200306132nd Response to Staff Questions.pdf

IDAHO POWER COMPANY
O. BOX 70
BOISE, IDAHO B3707
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MAGGIE BRILZ
Director, Pricing
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mbrilz(ii)idahopower.com
June 13, 2003
Mr. Lynn Anderson
Idaho Public Utilities Commission
P. O. Box 83720
Boise ID 83720-0074
RE:Idaho Power Company s Responses to IPUC Staff's Second Set
Questions Following the AMR Workshop Case No. IPC-02-
Dear Lynn:
Enclosed is a copy of Idaho Power s responses to Staff's second set of
questions which were e-mailed to me the evening of June 11. Consistent with the May 9, 2003
Protective Agreement, the Company has marked and printed the proprietary portions of its
responses on yellow paper. I would appreciate your ensuring this information is stored in a
secure location with limited access and safeguarded from unauthorized disclosure.
1 understand from your e-mail that Staff intends to provide Idaho Power with
another set of assumptions and request that another run of the financial model be made. As I
stated in my letter to Staff on June 9, Idaho Power would appreciate the opportunity to meet
with Staff to review our responses to your questions and to answer any other questions you
may have. Perhaps a meeting prior to Staff's submitting revised assumptions might help
facilitate an efficient exchange of information. Please feel free to contact me at any time to
schedule a meeting.
Sincerely, ~:~ 6
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Enclosures
Randy Lobb
Dave Schunke
Lisa Nordstrom
Ric Gale
Bart Kline
Idaho Power Company s Responses to IPUC Staff's Second Set of
Questions Following the AMR Workshop for Case No. IPC-O2-
1. The response to 9(a) says that Payette had to be added to Pocatello, et
, in 2004 in order to include Canyon County in 2005. Please explain why
the Company believes it is necessary for Canyon County to be converted in
2005. Please explain why the Company decided to bump Mini-Cassia
AMR implementation from 2004 to 2007 and Twin Falls, et ai, from 2005 to
2007, given that staff's only requested change in the schedule was that
Pocatello, et ai, be implemented in the first year, 2004. (We assumed that
the remaining areas would simply be bumped one year from their original
schedules while retaining the Company s original sequencing.
Due to the operational interconnectivity of our system , AMR would need to
be implemented in our Payette , Canyon , and Boise regions in three consecutive
years with implementation in the Canyon region in the second year of the three-
year timeframe since it lies geographically between Payette and Boise. In order
to allow for this orderly implementation , and recognizing that the Canyon and
Boise regions are large and a one-year implementation for each region is
ambitious, we believe it would be most reasonable to start with the Payette
region in the first year of an implementation plan so that any carry-over effect for
Canyon or Boise could be completed in year four.
The implementation plan that gives all parties the greatest benefit is one
that implements entire operating hubs together. Full O&M savings are realized
when an entire hub is fully converted to AMR. In order to achieve the greatest
benefits under the scenario incorporating Staff's request to move the Pocatello
American Falls, Blackfoot and Salmon areas to year one, we moved the
Southern region , which includes Twin Falls, Jerome , Gooding, and Mini-Cassia
to 2007. Due to the interconnectivity of our system , Twin Falls, Jerome and
Gooding all need to be complete before full O&M saving can be realized in the
Southern region. Although Hailey is part of the Southern region, under Staff'
scenario we moved it to 2005 rather than keeping it with the rest of the Southern
region because of its stand-alone nature and the fact that it is one of the more
cost-effective areas.
In response to Staff's additional questions, we re-ran the financial analysis
with an implementation plan that moved Pocatello, American Falls, Blackfoot
and Salmon to the first year and simply bumped the remaining areas one year
from their original schedules while retaining the Company s original sequencing.
Attached is a revised confidential Table 7 that reflects the results of this scenario.
This new analysis does not materially change the outcome from that provided to
Staff on June 9. Except for year 1 and years 21 through 24 , this revised scenario
increases the yearly revenue requirement of AMR. At the crossover point in year
, this revised scenario results in a $144 000 increase in revenue requirement
compared to the analysis provided to Staff on June 9. The payback period under
both Staff scenarios is year 16; however, under the second scenario , the NPV is
$457 000 less than under the first scenario provided on June 9.
2. The response to 9(c) says that 100% of the meter reading costs were
eliminated under the original analysis. But on Table 9 of the original
analysis, the column labeled "Post ARM (AMR?) Labor Dollars Remaining
Meter Readers " shows $4.6 million remaining in 2008 and growing
thereafter. Please explain what the $4.6 million represents if it is not
remaining meter reader labor costs.
Through Staff's e-mail dated June 10 Lynn Anderson indicated that Idaho
Power s June 9 response to Staff's question 5 provided the answer to this
question. Idaho Power does not have any revisions or clarifications to our
previous response.
3. The response to 9(f) suggests that staff's requested assumption of 2.
annual customer growth rate will grossly overstate growth. Table 6 of the
original analysis says that analysis was based on Feb. 2003 Customer
Growth Forecast and that the prior 2002 analysis was based on the 2001
Customer Growth Forecast. Please provide staff with copies of both
forecasts and highlight exactly which growth forecast numbers were used
in the 2003 AMR analysis and the 2002 AMR analysis. If these are not 40-
year forecasts please explain what assumptions were necessary to extend
them into 40-year forecasts.
Attached are Idaho Power s internal forecasted Customer Growth Rates
by operating area and Customer Class. Customer growth is forecasted through
2030. For the 2002 AMR Analysis we used the average 2002-2030 growth rates
for all years after 2030. For the 2003 AMR Analysis we used the 2030 customer
growth rate for all years after 2030. In reviewing our financial assumptions for
preparation of the 2003 Analysis we determined that the 2030 growth rate more
accurately represented growth in the "out" years.
4. The response to 9(g) says the staff's requested assumption of 3.
inflation is higher than "Idaho economic CPI" would indicate. Please
provide staff a copy of the "Idaho economic CPI" forecast. If it is not a 40-
year forecast, explain what assumptions were necessary to extend it into a
40-year forecast.
Confidential.Attached is the Long-term Forecast for Distribution Plant
provided to Idaho Power by Idaho Economics (John Church's company). This
forecast projects inflation through 2027. In our analysis we used the 2027
percentage for the years beyond 2027.
CONFIDENTIAL DOCUMENTS
WERE INCLUDED IN THIS FILING