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1 (The following proceedings were
2 had in open hearing.)
3 COMMISSIONER HANSEN: The exhibits,
4 Exhibit 501, 502, and 503, will be identified on the
5 record and spread upon the record if there be no
6 objections. So ordered.
7 (Idaho Irrigation Pumpers
8 Association Exhibit Nos. 501 through 503 were marked
9 for identification.)
10 MR. NYE: Mr. Chairman, the witness is
11 available for cross-examination.
12 COMMISSIONER HANSEN: Okay. We'll
13 begin with you, Mr. Budge.
14 MR. BUDGE: No friendly cross,
15 Mr. Chairman.
16 COMMISSIONER HANSEN: Okay. Mr. Ward.
17 MR. WARD: No questions. Thank you.
18 COMMISSIONER HANSEN: Mr. Richardson.
19 MR. RICHARDSON: Just a couple,
20 Mr. Chairman. Thank you.
21
22 CROSS-EXAMINATION
23
24 BY MR. RICHARDSON:
25 Q. Mr. Yankel, my questions yesterday of
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1 Mr. MacRitchie were actually sparked by your
2 testimony on page 9 where you suggest that
3 PacifiCorp's rates are actually going down over the
4 last ten years. Are you generally familiar with
5 that part of your testimony?
6 A. Yes.
7 Q. If rates are going down, wouldn't you
8 agree that anything that interrupts that downward
9 trend would be adverse impact to the ratepayers?
10 A. There's no question about that,
11 especially when rates in the Eastern Idaho section
12 or of the Utah Power or whatever you want to call
13 it -- PacifiCorp -- territory are so high compared
14 to other jurisdictions.
15 Q. And could that disparity in rates be
16 explained solely by density issues?
17 A. No, I don't believe it can.
18 Q. Is this service territory so unique
19 from the rest of the world that their rates have to
20 be, as you suggest in your testimony, I think in
21 preceding pages, almost double what the similar
22 customers are paying in Utah but on the same
23 utility?
24 A. No, I don't believe so. Again, if you
25 look at what the rates were like just before the
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1 merger, the rates in the Eastern Idaho portion of
2 the Utah Power and Light service territory were
3 comparable, possibly somewhat lower than those in
4 the Utah jurisdiction.
5 Now there's a very vast difference
6 between the two areas. Utah jurisdiction is
7 considerably less, while we've seen very little
8 downward movement in rates in the Eastern Idaho
9 portion of the PacifiCorp service territory.
10 Q. So I guess it would be possible to
11 suggest that there's a lot more room for downward
12 movement in the rates in the Idaho jurisdiction?
13 A. I would think so. In my opinion --
14 I've been involved in some Utah cases over the last
15 ten years. Utah has had cases and they have looked
16 at that, and rates have been going down in Utah.
17 The Company just hadn't filed any rate cases in
18 Idaho and I think it has prevented the downward --
19 the further downward movement of rates in Idaho.
20 Q. And, finally, isn't it true that the
21 only way that this Commission can assure itself of
22 no adverse rate impact is to condition approval of
23 the merger on some sort of a rate cap or ceiling?
24 A. Could I have that reread or could
25 you --
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1 Q. Isn't the only way that this
2 Commission can assure itself of no adverse rate
3 impact caused by this merger or this proposed merger
4 is to condition approval of the merger on some sort
5 of a rate cap or rate ceiling?
6 A. I see that as -- as a very bare bones
7 minimum with respect to rates and with respect to
8 rates only. I really don't think that a rate cap
9 fully addresses the issues that need to be addressed
10 in this jurisdiction. A rate cap, to me, sounds
11 like we would maintain the status quo, and I think
12 the status quo is really intolerable for a lot of
13 the customers out there in Eastern Idaho. It's
14 becoming more and more intolerable as the BPA credit
15 goes away.
16 The BPA credit has made life easier in
17 Eastern Idaho, but as that has diminished each year,
18 I'm not sure exactly what the percentages are but
19 four or five or eight percent increases in rates
20 because of reduction of BPA credit are just
21 automatically flowing through is just inappropriate,
22 and something needs to be done to change that.
23 But, to answer your questions, as a
24 bare bones minimum, yes, that's just a logical
25 thing, the rate cap is certainly better than
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1 nothing.
2 MR. RICHARDSON: Thank you,
3 Mr. Chairman. That's all I have.
4 COMMISSIONER HANSEN: Okay. We'll go
5 to Staff. Mr. Purdy.
6 MR. PURDY: Thank you.
7
8 CROSS-EXAMINATION
9
10 BY MR. PURDY:
11 Q. As a follow-up to Mr. Richardson's
12 questions, you agree with me, I'm sure -- I'm fairly
13 sure -- that when the Commission analyzes
14 PacifiCorp's rates, of course it has to do so with
15 respect to that Company's costs of doing business
16 only in the state of Idaho?
17 A. As allocated in the state of Idaho,
18 yes, I agree.
19 Q. Thank you. Good clarification. And
20 would you agree that --
21 Did you hear the testimony yesterday
22 to the effect that PacifiCorp is in the process of
23 preparing a cost of service study for its Idaho
24 jurisdiction?
25 A. I felt like I heard more of a rate
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1 case as opposed to cost of service study. I have a
2 distinction between the two. I would assume if
3 there was a rate case, there would be cost of
4 service study filed with it.
5 Q. And of course the cost of service
6 study is the aspect of a rate case that determines
7 how to split up the revenue requirement among
8 customer classes. Correct?
9 A. Certainly.
10 Q. Certainly. And, consequently, just
11 speaking in an abstract sense, in any given rate
12 case, you might potentially have a revenue
13 requirement decrease for the Company as a whole, but
14 yet have -- actually end up with higher rates for a
15 given customer class depending on how the cost of
16 service study results bear out. Is that a -- is
17 that potentially a possibility?
18 A. It depends on what the Commission
19 decides the cost of service study results turn out
20 to be like. I've seen cost of service studies more
21 specifically in the most recent one filed in the
22 Utah case where I was a participant, and it showed
23 irrigation needing a large percentage increase
24 compared to the other classes. By the time the case
25 was done, PacifiCorp had come around to the position
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1 that essentially the irrigation rates were within
2 the realm of the range of average and did not need
3 an increase or a decrease.
4 There's a lot of just work that needs
5 to be done prior to a case and throughout an entire
6 case to check the validity of the numbers.
7 Ultimately, the Commission will make the decision as
8 to what numbers are valid, what numbers aren't
9 valid.
10 Q. Well, I'm not sure I quite heard an
11 answer to my question. Let's say you have a -- a --
12 let's say that the Commission has determined that
13 the utility who's come in for a rate case is
14 entitled to a relatively -- or, not entitled, but
15 should have a revenue requirement decreased by a
16 relatively small amount; yet wouldn't it be possible
17 that then after the cost of service study is done,
18 one of that company's customer classes might
19 actually see its rates go up?
20 A. Anything is possible. Also within a
21 class. I mean classes could go down and a
22 particular customer within a class could actually go
23 up.
24 Q. Sure. The converse is true.
25 Do you -- are you aware that on an
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1 annual basis, information is provided by PacifiCorp,
2 among other utilities, to the Commission Staff
3 regarding its results of operations?
4 A. My understanding is they do that to
5 all of the jurisdictions, yes.
6 Q. Sure. Do you know necessarily what
7 the consequences of a PacifiCorp rate case would be
8 with respect to irrigation rates in Idaho at this
9 point? I'm assuming a rate case that would be filed
10 sometime this year.
11 A. Have I specifically seen data? No,
12 I've not specifically seen data. I do have an
13 opinion, but I've not specifically seen data.
14 Q. What's your opinion?
15 A. My opinion is that the irrigation
16 class would probably get at least the average rate
17 decrease, if not more. That is based upon the data
18 that I've seen -- cost of service data -- that I've
19 seen in the Utah case, and that's usually not filed,
20 in my opinion, with the -- well, maybe it is filed
21 with their annual report, I'm not quite sure -- but
22 the ultimate result of what we saw in the Utah case
23 which was just finalized, I believe, in February
24 showed relatively good results for the Utah
25 irrigators. And as shown on my page 8, I guess,
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1 Utah irrigators are paying substantially less than
2 Idaho irrigators.
3 Q. So your answer assumes a couple
4 things:
5 It assumes a rate decrease would
6 result in Idaho; an overall revenue decrease would
7 result in Idaho. Correct?
8 A. No, I believe you just asked me
9 whether or not -- how I thought the irrigators would
10 fair in that case. I was at least comparing the
11 irrigators. That was my direction.
12 Q. Okay. Fair enough. Then do you have
13 any indication or have you reviewed data sufficient
14 to form an opinion as to whether Utah Power would
15 necessarily be subject to a rate decrease if it were
16 to file a case in Idaho this year?
17 MR. NYE: Objection.
18 COMMISSIONER HANSEN: Mr. Nye.
19 MR. NYE: My inquiry is whether or not
20 he's asking based on the testimony of ScottishPower
21 and their findings, or the relevance of a rate case
22 directly in this issue. In other words, this man's
23 opinion? I just want a clarification, I guess,
24 based on what ScottishPower is doing in a merger
25 which is what is at issue here, the effect on rates
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1 versus other matters.
2 COMMISSIONER HANSEN: Mr. Purdy.
3 MR. PURDY: Well, my response is that
4 Mr. Yankel, in his direct testimony in response to
5 cross questions of other counsel, has brought
6 into -- to issue in this case the rates that his
7 constituency is paying as a customer class and has
8 essentially melded that aspect into this proceeding,
9 and so I just wanted to follow up a little bit on
10 what he's already testified.
11 MR. NYE: Thank you, Mr. Chairman.
12 COMMISSIONER HANSEN: Yes. I believe
13 the Chair, if you look at page 9 of Mr. Yankel's
14 testimony and you read lines 9 and 10, Mr. Yankel is
15 talking about -- or, excuse me, 8, 9, and 10 -- he's
16 talking about the effect in other jurisdictions. So
17 I'm going to allow that question.
18 THE WITNESS: Would you either
19 rephrase it or could I have it reread, whichever is
20 easiest.
21 Q. BY MR. PURDY: I believe my question
22 was have you reviewed any data or come to any
23 conclusion regarding whether Utah Power would
24 necessarily be subject to a rate decrease were it to
25 file a rate case in Idaho this year?
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1 And I said -- I'm sorry, I said
2 Utah Power. PacifiCorp. I'm sorry.
3 A. Right. I've certainly not done a
4 detailed study at this point. I was hoping to get
5 into that essentially after this case. So I have
6 not done that. Again, the indications that I've
7 had, the numbers that I've seen, would indicate that
8 there is a very good chance for a rate decrease in
9 this jurisdiction.
10 Q. But those numbers that you have seen
11 pertain to the results of the Utah proceeding.
12 Correct?
13 A. To a very large extent. I also have a
14 copy of the filing that was made in Idaho. It's
15 about three inches thick or whatever. My
16 understanding, it would be the same filing the Staff
17 would be looking at now.
18 I think that there are probably some
19 large holes in that, and like rate return, for
20 example, that the Commission would probably not
21 authorize -- rate of return is not my area of
22 expertise, but again looking at the rate of return
23 seemed very high compared to what the Commission
24 would probably do. There seemed to be large areas,
25 and that was just kind of the cursory look at it.
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1 I've not looked at anything.
2 Listening to the testimony
3 yesterday -- I believe it was yesterday, maybe the
4 day before -- of Mr. O'Brien, he indicated that
5 there was -- at least my interpretation -- a lot of
6 inappropriate expenditures taking place at
7 PacifiCorp over the last couple of years, things
8 that shouldn't have been taking place. Seems that
9 those should be pulled out of a rate case. I mean,
10 I've not made any analysis whatsoever there, so I
11 view a rate case at this point in time as probably
12 very beneficial to the state of Idaho.
13 Q. But that filing you indicate you've
14 reviewed, isn't that, in fact, essentially
15 PacifiCorp's annual results of operations?
16 A. Yes.
17 Q. And doesn't that filing indicate that
18 PacifiCorp at least believed it's entitled to
19 roughly a $24 million rate increase?
20 A. Yes, it does.
21 Q. All right. And based on that, you
22 think that it's quite likely that they will end up
23 with a rate decrease in Idaho?
24 A. If one makes some corrections or
25 changes to the assumptions of the Company, yes, I
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1 do.
2 Q. And, again, those have to do with cost
3 of service assumptions that were made in their
4 filing -- or, I'm sorry, return on equity?
5 A. Return on equity would be a very large
6 just first-cut number. I have not looked hardly
7 beyond that. I just, again, looked at the numbers.
8 I think it would take days and months. I believe
9 the Staff is taking most of the summer to look at
10 it. I mean, it's not a -- not a simple task.
11 Q. Well, but earlier in response to one
12 of Mr. Richardson's questions, I believe that you
13 indicated that there was some benefit to a price cap
14 were it to be offered by PacifiCorp in this state.
15 Correct?
16 A. Correct. And I felt it was a very
17 minimal benefit, but yes, it's an obvious benefit.
18 Q. And is it fair to say that it's a
19 benefit because, quite frankly, the results of a
20 rate case, no matter which side you're looking at it
21 from, are always an unknown ahead of time?
22 A. Future is always unknown.
23 Q. Okay. Fine. I'll leave it at that.
24 Thank you.
25 COMMISSIONER HANSEN: Okay. We'll go
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1 now to Mr. Miller.
2 MR. MILLER: Thank you, Mr. Chairman.
3
4 CROSS-EXAMINATION
5
6 BY MR. MILLER:
7 Q. Good morning, Mr. Yankel.
8 A. Good morning.
9 Q. Could I start by directing your
10 attention to your testimony on page 19?
11 A. Yes.
12 Q. And there with -- starting on line 11,
13 you are critical of the Companies for not addressing
14 certain issues you say that are required by
15 Order 27939. Is that correct?
16 A. Yes.
17 MR. MILLER: May I approach the
18 witness?
19 COMMISSIONER HANSEN: Yes.
20 MR. MILLER: I'd just like to hand the
21 witness a copy of the order that he refers to there.
22 Q. BY MR. MILLER: And at other places in
23 your testimony, you were critical of the Companies
24 for the same reason. I want to direct your
25 attention to page 3 of the Order, and at the top,
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1 the very first sentence, the Order reads: The
2 Commission advised the parties that it expects
3 Applicants to address and respond to the following
4 issues.
5 Now, that doesn't say To address and
6 respond to the following issues in direct testimony;
7 does it?
8 A. No, as a matter of fact, the direct
9 testimony was filed by the Company I think just a
10 couple days after this came out. It would have
11 been, in my opinion, next to impossible for them to
12 address that in their direct testimony.
13 Q. And you'll note, as I think you've
14 indicated, that the testimony was due on February
15 26th?
16 A. Yes.
17 Q. And if you look at the front page of
18 the Order, you see that the service date was
19 February 24th?
20 A. Yes.
21 Q. And you see that I received the Order
22 in my office on February 25th?
23 A. Yes. I take no exception to the fact
24 that it was not direct testimony. I fully
25 understand that.
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1 Q. Well, don't you think the reason that
2 the Commission didn't require it to be addressed in
3 direct testimony was the obvious impossibility of
4 doing that, given the date of the Order and the date
5 of the filing?
6 A. Yes, but as I believe I point out in
7 my testimony -- maybe I did not -- but as I believe
8 I pointed out elsewhere in my testimony, the Company
9 has addressed concerns of other parties in other
10 cases not associated with the Commission Order. I
11 mean, this was a Commission Order saying that the
12 Applicants should address these issues. The
13 Company -- specifically, ScottishPower -- has filed
14 supplemental testimony in other jurisdictions
15 addressing concerns of other parties, but it has
16 failed to file supplemental testimony in this case
17 and waited essentially until after -- or, for
18 rebuttal testimony in order to address some of these
19 issues and not all of them.
20 Q. Well, with respect to your testimony
21 assertions, they should have been directed in the
22 direct testimony. Don't you think it overlooks some
23 very obvious and easy to determine facts; that is,
24 that it would be impossible to address it in direct
25 testimony?
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1 A. I never said that it should have been
2 addressed in the direct testimony that I'm aware of.
3 Q. All right. We'll come back to that.
4 I want to direct your attention now to
5 page 10 of your direct testimony where you have this
6 rate comparison chart. This isn't really a rate
7 comparison chart, is it; it's a bill comparison
8 chart?
9 A. It's a bill comparison chart for a
10 specific usage level.
11 Q. Yeah. And it compares the -- a bill
12 for a Idaho customer taking service under
13 Schedule A. Is that correct?
14 A. That is correct, which would be
15 comparable to all of the other categories. There
16 are no interruptible categories in the other
17 jurisdictions.
18 Q. Do you know in 1998 how many customers
19 in Idaho actually took service under Schedule A?
20 A. Not off the top of my head, but there
21 were very few.
22 Q. And if I told you that I had been
23 informed by the Company that it was 199, would you
24 accept that, subject to check?
25 A. Certainly.
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1 Q. Do you know how many customers in
2 Idaho take service under Schedule C?
3 A. Probably close to the remainder.
4 Q. If I told you that I'd been informed
5 that it's 4,174, would you accept that, subject to
6 check?
7 A. Yes, I would.
8 Q. Do you know how many kilowatt hours
9 were sold under Schedule A in 1998?
10 A. No, I do not.
11 Q. If I told you I'd been informed by the
12 Company it's approximately nine and a half million,
13 would you accept that, subject to check?
14 A. Yes.
15 Q. Do you know how many kilowatt hours
16 were sold under Schedule C in 1998?
17 A. Again, probably the vast majority, the
18 rest of the irrigation load.
19 Q. If I told you it was approximately
20 410 million, would you accept that subject to check?
21 A. Certainly.
22 Q. Now, if we go back to your testimony
23 on page 7, we see in your testimony there at the
24 very bottom that, as I understand it, an Option C
25 customer would have paid -- would have had a bill
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1 for that service of approximately slightly over
2 $3,000?
3 A. In Idaho?
4 Q. In Idaho.
5 A. Yes.
6 Q. All right.
7 A. And, again, these are -- the C is the
8 fully interruptible customer --
9 Q. Right.
10 A. -- versus the A, which is fully firm.
11 Q. Well, given the fact that more than
12 97 percent of the customers are Schedule C
13 customers, and given the fact that more than
14 95 percent of the Company's sales occur under
15 section -- Schedule C, we compared -- if we went
16 over to page 10 again and compared a Schedule C rate
17 for Idaho, that would be approximately $3,000, would
18 it not?
19 A. Yes, again for two totally different
20 types of service. It would be like comparing
21 Monsanto to a residential home: It's just different
22 service.
23 Q. But given the fact that virtually
24 nobody takes service under Schedule A, the
25 comparison here, use of that rate is somewhat
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1 misleading, is it not?
2 A. Again, I don't believe it's misleading
3 since it's comparing comparable service to
4 comparable service.
5 Q. But it's a service nobody takes.
6 A. It's a service people do take. It's a
7 service that other people on irrigation rate C, they
8 take C because they probably put in other
9 expenditures in order to irrigate differently to
10 provide for the interruptibility. So it's a cost to
11 them that's not bore in the rate.
12 COMMISSIONER HANSEN: You may approach
13 the Bench.
14 MR. MILLER: Thank you, Mr. Chairman.
15 I got a little carried aware there.
16 We would ask that this exhibit be
17 numbered next in order.
18 COMMISSIONER HANSEN: Mr. Miller, what
19 is the number? Have you numbered it yet?
20 COMMISSIONER SMITH: 229. 229.
21 MR. MILLER: We would ask that this
22 document be marked as Exhibit No. 229.
23 (ScottishPower Exhibit No. 229 was
24 marked for identification.)
25 Q. BY MR. MILLER: Have you had a chance
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1 to look over the exhibit, Mr. Yankel?
2 A. Very briefly.
3 Q. I'm going to represent to you that
4 this is a series of computations prepared by --
5 formally by PacifiCorp personnel that attempts to
6 replicate, in a way, your bill comparison for an
7 Idaho customer on a 200 horsepower pump for half the
8 hours in a month, which I think is the type of bill
9 comparison you had done in your testimony.
10 A. Yes.
11 Q. And if we're going to compare
12 bills -- that is, what the customers actually pay --
13 at this moment, recognizing maybe subject to change
14 sometime in the future, we would have to include the
15 BPA credit, would we not?
16 A. Are you asking that the BPA credit go
17 back to the Company? That's what it sounds like
18 you're doing.
19 Q. What I'm suggesting is that if we're
20 going to look at bills customers actually pay --
21 which is what I think you were trying to do with
22 your testimony -- at least at the present time, you
23 would have to include the BPA credit, would you not?
24 A. The bills customers pay also include
25 the BPA credit, that's correct; but the rates
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1 charged by the Company are the rates charged by the
2 Company, which is what I attempted to portray if --
3 I feel, in my opinion, living --
4 having lived in Idaho, that the BPA credit is
5 something that is for the residential and farm
6 customers of Idaho, it's not something that helps
7 out PacifiCorp and just --
8 Q. I'm not suggesting that. All I'm
9 looking at asking you to do is a comparison of what
10 customers actually pay. And if you look at Option C
11 in Idaho compared to Option C in Utah, you see Idaho
12 customers actually pay less, do they not?
13 MR. NYE: Mr. Chairman.
14 COMMISSIONER HANSEN: Mr. Nye.
15 MR. NYE: I just have an objection for
16 the record that we not refer to the document unless
17 it's into evidence or admitted and received; and if
18 it is, I'd like to object to its use or reserve an
19 objection, and our objection is simply that this
20 should not be allowed by the Commission as an
21 attempt to now address irrigation concerns
22 previously ordered and strung in this manner in this
23 fashion. So that's just an objection for the
24 record.
25 COMMISSIONER HANSEN: Mr. Miller, do
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1 you have any comment?
2 MR. MILLER: Just two:
3 First, if you will look carefully at
4 the prehearing Order, there is nothing there that
5 requires the issue of rate disparity to be
6 addressed. The indication of irrigation concerns
7 generally, which they have tried to boot strap into
8 a idea that we were supposed to address the idea of
9 rate disparity, but never were we directed to do
10 that. It's appropriate on cross, the BPA will point
11 out, that the analysis that they're using is really
12 flawed.
13 COMMISSIONER HANSEN: We will note the
14 objection on the record, Mr. Nye --
15 MR. NYE: I don't wish to interrupt
16 cross. I just want to preserve our objection of
17 their failure to address an issue that we believe
18 was ordered. Thank you.
19 COMMISSIONER HANSEN: The Chair will
20 recognize that. Continue on with the question.
21 MR. MILLER: Thank you very much.
22 Q. BY MR. MILLER: All right. Let me
23 direct your attention now to page 13, line 9, of
24 your testimony.
25 A. Yes.
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1 Q. And there you repeat what I take to be
2 a theme that recurs throughout your testimony, that
3 the Applicants had been vague and nonspecific in
4 their proposals?
5 A. That is correct.
6 Q. Do you see those lines there?
7 I direct your attention to the
8 testimony of Mr. Sterling and his
9 attached Exhibit 105 which is the supplemental
10 testimony of Alan Richardson.
11 A. Is it approximately 41 pages? I
12 believe I have it.
13 COMMISSIONER HANSEN: It is 41 pages,
14 unless I'm missing a page or two.
15 Q. BY MR. MILLER: Yes. All right then.
16 Attached to the supplemental testimony of
17 Mr. Richardson is a document entitled Benefits to
18 Customers from the Transaction. Do you see that?
19 A. Beginning at what page?
20 Q. Beginning of page 21 of 41.
21 A. Yes.
22 Q. Directing your attention to
23 Subparagraph A which is entitled Network
24 Performance --
25 A. Yes.
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1 Q. -- do you have that?
2 What, in your opinion, is vague and
3 nonspecific about the network performance standards
4 contained in Section A?
5 A. Probably the most obvious thing is
6 it's ten percent off what? And the Company has
7 indicated that they don't know what the base line is
8 to begin with, they have not studied what the base
9 line is, and they will not even establish a base
10 line until after the merger. So they're going to
11 take ten percent off of something. To me, it's
12 vague.
13 Q. The Companies have proposed a process,
14 have they not, for finding the base lines, and have
15 they not explained that it's impossible to develop
16 base lines now because of inaccurate data in
17 PacifiCorp's current measurements?
18 A. They have indicated that, yes.
19 Q. So other than that point, is there
20 anything that's vague and nonspecific about these
21 commitments?
22 A. There's also the question again of
23 extreme event. The Company did not seem to know
24 what -- "the Company" meaning ScottishPower -- did
25 not seem to have a definition of "extreme event."
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 They had a definition in the UK. They said their
2 definition is different than PacifiCorp. They
3 didn't seem to be able to, through the six months
4 that I've been dealing with this, have a definition
5 yet. Again, they're working towards one, but didn't
6 have one. Again, to me, that's nonspecific.
7 Q. And were you here yesterday for the
8 testimony of Mr. MacLaren?
9 A. I probably was not in the room.
10 Q. We'll just represent for the record
11 that that issue was discussed and I believe
12 clarified by Mr. MacLaren in his testimony with
13 Mr. Nye.
14 So other than that, is there anything
15 that's vague and nonspecific about these
16 commitments?
17 A. I don't know. No. 5, you know, supply
18 would be restored within -- or, to 80 percent of the
19 customers within three hours. My understanding is
20 that the supply is -- supply restoration is far
21 greater than that now. So to me, that's certainly
22 not a commitment to -- you couldn't be going the
23 other way. To me, it's either vague as to really
24 what's going -- if there is going to be an
25 improvement, I would expect the improvement to be
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 far greater than what is shown there.
2 Q. Well, isn't that a quibble about the
3 quality of the commitment, not about whether it's
4 vague or nonspecific?
5 A. I don't want to quibble with your
6 words, but it's a problem I have with that specific
7 commitment.
8 Q. Do you happen to have with you the
9 PacifiCorp Response to your Request No. 136?
10 A. I may.
11 I do not.
12 MR. MILLER: I think I can do this,
13 Mr. Chairman, without introducing another exhibit.
14 Q. BY MR. MILLER: Do you have it?
15 A. I do not.
16 Q. Oh, I'm sorry.
17 COMMISSIONER HANSEN: That's all
18 right. Yes, he said he had it. He did not have
19 that.
20 MR. MILLER: If I could approach the
21 witness?
22 COMMISSIONER HANSEN: You may
23 approach.
24 Q. BY MR. MILLER: That Response to a
25 Request of yours is a table that shows what,
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 reported outages from 1994 through 1998?
2 A. Right, and those that were restored
3 within certain time frames. I mean, just real quick
4 looking at it, that's what it seems to be, yes.
5 Q. If you look at that, you see that the
6 number of outages appears to drop off dramatically
7 during the time 1994 through 1998, does it not?
8 A. In Idaho. At least looking at the
9 other two states, Utah and California on this page
10 are going up. Yes, in Idaho, they did seem to drop
11 off a bit.
12 Q. So there are two possible explanations
13 of that. One is that outages -- outage performance
14 has been improving; or another possibility is that
15 outage reporting has changed dramatically, they've
16 just stopped reporting outages?
17 A. Those are the two possibilities, yes.
18 Q. And isn't that, in fact, a reason why
19 the Company cannot at this moment determine adequate
20 base lines upon which to base further performance
21 measures?
22 A. The fact that --
23 Q. The current data is no good. You
24 can't make out a base line, can you?
25 A. I'm sorry. In the leap of faith
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 there, I missed -- you gave me two possibilities and
2 then I guess assumed that the date is no good
3 because there's two possibilities out there.
4 Q. Well I'll just leave it at that.
5 Let's return to what we were doing,
6 which is identifying things that are vague and
7 nonspecific. If you turn to the next page of the
8 Richardson supplemental testimony, the Customer
9 Service Performance data. What, in your opinion, is
10 vague and nonspecific about these commitments?
11 A. I don't know. I didn't spend much
12 time looking at these commitments, and again, these
13 weren't really the ones I was focusing on in my
14 comments as far as being vague and nonspecific.
15 Q. Would you give the same answer for the
16 Customer Service Guarantees contained in Section C?
17 A. I had more of a problem with those
18 guarantees, but I'd rather not quibble with you over
19 them. To me, they weren't that specific; I just
20 looked at them and did have some questions: What
21 does this mean, what does that mean.
22 Q. But nothing that comes to mind
23 specifically at this moment that you could say is
24 vague and nonspecific?
25 A. I think I probably can if you'd like
834
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 me to. I'm just trying to move on.
2 Q. Well, why don't you go ahead and do
3 it, because if there are things here that are vague,
4 we ought to fix them and make them more specific.
5 A. Just Guarantee No. 3.a., a guarantee
6 that if there's no construction required, the
7 customer's power will be turned on within 24 hour.
8 What does "no construction" mean? Does that mean
9 installing a meter into a meter set? You know, I
10 don't know what these things mean specifically.
11 Q. To you the phrase "no construction" is
12 vague?
13 A. Yes.
14 Q. All right. Anything else?
15 MR. NYE: Counsel, are you referring
16 to this exhibit, or things that are vague and
17 nonspecific that you want to fix globally?
18 MR. MILLER: Thank you for that
19 clarification. I was asking the witness to focus on
20 commitments in Section C.
21 MR. NYE: Thank you.
22 THE WITNESS: Guarantee 1 -- 1.a. You
23 know, if the customer loses electric supply because
24 of a fault on the PacifiCorp system, PacifiCorp will
25 restore the customer's supply as soon as possible.
835
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Well, what does "as soon as possible"
2 mean? The penalty is if it's not restored within
3 24 hours. My understanding in looking at the data,
4 that by far, over the last five years I think it
5 showed only five customers who were without power
6 for more than 24 hours. "As soon as possible" could
7 mean pushing this back and actually making things
8 worse than they presently are.
9 Q. BY MR. MILLER: That, of course,
10 assumes that the Company's reporting of outage
11 performance over the last couple years is accurate.
12 There is some possibility that it's not.
13 A. But we're talking about as soon as
14 possible, and I guess my definition of "as soon as
15 possible" is not necessarily specific.
16 Q. How would you rewrite that then to fix
17 it?
18 A. My overall concerns haven't been in
19 this area of customer guarantees, so I really
20 haven't thought about that. My overall concerns
21 have really addressed the impact on rates to the
22 customers, just what's going to happen generally to
23 the customers out there, and not specifically the
24 customer guarantees or system guarantees that the
25 Company has proposed.
836
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Q. All right, well let's go to that topic
2 then. Let me direct your attention to page 23 of
3 your testimony. And this is an area of your
4 testimony where you express your concern about
5 potential for upward pressure on PacifiCorp's costs
6 as a result of the bid premium and other things. Is
7 that -- is that correct?
8 A. That would be correct.
9 Q. And there you quote a portion of a
10 Data Response to the Utah Division of Public
11 Utilities entitled S.42?
12 A. Yes.
13 MR. MILLER: Could I approach the
14 Bench, please?
15 COMMISSIONER HANSEN: You may.
16 MR. MILLER: We would ask this
17 document be marked as Exhibit 230.
18 (ScottishPower Exhibit No. 230 was
19 marked for identification.)
20 Q. BY MR. MILLER: Is this the entire
21 Data Response in which you quote a portion at
22 lines 3 through 9?
23 A. Yes, it is.
24 Q. If we look at the previous part of the
25 Data Response, we can see that there is there a
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 discussion of financial theory on how customers and
2 shareholders benefit from mergers in competitive
3 markets. Do you see those two paragraphs at the
4 bottom?
5 A. Of the first page?
6 Q. Yes.
7 A. Yes.
8 Q. If we put this in context, we see that
9 Scottish is expressing a concern that the regulator
10 in the United Kingdom may be too quickly eroding
11 shareholder benefits, not -- it's not a criticism of
12 regulation in the United States, is it?
13 A. No, I don't believe it is. It's maybe
14 recommendation, which is what I quoted, but it's
15 certainly not a comment on what is taking place in
16 the United States.
17 Q. All right. Now on the second page,
18 the first paragraph is what you put in your Data
19 Response. Correct?
20 A. Correct.
21 Q. Okay. Could you read the third
22 paragraph for us, which you did not quote?
23 A. You mean the final paragraph?
24 Q. Yes.
25 A. In relation to PacifiCorp, we seek a
838
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 win-win outcome, i.e., a value-adding deal for the
2 shareholders, combined with benefits to customers in
3 the form of moderated prices and/or improved levels
4 of service.
5 Q. Does that statement, if you read --
6 look at the whole Data Response and you read the
7 last paragraph as you just have, does that statement
8 in any way imply that PacifiCorp would lower its
9 capital expenditures, terminate personnel, and seek
10 an overall reduction in operation and management
11 budgets?
12 A. From that specific paragraph, no.
13 Q. Very good.
14 MR. MILLER: As a note, Mr. Chairman,
15 if I can just make an aside: I've picked out one
16 example here of where the witness has cited a part
17 of a Data Response and I -- what I think is a
18 somewhat inadequate way. And I would point out that
19 throughout the testimony, there are other footnoted
20 Data Responses.
21 MR. NYE: Objection, your Honor, to
22 commentary on the evidence.
23 MR. MILLER: I can hold that till
24 later.
25 COMMISSIONER HANSEN: Okay.
839
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 MR. NYE: And ask that it be stricken.
2 COMMISSIONER HANSEN: We'll strike
3 that.
4 MR. MILLER: That would be very fine,
5 very fine.
6 Q. BY MR. MILLER: Now, throughout your
7 testimony at this place and others, you express this
8 worry we've been talking about about upward pressure
9 on PacifiCorp costs. Correct?
10 A. Correct.
11 MR. MILLER: This is my last one.
12 COMMISSIONER HANSEN: You may approach
13 the Bench for the last time.
14 MR. MILLER: Very good.
15 MR. PURDY: Mr. Chairman, in the
16 interim, just for the sake of the record, if I heard
17 Mr. Miller correctly, I believe he referred to the
18 last exhibit as 320, the exhibit Mr. Yankel has
19 spoke to from the Public Service Commission of Utah,
20 and I think that should be 230.
21 COMMISSIONER HANSEN: I have it as
22 230.
23 MR. PURDY: Did you? Might have been
24 my mishearing.
25 Q. BY MR. MILLER: In preparation of your
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 testimony, did you happen to review any prior
2 Commission decisions that --
3 COMMISSIONER HANSEN: Mr. Miller,
4 could I ask you to wait until you get back to your
5 mike so everyone can hear?
6 MR. MILLER: A thousand pardons,
7 Mr. Chairman.
8 Q. BY MR. MILLER: Did you happen to
9 review any prior Commission Decisions to get any
10 guidance on the relative weight to be attached to
11 any statutory standards of relevant statute here?
12 A. I reviewed prior Commission Decisions
13 not necessarily with the intent that you spoke, but
14 yes, I certainly have reviewed some.
15 Q. I've handed you what is a copy of the
16 Commission's final Order in the preceding Utah --
17 or, previous Utah Power/PacifiCorp merger, and would
18 direct your attention to page 13 of that Order.
19 COMMISSIONER HANSEN: Mr. Miller, I do
20 have one question: Are you planning on submitting
21 this as an exhibit or are you just using this as
22 other means at the time?
23 MR. MILLER: I'm assuming that the
24 Commission would take administrative notice of its
25 prior Orders, although I could have it marked at
841
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 your pleasure.
2 COMMISSIONER HANSEN: I was just
3 wondering what you were planning. Okay. Continue
4 on.
5 MR. MILLER: Very good.
6 THE WITNESS: I'm at page 13.
7 Q. BY MR. MILLER: And in the section --
8 Subsection B, there are three paragraphs. Is that
9 correct?
10 A. Yes.
11 Q. Could you read for us the third
12 paragraph?
13 A. The Commission cannot, by Order or
14 decree, prohibit costs from rising as a result of
15 the merger. It can, however, prohibit rates from
16 rising as a result of the merger. Our finding on
17 rates is therefore more important than our finding
18 on costs, and it predominates.
19 Q. Could you go now to page 19 of the
20 Order?
21 A. Yes.
22 Q. And at the top there, you see a
23 paragraph that starts with the words "the first
24 condition"?
25 A. Yes.
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Q. Would you read that paragraph for us?
2 A. The first condition will be
3 implemented through this Commission's fact finding
4 in individual rate proceedings involving one
5 division or the other. We cannot, in this Order,
6 anticipate or identify every potential
7 merger-related effect on rates or costs. Those will
8 be handled on a case-by-case determination in the
9 future. The second condition will be implemented
10 through informal meetings between the merged Company
11 and this Commission's and other Commissions' Staffs.
12 The third condition is self-implementing.
13 Q. Now, as implied by a question from
14 Mr. Ward yesterday, it's possible that the
15 Commission as it was composed in 1988 or '89 lacked
16 the intellectual horsepower and sophistication of
17 the Commission as it's currently composed; but it is
18 true, is it not, that on one prior occasion, that
19 the Commission has indicated that as long as the
20 Commission's ability to control rates stays in
21 place, concerns about upward cost pressure are
22 secondary?
23 A. That is clearly one Commission's
24 Decision as written here. Whether or not that
25 complies with the Idaho Statute is certainly
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HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 another -- another story.
2 Q. There was no appeal of this
3 well-written Decision, was there?
4 A. My understanding is that -- I was
5 involved with this to some extent -- it was pretty
6 much agreed to. Most of the parties were very
7 favorable, unlike this case.
8 Q. Let me direct your attention to the
9 testimony of Robert Green.
10 A. Would this be direct or --
11 Q. Direct, page 13, for the record.
12 COMMISSIONER KJELLANDER: Did you say
13 13?
14 MR. MILLER: Yes.
15 COMMISSIONER HANSEN: I'm sorry,
16 Mr. Miller, I just found the testimony. What was
17 the page again?
18 MR. MILLER: 13.
19 THE WITNESS: Yes, I'm there.
20 Q. BY MR. MILLER: And there, Mr. Green,
21 on behalf of the Company, makes certain commitments
22 relating to the Commission's access to Scottish
23 books and records to ensure that the Commission's
24 ability to regulate will not be undermined as a
25 result of the transaction. Do you see that
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HEDRICK COURT REPORTING YANKEL (X)
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1 testimony?
2 A. Generally, yes.
3 Q. I didn't see anything in your
4 testimony where you claimed that these commitments
5 were inadequate or that the ability of the
6 Commission to regulate was undermined. You did not
7 respond to this testimony, did you?
8 A. No, I did not. I had hoped that the
9 Staff would have checked that in sufficient detail
10 and that the Commission would have proper action in
11 the future. I did not check that myself personally,
12 no.
13 Q. So the answer is no, you did not?
14 A. Correct.
15 MR. MILLER: Could I have just one
16 moment, Mr. Chairman?
17 (Discussion off the record.)
18 MR. MILLER: Mr. Chairman, the
19 consensus here is that I should quit, so --
20 COMMISSIONER HANSEN: I'll accept
21 that.
22 MR. MILLER: Those are all the
23 questions we have.
24 COMMISSIONER HANSEN: All right,
25 fine. Thank you.
845
HEDRICK COURT REPORTING YANKEL (X)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Let's see if we have any questions
2 from the Commission. Commissioner Kjellander.
3 Commissioner Smith.
4
5 EXAMINATION
6
7 BY COMMISSIONER SMITH:
8 Q. Mr. Yankel, did you participate in the
9 last rate case that Utah Power and Light had before
10 the Idaho Commission?
11 A. I'm almost positive I think I
12 participated in the last 20 years' worth, but in my
13 opinion, yes.
14 Q. I think it would have been in the late
15 eighties.
16 A. Yes.
17 Q. And then it was followed up by a
18 separate rate design phase that I believe concluded
19 in January of '91, the Commission Order?
20 A. That could be true, yes. I would have
21 participated in both phases.
22 Q. I mark that time because it was just
23 before I came on the Commission.
24 A. Okay.
25 Q. It was my understanding that
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HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 irrigation rates that were set in that last phase,
2 the rate design phase, were not set at full cost of
3 service.
4 A. They may not have been.
5 Q. So you don't have any recollection of
6 how far below cost of service irrigation rates are?
7 A. At that time or --
8 Q. Uh-huh.
9 A. No, at that time, no, I don't recall.
10 Q. Because I was just surprised by your
11 seeming confidence that irrigators could come out of
12 a current rate case as good off as they are now and
13 maybe better.
14 A. A lot of my confidence comes from the
15 last Utah case that last year that I was involved in
16 down in Utah. A lot of the numbers we found for the
17 irrigation class were --
18 Q. What kind of numbers?
19 A. Numbers for meter reading. Mr. Miller
20 today gave a number -- and I can't recall what it
21 was, but 4,600, approximately, for irrigators on
22 Schedule A. If you look at --
23 Q. No, no, no, no. That's incorrect.
24 A. Excuse me. Schedule C. Schedule C.
25 I don't recall exactly the number he gave me, but it
847
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 was Schedule C.
2 Q. I think I wrote those down: 4,174
3 Schedule C?
4 A. Okay.
5 Looking at the numbers in the FERC
6 Form 1, they're very different. FERC Form 1 doesn't
7 show that many irrigation customers on the system.
8 The Company has different ways of
9 calculating the number of irrigators, for example.
10 There is --
11 Q. Is that because -- and I think we ran
12 into this looking at line extension costs -- that
13 irrigators are lumped with people using electricity
14 maybe at the same voltage levels in the one customer
15 class. There isn't an actual irrigation customer
16 class; it's called Large General Service or
17 something that includes some others besides
18 irrigators?
19 A. There were a variety of problems, one
20 of which is similar to that where irrigation was
21 lumped in with industrial. I mean, they would do
22 sometimes residential, commercial, and industrial
23 groupings, and irrigation would be lumped in with
24 industrial.
25 In looking at the way they came up
848
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 with their ratings, irrigators are typically billed
2 four times a year because their meters are only read
3 four times a year during the summer growing season.
4 I mean, this is nothing sadistic the Company was
5 doing, but they just looked at the numbers and the
6 way they recorded on one set of books is picked up
7 and then used elsewhere. Didn't look at the fact
8 that they weren't sending meter readers out there
9 12 months a year, but we were getting charged for
10 costs as if they were.
11 There was a lot of problems like this
12 that were corrected in Utah that had never come up
13 before. I mean, I had never looked into this, the
14 Company never looked into this. It was just one of
15 those things that people have been arguing about
16 production costs for 20 years and people just really
17 haven't looked into meter reading costs, the cost of
18 billing and whatnot. And we found that there was a
19 large disparity there in what was being charged and
20 what really should have been charged to the
21 irrigator. So the Company agreed with a lot of the
22 changes. It's not like there was a lot of argument.
23 There was argument in some areas. So I feel much
24 more confident now than --
25 Q. Is there anything besides meter
849
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 reading costs because I've actually moved pipe in
2 Eastern Idaho many years ago, and it occurs to me
3 that it might cost more to read those meters given
4 where they are, as opposed to the residential class?
5 A. You also have to understand,
6 especially in Eastern Idaho, the residential class
7 is pretty much out there with those people.
8 Q. For PacifiCorp?
9 A. For PacifiCorp.
10 Q. That's true.
11 A. Because PacifiCorp is pretty much a
12 rural area, and, you know, you're not looking at the
13 city of Idaho Falls. You're not looking at the city
14 of Pocatello. You're looking at the more rural
15 areas where the people themselves are living in
16 rural areas. So those costs tend to blend a lot
17 more.
18 And they didn't in Utah, actually.
19 Utah would have much more of the irrigators being a
20 higher cost because it's further to go out and
21 they've got Salt Lake.
22 Q. Is the Utah -- on the Utah system, is
23 the irrigation class a much smaller part of their
24 electric business?
25 A. Yes.
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HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Q. Because in Idaho, it's a very large
2 part, actually.
3 A. Yes. In Utah, I'm not sure, but I
4 would guess about a percent and a half, I mean in
5 that vicinity.
6 Q. And here I think I've heard we're
7 40 percent?
8 A. We could be.
9 Q. So I guess you could understand my
10 fear --
11 A. I represent them, yes.
12 Q. -- in placing a lot of -- of having
13 the same degree of confidence that you apparently do
14 that a rate case in Idaho could have a positive
15 outcome for this class of customers.
16 A. Well, again, if you look at the pages
17 that we were looking at before on the numbers, if
18 you disregard the interruptibility for the
19 irrigation customers -- which I don't think you
20 should disregard -- but if you disregard the
21 interruptibility, there's no reason why a customer,
22 an irrigation customer in Idaho, should be paying
23 nearly double that for an irrigation customer in
24 Utah. There really is no reason for that.
25 Q. Well, this of course is all irrelevant
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HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 to the Decisions on the merger and it really needs
2 to come up in a rate case, so -- but it is something
3 I am concerned about.
4 I guess I wanted to touch again on
5 pages 10 -- and I think it's page -- well I have two
6 page tens of your testimony. Interesting -- page 10
7 of your testimony where you did compare Schedule A
8 to the other states; and I see on line 16 that you
9 do say The following table lists monthly bills.
10 So you were trying to compare the
11 bills that a customer sees among these various
12 jurisdictions. Is that correct?
13 A. The rates charged by PacifiCorp, yes.
14 Q. But you didn't say "rates charged."
15 You said "monthly bills."
16 A. Okay.
17 Q. So knowing now that this is only
18 Schedule A --
19 A. Yes.
20 Q. -- and not Schedule C which the bulk
21 of the customers pay, and that it does not include
22 the BPA credit which they would also see in a
23 monthly bill, do you still believe this is not
24 misleading?
25 A. No, I really do not. Again --
852
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 COMMISSIONER SMITH: That's my only
2 questions. Thank you.
3 COMMISSIONER HANSEN: Thank you.
4
5 EXAMINATION
6
7 BY COMMISSIONER HANSEN:
8 Q. I have a couple of questions.
9 Mr. Yankel, as we've gone through these proceedings
10 and I know you've been in here for some of it and
11 maybe you've been on the floor for some also, but
12 we've talked about the stockholders, we've talked
13 about the executives, and so forth. And I'm going
14 to ask you a couple of questions:
15 Do you feel that the PacifiCorp
16 stockholders are receiving some guarantee in this
17 merger?
18 A. I think a great deal of guarantee in
19 this merger, at least the bid premium for one. I
20 think the stockholders are being well taken care of,
21 yes.
22 Q. Do you believe that the -- some of the
23 top executives -- 26, I believe, was identified --
24 executives of PacifiCorp are receiving some
25 guarantee in this merger?
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HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 A. Yes, very large guarantees again, and
2 it strikes me somewhat funny, given what Mr. O'Brien
3 had indicated about the mismanagement, maybe a lot
4 of those -- those individuals to be receiving some,
5 quote, golden parachutes.
6 Q. And do you recall about how much money
7 the executives' guarantee was?
8 A. No, I do not. I don't recall.
9 Q. But you don't recall whether it was
10 around the 20 million range or whatever?
11 A. It was ten to 20, yes.
12 Q. Also, were you -- were you in here
13 when they talked about some of the guarantees that
14 PacifiCorp had made with Wyoming on future rate
15 increases there over the next couple years?
16 A. Yes, I'm familiar with that.
17 Q. And were you aware that
18 ScottishPower -- a witness stated that they honored
19 any commitment that PacifiCorp had made with any
20 individual state as far as Wyoming, or if they were
21 to make any commitment, were you -- are you aware or
22 did you understand that whatever commitment before
23 this merger PacifiCorp made, that ScottishPower
24 would honor that merger -- or, honor that in the
25 merger?
854
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 A. I'm familiar with the commitment, but
2 as I read the commitment, it's sort of a favored
3 nation type commitment, but then by the same token,
4 it didn't seem to be because it was only what
5 ScottishPower chose to be carried forward to other
6 jurisdictions. So, to me, it really wasn't a
7 favored nations where whatever we would do in
8 Wyoming, we would do in Idaho. It was whatever we
9 did in Wyoming that we want to carry over into
10 Idaho, we will do in Idaho; but it was not quite
11 like I'd like to see it to be.
12 Q. Do you believe in this merger that the
13 irrigation class of customer has received some
14 financial type guarantee like the stockholders and
15 the executives? Do you see -- or any other type of
16 guarantees? Do you see that in this merger so far?
17 A. No, what I see is basically the
18 Company asking for a blank check and, you know,
19 promise -- promises and we hope to do better and we
20 hope to do good; and stockholders getting a lot of
21 benefit, the Company executives getting a lot of
22 benefit, and the ratepayers getting a lot of
23 promises that I think are just that -- promises and
24 hopes and dreams -- but there really isn't anything
25 very sound for the ratepayers to grab on to.
855
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Q. So what kind of a guarantee would you
2 feel would be fair to, say, the irrigation class of
3 customers that you're representing here today?
4 A. One thing, as I've said before, I
5 think we really need a rate case, and we need to get
6 rates down to the point where they're comparable to
7 what's being paid in other jurisdictions. Now,
8 admittedly, rates can be set on the cost of service
9 in Idaho.
10 But I think we need to take a good
11 look at that. We've not taken a good look at that
12 for ten years within this jurisdiction. Utah has
13 looked at it several times and their rates have come
14 down each time. They're down -- I'm not sure -- I'd
15 say probably 25 percent from where they were.
16 So, in my opinion, I think the
17 irrigators need a rate reduction. Now, whether that
18 comes through a rate case or just an outright
19 reduction, promises of an outright reduction as a
20 part of the merger, I don't know. The vehicle I
21 have an opinion on, but generally I think that's
22 what needs to be done.
23 Q. But from the discussion we have, do
24 you believe that a rate case could cut either way?
25 It could actually be, as some people have stated
856
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 here today, it could be an increase. The total --
2 the total may come out that the Company is
3 underearning, and so it could be a rate increase for
4 everyone. It could possibly come out they're
5 overearning, but as is brought out as cost of
6 service, could have an effect. So do you agree that
7 a rate case could cut either way; there's no
8 guarantees?
9 I'm talking here about guarantees,
10 not -- so would you agree or what is your opinion, I
11 guess? I'm asking for what would be an acceptable
12 guarantee. Are you just saying a guarantee that we
13 have a rate case? Is the type of guarantee that
14 you, as representing the irrigation customers, want;
15 or are you tell- --
16 I'm asking guarantees, and I don't --
17 I don't see a rate case a guarantee of lower rates
18 to you people. I don't see it as an increase
19 either. I don't know. But I'm talking about
20 guarantees. So if I ask you --
21 Well I guess I better let you ask
22 (sic) that question. Do you see a rate case going
23 either way?
24 A. Certainly, a rate case can go either
25 way. I mean, in my opinion, I really don't think it
857
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 will, but again, there is no question that you
2 always take the chance that the data will go
3 opposite what you feel.
4 Given what ScottishPower has indicated
5 all along about rate savings that they're going to
6 provide, as far as a guarantee goes, I think at
7 least there should be a guarantee that those savings
8 will be passed on a lot more quickly to the
9 ratepayers than what ScottishPower has proposed.
10 ScottishPower, as I read their proposal, is that
11 they will do a lot of cost-cutting, save a lot of
12 money, and not change rates, and not reduce rates
13 for the customers.
14 I would like to see when -- one of the
15 commitments that has been recently made is that they
16 will make a filing with respect to the corporate
17 cost savings that take place and they're estimating
18 that at $10 million.
19 There's a huge amount more that
20 they've talked about, on the order of $200 million a
21 year cost savings. I'd like to see those reported,
22 and I would like to see action taken to reduce rates
23 because of those savings as well, say, on an annual
24 basis or something in the future. To me, that would
25 be a far better guarantee than what we have now.
858
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Q. Do you -- I know you're a witness for
2 the irrigation class of customers. Have you had the
3 opportunity to be in meetings with a lot of the
4 irrigators in Southeastern Idaho? Have you had that
5 opportunity?
6 A. Not -- not recently. Again, people
7 I've been dealing with more has been in Utah. I've
8 been dealing with actually some irrigators in Utah
9 and whatnot, talking to them, but I've not been in
10 Idaho specifically and dealt with any irrigators for
11 the last year or two.
12 Q. So you really wouldn't be in a
13 position to answer whether you felt like the
14 irrigators, those that pay the bill, would be
15 willing to gamble on a rate case versus, let's say,
16 a rate freeze?
17 Let's say if all of a sudden you said,
18 okay, here's a possibility of one of the conditions
19 of approval of the merger is that we would freeze
20 rates for a period of time; or the other possibility
21 is we'll go with a rate case. Can you speak for the
22 irrigators? Do you know what -- would they rather
23 gamble on the rate case or do you think they would
24 feel more secure with a rate case?
25 A. Okay, I'm not the one that deals
859
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 specifically with the irrigators, that would have to
2 be the attorney, and -- so, again, it's the attorney
3 that does that and not me.
4 COMMISSIONER HANSEN: I don't believe
5 I'm going to get him on the stand, so --
6 MR. NYE: You go ahead.
7 COMMISSIONER HANSEN: No.
8 MR. NYE: I think you're asking --
9 could I ask a question to clarify?
10 COMMISSIONER HANSEN: You can ask a
11 question.
12 MR. NYE: Are you asking this witness
13 whether -- not what he would negotiate, but as
14 opposed to what the Commission should do? In other
15 words, say, a cap in the meanwhile and with the
16 potential of some guarantee there won't ever be
17 above that amount for, say, three to five years and
18 then see what happens, versus what assurance this
19 Commission should give ratepayers generally? In
20 other words, the difference between what his opinion
21 is personally versus what his opinion or
22 recommendation is to you under your authority of how
23 you should best protect the ratepayer? That was my
24 only question, and I'll take the stand.
25 Q. BY COMMISSIONER HANSEN: Mr. Nye and
860
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Mr. Yankel, I was more or less trying to not put you
2 on the spot as much as I was wanting to ask you
3 whether you had an idea of what -- if you discussed
4 this with the irrigators and so forth and been in
5 meetings. And you've answered the question; you
6 said you didn't know.
7 A. I get the letters back from the
8 meetings --
9 Q. And that's fine.
10 A. -- as opposed to I don't go to the
11 meetings.
12 Q. But I am going to ask you the question
13 from your expertise and your point of view, do you
14 feel that a rate freeze for a period of time would
15 be a guarantee of some type of a guarantee for the
16 irrigation class of customer?
17 A. That's --
18 MR. NYE: Mr. Chairman -- excuse me --
19 by "freeze," we interpret as opposed to a "cap." So
20 in other words, "freeze" would prevent a reduction.
21 I just want to clarify the term.
22 COMMISSIONER HANSEN: Okay, and I'll
23 clarify that.
24 Q. BY COMMISSIONER HANSEN: When I speak
25 of a freeze, I don't speak of a reduction. I speak
861
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 of a cap or an increase that it would stay the rate
2 it is currently for a period of time.
3 I guess we talked yesterday about
4 Solutia, for an example. With their contract, they
5 are covered until I believe the end of 2001, so to
6 me they have a guarantee their rates aren't going to
7 go up. 2001 gives ScottishPower a chance to get
8 started. I think the Commission will know by 2001
9 if ScottishPower is heading down the road that they
10 have stated they're going to go down. I think there
11 will be a lot more information. So I think Mon- --
12 or, excuse me, Solutia has some guarantee even
13 though it's a special contract.
14 I'm asking that question to you: Do
15 you feel like that setting a lid on the current rate
16 for a period of time, is that a guarantee? Would
17 that be classified in your mind as a guarantee to
18 the irrigation customers?
19 A. I just had a little difficulty
20 following the question, so I'll just give --
21 Q. You probably did.
22 A. -- a slightly short -- I'll try to
23 keep it very short.
24 Q. Pretty long one.
25 A. There is different degrees. One
862
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 degree would be a rate freeze, and that's certainly
2 a guarantee that rates will not go up and there's
3 also a guarantee that the rates will not go down.
4 And I also thought I heard -- and I
5 wasn't quite sure -- another possibility would be a
6 rate cap, which means that the rates would not go
7 higher but could go lower. To me that's also a
8 guarantee and a far better guarantee.
9 And certainly I would prefer to see a
10 rate cap as opposed to a rate guarantee. Either one
11 of those are certainly guarantees.
12 The question is do we want -- do the
13 irrigators really want the guarantee but knowing
14 they're going to continue to pay very high rates, or
15 would they like to take a chance and hopefully get
16 much lower rates.
17 Q. And you mentioned that you really are
18 not in the position to given us the -- what you feel
19 is the irrigation customers' opinion on that?
20 A. I'm -- I can give you what I feel is
21 their opinion on that from what I've heard. The
22 original question was have I been there and talked
23 to them. I have not talked to them directly.
24 Q. That's fine. That ends that line of
25 questioning.
863
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 COMMISSIONER HANSEN: I believe that's
2 all the questions I have, but Commissioner
3 Kjellander has passed me a note that he has a
4 question.
5 COMMISSIONER KJELLANDER: And I do,
6 just one.
7 COMMISSIONER HANSEN: Commissioner.
8
9 EXAMINATION
10
11 BY COMMISSIONER KJELLANDER:
12 Q. And it's directly along this same
13 line, but it's more just for clarification so that
14 I'm not confused.
15 In your testimony, you mentioned that
16 a rate cap as a bare bones minimum is better than
17 nothing, and then you followed that up by saying
18 that there are some obvious benefits to a price
19 cap. I was hoping that you might be able to just
20 elaborate on that so that no one could say that you
21 were being vague.
22 A. Okay. Let me maybe just redo it to
23 make sure that I've got all the terms right.
24 There's a rate freeze -- I mean, the
25 possibility of a rate freeze has been mentioned,
864
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 which would keep rates --
2 Could you ask the question again? I
3 guess I --
4 Q. What are the obvious benefits of a
5 price cap as you referred to in your previous
6 testimony?
7 A. Okay. To me, a price cap would state
8 the rates could not go any higher than they
9 presently are today. The advantage there is
10 obviously the guarantee, especially guaranteed when
11 rates are considered to be extremely high right now;
12 but also the advantage that we have the possibility
13 of moving those rates lower. One, I believe the
14 rates could be brought lower now. If they can't be
15 brought lower in a rate case for one reason or
16 another, we haven't lost anything. And second of
17 all, ScottishPower contends that it's going to
18 drastically reduce costs and produce a great deal of
19 savings on the system with a rate cap. That could
20 be utilized to eventually bring down rates and
21 hopefully quickly as opposed to five years, ten
22 years out in the future to look at it. We would
23 have regular reviews under a price cap mechanism and
24 find that savings should be passed on to customers
25 in reduced rates. I find that relatively
865
HEDRICK COURT REPORTING YANKEL (Com)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 acceptable.
2 COMMISSIONER KJELLANDER: Thank you.
3 COMMISSIONER HANSEN: Okay, Mr. Nye,
4 do you have any redirect?
5 MR. NYE: Just a couple, your Honor.
6 COMMISSIONER HANSEN: That kind of
7 surprises me. No --
8 MR. NYE: Seriously, just a couple.
9
10 REDIRECT EXAMINATION
11
12 BY MR. NYE:
13 Q. You've been asked a line of questions
14 here, Mr. Yankel, but have those questions been
15 based on the assumption that the Applicant -- as far
16 as the freeze or some sort of resolution, are those
17 based on the assumption that the Applicant is
18 eligible for favorable treatment by this
19 Commission? Do you understand that?
20 A. Yes, I understand the question.
21 Q. Okay.
22 A. Yes, it would be under that
23 assumption, that a rate cap would be appropriate,
24 assuming that the Company met the test of showing
25 that there was a -- was not a detriment to rates and
866
HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 not a detriment to the operation and maintenance of
2 the system.
3 Q. And you were asked questions on
4 cross-examination as to areas of the Application
5 that were vague or unspecific or uncertain or
6 lacking guarantees. Do you remember that line of
7 questions?
8 A. Yes, I do.
9 Q. And has your opinion changed in that
10 regard, that this Applicant has failed to give
11 specificity or concrete evidence that would even
12 justify this Commission granting the Application?
13 A. No, my testimony remains as it was. I
14 still feel that the Company has not provided the
15 information necessary to meet the requirements of
16 mergal -- merger approval.
17 Q. And do you have an opinion that there
18 is any evidence that rates will be the same as a
19 result of the merger based upon the Application?
20 A. No, there is no evidence, in my
21 understanding of the record, that rates will be the
22 same or that they will not go up because of the
23 merger.
24 MR. NYE: No further questions.
25 COMMISSIONER HANSEN: Thank you,
867
HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Mr. Yankel.
2 (The witness left the stand.)
3 COMMISSIONER HANSEN: Does that
4 complete your case?
5 MR. NYE: Yes, Mr. Chairman, and if
6 the witness might be excused if there's no
7 objection?
8 COMMISSIONER HANSEN: Is there any
9 objection to the witness being excused?
10 Shall be granted.
11 Before we take our recess till quarter
12 till 11, I would like to acknowledge that we have
13 State Senator Stan Hawkins with us today, and we
14 welcome you to our hearing.
15 We will now take a break until -- or,
16 recess until quarter to 11, and then we will resume
17 with the Staff's witnesses.
18 (Recess.)
19 COMMISSIONER HANSEN: I believe we
20 will try to get started. Okay, I believe we just
21 finished up with the Irrigation Customers, and --
22 or, excuse me, Idaho Irrigation Pumping Association.
23 We'll now move to the Idaho Public Utility
24 Commission Staff.
25 MR. PURDY: Thank you, Mr. Chairman.
868
HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 Irrigators
1 Staff will first call Terri Carlock.
2
3 TERRI CARLOCK,
4 produced as a witness at the instance of the Staff,
5 being first duly sworn, was examined and testified
6 as follows:
7
8 DIRECT EXAMINATION
9
10 BY MR. PURDY:
11 Q. Would you please state your name and
12 business address?
13 A. My name is Terri Carlock. My address
14 is 472 West Washington Street, Boise, Idaho.
15 Q. You're implied -- employed by the
16 Idaho Public Utility -- Utilities Commission, are
17 you not?
18 A. Yes, I am.
19 Q. All right. And in what capacity?
20 A. I am the accounting section
21 supervisor.
22 Q. And in that capacity, have you
23 previously prefiled in this proceeding direct
24 testimony consisting of 15 pages of text?
25 A. Yes.
869
HEDRICK COURT REPORTING CARLOCK (Di)
P.O. BOX 578, BOISE, ID 83701 Staff
1 Q. And attached to that direct testimony
2 and identified in that testimony are exhibits, Staff
3 Exhibits 101 through 103. Correct?
4 A. That is correct.
5 Q. All right. Do you have any changes or
6 modifications to your direct testimony?
7 A. No, I do not.
8 Q. Therefore, if I were to ask you the
9 same questions today as contained in your direct
10 testimony, would your answers be the same?
11 A. Yes, they would.
12 Q. All right.
13 MR. PURDY: Given that, Mr. Chairman,
14 I would ask that the direct testimony of
15 Terri Carlock be spread upon the record as if read,
16 and that Staff Exhibits 101, 102, and 103 be
17 identified for the record.
18 COMMISSIONER HANSEN: Okay. The
19 testimony will be spread upon -- the direct
20 testimony of Ms. Carlock will be spread upon the
21 record if there be no objection. No objections, it
22 will be so ordered.
23 (The following prefiled direct
24 testimony of Ms. Carlock is spread upon the record.)
25
870
HEDRICK COURT REPORTING CARLOCK (Di)
P.O. BOX 578, BOISE, ID 83701 Staff