kimberly D. Bose, Secretary. UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Sierra Pacific Resources Operating I Docket No.ER07-1371-000 Companies ANSWER OR,ALTERNATIVELY,MOTION FOR LEAVE TO ANSWER AND ANSWER OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT,NEWMONT MINING CORPORATION AND THE CITY OF FALLON,NEVADA Pursuant to Rule 213 (and, alternatively, Rule 212) of the Commission's Rules of Practice and Procedure, 18 C.F.R. §§ 385.212, 385.213, Truckee Donner Public Utility District,Newmont Mining Corporation and the City of Fallon,Nevada answer one aspect of the October 22, 2007 "Answer Of Sierra Pacific Resources Operating Companies"' in the above-captioned docket: Sierra's request for summary acceptance of its as-filed stated rate design for network transmission service. Because Sierra's "Answer" requests summary disposition of matters raised by its earlier Section 205 filing,3 SPR Answer at 1- 7, its pleading should be treated as a motion that may be answered of right. See 18 C.F.R. § 385.213(a)(3). If, however, the Commission treats Sierra's pleading as an ' Answer Of Sierra Pacific Resources Operating Companies, Sierra Pacific Resources Operating Companies,Docket No.ER07-1371-000(Oct.22,2007)("SPR Answer and Motion"). 2 Our silence as to other matters does not indicate substantive agreement. Rather, since Sierra concedes that the remaining matters raise factual issues that should be set for hearing and settlement judge procedures,SPR Answer and Motion at 1,we will pursue those issues in that context. 3 See Letter from Matthew W. S. Estes, Attorney for Sierra Pacific Power Company and Nevada Power Company, to Hon. Kimberly D. Bose, Secretary, Federal Energy Regulato)(ommission, Sierra Pacific Resources Operating Companies,Docket No.ER07-1371-000(Sep. 14,2007 SPR Section 205 Filing"). - 3 - been set for hearing, including "whether SPR's stated rate should be updated periodically.'6 The parties' unequivocal intent was to ensure that no Settling Party would be disadvantaged with respect to this issue because of the Settlement. Yet the summary relief that Sierra seeks here would deprive its customers of rights they had at the time they settled: namely, the right to develop evidence through discovery and hearing procedures and to present testimony demonstrating why Sierra's stated rates must be updated periodically. The Commission should not countenance this bait and switch and should set for hearing and settlement judge procedures the same issues it set for hearing in Docket No. ER05-14-000. No party would be prejudiced by setting this issue for hearing, as doing so simply returns the parties to the position they were in(as to this issue) before the settlement and appropriately frames for resolution the issue that the settlement deferred. Moreover, 6 Id. at 4-5(quoting the Explanatory Statement submitted with the Settlement,at 4). 7 Sierra wrongly suggests that providing for (or requiring) the periodic updating of stated rates is an unheard of concept and that any decision requiring such updating would lead to a flood of rate filings. SPR Answer and Motion at 5-7. While Sierra is correct that load growth is not the only variable, it is far from obvious that other variables—notably, Sierra's costs—are likely to increase in proportion with load. For this reason, many utilities filing stated rates do provide for periodic updating of those rates as often as annually. For example, ISO New England files updated stated rates each calendar year. E.g., ISO New England Inc., 117 F.E.R.C. 161,310, P 1 (2006). While the Commission's Docket No. ER05-14 orders declined to rely on Southwest Power Pool, Inc., 96 F.E.R.C. ¶ 61,034 (2001) as a basis for summarily requiring updating, 110 F.E.R.C.161,126,P 8,the Commission nonetheless set the matter for hearing,id., and has followed that precedent in subsequent cases. E.g., North Western Corp., 117 F.E.R.C. ¶ 61,293, P 17 &n.13(2006)(citing Docket No. ER05-14-000 and setting for hearing"the appropriate level of the stated rate, as well as whether any further modifications are required to the proposed rate design"). The Commission should follow the same course here and allow parties to introduce evidence as to whether updating should be required. As explained in our respective protests,preliminary analysis of Sierra's cost- of-service data shows that Sierra's existing Zone A rate of $2.88/kW-month has become excessive, amplifying our concern that the use of a stated network rate without some form of periodic updating will result in unjust and unreasonable rates. Truckee Protest at 10;Motion to Intervene and Protest of Newmont Mining Corporation and The City of Fallon, Nevada, Sierra Pacific Resources Operating Companies, Docket No.ER07-1371-000,at 22(Oct.5,2007). -4 - Sierra acknowledges that other issues raised by its Section 205 filing raise factual questions requiring an evidentiary hearing. Including this issue among those set for hearing would be consistent with precedent—not only in Docket No. ER05-14-000 but in other, more recent cases (see North Western Corp., supra n.7) — and would not materially disadvantage Sierra or any other party. Respectfully submitted, ls/ Timothy K. Shuba /s/ Jeffrey A. Schwarz Timothy K. Shuba Margaret A. McGoldrick Heather H. Anderson Jeffrey A. Schwarz GOODWIN PROCTER LLP SPIEGEL&MCDIARMID LLP 1800 Massachusetts Avenue,N.W. 1333 New Hampshire Ave.,NW, 2d Floor Washington, D.C. 20036 Washington, DC 20036 (202) 828-2000 (202) 879-4000 Attorneys for Newmont Mining Attorneys for Corporation and The City of Fallon, Truckee Donner Public Utility District Nevada November 6,2007 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Sierra Pacific Resources Operating I Docket No. ER07-137 1-000 Companies MOTION TO INTERVENE,PROTEST,AND REQUEST FOR SUSPENSION AND HEARING OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT On September 14, 2007, Sierra Pacific Power Company ("Sierra") and Nevada Power Company (collectively, the "SPR Operating Companies") filed under Section 205 of the Federal Power Act ("FPA"), 16 U.S.C. § 824d, to increase Sierra's "Zone A transmission rates" and its rates for "Scheduling, System Control and Dispatch Service (Schedule I)."' SPR Operating Companies state that the increased rates are being filed in compliance with a Settlement in Docket No. ER05-14-000, which obligated them to file cost justification for either the existing Zone A base rates or new rates by September 15, 2007.2 If accepted, the instant filing would increase Zone A Point-to-Point and Network transmission rates from $2.88/kW-month to $2.97/kW-month and would increase Schedule 1 rates from $158.81/MW-month to $246.27/MW-month. Transmittal Letter at 2. Pursuant to the Commission's Notice of Filing dated September 20, 2007, and Rules 211, 212, and 214 of the Commission's Rules of Practice, 18 C.F.R. Letter from Matthew W.S.Estes to Hon.Kimberly D.Bose,Sierra Pac.Res. Operating Cos.,Docket No. ER07-1371-000, 1 (Sept. 14, 2007) ("Transmittal Letter"), available at eLibrary Accession No. 2070918-016. Z Id. The Commission approved the Settlement on May 6, 2005. Sierra Pac. Res. Operating Cos., 111 F.E.R.C.161,173(2005).