20241127Larry Blank 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 TO )
INCREASE RATES FOR ELECTRIC )
SERVICE TO RECOVER COSTS ) CASE NO. IPC-E-24-07
ASSOCIATED WITH INCREMENTAL )
CAPITAL INVESTMENTS AND CERTAIN )
ONGOING OPERATIONS AND )
MAINTENANCE EXPENSES )
THE FEDERAL EXECUTIVE AGENCIES
REBUTTAL TESTIMONY
OF
LARRY BLANK
NOVEMBER 27, 2024
1

TABLE OF CONTENTS
Page
I. IDENTIFICATION............................................................................................................... 3
II. PURPOSE AND SUMMARY.............................................................................................. 3
III. IIPA'S REVENUE SPREAD RECOMMENDATION........................................................ 6
IV. ICIP'S REVENUE SPREAD RECOMMENDATION...................................................... 17
V. STAFF'S REVENUE SPREAD RECOMMENDATION.................................................. 19
VI. CONCLUSION................................................................................................................... 20
2

1 I. IDENTIFICATION
2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS FOR THE
3 RECORD.
4 A. My name is Larry Blank. My business address is TAHOEconomics, LLC, 6061
5 Montgomery Road, Midlothian, TX 76065. My email address is
6 LB&tahoeconomics.com.
7 Q. DID YOU PREPARE DIRECT TESTIMONY IN THIS CASE THAT WAS
8 PREVIOUSLY FILED?
9 A. Yes. I prepared direct testimony filed with the Idaho Public Utilities Commission
10 ("Commission") in this case on November 6, 2024.
11 Q. ON WHOSE BEHALF ARE YOU TESTIFYING?
12 A. I am testifying on behalf of the Federal Executive Agencies ("FEA").
13 II. PURPOSE AND SUMMARY
14 Q. WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?
15 A. I am responding to the revenue spread recommendations within the testimonies of
16 Lance D. Kaufman for the Idaho Irrigation Pumpers Association ("IIPA"), Don
17 Reading for the Industrial Customers of Idaho Power("ICIP"), and Michael Eldred for
18 Commission Staff("Staff').
19 Q. PLEASE SUMMARIZE YOUR REVIEW OF THE IIPA'S APPROACH FOR
20 REVENUE SPREAD.
21 A. Dr. Kaufinan interprets IPC's cost-of-service index ("COS Index") in this case to
22 suggest that an equal percentage rate increase for each customer class is reasonable.
23 This COS Index used by Dr. Kaufinan comes from Mr. Tatum's IPC direct testimony
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I Exhibit No. 4. However,Dr. Kaufinan's use of this COS Index to guide revenue spread
2 considerations is flawed. As explained by IPC in its response to IIPA 3-5:
3 "...the COS Index in Tatum Exhibit 4 is overstated towards 1.0 for each
4 customer class due to the calculation being performed on total revenue
5 requirement rather than just the incremental revenue requirement at
6 issue in this limited issue rate case. ...the CCOS study only includes the
7 incremental revenue requirement in this limited issue rate case. The
8 COS Index illustrated in Tatum Exhibit 4 combines existing base
9 revenue with the CCOS results for the incremental revenue requirement.
10 Therefore, the index is muted because each customer class's base
11 revenue differs from the results of a CCOS study as if it had included
12 all revenue requirement — not just the incremental revenue
13 requirement."
14 Dr. Kaufman misplaced reliance on this COS Index as the basis for his revenue spread
15 recommendation, and consequently,he understates the much larger class cost recovery
16 disparity experienced by IPC's customers on a total revenue basis. Therefore, Dr.
17 Kaufman's recommendation would worsen the existing class cross-subsidization
18 problem.
19 Q. PLEASE SUMMARIZE ICIP'S APPROACH FOR REVENUE SPREAD.
20 A. Dr. Reading recommends using the ratio of the class percentage increase to system
21 percentage increase from the last rate case stipulation (Case No. IPC-E-23-11) as the
22 basis for the revenue spread in this case. This recommendation fails to recognize cost-
23 based guidance for establishing a revenue spread in this case.
24 Q. PLEASE SUMMARIZE YOUR REVIEW OF STAFF'S REVENUE SPREAD
25 RECOMMENDATION.
26 A. Similar to IPC's direct case, Staff witness Mr. Eldred applies the revenue spread cap of
27 130% and floor of 50% of the overall increase based on the 2023 GRC stipulation.1
28 Staff s revenue spread proposal is not substantially different than leaving rates
29 unchanged given Staffs proposed overall increase of 0.66%, with a cap at 0.85% and
'Eldred DI at pp.7-8.
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I a floor of 0.33%. Leaving rates unchanged perpetuates inter-class subsidies. Given the
2 relatively low revenue requirement recommendation from Staff, I would have expected
3 a little more movement toward cost of service rather than an application of the cap and
4 floor approach used in stipulating the last rate case.
5 Q. BASED ON YOUR REVIEW OF THESE ALTERNATIVE APPROACHES
6 FOR THE REVENUE SPREAD IN THIS CASE,WHAT IS YOUR
7 RECOMMENDATION?
8 A. I continue to recommend that the Commission give greater weight to the cost of service
9 guidance in this case. Every case should be used as an independent opportunity for
10 movement toward cost of service and not to simply maintain the status quo on cost
11 subsidization. None of these approaches give weight to the cost of service evidence in
12 this case and, therefore, should be given little weight. I continue to reiterate my
13 testimony in favor of a broader cap and floor methodology which allows for a cost-
14 based revenue spread in this case as explained in my direct testimony.
15 III. IIPA's REVENUE SPREAD RECOMMENDATION
16 Q. WHAT IS IIPA'S RECOMMENDATION FOR THE REVENUE SPREAD IN
17 THIS CASE?
18 A. IIPA's Dr. Kaufman recommends a uniform, equal percentage increase to all customer
19 classes.
20 Q. WHAT IS THE BASIS FOR DR. KAUFMAN'S RECOMMENDATION TO
21 USE A UNIFORM PERCENTAGE INCREASE FOR ALL RATE CLASSES?
22 A. He uses a"cost per kWh" index as his support for an uniform increase suggesting that
23 the differences are within an acceptable margin of error.
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I Q. HAVE YOU REVIEWED THE DETAILS OF DR. KAUFMAN'S
2 SUGGESTIONS FOR GUIDANCE ON REVENUE SPREAD?
3 A. Yes. Dr. Kaufman suggests the use of a"cost per kWh"measure in comparison to"the
4 revenue cost per kWh" to suggest a uniform revenue increase.2 He makes this
5 comparison by developing a"cost of service index"which is simply"the revenue cost
6 per kWh divided by the cost per kWh. ,3 He goes on to suggest that a reasonable margin
7 of error for a class cost-of-service study is 5%, and if his calculated "cost of service
8 index" is less than 5%, then a uniform percentage increase for the rate class is not
9 materially different from the cost-based increase.4
10 Q. CAN YOU EXPLAIN IPC'S USE OF CLASS COST-OF-SERVICE INDICES
11 IN THE PRIOR GENERAL RATE CASE,AND WHAT THOSE INDICES
12 REPRESENT?
13 A. Yes. IPC witness Pawel P. Goralski presents class cost-of-service indices in IPC
14 Exhibit No. 48 in the 2023 GRC. For example, Mr. Goralski calculated a cost-of-
15 service index for the Dusk/Dawn Lighting class of 180% based upon proposed
16 revenues of$1,327,038 and cost-based revenues from IPC's CCOS study in that case
17 of $737,644.5 That index shows that the Dusk/Dawn Lighting class would pay a
18 significant subsidy at IPC's proposed revenue spread in the 2023 GRC. That subsidy
19 is the direct result of IPC's proposal to mitigate movements toward cost-based revenues
20 by applying a 150% cap and 50% floor relative to the overall proposed percentage
21 increase. As another example from the 2023 GRC, Mr. Goralski calculated a cost-of-
22 service index for the Traffic Control Lighting class of 52% based upon proposed
2 Kaufman DI at p.4,lines 3-5.
3 Id.p.4,lines 5-6.
4Id.p. 5,lines 3-5.
5 Note that the cost-of-service indices by rate class presented in Exhibit No.48 are identical whether calculated
using revenues or revenues per kilowatt-hour("kWh")and stated in mills/kWh.
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I revenues of$224,972 and cost-based revenues of$433,379. This index shows IPC was
2 proposing that the Traffic Control Lighting class receive a significant subsidy. The
3 cost-of-service indices for all rate classes from the 2023 GRC are shown in Table 1
4 below.
5
Table 1. IPC's Proposed Class Base Rate and Cost-Based Revenues and COS IndexM
Base Rate Revenues ($)
Final Proposed Revenue
Revenue Allocation at COS
Rate Class Allocation(') COS DifferenceN Index
Residential 625,504,833
Residential On-Site Generation 19,752,112
Combined Residential 650,093,644 645,256,946 4,836,698 101%
Small General Service 20,117,882
Small Gen. Service On-Site Gen. 101,442
Combined Small Gen. Service 20,108,644 20,219,324 (110,680) 99%
Large General Service 316,304,706 313,157,437 3,147,269 103%
Dusk/Dawn Lighting 1,327,038 737,644 589,394 180%
Large Power Service 164,068,656 162,848,079 1,220,577 101%
Irrigation 183,423,605 194,263,258 (10,839,653) 94%
Unmetered Service 1,352,288 1,342,227 10,061 101%
Street Lighting 3,750,417 2,825,017 925,400 133%
Traffic Control Lighting 224,972 433,379 (208,407) 52%
Special Contracts 63,661,231 63,231,509 429,722 101%
Total Uniform Tariff Schedules 1,404,314,821 1,404,314,821 0 100%
(1) Case No. IPC-E-23-11,Goralski, Exhibit No.48.
(2) IPC utilized a 150%cap and 0%floor for its revenue allocation.
(3) The difference represents proposed subsidies paid (positive)or subsidies received (negative).
6
7 Importantly, IPC's CCOS study in that case distributed IPC's total proposed
8 revenue requirement among the rate classes, thereby providing for the development of
9 cost-of-service indices for each rate class. Those indices provide a meaningful measure
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I of whether IPC's proposed revenue spread balances the primary goal of achieving cost-
2 based rates while also avoiding concerns regarding rate shock.
3 Q. WERE THERE STILL INTER-CLASS SUBSIDIES CONTAINED IN THE
4 STIPULATION THAT RESOLVED THE REVENUE SPREAD IN THE 2023
5 GRC?
6 A. Yes. Exhibit No. 4 of the stipulation shows that material subsidies remained in IPC's
7 rate structure with the revenue spread in the 2023 GRC and approved by the
8 Commission. Those subsidies are shown in Table 2 below. Most notably, the on-site
9 generation, Irrigation, and Traffic Control Lighting classes are receiving material
10 subsidies with the revenue spread from the 2023 GRC stipulation.
11
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Table 2. Stipulated Class Base Rate and Cost-Based Revenues and COS IndexM
Base Rate Revenues ($)
Stipulated COS Revenue COS
Rate Class Revenue(2) Requirement Difference(3) Index
Residential 595,468,521 595,989,810 (521,290) 100%
Residential On-Site Generation 13,683,222 18,948,175 (5,264,954) 72%
Combined Residential 609,151,743 614,937,985 (5,786,242) 99%
Small General Service 18,690,670 19,148,903 (458,232) 98%
Small Gen. Service On-Site Gen. 51,921 97,520 (45,599) 53%
Combined Small Gen. Service 18,742,591 19,246,423 (503,832) 97%
Large General Service 318,669,668 299,988,648 18,681,020 106%
Dusk/Dawn Lighting 1,325,232 689,884 635,348 192%
Large Power Service 157,333,066 156,456,753 876,313 100%
Irrigation 170,746,050 186,121,685 (15,375,635) 92%
Unmetered Service 1,307,805 1,287,368 20,438 102%
Street Lighting 3,742,273 2,701,663 1,040,610 139%
Traffic Control Lighting 209,219 417,200 (207,980) 50%
Special Contracts 61,391,966 60,772,004 619,962 101%
Total Uniform Tariff Schedules 1,342,619,613 1,342,619,613 0 100%
(1) Case No. IPC-E-23-11,Stipulation, Exhibit No.4.
(2) The stipulation used a 130%cap and 50%floor for the agreed upon revenue allocation.
(3) The difference represents subsidies paid (positive)or subsidies received (negative).
1
2 Interestingly, several class subsidies increased with the stipulation compared
3 with IPC's proposed revenue spread, and most notably the Large General Service class.
4 For this class, the stipulated revenue requirement of $318,669,668 exceeded IPC's
5 proposed revenue requirement of$316,304,706, which is counter intuitive given the
6 substantial reduction in IPC's proposed base revenue increase with the stipulation.
7 There are two important considerations for this case that are evident from Table
8 1 and 2 above from the 2023 GRC. First, stipulated revenue spreads do not always
9 move class revenues toward cost-based levels. In fact, the opposite can occur. This is
10 directly relevant to this case because ICIP's revenue spread proposal presented by Dr.
11 Reading is to rely on the 2023 GRC stipulated revenue spread in percentage terms to
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I develop the revenue spread in this case. There is no cost-based foundation for such a
2 proposal. Second, overly stringent gradualism proposals are a primary impediment for
3 achieving cost-based revenue levels. For example,the Irrigation class has a lower COS
4 index with the stipulation than IPC proposed in the 2023 GRC, which produced a
5 material revenue shift to other rate classes. This result is directly tied to the tighter cap
6 and floor utilized with the stipulation. Tighter revenue spreads are directly relevant to
7 this case because of Staff s narrow revenue spread proposal. It is also relevant to this
8 case because IIPA's revenue spread proposal presented by Dr. Kaufman represents no
9 movement nor gradualism toward cost-based revenue levels. Of note, Staffs revenue
10 spread proposal is minimally different from that proposed by IIPA, or nearly an equal
11 percentage allocation. My recommendation for cost-based rates not to exceed a 190%
12 - 0% cap—floor band will provide important movement toward cost of service.
13 Q. CAN YOU EXPLAIN HOW MR. TATUM PRESENTED A COST-OF-
14 SERVICE INDEX IN IPC'S EXHIBIT NO. 4 IN THIS CASE?
15 A. Yes. Mr. Tatum added 2024 normalized class sales revenue with "incremental" class
16 revenue requirements from IPC's "incremental" cost-of-service study prepared for this
17 case to produce what IPC's labels as"Class Cost-of-Service Allocation"in Exhibit No.
18 4. To explain, consider the following: "A" is IPC's 2024 normalized class sales
19 revenue, `B" is IPC's incremental class revenue requirements from IPC's incremental
20 cost-of-service study, and "C" is class cost-based revenue levels as presented by IPC.
21 In this calculation,"A",IPC's 2024 normalized class sales revenues, are not cost-based
22 revenue levels. Instead, they are normalized actual sales revenue. As can be seen in
23 Table 2, IPC's actual class sales revenues set in the stipulation in the 2023 GRC do not
24 represent cost-based revenues given the significant subsidies in IPC's rate structure. In
25 this same calculation, "B", IPC's incremental class revenue requirements from its
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I incremental cost-of-service study are representations of cost-based revenue levels
2 because IPC applied cost-of-service principles from its 2023 GRC CCOS study to
3 calculate those incremental class revenue requirement levels. The sum of an actual
4 revenue level, or "A", with a cost-based incremental revenue level, or `B", does not
5 equate to a cost-based level of revenues. Instead, "C" simply represents IPC's revenue
6 spread proposal before applying any gradualism restrictions.
7 The data that Mr. Tatum labels as "COS Index" in IPC Exhibit No. 4 are not
8 cost-of-service indices because the denominator for those indices did not come from a
9 CCOS study of IPC's entire revenue requirement.Instead,those indices represent IPC's
10 proposed class revenue spread with its gradualism restrictions compared to IPC's base
11 case proposed class revenue spread without its gradualism restrictions.A more accurate
12 label for that column of data in Exhibit No.4 is"Mitigation Index,"where a class index
13 below 100%indicates a class would benefit from IPC's mitigation proposal and a class
14 index above 100% indicates a class would suffer economic harm from that proposal.
15 Again, IPC's COS Index information in Exhibit No. 4 is not a comparison of proposed
16 revenues to cost-based revenues from a CCOS study for IPC's entire revenue
17 requirement, and therefore not consistent with how IPC has calculated a COS Index for
18 decades.
19 Q. DID IPC EXPLAIN IN DISCOVERY THAT THE COS INDEX IS NOT
20 REPRESENTATIVE OF FULL COST OF SERVICE?
21 A. Yes. In response to IIPA 3-5,the Company has explained why the COS Index is greatly
22 limited and biased in that it only includes cost of service for the incremental revenue
23 increase in this case added to current base revenue. I have attached a copy of this
24 response to this rebuttal testimony as Exhibit 502. In summary, "the COS Index in
25 Tatum Exhibit 4 is overstated towards 1.0 for each customer class due to the calculation
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I performed on total revenue requirement rather than just the incremental revenue
2 requirement at issue in this limited issue rate case. ,6
3 Q. CAN YOU GIVE AN EXAMPLE OF HOW LARGE THE OVERSTATEMENT
4 IS IN THE COS INDEX USED BY DR. KAUFMAN?
5 A. An obvious example of the overstatement is evident in his presentation of cost-based
6 revenue for the Dusk/Dawn Lighting class. As shown in Table 2 above, IPC calculated
7 that the Dusk/Dawn Lighting class revenue allocation with the 2023 GRC is$1,325,232
8 while a cost-based allocation was only $689,884, thereby equating to a significant
9 subsidy borne by Dusk/Dawn Lighting class customers. In Exhibit No. 4, Mr. Tatum
10 presents the Dusk/Dawn Lighting (labeled as Area Lighting) class's 2024 normalized
11 revenues at $1,327,007, or insignificantly different from those established with the
12 2023 GRC stipulation. Mr. Tatum also presents the incremental revenue requirement
13 for this class from IPC's incremental cost-of-service study of $821. He then adds
14 $1,327,007, or"A", with $821, or `B", to establish what he represents is a cost-based
15 revenue allocation for the Dusk/Dawn Lighting class of$1,327,828, or"C". It is not a
16 cost-based revenue allocation when 99.9% of "C" is based on normalized actual
17 revenues, or "A", and not cost-based revenues from a CCOS study on IPC's full
18 revenue requirement. As shown in Table 2 above, cost-based revenue for the
19 Dusk/Dawn Lighting class from the 2023 GRC and computed by IPC just last year was
20 only $689,884. It is conceptually easy to realize that the Dusk/Dawn Lighting class is
21 still paying a substantial subsidy if that class is responsible for $1,327,828 of IPC's
22 revenue requirement in this case. Therefore, $1,327,828 represents IPC's revenue
23 spread in this case before its rate mitigation proposal, and nothing more.
6 FEA Exhibit 502(IPC Response to Request for Production No.IIPA 3-5.a).
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I IPC's proposed revenue spread after its cap and floor mitigation proposal is for
2 the Dusk/Dawn Lighting class to pay $1,375,486 of IPC's revenue requirement, or a
3 $48,479 increase rather than the$821 increase supported by IPC's incremental cost-of-
4 service study.Dividing$1,375,486 by$1,327,828 equals 104%,thereby indicating that
5 the Dusk/Dawn Lighting class suffered economic harm($48,479 less$821,or$47,658)
6 with IPC's mitigation proposal.
7 Q. IS MR. TATUM'S PRESENTATION OF COST-OF-SERVICE
8 INFORMATION IN EXHIBIT NO. 4 INCONSEQUENTIAL TO THIS CASE?
9 A. Unfortunately, no. Dr. Kaufman latched onto this presentation and now suggests that
10 IPC's rate classes are all paying reasonable approximations of their cost-based share of
11 IPC's revenue requirement. Stated another way, Dr. Kaufman is opportunistically
12 suggesting that IPC's rate structure is now free of inter-class subsidies. It is not, as
13 Table 2 above clearly demonstrates from only a year ago. Dr. Kaufman's presentation
14 of class cost-of-service information in this case is demonstrably erroneous.
15 Q. PLEASE EXPLAIN THE ERRORS IN DR. KAUFMAN'S PRESENTATION
16 OF CLASS COST-COST-OF-SERVICE INFORMATION IN THIS CASE.
17 A. Dr. Kaufman's erroneous presentation of cost-of-service information is shown in Table
18 1 of his direct testimony. His subsequent interpretations of that information and the
19 inferences he makes based upon that information formulate his revenue spread
20 recommendation. The first column of that table was taken from Mr. Tatum's Exhibit
21 No. 4 and equals IPC's proposed revenue spread before IPC's mitigation proposal but
22 stated in mills per kilowatt-hour("kWh"). The second column in Dr. Kaufman's Table
23 1 is IIPA's proposed revenue spread stated in mills/kWh. That revenue spread reflects
24 IIPA's proposal that all rate classes receive an equal percentage increase, or 7.31%
25 given IPC's proposed system average increase in this case. He then divides the second
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I column by the first column to produce what he labels as a COS Index, no differently
2 than Mr. Tatum presented an erroneous COS Index in Exhibit No 4. Dr. Kaufman's
3 COS Index is a Mitigation Index that indicates the difference between IIPA's proposed
4 revenue spread and IPC's proposed revenue spread before mitigation, and nothing
5 more. That is because the first column in Dr. Kaufinan's Table 1 does not reflect IPC's
6 cost of service. As I previously explained, the information in that column is comprised
7 primarily of IPC's normalized actual revenues and not a cost-based allocation of IPC's
8 entire revenue requirement.
9 The Mitigation Index column in Dr. Kaufman's Table 1,which he labels"COS
10 Index," shows that the Irrigation and Traffic Control Lighting classes benefit from
11 IIPA's proposal to ignore cost-of-service allocations of IPC's incremental revenue
12 requirement in this case, and that other rate classes, most notably the Dusk/Dawn
13 Lighting class and Special Contract customers, suffer economic harm with IIPA's
14 proposed revenue spread. Table 3 below is equivalent to Dr. Kaufman's Table 1 but
15 stated in dollars and not mills/kWh, and with IIPA's proposed revenue spread in the
16 first column to maintain consistency with the presentations in Tables 1 and 2 above.
17
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Table 3. Comparison of IIPA's and IPC's (Pre-Mitigation) Revenue Spreads
Base Rate Revenues ($)
IIPA's IPC's Proposed
Proposed Revenue Miti-
Revenue Spread Before gation
Rate Class Spread(') Mitigation(2) Difference(') Index
Residential 655,432,765
Residential On-Site Generation 19,484,835
Combined Residential 675,829,257 674,917,600 911,656 100%
Small General Service 19,991,158
Small Gen. Service On-Site Gen. 70,646
Combined Small Gen. Service 20,079,746 20,061,804 17,942 100%
Large General Service—Sec. 293,606,991 292,143,273 1,463,717 101%
Large General Service— P/T 50,303,370 49,996,522 306,848 101%
Dusk/Dawn Lighting 1,423,965 1,327,828 96,137 107%
Large Power Service 167,847,103 167,385,710 461,393 100%
Irrigation 179,057,456 183,832,310 (4,774,853) 97%
Unmetered Service 1,449,136 1,449,928 (792) 100%
Street Lighting 3,928,133 3,875,581 52,552 101%
Traffic Control Lighting 235,180 243,671 (8,491) 97%
Total Idaho Rates 1,393,760,337 1,395,234,227 (1,473,890) 100%
Micron 37,428,172 36,776,472 651,701 102%
Simplot 10,870,355 10,584,592 285,763 103%
DOE/INL 16,206,906 15,670,479 536,427 103%
Total Special Contracts 64,505,433 63,031,543 1,473,890 102%
Total Uniform Tariff Schedules 1,458,265,770 1,458,265,770 0 100%
(1) IIPA's proposed revenue spread at IPC's proposed revenue requirement.
(Z) IPC's proposed revenue spread before mitigation at IPC's proposed revenue requirement(Ex. No.4).
(3) The difference represents mitigation economic harm (positive)or mitigation benefits (negative).
1
2 In summary, Dr. Kaufman proposes to ignore any cost-of-service allocation of
3 IPC's incremental revenue requirement in this case to benefit primarily the Irrigation
4 and Traffic Control Lighting classes. Yet, those two rate classes are already receiving
5 substantial subsidies as recognized by the Commission and the parties in Case No.IPC-
6 E-23-11, and as shown in Table 2 above where these classes have COS indices of 92%
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1 and 50%, respectively. Therefore, the Commission should reject IIPA's proposed
2 revenue spread because it is unsupported by cost-of-service principles and actually
3 moves away from cost-based revenue targets.
4 Q. DO YOU HAVE ANY OTHER COMMENTS ON IIPA'S PROPOSED
5 REVENUE SPREAD?
6 A. Yes. The Commission should not give weight to Dr. Kaufman's comments on rate
7 classes being within 5% of cost-of-service because Dr. Kaufman is not making a cost-
8 of-service comparison and instead is comparing IIPA's proposed revenue spread to
9 IPC's proposed revenue spread before mitigation. The latter does not represent IPC's
10 cost of service derived from a CCOS study of IPC's entire revenue requirement. It
11 primarily represents current class normalized actual revenue levels with embedded
12 inter-class subsidies that Dr. Kaufman chooses to ignore, most likely because he
13 latched onto Mr. Tatum's representation of IPC's revenue spread before mitigation.
14 Furthermore, Dr. Kaufman's statement that "a reasonable margin of error for a COSS
15 is 5 percent" is unsubstantiated and would require a statistical study which does not
16 exist.
17 Q. WOULD YOU LIKE TO RESPOND TO DR. KAUFMAN'S CLAIM THAT
18 WINTER DEMAND IS MORE COSTLY TO SERVE THAN SUMMER
19 DEMAND?
20 A. Yes.Dr.Kaufman claims that"winter demand is more costly to serve."7 This statement
21 is false. When asked in discovery for support of this statement,IIPA's response to FEA
22 Request No. 1 claims that Idaho Power services its incremental capacity with battery
23 storage and battery storage is more efficient in the summer than in the winter. This
24 response ignores the large amount of additional capacity and additional capacity costs
7 Kaufman DI at p.2,lines 19-20.
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I required in the summer to meet the system peak demand, and that demand is not being
2 serviced with battery storage. Electric power is not created from battery storage, it is
3 created by generation capacity and delivered by transmission capacity, and much of
4 that generation and transmission is actually more efficient in the winter than in the
5 summer. But this is not a textbook exercise in marginal cost economics, this is a
6 question of proper allocation of fixed capacity costs that exist to serve system peak
7 demand, and system peak demand clearly occurs in the summer. These additional
8 capacity costs to serve system peak demand outweigh any marginal difference in
9 battery storage efficiency between the summer and winter. Dr. Kaufman provided no
10 additional explanation when given the opportunity in discovery, and therefore, I
11 conclude that he is wrong. The total capacity costs to serve summer system peak
12 demand times are greater than the that in the winter.
13 Q. WHAT IS YOUR RECOMMENDATION TO THE COMMISSION
14 REGARDING IIPA'S PROPOSED REVENUE SPREAD?
15 A. I recommend that the Commission reject IIPA's proposed equal percentage revenue
16 spread in its entirety.
17 IV. ICIP's REVENUE SPREAD RECOMMENDATION
18 Q. WHAT IS ICIP'S RECOMMENDATION FOR DEVELOPING THE
19 REVENUE SPREAD IN THIS CASE?
20 A. Dr. Reading recommends that the revenue spread should be determined by calculating
21 the class percentage increases from the 2023 GRC stipulation as a percentage of the
22 system percentage increase from the 2023 GRC and applying those ratios to the system
23 percentage increase IPC is proposing in this case to develop the revenue spread.
24 Q. IS THERE A LOGICAL FOUNDATION FOR THAT PROPOSAL?
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I A. No. Material progress was made in reducing the subsidy borne by the Large Power
2 Service class(Schedule 19)in the stipulation in the 2023 GRC. This is evident in Table
3 2 above where this class achieved a 100%COS index with that stipulation. Any further
4 concessions to this rate class in this case would upset the cost-based allocation of IPC's
5 incremental revenue requirement in this case, thereby shifting cost recovery to other
6 classes in an unwarranted manner. Instead, the Large Power Service class should
7 receive its cost-based share of IPC's incremental revenue requirement as I have
8 proposed on behalf of the FEA,just like all other rate classes.
9 Q. CAN YOU PROVIDE AN EXAMPLE OF THE CONSEQUENCES OF
10 ADOPTING ICIP'S REVENUE SPREAD PROPOSAL?
11 A. Yes. The Residential class would be materially and negatively affected by ICIP's
12 revenue spread proposal. IPC's Exhibit No.4 indicates that the Residential class should
13 receive a 7.12% increase prior to IPC's mitigation proposal, or slightly less than the
14 7.31% system average increase. ICIP's proposal would produce a 9.50% increase for
15 this class, thereby shifting $14.5 million in cost recovery to the Residential class and
16 away from other classes. Based on the COS index from the 2023 GRC,the Residential
17 class is currently paying approximately its equitable share of IPC's cost of service as
18 shown in Table 2, above. With a COS index of 100%. This demonstrates the
19 unreasonableness of ICIP's revenue spread proposal in this case.
20 Q. WHAT IS YOUR RECOMMENDATION TO THE COMMISSION
21 REGARDING ICIP'S REVENUE SPREAD PROPOSAL?
22 A. I recommend that the Commission reject ICIP's revenue spread proposal because it
23 ignores the subsidy reductions achieved with the 2023 GRC stipulation and lacks cost
24 of service foundation.
L. BLANK, RE 18
Federal Executive Agencies

I V. STAFF'S REVENUE SPREAD RECOMMENDATION
2 Q. PLEASE EXPLAIN YOUR CONCERNS WITH STAFF'S REVENUE SPREAD
3 PROPOSAL.
4 A. Staff s revenue spread proposal is not substantially different than leaving rates
5 unchanged given Staffs proposed overall increase of 0.66%, with a cap at 0.85% and
6 a floor of 0.33%. Leaving rates unchanged perpetuates the inter-class subsidies shown
7 in Table 2 above. Importantly, the narrow gap between Staff s cap and floor illustrates
8 the pitfall of using percentage caps and floors tied to the overall percentage increase in
9 a case when the overall increase becomes insignificantly different from 0%. Given the
10 subsidies that exist in IPC's current rate structure indicated by Table 2 above, I suggest
11 that the Commission should find it difficult to justify Staff s cap and floor
12 recommendation because adopting that recommendation requires the Commission to
13 ignore known inequities in IPC's existing rate structure that are in plain sight.
14 Q. ARE THERE ALTERNATIVES TO STAFF'S OVERLY NARROW
15 REVENUE SPREAD PROPOSAL THAT THE COMMISSION COULD
16 UTILIZE TO ESTABLISH AN EQUITABLE REVENUE SPREAD IN THIS
17 CASE?
18 A. Yes. FEA's proposal for a cap of 190%8 on the overall increase applied to the
19 incremental increase in this case only is far more effective at moving class revenues
20 toward cost of service than Staff s proposal,yet even FEA's proposal is frustrated when
21 applied to an overall percentage as low as that proposed by Staff, particularly with
22 FEA's proposed floor of 0%. As an additional alternative, the Commission can utilize
23 its discretion to establish a revenue spread in this case using IPC's incremental cost-of-
24 service study as a guide while establishing any revenue requirement it determines is
8 Blank DI at p. 19.
L. BLANK, RE 19
Federal Executive Agencies

I appropriate for IPC based on the evidence in this case. For example, in Case No. IPC-
2 E-08-11, IPC's last litigated general rate case, the Commission approved a cap of 6%
3 and a floor of 0%for the revenue spread,or a 6%spread between the highest and lowest
4 changes in class revenues.That same spread applied to Staff s 0.66%increase produces
5 a cap of 3.66% and a floor of(2.34%).
6 Q. WHAT IS YOUR RECOMMENDATION REGARDING STAFF'S PROPOSED
7 REVENUE SPREAD?
8 A. I recommend that the Commission reject Staff s revenue spread as being overly narrow.
9 VI. CONCLUSION
10 Q. DO YOU HAVE ANY SUMMARY COMMENTS ON REVENUE SPREAD?
11 A. I do. Establishing a revenue spread that is tied to cost of service is a primary objective
12 of establishing just and reasonable rates, and I encourage the Commission to focus on
13 that objective and employ caution when considering mitigation proposals.
14 Q. DOES THIS CONCLUDE YOUR REBUTTAL TESTIMONY?
15 Yes.
L. BLANK, RE 20
Federal Executive Agencies

EXHIBIT NO. 502
REBUTTAL TESTIMONY OF LARRY BLANK
FEDERAL EXECUTIVE AGENCIES
CASE NO. IPC-E-24-07
Exhibit 502 p. 1 of 3
L.Blank,RE
Federal Executive Agencies

REQUEST FOR PRODUCTION NO. IIPA 3-5: Please refer to the Direct
Testimony of Dr. Don Reading page 11 lines 1 to 5.
a. Please provide Schedule 19's COS Index as expressed in Column P of Tatum
Exhibit 4 using the 2023 CCOS, before and after the 2023 GRC rate increase.
b. Please explain the significance of the COS Index.
RESPONSE TO REQUEST FOR PRODUCTION NO. IIPA 3-5: Please see
responses below.
a. The 2023 GRC Settlement Stipulation did not explicitly include a "COS Index."
However, the Company has prepared the file labeled "Attachment — Response to
IIPA 3-5a," which contains the same metric for each customer class for the 2023
GRC Settlement Stipulation. The calculation compares each customer class's mill
rate (i.e., revenue requirement per kWh sales) as a result of the final revenue
allocation compared to the CCOS results. Therefore, a "before and after GRC" is
not a calculation that can be performed as the final results are inherently
embedded in the underlying calculation of the metric. As further described in
subpart (b) to this response, the COS Index in Tatum Exhibit 4 is overstated
towards 1.0 for each customer class due to the calculation being performed on
total revenue requirement rather than just the incremental revenue requirement at
issue in this limited issue rate case.
b. The "COS Index" is a customer class's final revenue allocation ratio relative to the
CCOS results. A customer class with a ratio greater than 1.0 or 100% is being
allocated revenue requirement above the results of the CCOS study, and a ratio
Exhibit 502 p. 2 of 3
L. Blank, RE
Federal Executive Agencies
IDAHO POWER COMPANY'S RESPONSE TO IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
THIRD SET OF DATA REQUESTS- 7

less than 1.0 or 100% is being allocated revenue requirement below the results of
the CCOS study.
However, the CCOS study only includes the incremental revenue requirement in
this limited issue rate case. The COS Index illustrated in Tatum Exhibit 4 combines
existing base revenue with the CCOS results for the incremental revenue
requirement. Therefore, the index is muted because each customer class's base
revenue differs from the results of a CCOS study as if it had included all revenue
requirement— not just the incremental revenue requirement.
The response to this Request is sponsored by Grant T. Anderson, Regulatory
Consultant, Idaho Power Company.
Exhibit 502 p. 3 of 3
L. Blank, RE
Federal Executive Agencies
IDAHO POWER COMPANY'S RESPONSE TO IDAHO IRRIGATION PUMPERS ASSOCIATION, INC.'S
THIRD SET OF DATA REQUESTS- 8

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. IPC-E-24-07
OF IDAHO POWER COMPANY TO )
INCREASE RATES FOR ELECTRIC )
SERVICE TO RECOVER COSTS ) CERTIFICATE OF SERVICE
ASSOCIATED WITH INCREMENTAL )
CAPITAL INVESTMENTS AND CERTAIN )
ONGOING OPERATIONS AND )
MAINTENANCE EXPENSES )
I CERTIFY that on this date I sent by email a true and correct copy of THE
REBUTTAL TESTIMONY OF LARRY BLANK on behalf of the Federal Executive
Agencies on the parties of record to this proceeding.
DATED November 27, 2024.
f�j
Emily W. Medlyn
Attorney-Adviser
U.S. Department of Energy
1000 Independence Ave., S.W.
Washington, D.C. 20585
Phone: [phone]
[e-mail]
1