7. How should the Klamath Assets
be Depreciated?

PacifiCorp requests approval of an accelerated depreciation schedule to depreciate Klamath assets and amortize the relicensing and settlement process costs on a straight-line basis over the same period as the surcharge.⁴⁵ This is consistent with the provisions of the KHSA which contemplates fully depreciating each Klamath asset based on the assumption that each of the assets will be removed in 2020, and that the depreciation schedule should be changed at any time if removal of an asset will occur in a year other than 2020. ⁴⁶ In support of its request, PacifiCorp states that the Commission has already approved this adjustment to implement PacifiCorp's proposed accelerated deprecation for the Klamath assets and amortization of the relicensing and settlement process costs as part of the settlement adopted in PacifiCorp's recent General Rate Case (GRC) decision, D.10-09-010. PacifiCorp goes on to state that if the anticipated remaining lives of the Klamath assets change, the Commission can adjust the depreciation lives of the Klamath assets in a future GRC, to ensure that customers do not overpay the depreciation allowance.⁴⁷

The Conservation Groups support PacifiCorp's request,⁴⁸ while DRA believes that it is premature to begin depreciating Klamath assets at an accelerated rate at this time. DRA's concerns regarding accelerated depreciation are similar to the concerns it has with the surcharge - the risk of the KHSA being terminated at some point in the future.⁴⁹

If the Commission does authorize accelerated depreciation of the Klamath assets in the current case, DRA recommends that the period over which the assets are depreciated should be extended from nine to 18 years, to reflect what it considers the risks and uncertainties identified in the KHSA and elsewhere that may result in termination of the KHSA.

Pursuant to D.10-09-020, PacifiCorp is already authorized to amortize the relicensing and settlement process costs and recover depreciation on KHSA assets over a shorter length of time than the original useful life of the assets, so that they will be completely depreciated by the target date for dam removal of 2020. We see no reason to change our previous order. DRA's argument here is essentially the same reasoning it used to support (i) rejection of the surcharge, or (ii) extension of recovery of the surcharge over a longer period of time, proposals which we have already rejected, as discussed in Sections 3 through 5 of this decision. We therefore affirm D.10-09-020 regarding the depreciation authorized for the Klamath assets and amortization of the relicensing and settlement process costs.

We also require PacifiCorp to adjust the depreciation of the Klamath assets and amortization of the relicensing and settlement process costs in any GRC application, if, in the future, the anticipated remaining life of the Klamath assets change. PacifiCorp must also identify the annual and cumulative balance of accelerated depreciation on the Klamath assets and amortized relicensing and settlement processing costs in all future GRC applications, until the Klamath assets are totally depreciated and the costs amortized.

⁴⁵ A.10-03-015 at 6-7.

⁴⁶ KHSA at Section 4.5.2.

⁴⁷ Exhibit PPL-203 at 2-3.

⁴⁸ Conservation Groups Opening Brief at 18.

⁴⁹ Exhibit DRA-001R at 13.