20250211Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER LODGE
COMMISSIONER HAMMOND
COMMISSIONER HARDIE
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM: SHUBHRA DEB PAUL, COMMISSION STAFF
MICHAEL DUVAL,DEPUTY ATTORNEY GENERAL
DATE: FEBRUARY 11, 2025
RE: IDAHO POWER'S ANNUAL COMPLIANCE FILING TO UPDATE
CHARGES, CREDITS, AND GENERAL OVERHEADS UNDER RULE H,
NEW SERVICE ATTACHMENTS AND DISTRIBUTION LINE
INSTALLATIONS OR ALTERATIONS; CASE NO. IPC-TAE-24-05.
BACKGROUND
On December 20, 2024, Idaho Power Company ("Company") filed Tariff Advice No. 24-
05 with the Idaho Public Utilities Commission ("Commission") proposing to update charges and
allowances to the Company's Rule H tariff, New Service Attachments and Distribution Line
Installations or Alterations ("Application"). The Company is required to make this annual
compliance filing to update the Rule H charges and credits by way of Commission Order Nos.
30853 and 30955. The Company is also required to update the general overhead rate used within
the Rule H tariff through Commission Order No. 32472. The filing requests that the Commission
approve the update by March 1,2025,to facilitate implementation of the Rule H tariff revisions to
meet an effective date of March 15, 2025.
STAFF ANALYSIS
Staff reviewed the Company's Rule H compliance filing and focused on: (1)the adjustment
to the overhead rates applied to work order costs; (2) the updated costs for standard service
attachment charges; (3) the revisions to line installation and attachment allowances; and (4) the
update to the rate charged for engineering services. The cost estimation methodology used to
update these charges and credits is the same as used in prior annual filings. Overall, the proposed
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Rule H charges and credits increased, driven by higher material, labor, and vehicle costs. These
increases were partly offset by a reduction in the general overhead rate.
Correction to the Application
Staff noted discrepancies between the subtotal amounts of materials cost and line item
"Total Materials" for both single and three phase allowances reported in the Application.
Application at 15 and 16. Staff inquired about the discrepancies and the Company responded that
the error in the subtotal line item of materials cost was due to typographical errors in its Application
as the "transformer bussing" lines were understated in both cases. The Company also clarified
that although the subtotal amounts were erroneous, both "Total Materials" and"Total" line items
are correctly reported. Response to Staff Information Request No. 1. Staff understands this
unintentional error and confirms that line items of"Total Materials" and "Total" for both single
and three phase allowance calculations are accurate. As a result, the errors do not impact the
corresponding allowances. The revised values are summarized in Table No. 1.
Table No. 1: Summary of Corrections to the Company's Application—Line Installation
and Service Attachment Allowances
Application Page Line Item Costs Reported in Correct
No. Application ($) Amount ($)
Page No. 15 Transformer bussing 49.61 54.96
Subtotal amount 3,219.69 3,225.04
Page No. 16 Transformer bussing 95.08 108.03
Subtotal amount 6,081.44 6,094.39
Overhead Rates
Staff verified the Company's overhead rates and stores loading rate, and Staff believes
them to have a sound basis and are therefore reasonable. Staff recommends the Commission
approve the proposed general overhead rate and stores loading rate.
General overheads are capital costs that cannot be directly assigned to a specific asset or
individual project. The Company's general overhead rate is applied to all direct costs related to
vehicles, labor, materials, and trenching. Compared to last year's filing,the general overhead rate
DECISION MEMORANDUM - 2 -

decreased from 10.69 percent to 9.42 percent. Staff verified the Company's inputs and its
calculations and believes they are accurate.
The stores loading rate, which captures the cost of supervision, labor, and expenses
incurred for the purchasing, storage,handling, and distribution of material and supplies,decreased
from 6.5 percent to 4.75 percent. The Company evaluates the stores loading rate quarterly to
determine whether an adjustment is needed to align the clearing rate with year-to-date stores
expenses and issuances while considering forecasted activity. Staff reviewed the Company's most
recent evaluation of the stores loading rate and Staff supports the reduction in the stores loading
rate.
Standard Charges
Standard charges are established for the installation of underground services, temporary
service attachments, and return trip services. The installation of underground services includes
both base and distance charges. The base charges increased within the range of 0 percent to 4
percent compared to the previous year, where the distance charges increased within the range of 0
percent to 11 percent. Staff reviewed all changes to vehicle, labor, material, and trenching costs
used to develop the standard charges, and Staff believes the Company's proposed amounts are
reasonable.
Line Installation and Service Attachment Allowances
Service attachment allowances are provided to customers to compensate for distribution
costs the Company recovers through base retail rates. Customers receive the allowance as a credit
against the cost of new line installation and terminal facilities. Overall, the proposed allowances
for single-phase and three-phase installations increased by 11 percent.
The increases were driven by increases in material costs for single and three phase
transformers (a 14 to 15 percent increase), based on their average inventory costs at the time of
design. Staff reviewed and verified purchase orders and invoices related to material costs, and
Staff believes that they reflect the proposed increases. The vehicles' costs remained unchanged
while labor costs marginally increased by 2 percent. Staff notes the increases in transformer costs
were partially mitigated by the reduction in overhead and stores loading rates. Therefore, Staff
believes the proposed allowance increases are reasonable.
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Engineering Services
Engineering costs for line installations and alterations have increased from$93 per hour to
$97 per hour, a 4 percent increase compared to the previous year. The increase is driven by a 4
percent rise in engineering wages, a 6.1 percent increase in the benefit rate, and an 8.36 percent
reduction in the overhead rate. The increased electrical engineering wage aligns with the
nationwide average for electrical engineers.' Thus, Staff believes the increase in Engineering
Services costs are reasonable.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's proposed general
overhead rate of 9.42 percent and the changes to the Rule H charges and allowances reflected in
the Company's original filing, dated December 20, 2024, as filed. Staff recommends an effective
date of March 15, 2025.
COMMISSION DECISION
Does the Commission wish to approve the Company's proposed updates to the general
overhead rate and the Rule H charges and allowances as filed with an effective date of March 15,
2025?
Shubhra Deb Paul
Commission Staff
I:\Utility\UDMEMOS\IPC-TAE-24-05 Decision Memo.docx
'According to the U.S.Bureau of Labor Statistics—Occupational Employment and Wages,May 2023,the
Company's electrical engineering hourly wage takes place within the 70'and 751 percentile nationwide.
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