On February 1, 2000, the Montana Public Service Commission (MPSC) issued an interim order relating to the restructuring plan of Montana Power Company (Montana Power). The MPSC’s order terminates the provisions of its earlier accounting order for generation-related regulatory assets, and extends the accounting order for recovery of out-of-market qualifying facility costs to December 31, 2000. Following Montana Power’s sale of generating assets and certain purchase power contracts on December 17, 1999 at an above-book price, Montana Power sought a reduction in rates, because Montana Power had previously stated above-book proceeds would be returned to customers. Montana Power’s obligations to qualify facilities, in contrast to the generation-related regulatory assets, continue to be recoverable in rates. The interim order shares these QF costs between customers receiving bundled Montana Power service and customers who have opted for choice. The MPSC reserved the determination of the amount of regulatory asset related transition costs which Montana Power may recover. Montana’s restructuring statute defines transition costs as a public utility’s net verifiable generation-related and electricity supply costs that become unrecoverable as a result of restructuring which include, among other things, the cost of qualifying facility contracts.
According to the order, $16,722,212 of generation related regulatory assets is currently in rates. The MPSC found that the December 17, 1999 sale of generating assets produced sufficient above-book proceeds to eliminate all costs associated with generation related regulatory assets. As such, the MPSC found that there is no longer any need for these costs to be recovered from customers who have opted for choice or from customers who continue to receive bundled service from Montana Power. Therefore, the MPSC terminated the accounting order which tracked and incorporated rate recovery of those costs, thereby reducing rates for customers.
The order states, however, that Montana Power will continue to incur costs associated with its obligations to qualifying facilities until the final order on Montana Power’s transition costs is issued by the MPSC. The order further recognizes that the MPSC has authorized recovery of these qualifying facility costs in Montana Power’s rates. Montana Power maintains that the out-of-market qualifying facility costs inherent in current rates is $20,229,070. While customers receiving unbundled Montana Power service are allocated their share of the qualifying facility costs, customers opting for choice would not pay their share absent an accounting order. Montana Power proposed two options to the MPSC relative to recovery of out-of-market qualifying facility costs. The first option, which the MPSC elected in its interim order, was to accumulate from customers opting for choice as deferred revenue the unrecovered out-of-market qualifying facility costs by the continuation of an accounting order. The second option proposed the unbundling of those costs and separate billing for the out-of-market qualifying facility costs.
The MPSC’s interim order establishes a formula for the recovery of the qualifying facility deferred revenues to be collected from customers opting for choice. The formula apportions the out-of-market qualifying facility costs among customers opting for choice by multiplying the energy delivered to the meters of these customers by a kWh charge and dividing that product by total retail energy. The formula also permits the deferred revenues to vary by customer class, as adjusted for losses. The MPSC’s order also compensates Montana Power with a six percent carrying charge, compounded annually, for the delay in receipt of these deferred revenues, which will be accrued on outstanding balances.
In the order, the MPSC stated that its interim approval of any issues, calculations, or methodologies should not be considered an endorsement of such matters for the final order. The MPSC added that it will provide a treatment for the regulatory assets created by its interim accounting order in its final order which will attribute qualifying facility transition costs to customers opting for choice. The order further provides that the MPSC is not precluded from adopting in its final order a different revenue requirement for such costs from that contained its interim order.
The MPSC’s interim order is effective for service rendered on and after February 1, 2000. The order directs Montana Power to submit a compliance filing, tariff filings, and associated work papers implementing the interim rate reductions.