22 amortization period and the possible risks of not 23 recovering the full amount. The 9.199% rate was 24 appropriate unless the Commission approves a faster 25 amortization period. The carrying charge associated with 506 IPC-E-97-12 CARLOCK, T (Di) 8 05/8/98 Staff 1 a faster recovery such as the five-year amortization 2 period or even a ten-year amortization period results in 3 significantly less risk of recovery for Idaho Power. The 4 appropriate carrying charge rate for the shorter 5 amortization period is the debt rate. Since the payment 6 of the accumulated DSM costs would be reasonably assured 7 due to the shorter repayment time frame, the DSM deferred 8 should be considered more like a receivable from 9 the ratepayers with the associated lower risk. 10 Therefore, on a basis, only a reasonable 11 interest rate would be required during the repayment 12 period. Idaho Power issued debt during 1996 at 6.93% and 13 6.85% under a bond rating of "A+". Standard & Poor's 14 upgraded Idaho Power's senior secured debt rating to "AA-" 15 in 1997. A recent issuance of senior bonds with 16 similar ratings was placed at 6.5% by Oklahoma Gas & 17 Electric Company. 18 I recommend a 7% rate be utilized for the 19 carrying charge during the amortization period.
22 amortization period and the possible risks of not 23 recovering the full amount. The 9.199% rate was 24 appropriate unless the Commission approves a faster 25 amortization period. The carrying charge associated with 506 IPC-E-97-12 CARLOCK, T (Di) 8 05/8/98 Staff 1 a faster recovery such as the five-year amortization 2 period or even a ten-year amortization period results in 3 significantly less risk of recovery for Idaho Power. The 4 appropriate carrying charge rate for the shorter 5 amortization period is the debt rate. Since the payment 6 of the accumulated DSM costs would be reasonably assured 7 due to the shorter repayment time frame, the DSM deferred 8 should be considered more like a receivable from 9 the ratepayers with the associated lower risk. 10 Therefore, on a basis, only a reasonable 11 interest rate would be required during the repayment 12 period. Idaho Power issued debt during 1996 at 6.93% and 13 6.85% under a bond rating of "A+". Standard & Poor's 14 upgraded Idaho Power's senior secured debt rating to "AA-" 15 in 1997. A recent issuance of senior bonds with 16 similar ratings was placed at 6.5% by Oklahoma Gas & 17 Electric Company. 18 I recommend a 7% rate be utilized for the 19 carrying charge during the amortization period.