20040326Oral Argument & Prehearing Conf.pdf

R1GtN
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR AUTHORITY
TO INCREASE ITS INTERIM AND BASE
RATES AND CHARGES FOR ELECTRIC
SERVI CE .
BEFORE
) CASE NO. IPC-03-
) PREHEARING CONFERENCE
ORAL ARGUMENT
COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER DENNIS HANSEN
COMMISSIONER PAUL KJELLANDER
PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:November 13, 200
VOLUME I - Pages 1 - 40
::;
r;:.; -71;Qr ffi ;:::::: rr1
W:
~ ~
Ui c: f'T1"'~' I.D
:J: e"
:::
3:r ~- a
(/)
CJ
(/)
~ DB
CSB REpORTING
Constance S. Bucy, CSR No. 187
17688 Allendale Road * Wilder, Idaho 83676
[phone] * [phone]
Email csb~spro.net
RAN
For the Staff:
For Idaho Power
Company:
For Industrial Customers
of Idaho Power:
For Idaho Irrigation
Pumpers Association:
(Telephonically)
For Federal Executive
Agenices :
For United Water Idaho:
For NW Energy Coalition:
For Micron Technology:
WELDON STUTZMAN, Esq.
and LISA NORDSTROM, Esq.
Deputy Attorney Generals
472 West Washington
Boise, Idaho 83720-0074
BARTON L. KLINE, Esq.
and MONICA MOEN, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
Richardson & 0 Leary
by PETER J. RICHARDSON, Esq.
Post Office Box 1849Eagle, Idaho 83616
Racine, Olson , Nye, Budge
& Bailey
by RANDALL C. BUDGE, Esq.
and ERIC L. OLSEN, Esq.
Post Office Box 1391
pocatello, Idaho 83204-1391
LAWRENCE A. GOLLOMP, Esq.
Uni ted States Dept. of Energy
1000 Independence Ave., SW
Washington , DC 20585
McDevitt & Miller
by DEAN J. MILLER, Esq.
Post Office Box 2564Boise, Idaho 83701
WILLIAM M. EDDIE
Advocates for the West
Post Office Box 1612Boise, Idaho 83701
Gi vens Pursley LLP
by CONLEY E. WARD, Esq.
Post Office Box 2720
Boise, Idaho 83701-2720
CSB REPORTING
Wilder , Idaho 83676 APPEARANCES
A P P A RAN C E S (Continued)
For Community Action
Partnership Assoc. of
Idaho & American Assoc.
of Retired Persons:
BRAD M. PURDY, Esq.
Attorney at Law
2019 North 17th StreetBoise, Idaho 83702
CSB REPORTING
Wilder, Idaho 83676
AP PEARANCE S
BOIS~, IDAHO, THURSDAY, NOVEMBER 13,2003, 9:30 A. M.
Good morning,COMMISSIONER SMITH:
ladies and gentlemen.This is the time and place set
for an oral argument and prehearing conference in
Idaho Public Utilities Commission Case No.
IPC-03-13, in the matter of the application of Idaho
Power Company for authority to increase its interim
and base rates and charges for electric service.
My name is Marsha Smith and I I m one of
the three Commissioners and I will be Chairman of the
hearings involving the Idaho Power rate case.On my
right is Commissioner Dennis Hansen and on my left is
Commissioner Paul Kj ellander who is also the president
of the Commission.
We III begin today I s proceedings by
taking the appearances of the parties and we will
start with the Company.
MR. KLINE:Thank you, Madam Chairman.
My name is Bart Kl ine .I I m appearing on behalf of
Idaho Power Company.Counsel of record for Idaho
Power also includes Monica Moen.Monica is here in
the Hearing Room as well.Seated with me at counsel
table is Larry Ripley.Mr. Ripley I think is well
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
known to everyone here at the Commission.Idaho Power
requested that Mr. Ripley participate or be here today
because he has some institutional knowledge and memory
that I think the Commission might find valuable.
With the exception of a very small
number of people in the room , my guess is that
Mr. Ripley is the only one that has participated in an
interim rate increase application, at least in my
knowledge , so to the extent he can be helpful to the
Commission, that I s why he I s here.
COMMISSIONER SMITH:He I s kind of the
grandfather memory?
MR. KLINE:Yes, we I re hoping that his
memory is still as good as it has been in the past.
COMMISSIONER SMITH:Thank you,
Mr. Kline.
For the Commission Staff.
MR. STUTZMAN:Thank you,
Madam Chairman.Weldon Stutzman and Lisa Nordstrom on
behalf of the Commission Staff.
COMMISSIONER SMITH:All right, because
the intervention deadline was yesterday, no orders
have been issued granting intervention; however, I was
intending to go down my list of people who have filed
interventions and grant them right now this morning
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
and, of course, the Company has the opportunity to
object if it sees the need and that way we can speed
the intervention order process.
First I have the Industrial Customers of
Idaho Power.
MR. RICHARDSON:Thank you,
Madam Chairman.Peter Richardson of the firm
Richardson & 0 Leary representing the Industrial
Customers of Idaho Power.
COMMISSIONER SMITH:Thank you, and the
Idaho Irrigation Pumpers Association.
MR. BUDGE:Randy Budge and also Eric
Olsen and we are participating by phone, obviously,
and we appreciate the Commission I s willingness to
accommodate us in that regard.
COMMISSIONER SMITH:Welcome,
Mr. Budge.
The Department of Energy.
MR . GOLLOMP:Lawrence A. Gollomp.Good
morning, Chairman.
COMMISSIONER SMITH:Good morning, and
Lawrence, would you spell your last name for the court
reporter, please?
MR . GOLLOMP:Yes, G-o-m-
COMMISSIONER SMITH:Thank you.
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
I I m appearing on behalf ofMR . GOLLOMP:
the Federal Executive Agencies.
United Water Idaho.COMMISSIONER SMITH:
Thank you, Madam Chairman.MR. MILLER:
Joe Miller of the firm McDevitt & Miller appearing on
behalf of United Water Idaho.
COMMISSIONER SMITH:The Northwest
Energy Coalition?
Good morning.William EddieMR. EDDIE:
for the Northwest Energy Coalition.
COMMISSIONER SMITH:Micron Technology.
MR. WARD:Conley Ward of the firm
Givens Pursley LLP for Micron Technology, Inc.
COMMISSIONER SMITH:And the Community
Action Partnership Association and AARP.
MR. PURDY:Thank you, Madam Chair.
Brad Purdy on behalf of both those organizations who
have petitioned separately.
MR. KLINE:Madam Chairman , I guess
that I S one thing I I d like to --
COMMISSIONER SMITH:Mr. Kline.
MR. KLINE:That is oneI I m sorry.
question I would like to address to Mr. Purdy just
exactly how that I s going to work.I wasn I t clear in
his petition as to exactly how that was going to
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
operate.
COMMISSIONER SMITH:Mr. Purdy.
MR. PURDY:Well, it I s going to operate
in the sense that both those groups are going to
intervene as a party independently and separately from
one another.m simply going to be their attorney.
We III have our own separate issues, each party will
and .we'll address those issues most likely through
more than one expert witness, but we don I t know who
that is at this point.
COMMISSIONER SMITH:How do you want us
to serve, if the intervention is granted, how do you
want us to serve?Will you just get one copy of
everything or will you get two?
MR. PURDY:One copy would be just fine,
yes.
MR. KLINE:I think, Madam Chairman
Mr. Purdy did represent in his intervention that he
would do his best to make sure that this type of
representation wouldn I t confuse the issues or expand
the issues and based on that representation, we
wouldn't have any objection.
COMMISSIONER SMITH:Okay, thank you.
That's the only intervenors that I have on my list.
Are there other parties in the room wishing to
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
intervene at this time?No?Well , then without
obj ection , I will grant the interventions of those who
have identified themselves and so now you are all
parties.
I want to get one more thing done and
that was to find out who else is joining us by
telephone besides Mr. Budge, so if there I s somebody
else out there on the phone, could you please identify
yourselves?Is there a Jim McFadden?
MR. McFADDEN:Yes, we I re here.
COMMISSIONER SMITH:And, Mr. McFadden,
who are you and who do you represent?
MR. McFADDEN:We are just interested
investors.
COMMISSIONER SMITH:I see, okay, and
where are you located?
MR. McFADDEN:In Connecticut.
COMMISSIONER SMITH:All right, thank
you.
MR. McFADDEN:Thanks.
COMMISSIONER SMITH:All right, the
purpose of , the first purpose of, today' s prehearing
is to hear arguments or positions on the Company'
request for an interim rate increase and there have
been three parties, I think, that have filed briefs
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
the Company, the Commission Staff and the Industrial
Customers of Idaho Power , so I assume, Mr. Kline, you
would like to maybe open with a brief opening
statement?
Madam Chairman, if it wouldMR. KLINE:
sui t the Commission because we do have the, I guess,
burden of proof in this particular case, I would
prefer to make our oral argument after the oral
arguments have been made by the other parties and that
way we I d have an opportunity to reply to those.
COMMISSIONER SMITH:Well, I would
always give you the opportunity to reply.I just
wondered if you also wanted to open.
MR. KLINE:I I d just as soon have our
argument the end,combine one.
COMMISSIONER SMITH:Okay,thank you.
That being the case,guess weill go to Staff.
MR.STUTZMAN:Thank you,
Madam Chairman , and I really don I t have much to add,
if anything, to the brief that we filed yesterday
afternoon.The issue at this point is pretty
straightforward.Idaho Power has requested immediate
Commission approval of a temporary rate increase
pending conclusion of the rate case.
The Commission I s last word on interim
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
rates was in Idaho Power I s last rate case in 1994.
The Commission made it clear then that it would
approve temporary rates only if the Company could show
that a financial emergency exists.Idaho Power does
not make any claim that a financial emergency exists
to justify a temporary rate increase.The Commission
should simply deny the Company I s request for interim
rates.
Thank you.
COMMISSIONER SMITH:Thank you,
Mr. Stutzman.
Mr. Richardson.
MR. RICHARDSON:Thank you,
Madam Chairman.I too will be brief.I read the
Company's memorandum , Madam Chairman , and the Company
simply failed to address the question you asked it to
address, which is what is the standard for interim
relief.The Commission has articulated that standard,
the Idaho Supreme Court has articulated that
standard.The Company, A, didn I t even identify what
the standard was and, B , therefore didn I t even allege
that their financial conditions meet those standards.
I outlined those standards in my brief.
In summary, in order to be entitled to interim relief,
the Company must show economic hardship caused by an
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
emergency situation.It must show that the
reasonableness of the rate increase is relatively
certain.If it's for a new plant, the new plant must
be a substantial part of the utility's overall
investment.It must show that a considerable period
of time would lapse before a final prudency
determination can be made, and the utility finally
must make a timely request for interim relief.
In our brief, Madam Chairman , we point
out none of these conditions exist and respectfully
request that you deny the request for interim relief.
Thank you.
COMMISSIONER SMITH:Thank you.Before
we go to Mr. Kline, would any of the intervenors who
did not file briefs wish to weigh in on this issue?
COMMISSIONER SMITH:Mr. Ward.
MR. WARD:Yes , Madam Chair, I would.
The Staff has written a fine brief and I won't replow
tha t ground.Basically, Idaho Power has argued that
the Commission has the discretionary authority to
grant this interim relief and that I s admittedly true,
but Idaho Power has not addressed the issue of whether
the Commission should grant this relief , nor has it
really addressed the question of the standards to be
applied, and I think the Staff's brief lays those
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
standards out very well , so I won I t go over that
again.
I would like to make three points,
however , that haven't been touched on yet, at least.
First of all , typically in an interim case the
pleading alleges that there is no significant dispute
about the proposed adj ustment; that is, if you add a
plant to rate base, for instance.I would suggest to
the Commission that in at least one of the four
adjustments at issue in this case that I s not the
case.
The jurisdictional reallocation question
is an issue that I expect to be, at the very least,
looked into in considerable detail by both the Staff
and the other parties because the simple fact that
contracts have expired doesn I t necessarily establish
that a jurisdictional reallocation should take place
so I would say that - - and, of course, if the Company
is wrong on that issue, then that affects the other
three issues and the amount that would be paid by the
Idaho ratepayers on those three issues , so this is
different than the typical interim pleading in that
regard.
Secondly, we know that other things
being equal is not really the case here because we are
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
looking at cost of capital rates that are only
slightly above 50-year lows and since we know that the
last rate case was in the mid ' 90s, it I S reasonable to
expect there will be an adjustment downward on the
other side of the ledger for cost of capital , and
having touched on that, I I d like to make the second
point which is to compare this with the 1982 case
which is the only one cited by Idaho Power.
In 1982 , I went back and looked at the
Value Line statistics, we were coming off three years
of double digit inflation.In 1981, the triple "A"
corporate bond rate was 14.2 percent.In 1982 , it
averaged 13. 8 percent.That's obviously a much
different circumstance than we face here.Clearly,
capital intensive industries like utilities were under
great pressure in 1982 that they I re not experiencing
in this case.
Finally, I'd like to make one other
point that seems, at the very least, anomalous.
client Micron Technology if one follows the cost of
service study that Idaho Power has proposed in this
case , even if the full rate relief was granted, Micron
on a cost of service basis would have a rate increase
of 2.87 percent, but the Company is seeking a 4.
percent interim increase.
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
Now, if the Commission were ultimately
to a~cept the Company I s cost of service study, that
means that under an interim across-the-board increase,
Micron would pay more than it would ultimately be
required to pay in permanent rates and I submit that I s
a rather obvious injustice.By the way, Micron is not
the only one in that circumstance, J. R. Simplot would
be similar , and finally, I'd just make the point that
if this interim is in effect until the Commission I
deadline to approve final rates, the fact of the
matter is that the customer class that's farthest
below cost service,that is,the Irrigation
Pumpers,will pay virtually nothing and the customer
classes that are closest cost service or even
above cost of service will pay the interim rate
increase.
That seems to me a question that the
Commission should, at the very least, consider and so
we would urge you to deny this application for interim
relief.
Thank you, Madam Chair.
COMMISSIONER SMITH:Thank you,
Mr. Ward.
Any other intervenors wish to weigh in?
MR.BUDGE:This is Randy Budge.The
CSB REPORTING COLLOQUY
Wilder Idaho 83676
Irrigation Pumpers takes no position on the interim
rate request.
Thank you,COMMISSIONER SMITH:
Mr. Budge.
Mr. Purdy.
Thank you, Madam Chair.MR. PURDY:
Yes, the Community Action Partnership and Association
of Retired Persons would simply join in with the
comments made by Staff and the other parties opposing
the interim relief.
COMMISSIONER SMITH:Thank you,
Mr. Purdy.
Mr. Kl ine .
MR. KLINE:Thank you , Madam Chairman.
Having listened to the oral arguments presented so
far, I think we certainly do have a disconnect and in
my opinion , Idaho Power Company's memorandum in this
case was the only one that really addressed the issue
that you asked us to address and that is the legal
standard to be applied in determining the
appropriateness of interim rates; in essence, the
findings that the Commission would need to - - the
Commission is legally required to make if it I s going
to grant interim rates.
Both ICIP and the Idaho Commission Staff
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
argue that one of the legal standards that is required
for the granting of interim rate relief is that there
be a finding by the Commission that there is economic
hardship or that there's an emergency situation that
exists; in other words, you must find that as a
prerequisi te of granting interim rate relief these
conditions exist and the fact of the matter is that
simply isn I t the case when you look at Idaho law.
Now , I know it I s the case in some other
states.ICIP in its memorandum cited California cases
in which economic hardship is a prerequisite under
California law , but in Idaho, that I s not the case and
I'll talk about that a little bit more.Now, I want
to be clear here, we I re not arguing that economic
emergency or economic hardship is not a reason that
the Commission could cite or could use in granting
emergency or granting interim rate relief.That is
something you could cite to, but it I S not
prerequisi te, a legal prerequisite, to your granting
interim rate relief.
Now , the reason I say I think it I S a
pretty good reason, good thing for you to consider is
I believe Idaho Power is in fact in that situation and
I think our testimony and our exhibits and the brief
filed in this case amply demonstrate that.I think
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
probably the most apparent situation that demonstrates
the fact that there is an economic hardship involved
here is that the Idaho Power Company board of
directors recently reduced the Company s dividend on
common equity by 35 percent.
That is the first time in the history of
the Idaho Power Company that the board of directors
has ever reduced the dividend.I can't think of any
stronger evidence that at least the board of directors
of Idaho Power Company looking at the economic
situation of the Company and considering the
investment the Company had already made in
infrastructure facilities and looking at the group of
infrastructure facilities that still needed to be made
when they made that analysis and decided to cut the
dividend, I think that demonstrates economic hardship,
and so I want to make sure that we I re clear on what we
are saying and what we believe the legal prerequisite
would be for your granting interim rates and that does
not include economic hardship.
Now , the ICIP brief and in its oral
argument, Mr. Richardson cited to an Idaho Supreme
Court case that he argues supports the idea that the
Idaho Supreme Court has established economic hardship
as a legal prerequisite for granting interim rate
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
relief and he cites to a 1983 Utah Power case and the
opinion in that case as his support for the economic
hardship requirement.The case for those of you who
remember it is the infamous construction work in
progress case that involved Utah Power & Light, but if
you read the case , you will see that the language
quoted by ICIP in its brief is not a part of the
opinion of the Idaho Supreme Court.
The language quoted is located in
Justice Bistline I s dissent in the case and if you look
at the dissent by Mr. Bistline, by Justice Bistline,
it's a classic Justice Bistline dissent.What he said
was if you guys are interested, here are all the
findings that the Idaho Commission made in this case
and then he just listed them all in his dissent, and
so I think it's really stretching the point to argue
that the Idaho Supreme Court has in fact made a
finding that economic hardship or economic emergency
is a legal prerequisite to the granting of interim
rate relief.
It's stretching it just about as far as
you can , and a second point on that same case and the
language included in the dissent in that case, if you
look at the actual language, what the Commission said
in the Utah case was there have been times when we
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
have granted interim rate relief or emergency rate
relief when times were hard.Again, it's a reason for
doing it, but it I S not a legal prerequisite, so I
think if you look at the Idaho Code, the statutes, and
if you look at the Idaho Supreme Court cases and you
scrape it all away, the legal standard that must be
determined by the Commission in setting interim rates
is that the rates are just, reasonable, sufficient,
non-preferential and non-discriminatory, no different
than for setting permanent rates and again , we I re
talking about the legal standard that the Commission
must meet if it I s going to implement interim rates.
I think the real issue in this case and
the one that you really have to focus on is the
process that needs to be followed in your making a
determination as to whether or not interim rates are
appropriate.Now, that's the thing about interim
rates , they re unique.The Commission can authorize
interim rates, recognizing that those rates can be
changed at the time that permanent rates are set.You
don I t need a full-blown rate proceeding, you don't
need a technical process in order to set interim rates
because you have the opportunity at a later date to
change those rates and that certainly reduces the risk
of ratepayer disparities in that regard.
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
In fact, I think because of the unique
situation that interim rates present, a strong
argument could be made that it isn I t even necessary
for this Commission to hold a technical hearing.You
wouldn I t have to have prefiled testimony, you wouldn't
have to have all of those things because, again
you I ve got the opportunity at the time of setting
permanent rates to make those change.So long as the
Commission can make the requis~te findings fair, just
and reasonable based on substantial evidence, in other
words, afford the parties due process, that is what
the Commission has to do in making a determination on
interim rates.It I S not required necessarily to have
a hearing.It I s just that simple.
I would also like to talk just a little
bi t about why this Commission should grant interim
rate relief to Idaho Power Company.I previously
talked about the fact that the economic hardship is
clearly evident from the reduction of the dividend,
the Company I S dividend, but I think you also need to
look at Mr. Keane I s testimony, prefiled testimony,
made in this case and in this case I I m talking about
the 13 -A interim rate application, that I s how
denominated it in our filing, and as you read his
testimony, what you see is that growth in the
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
Company s service territory is the 800-pound gorilla,
I guess is the way I would describe it, that is facing
both Idaho Power and ultimately this Commission.
Idaho Power Company has spent and needs
to spend very substantial amounts of money just to
keep up with growth in its service territory, building
the distribution lines, building the substations,
building the transmission facilities in order to
continue to provide reliable service to our
customers.The money that I s going to be needed to
fund all of that infrastructure improvement, to deal
with that growth is either going to be internally
generated by the Company I s rates or it I s going to be
borrowed and that I s where it I s going to come from
period, so one way or another we I re going to have to
figure out where to get that money.
Now, again, the Company s board, I
think , took the first step.They made the 35 percent
cut in the dividend and interestingly enough, I guess
I find this interesting, that 35 percent dividend
reduction is going to cost shareholders approximately
$20 million annually.Now , that amount is almost
identical to the annual amount that Idaho Power would
realize in an interim rate increase.There I S some
symmetry there.I think what you see is an effort on
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
the part of Idaho Power Company I s board and the Idaho
Power Company to share the pain of this growth and the
investment that I s going to need to be made to deal
with the continuing growth in our service area.
I also would like to put the interim
rate increase , the four percent interim rate increase,
somewhat in perspective.A typical residential
customer using 1,200 kilowatt-hours per month if the
four percent interim rate increase is implemented
would see an increase in their monthly bill of
approximately $2.50.That I s just from the four
percent interim rate increase.That I S for base rates,
that doesn I t include PCA and it shouldn I t include
PCA.
Now , I understand that some of the other
classes would see different monthly increases in their
bill~, but for purposes of your getting this into
perspective, that I s the amount the residential
customers would be paying.
Now , to the extent you want to make a
comparison, if this interim rate increase is not
included, then on an annual basis Idaho Power would be
foregoing approximately $1.7 million per month.
not saying they I re comparable but just put it in
perspective.
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
One of the other arguments that we heard
from the ICIP and I want to spend just a little bit of
time on that and that is well , Idaho Power Company
controls when it's going to file rate increases and it
could have come in earlier and it's really Idaho
Power's own fault that we're looking at the kind of
increase that we're looking at here in this particular
I think if you look at the rates that ourcase.
customers were paying over the last couple of years as
a result of the PCA, I think that argument is
specious.I don t know any other way to describe it.
I think denying an interim rate increase
on the basis well , the Company should have come in
earlier is simply penalizing the Company for not
having come to this Commission and tried to layer on
top of a 30 percent increase in rates due to the PCA,
layer on top of that an additional rate increase to
help the Company recover the investment that it was
making during that period of time.I think that I s
just not realistic.I don I t think that's reasonable.
That's why the Company wasn I t in in the last couple of
years.You don I t have that much control over timing
when the situation is like that.
In conclusion, as I indicated, whether
we like it or not, growth is going to require that we
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
make significant investments in the infrastructure in
the coming years and the perception in the financial
communi ty is important because we're going to have to
get some of that money from investors, from lending
institutions and one of the ways that we can reduce
the cost of making this infrastructure investment is
we can either reduce the amount that we have to borrow
through the internal generation of cash or we can
reduce the cost of borrowing, and it's Idaho Power
Company I S belief that if this Commission will grant
interim rate relief, it will send a very posi ti ve
signal to the financial community and that is this
Commission recognizes that it I S in the public interest
for Idaho Power Company to be an economically heal thy
company and this positive signal can reduce cost to
customers.It can reduce the cost of borrowing.
can reduce the cost of our having to go to the markets
and get additional cash to fund these investments
we I re going to have to make.
So in the end, I believe a strong
showing can be made that the interim rate increase
granting is in the long-term public interest.Thank
you very much.
COMMISSIONER SMITH:Thank you,
Mr. Kline.
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
Let's see if the Commissioners have any
questions.Commissioner Hansen.
COMMISSIONER HANSEN:Well , just a
couple of questions here.Am I correct, Mr. Kl ine ,
that you stated that Idaho Power is in economic
hardship and a reduction of the dividend is an
indication of this?
I believe that it is, yes.MR. KLINE:
COMMISSIONER HANSEN:As I look out at
information on your Web site, I have a couple of
questions I'd just like to clarify with you if that
would be okay.I see the utility credit rating is "A"
for senior secured debt as rated by all three rating
agencies; is that accurate?
MR. KLINE:I believe that it is.
not on top of that day to day, but I believe that it
is.I think that's evidence that the financial
community does still believe we're a strong company.
COMMISSIONER HANSEN:Is it accurate to
say that all the ratings of Idaho Power Company and
IdaCorp are investment grade?
I believe that's right.MR. KLINE:
Another exhibitCOMMISSIONER HANSEN:
you had out there is on your source of liquidity.
With your current debt authority, is it true that
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
Idaho Power reports sufficient liquidity?
I believe that's correct andMR. KLINE:
I think it's also correct to understand,
Commissioner Hansen, that all of those indicators are
under pressure.That's exactly the thing that the
Idaho Power board of directors looked at when they
decided to reduce the dividend.They looked at those
things and they said we want to keep those high
financial standards , we want to maintain those high
financial indicators because that lowers our cost of
financing.
COMMISSIONER HANSEN:I guess a
follow-up to these three questions, though, if your
rating is good with the three rating agencies, you
have good liquidity, your investment grade is up, why
are you so concerned that not receiving this interim
increase is going to cost you a lot more money to
borrow money?
MR. KLINE:I think the risk is,
Commissioner Hansen , that the investment community
could very well look at the denial of interim rates as
a negative sign that the Idaho Commission is not going
to be supportive of the rate increase and I think that
will put additional pressure on the investment and
financial communities and additional pressure on the
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
Company I S ratings.That I S our concern and that was
exactly what the board talked about when they decided
to reduce the dividend.
COMMISSIONER HANSEN:One last question
and this again comes from the Web , if you look at
Idaho Power s contribution to earnings per share, is
it true that there was a contribution of $2.24 in 2002
and $2.00 for 12 months ending in June of 2003?
MR. KLINE:I do recall that number for
2002.I also recall that a goodly junk of that was a
one-~ime contribution from the income tax , change in
the income tax , laws, so to the fact that it was
earning more than its dividend , it was for that
reason.
COMMISSIONER HANSEN:But I guess my
question would be if you look at your exhibit you
have , in 2002 , you're showing that Idaho Power
contributed $2.24; in 1999, they contributed $2., so
this is a greater amount that Idaho Power is
contributing now to the dividend than earlier; is that
correct?
MR. KLINE:But for the fact of the
income tax, the one-time income tax, that would not
have been the case.
COMMISSIONER HANSEN:But as you proj ect
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
into 2003 at the end of June at $2.00, that would
still be equal to what ' 99 was.
And there is also a one-timeMR. KLINE:
adj ustment in that , as I recall, related to the sale
of the IE book.Again , you have to look at the
contribution and you have to look at all of the
components of those earnings and in both 2002 and in
2003 there have been significant one-time events that
have contributed to those earnings.
COMMISSIONER SMITH:Mr. Kline, just to
keep the record clear , do you want to explain what an
IE book is?
MR. KLINE:I I m sorry, you're absolutely
right.IdaCorp Energy was the subsidiary of IdaCorp
and they recently concluded their business and they
sold what I s called the book of business.It I s
essentially the ongoing contracts that they have with
various other utilities and this sale of these assets
produced cash and this cash went into the earnings on
a one-time basis.IE is out of the business now , it'
wrapped up and gone.That will not happen again.
COMMISSIONER HANSEN:I guess just last
in summing up, though , but to look at these numbers,
to me it would seem that the investment community
would think that Idaho Power was very solid right now
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
financially.
I don't know if theMR. KLINE:
investment community would come to that conclusion.
think wi th the --
Well , with yourCOMMISSIONER HANSEN:
ratings and everything it looks good, doesn't it,
apparently?
No question those ratingsMR. KLINE:
are unchanged from prior times.They are not changed
at this point in time.
COMMISSIONER HANSEN:Thank you, that I s
all I had.
COMM IS S I ONER SMITH:Thank you.
Commlssioner Kj ellander.
COMMI S S IONER KJELLANDER:Thank you,
Commissioner Smith.I guess just a follow-up to that
and maybe to ask the question somewhat similarly, but
when you look at short-term positive messages for the
financial community, your third quarter earnings come
out and even though I think as I hear you describe
there's some one-time elements to that, it still came
out, as I understand it without complete analysis,
that the earnings were well above expectations.
MR. KLINE:I don't know if I Id use well
above, but --
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
AboveCOMMISSIONER KJELLANDER:
expectations.On the short term isn t that a positive
message and where does this fit in , then , in terms of
increasing the credit rating and reducing the cost of
borrowing?
I'll just take one step backMR. KLINE:
and talk about the earnings in the third quarter and
the fact that they were positive, they were above
expectations.Now, of course, one of the reasons they
were above is because this one-time event occurred.
No one really knew when that event was going to occur,
the sale of the IdaCorp Energy book, so it wasn't a
part of prior proj ections.Everybody knew that it was
up for sale, but again , this was a one-time event.
I think what we have to be cognizant of
is that the financial community isn I t always looking
backwards.Most of the time they re looking forward.
They're trying to anticipate what kind of pressures
the Company is going to be facing, what kind of
revenues it's going to be generating, what kind of
support there will be for borrowings that the Company
needs to make and our concern is that unless there I s
an indication from this Commission that there's going
to be some rate support going forward, there could be
negative implications and reductions in the Company'
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
ability to raise funds.
COMMISSIONER KJELLANDER:Let me follow
that up.There could be, I mean, we're always hearing
of the would have's, should have's and could have'
is there any support for that?I s there any
documentation from the analysts that your credit
ratings are going to fall if some interim relief isn'
granted?I have to base my decision on facts in the
record, not on speculation.Do you have any documents
that say look, your credit rating is going down if you
don't get interim relief?
MR. KLINE:Of course, we do not,
Commissioner Kj ellander.That I S not typically the way
that the rating process works.It I S generally based
on - - you know , they look and see what you do and then
they make a decision.
COMMISSIONER KJELLANDER:Have there
been strong overtures?
MR. KLINE:I think there have been
indications.I don't know whether you I d call it
strong.
COMMISSIONER KJELLANDER:One
follow-up.How is it , and maybe I'm extrapolating too
much or interpreting too much in what you I ve said, how
is it that not granting interim rate relief can be
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
misconstrued or construed to be that the Commission
wouldn I t support some pieces or parts of the total
How is it that anyone who follows thisrate case?
industry could assume that not granting interim rate
relief is an indication that the Commission or any
commission in any state would turn its back on a
reasonable request that could be determined to be
fiscally sound on a going-forward basis?Is the
financial community that -- and I won't repeat
Commissioners Smith's word for the record , but I think
you get j est of my question.
MR. KLINE:I do, and we certainly hope
that doesn I t occur.I mean , all I think we can do is
present to you our concern, our belief that granting
interim rates would certainly be viewed as a positive
step.Now , not granting them, I don' t know how that
would be viewed.
COMMI S S IONER KJELLANDER:One more and I
apologize and I recognize that maybe this is too deep
to go into, but I think I heard Mr. Ward in his
comments say that there was an undue burden on several
of the Industrial Customers that may not have been at
least immediately known until today, at least not to
me anyway, do you have any follow up to his comments
specifically?I know in your comments you sort of
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
stayed away from that.I I m assuming it was because
you didn't have it readily available.m just
wondering if there is any more information that you
can share with regards to the impact and what - - and
again my characterization of what I think I heard
Mr. Ward say is that it I S an undue impact on some of
those larger Industrial Customers.
MR. KLINE:Mr. Commissioner, I don'
have an immediate response.I certainly could speak
wi th Mr. Gale and perhaps we could give you that
information off line, so to speak, we could do that.
COMMISSIONER KJELLANDER:Thank you.
MR. KLINE:Okay.
COMMISSIONER SMITH:Mr. Kline, I just
had one question.How much on average would a space
heating customer use in terms of kilowatts in a
month?
MR. KLINE:I think the 1,200 that I
gave you is our average customer.A space heating
customer would be higher.Is it 1 500?
MR. GALE:More like 2 000.
MR. KLINE:Okay, more like 2,000.
COMMISSIONER SMITH:2000?Thank you.
If there are no other comments, I think what our plan
is that the Commission will excuse itself to go
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
consider the arguments and determine whether or not we
can issue a ruling from the Bench immediately so that
people aren't left in doubt.In the meantime, we
could have the parties convene themselves in their
prehearing conference to go over all the procedural
timing issues, filing dates, discovery issues and see
if the parties can reach an agreement on a schedule
for processing the request in the main case.
If there I s a better suggestion , I'm open
to it.If there are other comments that people wish
to make at this time, I'm open to those, also.
MR. RICHARDSON:Madam Chairman?
COMMISSIONER SMITH:Mr. Ri chardson .
MR. RICHARDSON:Thank you,
Madam Chairman.Since I was addressed specifically in
Mr. Kline's argument , I have a response, if I may.
COMMISSIONER SMITH:Certainly.
MR. RICHARDSON:Thank you.Mr. Kline
characterized my brief as stating or asserting that
the Idaho Supreme Court has ruled that an emergency
must exist in order for this Commission to grant
interim relief and in fact, my brief does not do
that.My brief quotes orders from the Commission in
which you state that your standard for granting
interim relief is that an emergency must exist, but I
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
did not characterize and I did not intend to
characterize the Idaho Supreme Court as having made
that ruling.
Okay, thank you forCOMMISSIONER SMITH:
that clarification, Mr. Richardson.Anything else?
If not, the Commission will excuse ourselves and the
prehearing can commence and we will be at ease until
we're called back or until we reach a decision and
Thank you.return.
(Off the record discussion.
COMMISSIONER SMITH:All right, the
prehearing conference will be in order.The
Commission wishes to thank all of the parties for
their briefs and comments.As you're aware, it's the
first time that this group of Commissioners has faced
this issue together and I think we were greatly
assisted by all that was done here today and I think
we I ve determined it I S very clear that we have the
discretion to make this decision that no further
hearings or processes are required.
However, we do find that an interim rate
increase should not be implemented.While the Company
is correct to be concerned by the financial
community s view, as are we, the Company s current
financial position is sufficiently strong that those
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
concerns do not override other considerations.
appears that there will be disputes with regard to the
amounts requested even at the level of the interim
The inequity of the burden of a uniformrequest.
percent increase over customer classes actually using
electric service during the next six months cannot be
fully cured by the fact that we can set different
rates with a final Order, and I think even the Company
would agree that there is a time value to money for
everyone.
This Commission has a very strong record
of paying attention to and taking action to preserve
the financial health of the utilities that we
regulate.A utility's financial health is an
important part of the public interest standard that we
apply.That is unchanged with this interim rate
decision.We are the same Commission that passed on
the purchased power costs incurred in the energy
crisis of the years 2000 and 2001.The investment
community should not draw any inferences whatsoever
from today I s decision.We have not prejudged this
case and neither should they.This case will be
processed expeditiously and fairly.
The final decision will be based on the
record that is made.There's a lot of experience and
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
talent in this room and on the phone and that will
ensure that we will have a full presentation on all
the issues to be considered, so that is our decision
on the interim.
Is there a report on the prehearing
conference?Ms. Nordstrom.
MS. NORDSTROM:Yes , Commissioners,
thank you.The parties have discussed the dates and
deadlines for scheduling this particular case and we
believe the following dates will be acceptable to
eve ryone :The parties suggest that February or
rather , sorry, that January 30th be the deadline for
direct discovery requests to be made; that February
13th be the cutoff for responses to direct discovery
requests being filed; that February 20th be the
deadline for Staff and intervenors to file prefiled
direct testimony; that February 27th be the discovery
request cutoff for rebuttal; that March 12th be the
discovery response cutoff for rebuttal; that March
19th be the deadline for the parties to file prefiled
direct rebuttal testimony; that a hearing take place
March 29th through at the latest April 9th.
course , that will be dependent upon the testimony and
wi tnesses presented.The transcripts will be due on
April 19th.The parties have agreed to file final
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
briefs by April 30th and this presumes an effective
date of June 1st.
COMMISSIONER SMITH:Are there any other
It looks like everyone is nodding incomments?
agreement to the schedule.You re contemplating that
the direct case and the rebuttal will all be heard in
that same two-week period?
MS. NORDSTROM: Yes.
And you I reCOMMISSIONER SMITH:
contemplating that revenue requirement and rate design
will not be separated?
MR. KLINE:Right.
MS. NORDSTROM:Correct.
COMMISSIONER SMITH:Do either of the
Commissioners have questions?
MS. NORDSTROM:Also, if I may, we also
came to a couple of other conclusions.The parties
agreed that any filings, petitions, discovery,
mot ions, et cetera would be sent by overnight del i very
to the parties and to the Commission and e-mail could
accompany it as a courtesy; that workpapers would
~ccompany the testimony being filed and we also had an
agreement with regards to ordering dailies, could you
state that, Bart?
Mr. Kl i ne .COMMISSIONER SMITH:
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
MR. KLINE:Well , we agreed to request
daily transcripts to expedite the ability to file
briefs and the parties all agreed that the additional
cost of that could be recovered in the PCA.We all
agreed to that.
COMMISSIONER SMITH:Well, that's very
interesting.
MR. KLINE:No one will object.
COMMISSIONER SMITH:We will find out if
we will obj ect.
MR. KLINE:Yes, I understand.
MS. NORDSTROM:Mr. Kline, could you
also explain the discovery with regard to the 12th
month of the test year , what the parties have agreed
to?
MR. KLINE:Well , I'll let Rick go ahead
and do it, that's probably the easiest way.
created it.
COMMISSIONER SMITH:Okay, and will he
please identify himself for the record?
This is Ric Gale, Idaho PowerMR. GALE:
We have provided the third quarter to StaffCompany.
already.As we go through the fourth quarter, that
will be available to Staff.We have to fight through
disclosure issues now , which is why it's an extra
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
level of difficulty anymore, so by mid December, Staff
should have 11 months or the ability to review 11
months of the 12.Of course, December is the one
that's the most volatile.
As we progress with the year-end
closing, they can avail ourselves to our books and we
expect our audit to be complete by the first week in
February.
Okay.Ms. CarlockCOMMISSIONER SMITH:
were you going to make a comment?Please identify
yourself.
MS. CARLOCK:Terri Carlock , Commission
Staff.There was also a discussion that if the 12th
month was an unexpected month that Idaho Power would
agree to Staff doing something on a supplemental basis
to address that month only.
COMMISSIONER SMITH:In terms of your
testimony, your presentation?
MS. CARLOCK:In terms of testimony and
presentation , yes, that's correct.
MR. GALE:That I S correct.
COMMISSIONER SMITH:Are there any other
issues or items that should be called to our attention
at this time?If not, we're going to adj ourn the
prehearing.There I S a couple of things I guess I
CSB REPORTING
Wilder, Idaho
COLLOQUY
83676
would ask , as you go along, I don I t think you need to
wai t for the Commission to call formal prehearing
conferences if you believe there are items that would
benefit from mutual discussion, perhaps settlement or
at least agreeing on where it is you disagree.
think it would greatly aid the hearing process and the
Commission's consideration of the issues, so I'd
encourage you to do that.
The other thing I would encourage
everyone to do is whatever you can to please make it
snow a lot this winter.Wi th that, we re adj ourned.
(The prehearing adjourned at 11:25 a.
CSB REPORTING
Wilder , Idaho
COLLOQUY
83676
AUTHENTICATION
This is to certify that the foregoing
oral argument and prehearing conference held in the
matter of the application of Idaho Power Company for
authori ty to increase its interim and base rates and
charges for electric service, commencing at 9:30 a.m.,
on Thursday, November 13, 2003, at the Commission
Hearing Room , 472 West Washington , Boise, Idaho, is a
true and correct transcript of said oral argument and
prehearing conference and the original thereof for the
file of the Commission.
Reporter
","'U'""III
" .' ~ """""",,,'~ "~ '- .
A,f
'" ....::: "~ ...,.:- ,-"-'"::
f~
= =
c;o
~ \ ..:.
~ \ li \.' $ 0
.. ", "
, if' ~
:.. 0$' "
."""".", .,- "~.q
Te Of '1 1111'11 \ \I I II
CSB REPORTING
Wilder , Idaho
AUTHENT I CAT I ON
83676