20031119Oral Argument & Prehearing Conf.pdf

BOI SE , IDAHO , THURSDAY , NOVEMBER 13 , 2003 9: 30 A. COMMI S S IONER SMI TH :Good mornlng,ladies and gentlemen.This is the time and place setfor an oral argument and prehearing conference inIdaho Public Utilities Commission Case No.I P C - E - 0 3 - 1 3 , i n th e ma t t e r 0 f the a p p 1 i cat ion 0 f I d a h 0Power Company for authori ty to lncrease its interimand base rates and charges for electric serVlce.My name is Marsha Smi th and I m one ofthe three Commissioners and I will be Chairman of thehearings involving the Idaho Power rate case.On my
right is Commissioner Dennis Hansen and on my left
Commissioner Paul Kj ellander who is also the president
of the Commission.
ll begin today ' s proceedings by
taking the appearances of the parties and we will
tart wi th the Company.
MR. KLINE:Thank you , Madam Chai rman .
My name is Bart Kline.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 wi th me at counsel
table is Larry Ripley.Mr. Ripley I think is well
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known to everyone here at the Commission.Idaho Powerrequested that Mr. Ripley participate or be here todaybecause he has some insti tutional knowledge and memorythat I think the Commission might find valuable.Wi th the exception of a very smallnumber of people in the room , my guess is thatMr. Ripley is the only one that has participated in aninterim rate increase application , at least in myknowledge, so to the extent he can be helpful to theCommis sion , that's why he s here.COMMI S S IONER SMI TH :s kind of thegrandfather memory?MR. KLINE:Yes , we re hoping that his
memory lS still as good as it has been in the past.
COMMI S S IONER SMI TH :Thank you
Mr. Kline.
For the Commission Staff.
MR. STUTZMAN:Thank you
Madam Chai rman Weldon Stutzman and Lisa Nordstrom on
behalf of the Commission Staff.
COMMI S S IONER SMI TH :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
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and , of course , the Company has the opportuni ty toobj ect if it sees the need and that way we can speedthe intervention order process.First I have the Industrial Customers ofIdaho Power.MR. RI CHARD S ON :Thank youMadam Chai rman Peter Richardson of the firmRichardson & 0' Leary representing the IndustrialCustomers of Idaho Power.COMMI S S IONER SMI TH :Thank you , and theIdaho Irrigation Pumpers Association.MR. BUDGE:Randy Budge and also EricOlsen and we are participating by phone , obviously,
and we appreciate the Commission s willingness to
accommodate us In that regard.
COMMI S S IONER SMI TH :Welcome
Mr. Budge.
The Department of Energy.
MR.GOLLOMP:Lawrence A.Gollomp.Good
mornlng,Chairman.
COMMI S S IONER SMITH:Good mornlng,and
Lawrence , would you spell your last name for the court
reporter , please?
MR. GOLLOMP:Yes , G-
COMMI S S IONER SMI TH :Thank you.
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MR. GOLLOMP:m appearing on behalf ofthe Federal Executi ve Agencies.COMMI S S IONER SMI TH :Uni ted Water Idaho.MR. MILLER:Thank you , Madam Chai rman .Joe Miller of the firm McDevi tt & Miller appearing onbehalf of Uni ted Water Idaho.COMMI S S IONER SMI TH :The NorthwestEnergy Coali tion?MR. EDDIE:Good mornlng.William Eddiefor the Northwes t Energy Coali tion.COMMI S S IONER SMI TH :Micron Technology.MR . WARD:Conley Ward of the firmGivens Pursley LLP for Micron Technology, Inc.
COMMI S S IONER SMI TH :And the Communi t y
Action Partnership Association and AARP.
MR. PURDY:Thank you , Madam Chai r .
Brad Purdy on behalf of both those organizations who
have peti tioned separately.
MR. KLINE:Madam Chairman I guess
that's one thing I d like to --
COMMI S S IONER SMI TH :Mr. Kline.
MR. KLINE:m sorry.That is one
question I would like to address to Mr. Purdy just
exactly how that's golng to work.I wasn t clear in
his peti tion as to exactly how that was going to
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operate.COMMI S S IONER SMI TH :Mr. Purdy.MR. PURDY:Well , it's going to opera in the sense that both those groups are going intervene as a party independently and separately fromone another.simply going to be their attorney.ll have 0 u r own s par ate i s sue s , e a c h par t y wi 11 ,and we ll address those issues most likely throughmore than one expert wi tness , but we don t know whothat is at this point.COMMI S S IONER SMI TH :How do you wan t usto serve , if the intervention is granted , how do youwant us to serve?Will you just get one copy of
everything or will you get two?
MR. PURDY:One copy would be jus t 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 t confuse the lssues or expand
the issues and based on that representation , we
wouldn t have any obj ection.
COMMI S S IONER SMI TH :Okay, thank you.
That's the only intervenors that I have on my list.
Are there other parties in the room wishing
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intervene at this time?No?Well , then wi thoutobj ection I will grant the interventions of those whohave identified themselves and so now you are allparties.I want to get one more thing done andthat was to find out who else is joining us bytelephone besides Mr. Budge , so if there s somebodyelse out there on the phone , could you please identifyyourselves?Is there a Jim McFadden?MR. McFADDEN:Yes , we re here.COMMI S S IONER SMI TH :And , Mr. McFaddenwho a re you and who do you rep re s en t ?MR. McFADDEN:We are just interested
investors.
COMMI S S IONER SMI TH :I see , okay, and
where are you located?
MR. McFADDEN:In Connecticut.
COMMI S S IONER SMI TH :All right , thank
you.
MR. McFADDEN:Thanks.
COMMI S S IONER SMI TH :All right , the
purpose of , the first purpose of , today s prehearing
is to hear arguments or posi tions on the Company
request for an interim rate increase and there have
been three parties I think , that have filed briefs
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the Company, the Commission Staff and the IndustrialCustomers of Idaho Power , so I assume , Mr. Kline , youwould like to maybe open wi th a brief openingstatement?MR. KLINE:Madam Chairman , if it wouldsui t the Commission because we do have the I guessburden of proof in this particular case I wouldprefer to make our oral argument after the oralarguments have been made by the other parties and thatway we d have an opportuni ty to reply to those.COMMI S S IONER SMI TH :Well I wouldalways gl ve you the opportuni ty to reply.I jus wondered if you also wanted to open.
MR. KLINE:d just as soon have our
argument at the end , combine it in one.
COMMI S S IONER SMI TH:Okay,thank you.
That being the case guess Staff.
MR.STUTZMAN:Thank you
Madam Chairman and really don have much 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 lncrease
pending conclusion of the rate case.
The Commission s last word on interim
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rates was in Idaho Power s last rate case in 1994.The Commission made it clear then that it wouldapprove temporary rates only if the Company could showthat a financial emergency exists.Idaho Power doesnot make any claim that a financial emergency existsto justify a temporary rate increase.The Commissionshould simply deny the Company s request for interimra tes Thank you.COMMI S S IONER SMI TH :Thank youMr. Stutzman.Mr. Richardson.MR. RI CHARD S ON :Thank you
Madam Chai rman 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,didn even identify what
the standard was and , B , therefore didn t even allege
that their financial condi tions meet those standards.
I outlined those standards in my brief.
In summary, in order to be enti tled to interim relief
the Company must show economlC hardship caused by an
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emergency si tuation.It must show that thereasonableness of the rate increase is relativelycertain.If it's for a new plant , the new plant mus be a substantial part of the utility s overallinvestment.It must show that a considerable periodof time would lapse before a final prudencydetermination can be made , and the utili ty finallymust make a timely request for interim relief.In our brief , Madam Chairman , we pointout none of these condi tions exist and respectfullyrequest that you deny the request for interim relief.Thank you.COMMI S S IONER SMI TH :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?
COMMI S S IONER SMI TH :Mr. Ward.
MR . WARD:Yes , Madam Chair I would.
The Staff has wri tten a fine brief and I won t replow
tha t ground.Basically, Idaho Power has argued that
the Commission has the discretionary authori ty
grant this interim relief and that's admi ttedly 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
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standards out very well , so I won t go over thatagaln.I would like to make three pointshowever, that haven t been touched on yet , at least.Fir s t 0 f all , t yp i call y i n an i n t e rim cas e thepleading alleges that there is no significant disputeabout the proposed adjustment; that is , if you add plant to rate base , for instance.I would suggest the Commission that in at least one of the fouradjustments at issue in this case that's not thecase.The jurisdictional reallocation questionlS an lssue 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 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
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
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looking at cost of capital rates that are onlyslightly above 50-year lows and since we know that thelast rate case was in the mid ' 90s , it's reasonable expect there will be an adjustment downward on theother side of the ledger for cost of capital , andhaving touched on that , I d like to make the secondpoint which is to compare this wi th the 1982 casewhich is the only one ci ted by Idaho Power.In 1982 I went back and looked at theValue Line statistics , we were coming off three yearsof double digit inflation.In 1981 , the triple corporate bond rate was 14.2 percent.In 1982 , itaveraged 13.8 percent.That's obviously a much
different circumstance than we face here.Clearly,
capi tal intensive industries like utili ties were under
great pressure in 1982 that they 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 lncrease.
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Now , if the Commission were ul timatelyto accept the Company s cost of service study, thatmeans that under an interim across-the-board increaseMicron would pay more than it would ul timately berequired to pay in permanent rates and I submi t that'a rather obvious injustice.By the way, Micron is notthe only one In that circumstance J. R. Simplot wouldb e s i mi 1 a r , and fin a 11 y , I ' d jus t ma k e the poi n t t hatif this interim is in effect until the Commissiondeadline to approve final rates , the fact of thematter is that the customer class that's farthestbelowcostserVlcethattheIrrigationPumperswillpay virtually nothing and the customer
classes that are closest cost serVlce even
above cost of service will pay the interim rate
lncrease.
That seems to me a question that the
Commission should , at the very least , consider and
we would urge you to deny this application for interim
relief.
Thank you , Madam Chai r .
COMMI S S IONER SMI TH :Thank you
Mr. Ward.
Any other intervenors wish to weigh in?
MR. BUDGE:This is Randy Budge.The
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Irrigation Pumpers takes no posi tion on the interimrate request.COMMI S S IONER SMI TH :Thank youMr. Budge.Mr. Purdy.MR. PURDY:Thank you , Madam Chai r .Yes , the Communi ty Action Partnership and Associationof Retired Persons would simply join in wi th thecomments made by Staff and the other parties opposlngthe interim relief.COMMI S S IONER SMI TH :Thank youMr. Purdy.Mr. Kline.
MR. KLINE:Thank you , Madam Chai rman .
Having listened to the oral arguments presented
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 lssue
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's going
to grant interim rates.
Both ICIP and the Idaho Commission Staff
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argue that one of the legal standards that is requiredfor the granting of interim rate relief is that therebe a finding by the Commission that there is economichardship or that there s an emergency si tuation thatexists; in other words , you must find that as aprerequisi te of granting interim rate relief thesecondi tions exist and the fact of the matter is thatsimply isn t the case when you look at Idaho law.Now I know it's the case in some otherstates.ICIP in its memorandum ci ted California casesin which economic hardship is a prerequisite underCalifornia law , but in Idaho , that's not the case andll talk about that a little bit more.Now I want
to be clear here , we re not arguing that economlC
emergency or economlC hardship is not a reason that
the Commission could ci te or could use in granting
emergency or granting interim rate relief.That is
something you could ci te to , but it's not a
prerequisite , a legal prerequisite , to your granting
interim rate relief.
Now , the reason I say I think it's a
pretty good reason , good thing for you to consider
I believe Idaho Power is in fact in that si tuation and
I think our testimony and our exhibi ts and the brief
filed in this case amply demonstrate that.I think
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probably the most apparent si tuation that demonstratesthe fact that there is an economic hardship involvedhere is that the Idaho Power Company board ofdirectors recently reduced the Company s di vidend oncommon equi ty by 35 percent.That is the first time in the history ofthe Idaho Power Company that the board of directorshas ever reduced the di vidend.I can t think 0 f anystronger evidence that at least the board of directorsof Idaho Power Company looking at the economicsi tuation of the Company and considering theinvestment the Company had already made ininfrastructure facili ties and looking at the group of
infrastructure facili ties 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 re clear on what we
are saying and what we believe the legal prerequisi
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 ci ted to an Idaho Supreme
Court case that he argues supports the idea that the
Idaho Supreme Court has established economic hardship
as a legal prerequisi te for granting interim rate
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relief and he ci tes to a 1983 Utah Power case and theopinion in that case as his support for the economichardship requirement.The case for those of you whoremember it is the infamous construction work inprogress case that involved Utah Power & Light , but ifyou read the case , you will see that the languagequoted by ICIP in its brief is not a part of theopinion of the Idaho Supreme Court.The language quoted is located inJustice Bistline s dissent in the case and if you lookat the dissent by Mr. Bistline , by Justice Bistlineit's a classic Justice Bistline dissent.Wha t he saidwas 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
finding that economic hardship or economlC emergency
lS a legal prerequisi te to the granting of interim
rate relief.
It'stretching it just about as far
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
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have granted interim rate relief or emergency raterelief when times were hard.Again , it's a reason fordoingbutit'not legal prerequisi tethinkyoulooktheIdahoCodethestatutes andyoulooktheIdahoSupremeCourtcasesand youscrapeallaway,the legal standard that must bedetermined by the Commission in setting interim ratesis that the rates are just , reasonable , sufficientnon-preferential and non-discriminatory, no differentthan for setting permanent rates and again , wetalking about the legal standard that the Commissionmust meet if it's golng 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
determination as to whether or not interim rates are
appropriate.Now , that's the thing about interim
ra tes , they re unlque.The Commission can authorize
interim rates , recognizing that those rates can be
changed at the time that permanent rates are set.You
do n 't nee d a full - b 1 own rat e pro c e e din g, yo u do n '
need a technical process in order to set interim rates
because you have the opportuni ty at a later date
change those rates and that certainly reduces the risk
of ratepayer disparities in that regard.
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In fact I think because of the unlquesi tuation that interim rates present , a strongargument could be made that it isn t even necessaryfor this Commission to hold a technical hearing.Youwouldnt have to have prefiled testimony, you wouldnhave to have all of those things because , agalnyouve got the opportuni ty at the time of settingpermanent rates to make those change.So long as theCommission can make the requisi te findings fair , justand reasonable based on substantial evidence , in otherwords, afford the parties due process , that is whatthe Commission has to do in making a determination oninterim rates.It's not required necessarily to have
a hearing.It'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
clearly evident from the reduction of the di vidend
the Company s di vidend , but I think you also need
look at Mr. Keane s testimony, prefiled testimony,
made in this case and in this case I m talking about
the 13-A interim rate application , that's how we
denominated it in our filing, and as you read his
testimony, what you see is that growth in the
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Company s serVlce territory is the 800-pound gorillaI guess is the way I would describe that is facingboth Idaho Power and ul timately this Commission.Idaho Power Company has spent and needsto spend very substantial amounts of money just tokeep up wi th growth in its service terri tory, buildingthe distribution lines , building the substationsbuilding the transmission facili ties in order tocontinue to provide reliable serVlce to ourcustomers.The money tha t 's going to be needed fund all of that infrastructure improvement , to dealwi th that growth is ei ther golng to be internallygenerated by the Company s rates or it's going to be
borrowed and that's where it's going to come from
period , so one way or another we re going to have
figure out where to get that money.
Now , again , the Company s board
think , took the first step.They made the 35 percent
cut in the di vidend and interestingly enough I guess
I find this interesting, that 35 percent di vidend
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 s some
symmetry there.I think what you see is an effort on
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the part of Idaho Power Company s board and the IdahoPower Company to share the paln of this growth and theinvestment that's going to need to be made to dealwi th the continuing growth in our service area.I also would like to put the interimrate increase , the four percent interim rate increasesomewhat in perspecti ve.A typical residentialcustomer using 1 200 kilowatt-hours per month if thefour percent interim rate increase is implementedwould see an lncrease in their monthly bill ofapproximately $2.50.That's just from the fourpercent interim rate lncrease.That's for base ratesthat doesn t include PCA and it shouldn t include
PCA.
Now I understand that some of the other
classes would see different monthly increases in their
bills , but for purposes of your getting this into
perspective , that's the amount the residential
customers would be paYlng.
Now , to the extent you want to make
comparlson , if this interim rate increase is not
included , then on an annual basis Idaho Power would be
foregoing approximately $1.million per month.I '
not saying they re comparable but just put it in
perspecti ve.
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One of the other arguments that we heardfrom the ICIP and I want to spend just a little bit oftime on that and that is well , Idaho Power Companycontrols when it's golng to file rate increases and could have come in earlier and it's really IdahoPowers own faul t that we re looking at the kind oflncrease that we re looking at here in this particularcase.I think if you look at the rates that ourcustomers were paYlng over the last couple of years a resul t of the PCA I think that argument speclous.I don t know any other way to des cribe it.I think denying an interim rate increaseon 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 addi tional rate increase
help the Company recover the investment that it was
making during that period of time.I think tha ' s
just not realistic.I don t think that's reasonable.
That's why the Company wasn t in in the last couple of
years.You don t have that much control over timing
when the si tuation is like that.
In conclusion , as I indicated , whether
we like it or not , growth is going to require that we
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make significant investments in the infrastructure inthe coming years and the perception in the financialcommuni ty is important because we re going to have get some of that money from investors , from lendinginsti tutions and one of the ways that we can reducethe cost of making this infrastructure investment we can ei ther reduce the amount that we have to borrowthrough the internal generation of cash or we canreduce the cost of borrowing, and it's Idaho PowerCompanys belief that if this Commission will grantinterim rate relief , it will send a very positivesignal to the financial communi ty and that is thisCommission recognizes that it's in the public interest
for Idaho Power Company to be an economically heal thy
company and this posi ti ve signal can reduce cost
customers.It can reduce the cost of borrowing.
can reduce the cost of our having to go to the markets
and get addi tional cash to fund these investments
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.
COMMI S S IONER SMI TH :Thank you
Mr. Kline.
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Let's see if the Commissioners have anyques tions Commissioner Hansen.COMMISSIONER HANSEN:Well , just acouple of questions here.Am I correct , Mr. Klinethat you stated that Idaho Power is in economichardship and a reduction of the di vidend is anindication of this?MR. KLINE:I believe that it is , yes.COMMISSIONER HANSEN:As I look out atinformation on your Web si te I have a couple ofquestions I d just like to clarify with you if thatwould be okay.I see the utility credit rating is for senior secured debt as rated by all three rating
agencies; is that accurate?
MR. KLINE:I believe that it is.I '
not on top of that day to day, but I believe that
lS I think tha t 's evidence tha t the financial
communi ty does still believe we re a strong company.
COMMISSIONER HANSEN:Is it accurate
say that all the ratings of Idaho Power Company and
IdaCorp are investment grade?
MR. KLINE:I believe that's right.
COMMISSIONER HANSEN:Another exhibi t
you had out there lS on your source of liquidi ty.
Wi th your current debt authori ty, is it true that
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Idaho Power reports sufficient liquidi ty?MR. KLINE:I believe that's correct andI think it's also correct to understandCommissioner Hansen , that all of those indicators areunder pressure.Tha t 's exactly the thing tha t theIdaho Power board of directors looked at when theydecided to reduce the di vidend.They looked at thosethings and they said we want to keep those highfinancial standards , we want to maintain those highfinancial indicators because that lowers our cost offinancing.COMMISSIONER HANSEN:I guess follow-up to these three questions , though , if your
rating is good wi th the three rating agencles , you
have good liquidity, your investment grade is up, why
are you so concerned that not recei ving this interim
increase is going to cost you a lot more money
borrow money?
MR. KLINE:I think the risk is
Commissioner Hansen , that the investment communi ty
could very well look at the denial of interim rates
a negative slgn that the Idaho Commission is not going
to be supporti ve of the rate lncrease and I think that
will put addi tional pressure on the investment and
financial communi ties and addi tional pressure on the
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Company s ratings.That's our concern and that wasexactly what the board talked about when they decidedto reduce the di vidend.COMMISSIONER HANSEN:One last questionand this again comes from the Web , if you look atIdaho Power s contribution to earnings per share , lSit true that there was a contribution of $2.24 in 2002and $2.00 for 12 months ending in June of 2003?MR. KLINE:I do recall that number for2002 I also recall that a goodly junk of that was aone-time contribution from the income tax , change inthe income tax , laws , so to the fact that it wasearnlng more than its di vidend , it was for tha
reason.
COMMISSIONER HANSEN:But I guess my
question would be if you look at your exhibi t 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
contributing now to the di vidend than earlier; is that
correct?
MR. KLINE:But for the fact of the
lncome tax , the one-time income tax , that would not
have been the case.
COMMISSIONER HANSEN:But as you proj ect
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into 2003 at the end of June at $2., that wouldtill be equal to what ' 99 was.MR. KLINE:And there is also a one-timeadj us tment in tha t , as I recall , rela ted to the saleof the IE book.Again , you have to look at thecontribution and you have to look at all of thecomponents of those earnings and in both 2002 and in2003 there have been significant one-time events thathave contributed to those earnings.COMMI S S IONER SMI TH :Mr. Kline , just tokeep the record clear , do you want to explain what anIE book is?MR. KLINE:m sorry, you re absolutely
right.IdaCorp Energy was the subsidiary of IdaCorp
and they recently concluded their business and they
sold what's called the book of business.It'
essentially the ongoing contracts that they have wi
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 communi ty
would think that Idaho Power was very solid right now
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financially.MR. KLINE:I don t know if theinvestment communi ty would come to that conclusion.think wi th the --COMMISSIONER HANSEN:Well , with yourra tings and everything it looks good , doesn t itapparently?MR. KLINE:No question those ratingsare unchanged from prior times.They are not changedat thi s point in time.COMMISSIONER HANSEN:Thank you , tha ' sall I had.COMMI S S IONER SMITH:Thank you.
C 0 mmi s s l one r Kj ellander.
COMMI S S IONER KJELLANDER:Thank you
Commissioner Smi th.I guess just a follow-up to that
and maybe to ask the question somewhat similarly, but
when you look at short-term posi ti ve messages for the
financial communi ty, 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 earnlngs were well above expectations.
MR. KLINE:I don t know if I d use well
above , but --
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COMMI S S IONER KJELLANDER:Aboveexpectations.On the short term isn t that a posi ti message and where does this fit in , then , in terms ofincreasing the credi t rating and reducing the cost ofborrowing?MR. KLINE:ll jus t take one step backand talk about the earnings in the third quarter andthe fact that they were posi ti ve , they were aboveexpectations.Now , of course , one of the reasons theywere above is because this one-time event occurred.No one really knew when that event was going to occurthe sale of the IdaCorp Energy book , so it wasn t apart 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 communi ty isn 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
an indication from this Commission that there s going
to be some rate support going forward , there could be
negati ve implications and reductions in the Company
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abili ty to ralse funds.COMMI S S IONER KJELLANDER:Let me followthat up.There could be I mean , we re always hearingof the would have , should have s and could haveis there any support for that?Is there anydocumentation from the analysts that your credi tratings are going to fall if some interim relief isngranted?I have to base my decision on facts in therecord, not on specula tion.Do you ha ve an y do cumen t sthat say look , your credi t rating is going down if youdont get interim relief?MR. KLINE:Of course , we do notCommissioner Kj ellander.That's not typically the way
that the rating process works.It's generally based
on -- you know , they look and see what you do and then
they make a decision.
COMMI S S IONER KJELLANDER:Ha ve the
been strong overtures?
MR. KLINE:I think there have been
indications.I don t know whether you d call it
strong.
COMMI S S IONER KJELLANDER:One
follow-up.How is and maybe I m extrapolating too
much or interpreting too much in what you ve said , how
is it that not granting interim rate relief can be
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misconstrued or construed to be that the Commissionwouldnt support some pleces or parts of the totalrate case?How is it that anyone who follows thisindustry could assume that not granting interim raterelief is an indication that the Commission or anycommission in any state would turn its back on reasonable request that could be determined to befiscally sound on a going-forward basis?I s thefinancial communi ty that -- and I won t repeatCommissioners Smi th' s word for the record , but I thinkyou get jest of my question.MR. KLINE:I do , and we certainly hopethat doesn t occur.I mean , all I think we can do
present to you our concern , our belief that granting
interim rates would certainly be viewed as a posi ti
step.Now , not granting them I don t know how that
would be viewed.
COMMI S S IONER KJELLANDER:One mo re and
apologize and I recognlze 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
least immediately known until today, at least not
me anyway, do you have any follow up to his comments
specifically?I know in your comments you sort of
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stayed away from that.m ass umi n g i t was b e c a useyou didn t have it readily available.justwondering if there lS any more information that youcan share wi th regards to the impact and what -- andagaln my characterization of what I think I heardMr. Ward say is that it's an undue impact on some ofthose larger Industrial Customers.MR. KLINE:Mr. Commissioner I donhave an immediate response.I certainly could speakwi th Mr. Gale and perhaps we could gl ve you tha tinformation off line , so to speak , we could do that.COMMI S S IONER KJELLANDER:Thank you.MR. KLINE:Okay.
COMMI S S IONER SMI TH :Mr. Kline I just
had one ques tion.How much on average would a space
heating customer use in terms of kilowatts in
month?
MR. KLINE:I think the 1 , 200 tha t
gave you lS our average customer.A space heating
customer would be higher.Is it 500?
MR. GALE:More like 2 000.
MR. KLINE:Okay, more like 2 , 000.
COMMI S S IONER SMI TH :2000?Thank you.
I f there are no other comments I think what our plan
lS that the Commission will excuse itself to go
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consider the arguments and determine whether or not wecan issue a ruling from the Bench immediately so thatpeople aren t left in doubt.In the meantime , wecould have the parties convene themselves in theirprehearing conference to go over all the proceduraltiming lssues , filing dates , discovery issues and seeif the parties can reach an agreement on a schedulefor processing the request in the maln case.If there s a better suggestion opento it.If there are other comments that people wishto make at this time , I m open to those , also.MR. RI CHARD S ON :Madam Chai rman?COMMI S S IONER SMI TH :Mr. Richardson.
MR. RI CHARD S ON :Thank you
Madam Chai rman Since I was addressed specifically in
Mr. Kline s argument I have a response , if I may.
COMMI S S IONER SMI TH :Certainly.
MR. RI CHARD S ON :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
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did not characterize and I did not intend characterize the Idaho Supreme Court as having madetha t ruling.COMMI S S IONER SMI TH :Okay, thank you forthat clarification , Mr. Richardson.Anything else?I f not , the Commission will excuse ourselves and theprehearing can commence and we will be at ease untilre called back or until we reach a decision andreturn.Thank you.(Off the record discussion.COMMI S S IONER SMI TH :All right , theprehearing conference will be in order.TheCommission 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
ve determined it's very clear that we have the
discretion to make this decision that no further
hearings or proces ses are required.
However , we do find that an interim rate
lncrease 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 posi tion is sufficiently strong that those
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concerns do not override other considerations.appears that there will be disputes wi th regard to theamounts requested even at the level of the interimreques t.The inequi ty of the burden of a uniformpercent increase over customer classes actually usingelectric service during the next six months cannot befully cured by the fact that we can set differentra tes wi th a final Order , and I think even the Companywould agree that there is a time value to money foreve ryone This Commission has a very strong recordof paying attention to and taking action to preservethe financial heal th of the utili ties that we
regulate.A utili ty ' s financial heal th is an
important part of the public interest standard that we
apply.That is unchanged wi th 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
communi ty should not draw any inferences whatsoever
from today ' s decision.We have not prej udged this
case and nei ther should they.This case will be
processed expedi tiously and fairly.
The final decision will be based on the
record that is made.There s a lot of experience and
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talent in this room and on the phone and that willensure that we will have a full presentation on allthe issues to be considered , so that is our decisionon the interim.Is there a report on the prehearingconference?Ms. Nordstrom.MS. NORDSTROM:Yes , Commissionersthank you.The parties have discussed the dates anddeadlines for scheduling this particular case and webelieve the following dates will be acceptable eve ryone The parties suggest that February orrather, sorry, that January 30th be the deadline fordirect 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 la tes t April 9th.
course , that will be dependent upon the testimony and
witnesses presented.The transcripts will be due on
April 19th.The parties have agreed to file final
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briefs by April 30th and this presumes an effectivedate of June 1st.COMMI S S IONER SMI TH :Are there any othercomments?It looks like everyone is nodding inagreement to the schedule.You re contemplating thatthe direct case and the rebuttal will all be heard inthat same two-week period?MS. NORDSTROM: Yes.COMMI S S IONER SMI TH :And youcontemplating that revenue requirement and rate designwill not be separated?MR. KLINE:Right.MS. NORDSTROM:Correct.
COMMI S S IONER SMI TH :Do ei ther of the
Commissioners have questions?
MS. NORDSTROM:Al so , i I ma y, we a 1 s 0
came to a couple of other conclusions.The parties
agreed that any filings , peti tions , discovery,
motions , et cetera would be sent by overnight delivery
to the parties and to the Commission and e-mail could
accompany it as a courtesy; that workpapers would
accompany the testimony being filed and we also had an
agreement wi th regards to ordering dailies , could you
state that , Bart?
COMMI S S IONER SMI TH :Mr. Kline.
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MR. KLINE:Well , we agreed to requestdaily transcripts to expedi te the abili ty to filebriefs and the parties all agreed that the addi tionalcost of that could be recovered in the PCA.We allag reed to tha COMMI S S IONER SMI TH :Well , that's veryinteresting.MR. KLINE:No one will obj ect.COMMI S S IONER SMI TH :We will find out ifwe will obj ect.MR. KLINE:Yes I unders tand.MS. NORDSTROM:Mr. Kline , could youalso explain the discovery wi th 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 that's probably the easiest way.
crea ted it.
COMMI S S IONER SMI TH :Okay, and will he
please identify himself for the record?
MR. GALE:This is Ric Gale , Idaho Power
Company.We have provided the third quarter to Staff
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
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level of difficulty anymore , so by mid December , Staffshould have 11 months or the abili ty to review months of the 12.Of course , December is the onethat's the most volatile.As we progress wi th the year-endclosing, they can avail oursel ves to our books and weexpect our audi t to be complete by the first week inFeb rua ry COMMI S S IONER SMI TH :Okay.Ms. Carlockwere you golng to make a comment?Please identifyyourself.MS. CARLOCK:Terri Carlock , CommissionStaff.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.
COMMI S S IONER SMI TH :In terms of your
testimony, your presentation?
MS. CARLOCK:In terms of testimony and
presentation , yes , that's correct.
MR. GALE:That's correct.
COMMI S S IONER SMI TH :Are there any other
lssues or items that should be called to our attention
at this time?I f not , we re going to adj ourn the
prehearing.There s a couple of things I guess I
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would ask , as you go along, I don t think you need wai t for the Commission to call formal prehearingconferences if you believe there are items that wouldbenefit from mutual discussion , perhaps settlement orat least agreeing on where it is you disagree.think it would greatly aid the hearing process and theCommissions consideration of the issues , so Iencourage you to do tha t The other thing I would encourageeveryone to do is whatever you can to please make snow a lot this winter.Wi th tha t , we re adj ourned.(The prehearing adjourned at 11:25
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AUTHENT I CAT I This is to certify that the foregoingoral argument and prehearing conference held in thematter of the application of Idaho Power Company forauthori ty to increase its interim and base rates andcharges for electric service , commencing at 9: 30 a. m. ,on Thursday, November 13 , 2003 , at the CommissionHearing Room , 472 West Washington , Boise , Idaho , is atrue and correct transcript of said oral argument andprehearing conference and the original thereof for thefile of the Commission.
CONSTANCE S. BUCY
Certified Shorthand Reporter #187
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