20241127Timothy Tatum Rebuttal.pdf

RECEIVED
Wednesday, November 27, 2024
IDAHO PUBLIC
UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR ) CASE NO. IPC-E-24-07
AUTHORITY TO INCREASE RATES FOR )
ELECTRIC SERVICE TO RECOVER )
COSTS ASSOCIATED WITH )
INCREMENTAL CAPITAL INVESTMENTS )
AND CERTAIN ONGOING OPERATIONS )
AND MAINTENANCE EXPENSES . )
IDAHO POWER COMPANY
REBUTTAL TESTIMONY
OF
TIMOTHY E . TATUM

1 Q. Please state your name .
2 A. My name is Timothy E . Tatum.
3 Q. Are you the same Timothy E . Tatum that
4 previously presented direct testimony?
5 A. Yes .
6 Q. What was your role in developing the
7 Company' s rebuttal testimony in this case?
8 A. My role in the development of the Company' s
9 rebuttal testimony was to oversee, manage, and coordinate
10 the Company' s rebuttal .
11 Q. Have you read the direct testimony submitted
12 by the Idaho Public Utilities Commission ("Commission")
13 Staff ("Staff") and other intervenors in this case?
14 A. Yes, I have. Based upon my review, it is
15 clear that the central issue in dispute in this case is the
16 proper test year methodology to be used to set customer
17 rates . More specifically, there is disagreement as to the
18 appropriate method to establish test year rate base .
19 Q. What is the purpose of your rebuttal
20 testimony?
21 A. My testimony will first summarize the
22 Company' s rebuttal positions as presented in the rebuttal
23 testimonies of witnesses Brian Buckham, Matthew Larkin,
24 Grant Anderson, Eric Hackett, and Mitch Colburn. Second, my
25 testimony will respond to the testimony of Staff and other
TATUM, DI-REB 1
Idaho Power Company

1 intervenors regarding the proper test year and incremental
2 rate base determination method to be used in this
3 proceeding.
4 Q. What was Idaho Power' s initial request in
5 this case?
6 A. Idaho Power has requested to increase Idaho
7 base rates to include 2024 capital additions and to reflect
8 ongoing labor-related operations and maintenance ("0&M11f)
9 expenses ("0&M Labor") since the Company' s 2023 General
10 Rate Case. If approved, the Company' s original request
11 would have resulted in an overall increase to Idaho
12 jurisdictional base revenue of approximately $99 . 3 million,
13 or 7 . 31 percent, effective January 1, 2025 .
14 Q. Has Idaho Power revised its requested
15 incremental revenue requirement following its review of
16 Staff and party testimony?
17 A. Yes . As further described in the Rebuttal
18 Testimony of Company Witness Mr. Matthew Larkin, after
19 reviewing Staff and party testimony, Idaho Power recommends
20 the Commission approve a revised incremental revenue
21 requirement in this case to reflect several adjustments
22 that respond to concerns raised by Staff and other parties
23 to this case in their respective testimonies . This proposal
24 modifies the Company' s original request to an Idaho
25 jurisdictional base revenue increase of approximately $83 . 2
TATUM, DI-REB 2
Idaho Power Company

1 million, or 6 . 12 percent, effective January 1, 2025 . Mr.
2 Larkin discusses the revised incremental revenue
3 requirement determination in detail in his testimony.
4 I . REBUTTAL CASE OVERVIEW
5 Q. Please provide an overview of the Company' s
6 rebuttal testimony provided in this case.
7 A. The Company' s rebuttal begins with my
8 testimony, which responds to the parties' recommendations
9 regarding proper test year methodology.
10 Mr. Brian Buckham, Senior Vice President, Chief
11 Financial Officer, and Treasurer, discusses the
12 unprecedented growth Idaho Power is currently experiencing
13 and the importance of adequate rate recovery to address
14 regulatory lag. Mr. Buckham discusses why maintaining the
15 financial health of Idaho Power is a benefit to the
16 Company' s customers and details the detrimental impacts
17 that would occur if Staffs revenue requirement
18 recommendations were adopted.
19 Mr. Matthew Larkin, Revenue Requirement Senior
20 Manager, discusses Idaho Power' s response to parties'
21 recommended adjustments to the proposed revenue
22 requirement, detailing which adjustments the Company
23 believes are reasonable and those it does not. Mr. Larkin' s
24 testimony concludes by presenting the Company' s revised
25 incremental revenue requirement that incorporates parties'
TATUM, DI-REB 3
Idaho Power Company

1 recommendations that the Company is willing to adopt .
2 Mr. Grant Anderson, Regulatory Consultant, addresses
3 issues raised by parties with regard to revenue spread, and
4 presents the Company' s proposed class-specific rate impacts
5 resulting from the revised revenue requirement determined
6 by Mr. Larkin.
7 Mr. Eric Hackett, Projects and Resource Development
8 Director, responds to the generation-related project cost
9 adjustments proposed by Staff, detailing why the Company' s
10 expenditures were prudent and why all requested costs
11 should be included in rates without adjustment.
12 Mr. Mitch Colburn, Vice President of Planning,
13 Engineering, and Construction, responds to the transmission
14 and distribution-related project cost adjustments proposed
15 by Staff, as well as the single vendor platform project and
16 a variety of other individual projects . Mr. Colburn also
17 provides an update on the status of the Wood River Valley
18 Reliability Project.
19 Q. Did any party to this case dispute the
20 limited scope nature of this case?
21 A. No . However, Staff and several intervenors
22 have each put forth recommendations as to how the
23 incremental revenue requirement should be determined and/or
24 apportioned to customer classes in this case.
25
TATUM, DI-REB 4
Idaho Power Company

1 Q. What are Staff' s recommendations in this
2 case?
3 A. Staff' s recommendations in this case are
4 summarized by Mr. Michael Louis in his direct testimony.
5 Mr. Louis recommends a revenue requirement increase of $8 . 9
6 million, a 0 . 66 percent increase overall . This
7 recommendation reduces the Company' s requested incremental
8 revenue requirement by $74 . 7 million for a rate base test
9 year adjustment, $4 . 4 million for rate base disallowances,
10 $10 million for salary adjustments, and $1 . 3 million for a
11 revenue adjustment.'
12 Q. Do you believe that Staff' s proposed
13 incremental revenue requirement will result in rates that
14 are fair, just, and reasonable.
15 A. No, I do not.
16 Q. Do you believe that Commission acceptance of
17 Staff' s adjustments would best serve the interests of Idaho
18 Power' s customers?
19 A. No. Acceptance of the Staff' s adjustments
20 would deny the Company an opportunity to recover its
21 prudently incurred costs of safely and reliably serving its
22 customers and has the potential to impose unnecessary costs
23 on Idaho Power' s customers for many years into the future
1 Louis DI at 4, 11. 6-8 .
TATUM, DI-REB 5
Idaho Power Company

1 in the form of higher financing costs .
2 Q. Please explain.
3 A. As detailed in my direct testimony filed in
4 this case, Moody' s Ratings ("Moody' s") recently placed
5 Idaho Power' s current Baal credit rating on "negative
6 outlook" and a February 2023 note from Standard and Poor' s
7 ("S&P") indicated a downgrading of its liquidity assessment
8 of the Company from "strong" to "adequate. " These actions
9 by the rating agencies provide a backdrop for Idaho Power' s
10 need to increase its cash collections from customers .
11 Any credit rating changes would likely impact both
12 short-term and long-term borrowing costs and IDACORP' s cost
13 of equity. Moody' s stated, "without the benefit of more
14 incremental and timelier rate relief through riders,
15 quicker asset recovery via depreciation rates or more
16 frequent base rate increases, IPC' s credit metrics will no
17 longer be sustained at levels supportive of the Baal
18 rating. "Z A copy of Moody' s press release is included as
19 Exhibit No. 2 to my direct testimony. Further, S&P cited
20 the Company' s reliability and economic growth-driven
21 capital spending needs as reflecting its liquidity
22 downgrade, as it perceives "elevated capital spending that
23 will result in a modest weakening of the company [' s]
2 Rating Action: Moody's changes IDACORP and Idaho Power outlooks to
negative; affirms ratings, Moody's Investors Service 2 (Mar. 7, 2024) .
TATUM, DI-REB 6
Idaho Power Company

1 liquidity throughout the forecast period. "3 A copy of S&P' s
2 Research Update is included as Exhibit No. 3 to my direct
3 testimony.
4 As detailed by Mr. Buckham in his rebuttal
5 testimony, Staff' s recommended revenue requirement if
6 adopted by the Commission, would correspond to a reduction
7 to Idaho Power' s credit metrics in 2025 that could
8 potentially lead to "junk bond" ratings .
9 Q. Did Mr. Louis or any member of Staff respond
10 to the portions of your direct testimony that describe the
11 Company' s current credit ratings, the potential for a
12 credit rating downgrade and the detrimental effects that
13 would have on customers?
14 A. No . Neither Mr. Louis, nor any other member
15 of Staff, indicated that the Company' s credit ratings or
16 any other potential financial impacts were considered as
17 part of Staffs recommendation in this case .
18 II . TEST YEAR AND RATE BASE
19 Q. In his testimony, Mr. Louis suggests that
20 the Company' s proposed rate base determination using
21 projected December 31, 2024 plant balances is a departure
22 from Commission ratemaking practices and should be
3 IDACORP Inc, Idaho Power Co Liquidity Assessments Revised to Adequate;
`BBB' Long- And `A-2' Short-Term Rtgs Affirmed 1 (Feb. 7, 2023) .
TATUM, DI-REB 7
Idaho Power Company

I considered out of scope in this case. Do you agree with Mr.
2 Louis' position on this matter?
3 A. No . It is actually Staff' s recommendation
4 that is a departure from the rate base treatment applied to
5 Idaho Power to set rates in every rate case dating back to
6 2008 . First, Staff' s application of a historical test year
7 ending August 31, 2024, is a departure from the hybrid test
8 year method used to set rates for Idaho Power since 2008
9 and which Staff has previously supported.4 Second, every
10 Idaho Power rate case since 2008 has applied various forms
11 of annualizing or period-end adjustments using projected
12 plant balances .
13 It is indeed Staff' s use of a full historical test
14 year and the application of average of monthly averages
15 ("AMA") to determine incremental rate base that is a
16 departure from the ratemaking treatment applied to Idaho
17 Power for over 16 years . Even more troubling is that
18 Staff' s proposed test period includes four months of Idaho
19 Power' s 2023 General Rate Case test year. Thus, Staff
20 appears to be relitigating costs and investments that have
21 already been approved and included in current customer
22 rates .
4 Case No. IPC-E-08-10, Staff witness Lobb DI at 10-12.
TATUM, DI-REB 8
Idaho Power Company

1 Q. What is Idaho Power' s requested incremental
2 rate base in this case and how was it determined?
3 A. The Company initially requested approval of
4 2024 incremental rate base of approximately $731 million
5 based on year-end 2024 projected plant balances and has
6 since revised that request to approximately $720 million
7 based upon rate base adjustments discussed in Mr. Larkin' s
8 testimony. The use of year-end plant balances as opposed to
9 a historical monthly average best reflects plant
10 investments placed in service up to the time rates go into
11 effect, thereby reducing, albeit not eliminating,
12 regulatory lag.
13 Q. Please define your use of the term
14 regulatory lag.
15 A. I define regulatory lag as the difference
16 between the time period when test-year costs are incurred
17 and the time period when rates are implemented to recover
18 those costs . As I stated in my direct testimony in this
19 case, the impact of regulatory lag is dependent upon the
20 situation. As I also stated in my direct testimony, Idaho
21 Power is not currently experiencing the circumstances where
22 regulatory lag is beneficial to the Company.5
5 Tatum DI at 24, 11. 1-8.
TATUM, DI-REB 9
Idaho Power Company

1 The effects of regulatory lag are particularly
2 pronounced because the Company is currently experiencing an
3 unprecedented level of load growth and a once-in-a-
4 generation level of capital spend necessary to provide
5 safe, reliable service to its customers .
6 Q. Has the Commission previously approved the use
7 of projected year-end plant balances for rate base
8 determinations in past rate proceedings?
9 A. Yes . As presented in my direct testimony, the
10 Commission has approved the use of projected period ending
11 plant balances in various forms in every general rate case
12 since 2008 . In Idaho Power' s 2008 General Rate Case, IPC-E-
13 08-10, the Commission approved the use of projected year-
14 end plant balances for projects having a cost more than $2
15 million.6 The Commission again approved this year-end plant
16 balance methodology when it approved a settlement
17 stipulation in the Company' s 2011 General Rate Case, IPC-E-
18 11-08, in Order No. 32426 . Finally, the settlement
19 stipulation approved by Order No. 36042 in the Company' s
6 Case No. IPC-E-08-10, Order No. 30722 at 8-9 ("The Commission accepts
the adjustments Idaho Power made to the test year rate base to add
capital investments of less than $2 million, and to add and annualize
actual investments greater than $2 million. Staff reviewed the group of
smaller investments as projected for 2008 and determined the projected
balances are reasonable for what was anticipated to be actual costs by
the end of the year. The Commission' s acceptance of this adjustment
should not be seen as a blanket endorsement of the forecast methodology
used to add smaller plant costs to test year rate base. The burden
remains on the Company to demonstrate that its proposed test year
balances represent known and measurable expenditures.")
TATUM, DI-REB 10
Idaho Power Company

1 2023 General Rate Case, IPC-E-23-11, included a rate base
2 amount with end-of-period adjustments .
3 Q. Staff Witness Michael Louis' testimony
4 presents what Staff believes to be the relevant regulatory
5 history regarding test year methodology and the proper
6 method of determining test year rate base. Do you agree
7 with Mr. Louis' assessment of relevant regulatory history
8 as it pertains to Idaho Power' s test year rate base
9 methodology?
10 A. No . Mr. Louis presents Commission orders
11 that have either been superseded by more current orders or
12 orders pertaining to other utility companies operating
13 under vastly different load growth, investment and
14 financing circumstances than Idaho Power. In support of
15 Staff' s recommendation, Mr. Louis references a Commission
16 order from over two decades ago in the Company' s 2003
17 General Rate Case (IPC-E-03-13) and either ignores or
18 minimizes the significance of rate case orders issued after
19 that pertaining to Idaho Power.
20 Q. What significant regulatory history
21 transpired between 2003 and 2008 when the Commission first
22 approved the use of projected, annualized plant balances
23 for rate base determinations?
24 A. In both 2003 and 2005, Idaho Power filed for
25 general rate relief using test years that combined six
TATUM, DI-REB 11
Idaho Power Company

1 months of actual information with six months of forecast
2 information. This approach is commonly referred to as a
3 "split test year. " The 2007 General Rate Case was filed as
4 a full 12-month forecasted test year.
5 Q. What was the resolution of the test year
6 issue in the 2007 General Rate Case, Case No. IPC-E-07-08?
7 A. The Company proposed a 2007 test year based
8 upon fully forecasted data, while Staff and others proposed
9 a historical test year with adjustments . The issue was not
10 definitively resolved in the case. However, the parties to
11 the case did reach a settlement and signed a Stipulation
12 that addressed the test year issue in a workshop.'
13 Provision 6 (c) of the Stipulation stated:
14 (c) Forecasted Test Years : The Parties
15 agree to participate in a good faith discussion
16 regarding a test year methodology that balances
17 the auditing concerns of the Staff and the
18 Intervenors with the need for timely rate relief
19 expressed by the Company. The Parties agree to
20 discuss methodologies that include both a twelve
21 month period that can be audited, and techniques
22 to adjust the auditable data so that it would
23 accurately represent the costs and revenues the
24 Company will experience during the future period
25 of time in which the rates would be in effect.
26 The Stipulation was ultimately approved by the
27 Commission in Order No. 30508 .
Case No. IPC-E-07-08, Motion for Approval of Stipulation, Stipulation
at 6 (c) (filed Jan. 3, 2008) .
TATUM, DI-REB 12
Idaho Power Company

1 Q. What was discussed at the test year
2 workshop?
3 A. Idaho Power presented a straw man test year
4 proposal that started with actual 12-month results that
5 would include typical and traditional ratemaking
6 adjustments consistent with past Company methods and
7 Commission orders . The actual information would then be
8 transformed into forecasted results through the use of
9 adjustments appropriate for that particular revenue,
10 expense, or asset classification. Idaho Power generally
11 agreed with these recommendations . Ultimately, the
12 workshop did not attempt to prescriptively address methods
13 prior to the next general rate case.
14 Q. Did the Company prepare its test year in the
15 subsequent rate case consistent with input received in the
16 workshop?
17 A. Yes, it did. For its 2008 General Rate Case
18 (Case No. IPC-E-08-10) , the Company started with actual
19 2007 results adjusted for typical and traditional
20 ratemaking adjustments and then adjusted the data to 2008
21 levels based upon a number of methodologies appropriate for
22 each of the revenue, expense, or asset classifications .
TATUM, DI-REB 13
Idaho Power Company

1 Q. In the 2008 General Rate Case, did Staff
2 support the use of a test year with forecast plant amounts
3 with certain annualizing adjustments?
4 A. Yes . On page 11 of Staff witness Randy
5 Lobb' s direct testimony he stated the following:
6 Staff also supports the inclusion of major
7 plant additions (in excess of $2 million)
8 expected to be completed prior to December
9 31, 2008 and annualizing such plant as if
10 it were in service for the entire year.
11
12 Q. How did the test year approach address the
13 past concerns raised by the Company, the Commission Staff,
14 and other parties to the Stipulation?
15 A. The Company' s proposed 2008 test year
16 utilized a 2007 foundation of actual financial information.
17 One primary concern expressed by the Commission Staff
18 regarding the Company' s test year in the 2007 General Rate
19 Case was that there was no actual auditable information to
20 review and there was discomfort in reviewing only
21 forecasted data and methods . The Company' s approach
22 presented in the 2008 General Rate Case provided an actual
23 auditable financial base for review, while at the same time
24 adjusting the historic financial information into a more
25 current time period.
26 Q. You mentioned that the Commission has
27 approved the use of some form of period-end rate base
28 adjustments in every Idaho Power general rate case since
TATUM, DI-REB 14
Idaho Power Company

1 2008 . Are there any other examples where the Commission has
2 approved the use of a period-end or annualizing adjustment
3 to determine incremental rate base?
4 A. Yes . In 2012, the Commission issued Order
5 No . 32585 in Case No. IPC-E-12-14 approving an increase to
6 rate base to recover Idaho Power' s investment in the
7 Langley Gulch power plant ("Langley") in the amount of
8 $389, 417, 340 . The Commission' s order in that case provided
9 for an increase to Idaho jurisdiction revenue of $58 . 1
10 million effective July 1, 2012, just days after Langley
11 became commercially operational in late June of 2012 .
12 Although Langley became used and useful in June of 2012,
13 the Commission approved one hundred percent of the
14 incremental plant investment to be included in rate base
15 and did not apply any form of averaging of plant balances
16 or AMA methodology.
17 Q. Are there any other similarities between the
18 Company' s request in this case and Case No. IPC-E-12-14
19 ("2012 Langley Case") that the Commission should take note
20 of?
21 A. Yes . The Company initiated the 2012 Langley
22 Case on March 2, 2012, shortly after the conclusion of
23 Idaho Power' s 2011 General Rate Case, IPC-E-11-08, which
24 had a rate effective date of January 1, 2012 . Because the
25 Company had just gone through a full revenue requirement
TATUM, DI-REB 15
Idaho Power Company

1 review under a recent general rate case, the Company' s
2 request in the 2012 Langley Case was to adjust rates to
3 include the incremental revenue requirement associated with
4 Langley using the overall rate of return recently
5 authorized by Order No. 32426 in the 2011 General Rate
6 Case . The incremental Langley revenue requirement was
7 developed using a combination of actual and forecasted
8 plant balances annualized to month-ending June 30, 2012 -
9 one day before the rate effective date of July 1, 2012 . In
10 this current case, the Company is requesting the exact same
11 rate base treatment for incremental 2024 capital
12 investments as was approved in the 2012 Langley Case .
13 Q. Will you please summarize why the Company' s
14 requested period-end rate base determination is supported
15 by regulatory history and warranted in this case?
16 A. As discussed in my direct and rebuttal
17 testimonies in this case, the Commission has approved
18 various forms of rate base annualizing adjustments in Idaho
19 Power general rate cases and other revenue requirement
20 proceedings throughout the last 16 years . Recognizing that
21 in each instance, the Commission-approved treatment has
22 varied, the common thread between each case has been
23 approval of a forecast test year using a rate base
24 determination method aimed at reducing the harmful impacts
25 of regulatory lag on Idaho Power' s financial health. The
TATUM, DI-REB 16
Idaho Power Company

1 unprecedented level of investment currently required of
2 Idaho Power to maintain safe, reliable service for
3 customers has exacerbated the harmful effects of regulatory
4 lag that would exist under a historical test year with no
5 rate base annualizing adjustments . It was with these
6 extreme circumstances in mind that the Company is seeking
7 the period-end rate base treatment presented in this case .
8 This requested treatment moves further toward reducing
9 regulatory lag than the annualization of projects over $2
10 million method explicitly approved by the Commission in
11 Idaho Power' s 2008 General Rate Case (IPC-E-08-10) ;
12 however, the current circumstances warrant this important
13 incremental step .
14 III . CURRENT IMPACTS OF REGULATORY LAG
15 Q. Aside from being inconsistent with the most
16 recent regulatory orders pertaining to Idaho Power rate
17 cases, are there other aspects of Staff' s recommendation in
18 this case with which the Commission should be concerned?
19 A. Yes . The most concerning aspect of Staff' s
20 recommendation is that it does not produce rate relief that
21 is reflective of the current operational and financial
22 realities faced by Idaho Power and will not afford Idaho
23 Power a reasonable opportunity to earn anywhere near its
24 authorized rate of return.
TATUM, DI-REB 17
Idaho Power Company

1 Whether the test year selected is historical,
2 future, or some hybrid, the most important attribute of the
3 selected test year should be that it accurately reflects
4 the best expectation of the cost of service that will
5 prevail when the rates will be in effect. Staff' s
6 recommendation in this case does not achieve this
7 fundamental ratemaking tenet. Simply put, the effect of
8 Staff' s proposed rate base adjustment will result in Idaho
9 Power carrying approximately $614 million of new, needed
10 infrastructure investment to reliably serve customers with
11 no return on that investment until the conclusion of its
12 next general rate case. This result is neither fair nor
13 reasonable, and it is not indicative of a constructive or
14 sustainable ratemaking practice.
15 Q. Why is regulatory lag such a critical issue
16 to Idaho Power at this time?
17 A. The effects of regulatory lag are
18 particularly pronounced in periods where the Company is
19 engaged in capital-intensive projects . During periods of
20 escalating costs where marginal costs are higher than
21 average costs, new rates are already inadequate by the time
22 they go into place. If this situation continues for a
23 prolonged period of time, the Company will be denied a
24 reasonable opportunity to earn its authorized rate of
25 return.
TATUM, DI-REB 18
Idaho Power Company

1 Over the next five years, the Company currently
2 expects rate base growth at a compound average rate of 16 . 9
3 percent annually, totaling approximately $5 . 2 billion
4 dollars of incremental rate base over what is currently
5 reflected in rates . That means that Idaho Power expects to
6 double its rate base over the next five years . This
7 represents a once-in-a-generation level of investment
8 growth for Idaho Power. The Company has not experienced
9 such high growth in investment since the construction of
10 the Hells Canyon Complex over 50 years ago. The Company
11 cannot absorb the depreciation and financing expense
12 associated with the incremental plant investment without
13 the requested rate relief in this case, and likely
14 subsequent rate adjustments going into the future .
15 Q. In your direct testimony, you referenced the
16 then current projection of system peak load growth over the
17 next five years being approximately 3 . 7 percent annually.
18 Does that number still reflect the Company' s current
19 projection?
20 A. No . Over the next five years Idaho Power now
21 expects to experience an annual system peak increase of
22 approximately 4 . 8 percent per year with average demand
23 growing by 7 . 7 percent over the same period. Adding plant
24 and equipment to serve these higher demands on the system
TATUM, DI-REB 19
Idaho Power Company

1 combined with ongoing replacement of aging infrastructure
2 are driving this generational level of capital spend.
3 Q. Micron' s witness James A. Leyko and the
4 Industrial Customers of Idaho Power' s witness Dr. Don
5 Reading both suggest$ that Idaho Power has not taken steps
6 to symmetrically address regulatory lag where it benefits
7 the Company. Is this correct?
8 A. No . Idaho Power has in place several rate
9 mechanisms that pass along to customers the benefits of
10 regulatory lag. First and foremost, Idaho Power has a
11 revenue sharing mechanism that has been in place for over a
12 decade .
13 Since 2009, the Company has been subject to an
14 Accumulated Deferred Investment Tax Credits
15 ("ADITC") /Revenue Sharing Mechanism that includes
16 provisions for the accelerated amortization of ADITC to
17 help achieve a minimum specified percent Idaho-jurisdiction
18 return on year-end equity ("Idaho ROE") , currently set at
19 9 . 12 percent. The mechanism also provides for the potential
20 sharing between Idaho Power and Idaho customers of Idaho-
21 jurisdictional earnings in excess of a 9 . 60 percent Idaho
22 ROE . Since its inception, this mechanism has resulted in
23 earnings sharing or the sharing of beneficial regulatory
8 Leyko DI at 5, 11. 16-22; Reading DI at 6.
TATUM, DI-REB 20
Idaho Power Company

1 lag with Idaho Power' s Idaho customers of approximately
2 $126 . 8 million, of which Micron and Idaho Power' s other
3 industrial customers have been relatively large
4 beneficiaries . Contrary to the assertions made by Mr. Leyko
5 and Dr. Reading, since 2009 when regulatory lag has
6 benefited Idaho Power, this mechanism has facilitated the
7 sharing of that beneficial lag with customers .
8 Secondly, Idaho Power' s Power Cost Adjustment
9 ("PCA") and Fixed Cost Adjustment ("FCA") also pass along
10 certain elements of beneficial regulatory lag between rate
11 cases . The PCA is a symmetrical power supply expense
12 mechanism that passes through to customers annual
13 differences between actual net power supply expense
14 ("NPSE") and the normalized level of NPSE included in base
15 rates . To the extent that actual NPSE is lower than the
16 NPSE included in base rates, customers receive that benefit
17 through the PCA. Further, the FCA is a symmetrical
18 mechanism that tracks annual changes in residential and
19 small general service energy usage per customer and either
20 credits or charges customers if the Company over or under
21 collects its allowed fixed cost per customer as established
22 in a general rate case.
23 Q. On page 6 of Mr. Leyko' s direct testimony,
24 he recommends the Commission reject Idaho Power' s use of
25 year-end rate base citing the Commission' s Order No. 35762
TATUM, DI-REB 21
Idaho Power Company

1 in Veolia' s general rate case. Dr. Reading makes a similar
2 recommendation on page 6 of his direct testimony. Do you
3 believe the Order cited by Mr. Leyko and Dr. Reading
4 justifies the rejection of the Company' s rate base request
5 in this case?
6 A. No, not at all . Without taking a position on
7 the merits of Veolia' s arguments in favor of a period
8 ending rate base method, Veolia and Idaho Power are vastly
9 different companies operating under very different
10 circumstances which warrant individual consideration by the
11 Commission. Veolia is a foreign-owned environmental
12 management services corporation. Veolia has international
13 operations with North America representing just 7 . 4 percent9
14 of its total net sales, and Idaho representing an even
15 smaller share of those sales . Idaho Power, on the other
16 hand, is a mid-sized, publicly traded, investor-owned
17 electric utility with over 96 percent of its sales within
18 the state of Idaho. These differences, along with the
19 magnitude of capital investment required of Idaho Power in
20 relation to its current balance sheet, warrant individual
21 consideration by the Commission for the rate relief
22 requested by each respective company.
9 Euronext Exchange Live Quotes:
http://live.euronext.com/en/product/equities/FR0000124141-XPAR/company-
information.
TATUM, DI-REB 22
Idaho Power Company

1 IV. CONCLUSION
2 Q. Can you explain why the Company' s requested
3 rate increase is important not only to Idaho Power but in
4 the best interest of customers?
5 A. To maintain the financial strength to cost-
6 effectively finance the growth-related demands of its
7 customers, Idaho Power must achieve fair and timely
8 recovery of its prudently incurred costs and a reasonable
9 return on the Company' s investment in its electrical
10 system, which today' s rates will not fully provide . Such
11 timely recovery will better position the Company to avoid
12 unwarranted higher financing costs that would otherwise
13 negatively impact customers' rates for many years into the
14 future .
15 By providing for fair and timely recovery of the
16 Company' s expenses it incurs on behalf of customers and
17 investments in the systems and activities that serve its
18 customers, this rate increase is in the best interests of
19 the Company, its shareholders and debtholders who finance
20 the Company' s operations, and the people and communities
21 the Company serves .
22 Q. Does this conclude your testimony?
23 A. Yes, it does .
24
TATUM, DI-REB 23
Idaho Power Company

1 DECLARATION OF TIMOTHY E. TATUM
2 I, Timothy E . Tatum, declare under penalty of
3 perjury under the laws of the state of Idaho:
4 1 . My name is Timothy E. Tatum. I am employed
5 by Idaho Power Company as the Vice President of Regulatory
6 Affairs .
7 2 . On behalf of Idaho Power, I present this
8 pre-filed rebuttal testimony in this matter.
9 3 . To the best of my knowledge, my pre-filed
10 rebuttal testimony is true and accurate.
11 I hereby declare that the above statement is true to
12 the best of my knowledge and belief, and that I understand
13 it is made for use as evidence before the Idaho Public
14 Utilities Commission and is subject to penalty for perjury.
15 SIGNED this 27th day of November 2024, at Boise,
16 Idaho .
17
18 Signed:
19 Timothy E . Tatum
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21
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24
TATUM, DI-REB 24
Idaho Power Company