20040415Volume IX.pdf

ORIGINAL
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
SERVICE.
) CASE NO. IPC-O3-13
Idaho Public Utllttles Commission
Office of the Secretary REceiVED,
APR 1 5 2004
Boise, Idaho
BEFORE
(rU~
COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER PAUL KJELLANDER
COMMISSIONER DENNIS HANSEN
PLACE:Commission Hearing Room
472 West Washington
Boise, Idaho
DATE:March 30, 2004
VOLUME IX - Pages 1146 - 1395
CSB'REpORTING
Constance S. Bucy, CSR No. 187
17688 Allendale Road * Wilder, Idaho 83676
[phone] * [phone]
Emailcsb~spro.net
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RAN
For the Staf f :Lisa Nordstrom, Esq.
and Weldon Stutzman, Esq.
Deputy Attorney Generals
472 West Washington
Boise, Idaho 83720-0074
Barton L. Kline, Esq.
and Monica B. Moen, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
RICHARDSON & 0 I LEARY
by Peter J. Richardson, Esq.
Post Office Box 1849Eagle, Idaho 83616
RACINE , OLSEN , NYE , BUDGE
& BAI LEY
by Randall C. Budge, Esq.
Post Office Box 1391
Pocatello, Idaho 83204-1391
Lawrence A. Gollomp, Esq.
Assistant General Counsel
U. S. Department 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
GIVENS PURSLEY LLP
by Conley E. Ward, Esq.
Post Office Box 2720
Boise, Idaho 83701-2720
For Idaho Power
Company:
AP PEARANCE S
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For Industrial Customers
of Idaho Power:
For Idaho Irrigation
Pumpers Association:
For The United States
Department of Energy:
For United Water Idaho,Inc:
For NW Energy Coalition:
For Micron Technology,
Inc. :
CSB REPORTING
Wilder , Idaho 83676
A P P A R N C E S (Continued)
For Community Action
Partnership Association
of Idaho and AARP:
Brad M. Purdy, Esq.
Attorney at Law
2019 North 17th StreetBoise, Idaho 83702
BOEHM , KURSZ & LOWRY
by Kurt J. Boehm, Esq.
36 E. Seventh Street
Suite 2110
Cincinnati , Ohio 45202
For Kroger Company:
(Of Record)
CSB REPORTING
Wilder , Idaho 83676 APPEARANCES
WITNESS EXAMINATION BY PAGE
Theresa Drake Ms.Moen (Direct)1147IdahoPower)Prefiled Direct Testimony 1149
Mr.Richardson (Cross)1167
Mr.Stutzman (Cross)1171
Susan J.Fullen Ms.Moen (Direct)1173IdahoPower)Prefiled Direct Testimony 1175
Mr.Eddi e (Cross)1212
Mr.Purdy (Cross)1215
Mr.Richardson (Cross)1232
Commissloner Hansen 1234Commissioner Smith 1236
Ms.Moen (Redirect)1238
John R.Gale Mr.Kl i ne (Direct)1240IdahoPower)Prefiled Direct Testimony 1242
Mr.Kl i ne (Direct -Cont I 1264
Ms.Nordstrom (Cross)1265
Mr.Budge (Cross)1269
Mr.Eddie (Cross)1280
Mr.Purdy (Cross)1284
Mr.Ward (Cross)1288
Commissloner Hansen 1293Commissioner Smith 1296
Mr.Kl ine (Redirect)1299Commissioner Kj ellander 1300
Don Reading Mr.Richardson (Direct)1303(ICIP)Prefiled Direct Testimony 1306
Mr.Eddie (Cross)1345
Mr.Kl i ne (Cross)1347
Mr.Richardson (Redirect)1362
Pike Teinert Mr.Richardson (Direct)1363(ICIP)Prefiled Direct Testimony 1366
Mr.Kline (Cross)1389Commissioner Smith 1393
Mr.Richardson (Redirect)1394
CSB REPORTING
Wilder, Idaho INDEX83676
NUMBER DESCRIPTION PAGE
FOR IDAHO POWER COMPANY:
50.
51.
Derivation of Service Establishment, Premarked
Reconnection , and Field Collection
Charge s
Idaho Power Overall Score Premarked
52.Providing Outage Information Top
Rated Utilities
Premarked
53.
54.
55.
56.
57.
58.
59.
60.
61.
Cost Per Meter Read Premarked
Meter Reading Quality Premarked
Summary DSM Spending Premarked
Automated Call Distribution Premarked
Call Handle Time Comparison Premarked
Call Volume Premarked
Customer Satisfaction Research Premarked
J D Powers Study Premarked
Revenue Allocation Summary Premarked
FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
201. Danskin Station Cost per kWh Premarked
202. Danskin Generation Summary Premarked
203. IPC Mtn. Home Generation Station
Months of Operation
Premarked
204. Mid-Columbia On Peak Electric
Price $MWhr
Premarked
CSB REPORTING
Wilder , Idaho EXHIBITS83676
E X H I B T S (Continued)
NUMBER DESCRIPTION PAGE
(Continued)
Premarked
Premar ked
Premarked
Premarked
Identified 1219
FOR THE INDUSTRIAL CUSTOMERS OF IDAHO POWER:
205. Percent Change in Proposed Fixed
Demand , & Energy Charges by
Customer
Class
206. Total Monthly kWh - Residential &
Industrial class , Jan. 2001
Sept. 2003
207. 2003 Monthly Coincident Demand ~
Generation Level
208. Calculation of Excess DistributionService Trans. capacity for
Schedule 19 customers, etc.
FOR COMMUNITY ACTION PARTNERSHIP & AARP:
809. Demand-Side Management at Idaho
Power Company, A Business Plan
2003-2005
CSB REPORTING
Wilder , Idaho 83676 EXHIBITS
BOISE , IDAHO, TUESDAY , MARCH 30,2004 1:15 P. M.
COMMISSIONER SMITH:Let's go back on the
record.Mr. Kl i ne .
MR. KLINE:I would 1 ike just for one
preliminary matter , we didn't get Mr.Avera --
COMMISSIONER SMITH:Avera.
MR. KLINE:
- -
we didn't get him formally
excused.
COMMISSIONER SMITH:He may be formally
excused and it is true that once you get the incorrect
name in your brain, you cannot get it out.
MR. KLINE:I will attest to that.
Ms. Moen will conduct the spreading of the testimony of
Ms. Fullen.
MS . MOEN :Idaho Power would like to call
Theresa Drake.
CSB REPORTING
Wilder, Idaho
1146 COLLOQUY83676
THERESA DRAKE
produced as a witness at the instance of the Idaho Power
Company, having been first duly sworn , was examined and
testified as follows:
BY MS. MOEN:
DIRECT EXAMINATION
Ms. Drake, would you please state your
full name for the record?
Theresa Drake.
And are you employed by Idaho Power?
Yes , I am.
And in what capacity?
Currently I'm the manager of customer
relations and research.
CSB REPORTING
Wilder, Idaho
And have you previously filed written
testimony in this matter?
Yes , I have.
And do you wish to make any corrections to
that testimony?
I'd like to a modification to my
employment capacity.Presented in the direct testimony,
I presented as a senior pricing analyst and my employment
capaci ty has changed to manager of customer relations and
1147 DRAKE (Di)
Idaho Power Company83676
research.
So on page 1, I think lines 21 and 22 , you
indicate that in July of 2001 , your position evolved into
a senior pricing analyst?
That's correct.On page 1 , 1 ine 6 where
it states I am employed by Idaho Power as a senior
pricing analyst.
And presently you're employed as?
A manager of customer relations and
research.
If I would ask you the same questions
included in your testimony today other than the
modification you made, would your answers or responses to
those questions be the same?
Yes, they would.
MS. MOEN:I request, Madam Chair , that
the prefiled direct testimony of Theresa Drake consisting
of 13 pages , along with Exhibit 50 be spread on the
record as if read in its entirety and that Exhibit 50 be
marked for identification.
COMMISSIONER SMITH:If there is no
objection , it is so ordered.
(The following prefiled direct testimony
of Ms. Theresa Drake is spread upon the record.
CSB REPORTING
Wilder , Idaho
1148 DRAKE (Di)
Idaho Power Company83676
Please state your name and business address.
My name is Theresa Drake.My business address
is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what capacity?
I am employed by Idaho Power Company as a
Senior Pricing Analyst.
Please describe your educational background and
work experience.
In May of 1990 I received Bachelor of Science
Degree in Marketing with emphasis in Finance from
Jacksonville State Uni versi ty in Jacksonville, Alabama.
From June 1990 through February 1993, I was employed by
the Federal Reserve Bank in Birmingham , Alabama.During
February 1993, I relocated to Boise and was employed by
West One Bank managing the Marketing Customer Information
System , researching customer purchase behavior and
designing marketing campaigns around customers' needs.
also formed a marketing database consulting firm prior to
becoming employed by Idaho Power.I joined Idaho Power
in January 1997 as a Pricing Analyst.In July 2001 my
position evolved into a Senior Pricing Analyst.
duties as a Senior Pricing Analyst include involvement in
preparing the cost-of-service studies, unbundling
studies, development of the Company's tariffs, and
managing the Company I s Green Power
1149 DRAKE, DI
Idaho Power Company
Program.I also act as a regulatory liaison for customer
service related issues.
What is the purpose of your testimony?
My testimony addresses proposed updates and
changes to several of the Company I s service provisions
including numbering and organization changes and changes
to non-recurring charges , such as service establishment,
reconnection , returned checks and customer deposits.
Have you prepared any exhibits?
Yes, Exhibit No. 50 explains how the proposed
charges relating to service establishment and
reconnect ion were derived.
Do you intend to discuss every proposed change
to the tariff at this time?
No.While a few of the changes I discuss are
substantive in nature , a significant number of changes
are " form" or "housekeeping" in nature only and do not
change the scope , effect or application of the various
tariffs.The specific changes to the service provisions
I address are detailed in Ms. Brilz's Exhibit No. 48,
pages 1 through 52.These revisions are shown in
legislative format in Exhibit No.4 8 so that parties
reviewing them will be able to readily identify the
proposed changes.
Q. Let's begin with the changes being proposed to
the numbering of the Company's General Rules and
1150 DRAKE, DI
Idaho Power Company
Regulations.Would you please explain the nature of the
changes and why the Company is proposing them?
First, on pages 1 through 52 of Ms. Brilz I
Exhibit No. 48 , the Rules and Regulations have been more
specifically separated by category than in the previous
tariff.The change in format is intended to make
specific topics easier to locate by creating more
categories in the Rules and Regulations.
Second , Rule F is now labeled,Service
Establishment and Discontinuance" and clearly identifies
acti vi ties involving initiating and ceasing service.
Billing-related items have been moved to Rule G, formerly
"Corrected Billing", which is now labeled "Billings"
Deposit provisions have been assigned a separate rule
Rule L.
What are the substantive changes proposed to
the Company s "General Rules, Regulations, and Rates"?
The current Account Processing Charge
Reconnect Fee, and Field Collection Charge have been
updated to reflect current costs.In addition , the
Company has elected to adopt deposit criteria for large
commercial and special contract customers as provided in
IDAPA 31.21.01 Rule 601.
What provisions are included under Rule
Service Establishment and Discontinuance?
1151 DRAKE , DI
Idaho Power Company
Requirements described in Rule F include
Service Establishment, Service Reconnection
Discontinuance of Service, Termination Practices, and
Field Collection.
Please describe Service Establishment.
Service establishment describes the condition
where a customer desires to activate an account with the
Company and the service is currently energized.When a
customer contacts the Company and requests service at a
specified service point, the Company will determine if
the requested service point is currently energized.
the service point is energized, the Company performs the
work necessary to complete the transaction; the
customer I S name , address , and other pertinent information
are entered or updated into the Customer Information
System and the Company dispatches personnel to the
service point to collect an initial meter read.The
proposed Service Establishment Charge reflects the costs
of performing these tasks.
Does the Company currently have a charge
associated with establishing service?
Yes. The Account Initiation Charge is currently
assessed.However, no distinction is currently made
regarding whether the line is currently energized or not.
Will the Service Establishment Charge apply if
1152 DRAKE , DI
Idaho Power Company
a customer requests service establishment at a
non-metered service point?
The Service Establishment Charge is not
applicable to non-metered service points.Non-metered
service points such as cable TV power supplies, telephone
booths, street lighting, etc., are unique in respect to
the degree of account establishment work , as described
above , the Company may perform.In particular, no meter
reading is required. Therefore, the costs to establish
service for non-metered accounts are recovered through
the standard service schedule charges.
What if the customer requests service at a
location where the service line is not currently
energi zed?
Service Reconnection describes the condition
where service was once energized, has been disconnected
and is presently requested by the customer to be
re-energized.The Service Reconnection Charge reflects
the costs of tasks performed to physically reconnect the
service and update the pertinent information in the
Customer Information System.
Will a customer be charged both the Service
Establishment Charge and the Service Reconnection Charge?
No.The Service Reconnection Charge includes
the costs associated with the tasks of service
1153 DRAKE , DI
Idaho Power Company
establishment plus the costs of physically reconnecting a
service line.
What are the fees associated with these
1154 DRAKE, DI
Idaho Power Company
transactions?
The Service Establishment Charge as detailed on
page 140 of Ms. Brilz's Exhibit No. 48, is $20 for all
metered service points.The Service Reconnection Charge,
also detailed on page 142 of Exhibit No. 48, varies with
the skill level required of the employee dispatched to
perform the work.The skill level required is determined
by the line voltage typically serving the customer class.
Customers taking service under Schedules 1 , 7, and 9
requesting reconnect ion during normal business hours will
be charged $20.Customers taking service under Schedules
15, 19, 24, 25, 40 , 41, and 42 requesting reconnect ion
during normal business hours will be charged $40.The
higher fee for the latter schedules represents the
required expertise the dispatched employee to work
wi th the typically higher voltage at the point where
service is reconnected.Exhibit No. 50, page 2 , details
the derivation of these charges.
Can reconnect ion service be obtained outside of
normal business hours?
Yes.The charges by rate schedule outlined on
page 142 of Exhibit No. 48 include two additional
block-hours and associated charges.The block-hour
structure is the same as that currently in place.
However the charges have been updated to reflect current
1155 DRAKE , DI
Idaho Power Company
costs.
Please explain why the Company proposes the
block-hour charges.
1156 DRAKE , DI
Idaho Power Company
As detailed on Exhibit No. 50 , page 2 , the
charge has been updated in two ways; first, to delineate
by the type of skilled employee required to perform the
work and second, to recognize the higher cost to serve
those customer requests for reconnection after normal
working hours due to the overtime hourly rate paid to
employees.In most cases, during the third block-hours
of 9: 01 p. m. to 7: 29 a. m., two employees are dispatched
for safety reasons.The proposed charges reflect the
costs to serve the customer requests based on the time
the customer requests service reconnect ion.
In looking at the second and third block-hours
for reconnection of customers taking service under
Schedules 1 , 7 , and 9 on page 1 of Exhibit No. 50 , the
current costs are slightly lower than the charges
currently approved.Please explain why you are proposing
the charges remain unchanged.
Service provided during the after-hour time
frames poses safety concerns for our employees.The
Company proposes keeping the charges at their current
level to encourage Reconnection Service during the
lower-priced first block-hours.
Are any changes made to the Termination
Practices section?
The Termination of Service provisionNo.
1157 DRAKE, DI
Idaho Power Company
remains unchanged from our current tariff.The provision
states the termination practices as provided by the IPUC
Utility Customer Rules and Regulations will be enforced.
What updates have been made to the Field
Collection provision?
The Field Collection Charge is designed to
recover the costs incurred when Company personnel are
dispatched to terminate service and the Customer elects
to make a payment or payment arrangement to the
dispatched personnel to avoid termination. If the
customer chooses not to pay the necessary amount to avoid
termination , the dispatched Company personnel will
perform the termination of service at no charge. The
Field Collection Charge as detailed on page 1 of Exhibit
No. 50, has been updated to account for the variation of
skill level required of the employee dispatched to
perform the work.The skill level required is determined
by the line voltage typically serving the customer class.
In his testimony on page 14 , Mr. Obenchain
refers to an adjustment to other revenue to recognize
additional revenue to be collected from the Service
Establishment Charge, Service Reconnection Charge, and
the Field Collection Charge.Would you please explain
the basis for this adj ustment?
Yes.Page 3 of Exhibit No. 50 details the
1158 DRAKE, DI
Idaho Power Company
difference in revenues from the current charges to the
proposed charges.
Other than consolidating the billing related
items into one rule, are there any other changes to Rule
, Billings?
Yes.The Company is proposing to include a
description of its policy dealing with checks or other
payments returned non-paid by a customer's financial
institution.The Company has an established returned
check policy operated in conformance with the provisions
of the Idaho Code , and includes notification of the
applicable charge to customers on the monthly billing
statement.By listing the Returned Check Charge within
the Company s Rules and Regulations, the provision is
clarified for customers and is easier to reference for
PUC staff and Company employees.The corresponding
Returned Check Charge of $20 is listed in Schedule 66
(page 142 of Exhibit No. 48).
You mentioned earlier a new Rule L was
developed to address customer deposits.In addition to
creating a new Rule for deposits, has the criteria for
deposits changed?
Rule L was created to isolate and identify
deposit provisions for residential, small commercial
large commercial , and special contract customers.Other
1159 DRAKE , DI
Idaho Power Company
than moving the language from Rule F to Rule L, the
provision for
1160 DRAKE DI
Idaho Power Company
residential and small commercial customers has not
changed.However , the Company has elected to establish
deposit criteria for large commercial customers and
special contract customers as provided under IDAPA
31.21.01 Rule 601.
Briefly describe the deposit criteria for
existing large commercial and special contract customers.
For existing commercial and special contract
customers, a deposit may be required when the customer
fails to make a payment on the due date or the current
status of the customer I s business does not pass an
obj ecti ve credit screen.
What are the deposit condition criteria for new
large commercial and special contract applicants?
A deposit may be required for service if the
applicant is applying for service for the first time, or
the nature of the applicant's business is speculative or
is the type of business that is subj ect to a high
incidence of failure , or if the applicant has an
outstanding prior service account debt with the Company.
What is the proposed deposit amount?
The requested deposit amount will not exceed
two times the customer's actual or the applicant'
estimated highest monthly bill and is payable in two
installments.
1161 DRAKE , DI
Idaho Power Company
Why is the Company now seeking to implement the
deposi t provision for large commercial and special
1162 DRAKE , DI lOa
Idaho Power Company
contract customers?
In recent years , the Company has become
increasingly exposed to the effects of certain businesses
falling delinquent on paying their accounts and to an
increased number of businesses claiming bankruptcy.Some
instances have occurred where an existing business
customer who has historically made consistent timely
payments has filed for bankruptcy and ceased business.
Even one month I s worth of unpaid billing can amount to a
sizable impact on uncollectible amounts.For these
reasons, the Company plans to implement deposit criteria
for large commercial and special contract customers.
Has the Commission previously approved similar
deposit provisions for any other utility serving
customers in Idaho?
Yes.Utah Power and Light has a similar
Commission approved provision 1 isted under Sheet No.
9R.2 in the UP&L tariff.
Are there any other updates to non-recurring
charges?
Yes."Fractional Period Minimum Billings"
specifies the minimum bill requirements for each service
schedule when service is taken for a partial month.The
minimum bill amounts have been updated to be more
reflective of the costs associated with bill preparation.
1163 DRAKE, DI
Idaho Power Company
While the minimum bill amounts do not equal the total
cost of preparing, producing, and delivering a bill and
recording subsequent payments , they reflect a portion of
those costs associated with providing service.The
specific minimum bill amounts for each service schedule
are detailed on page 143 of Exhibit No. 48.
Please explain the proposed change to Rule
Rule B , Definitions, includes clarification of
what is considered to be a normal Billing Period.While
a typical billing period is 30 days, the normal billing
period is considered to be 27-33 days.
Is 27-33 days new for a normal billing period?
No.The Company has a long standing practice
of considering a normal billing period to be 27-33 days.
The Company proposes to add language to the definition so
that this practice is explicitly stated.
Is there any other change proposed to Rule B?
Yes.The definition of Connected Load
currently included in Rule B is pertinent only to
Schedule 72.Therefore, the definition is moved to
Schedule 72.
Are any changes proposed to Rule D , Metering?
The only proposed update is to state that the
Company has the right to modify meter reading schedules
as required by changing conditions.Certain events can
1164 DRAKE, DI
Idaho Power Company
trigger a meter reading schedule to be modified , such as
holidays or the alignment of meter read routes for better
operating efficiencies.The update to Rule D provides
clarification to customers.
Does this conclude your testimony?
Yes.
1165 DRAKE, DI
Idaho Power Company
open hearing.
(The following proceedings were had in
MS. MOEN:
cross-examination.
Ms. Drake is available for
COMMISSIONER SMITH:Mr. Budge, do you
No, I don'
1166
Thank you.
Mr. Eddie.
No questions.
Mr. Purdy.
None , thanks.
Mr. Gollomp.
Mr. Ward.
No questions.
Mr. Miller.
Mr. Richardson.
I hate to break the set,
Well, I was beginning
have questions?
MR. BUDGE:
COMMISSIONER SMITH:
MR. EDDIE:
COMMISSIONER SMITH:
MR. PURDY:
COMMISSIONER SMITH:
MR. GOLLOMP:None.
COMMISSIONER SMITH:
MR. WARD:
COMMISSIONER SMITH:
MR. MILLER:Nor I.
COMMISSIONER SMITH:
MR. RICHARDSON:
but I do , Madam Chairman.
to be worried.
CSB REPORTING
Wilder, Idaho
COMMISSIONER SMITH:
83676
DRAKE
Idaho Power Company
CROSS - EXAMINATION
BY MR. RI CHARDSON :
Ms. Drake , you just noted that you're no
longer senior pricing analyst, but you I re manager of
customer relations and research?
Correct.
And it says in your prefiled testimony
that your duties as manager , and I assume we're going to
change senior pricing analyst to manager of customer
relations and research , did your duties change when your
position changed?
The maj ori ty of my responsibilities, yes,
but I still manage the Green Power Program as mentioned
in my testimony.
Okay, can you tell me how many people are
enrolled in the Green Power Program?
Yes, we have just over 1 800 customers
enrolled in the program.
And what's that equate in terms of a
percentage penetration rate to the Company s total
customer base?
Approximately half of one percent.
Do you have a goal or a target penetration
rate?
CSB REPORTING
Wilder, Idaho
1167 DRAKE (X)
Idaho Power Company83676
One percent.
When do you anticipate reaching that?
We had hoped to already be there , but our
program grows about 25 percent every spring season when
we have a lot of promotional activities centered around
Earth Day, which , as some of you know , is coming up next
month , so we hope to grow that increasingly and get to
one percent relatively soon.
Do you have a marketing company or plan
for Green Power for promoting it?
Yes, we do.
Can you describe that for us?
Just in a general sense?
In general.
Our strategy for Green Power is to, first
of all , since the program has started over the last three
years is to educate all Idaho Power customers what Green
resources are all about.A second-tiered strategy of
that promotional piece would be to go after the target
market of customers that we feel would be highly likely
to subscribe to Green Power , which would be the
residential segment as well as some business customers
who are concerned with environmental affairs.
Do you have a program for evaluating the
effectiveness of your educational efforts?
CSB REPORTING
Wilder , Idaho
1168 DRAKE (X)
Idaho Power Company83676
I don I t know what you mean by "program.
Do you have a method of analyzing how
effective in a scientific or objective manner the
effectiveness of your education program?
One of the things we look at in
subscribership to the program is how effective it has
been in reaching those populations.
So the question was relating to customers
who aren't subscribing because, obviously, if they
subscribing, then you've reached them somehow , but the
customers who are not subscribers, do you have a method
of determining how you effectively reach them in terms of
getting the message out about your Green Power Program
ike market research?
We don't have plans to follow up and
contact people if that's what you I re asking.
Or sample?
Pardon me?
Not contact them, but just a sampling to
see how your message got through to your customers?
We don I t have plans to do that right
now.
Have you done a comparison on your one
percent target to other utilities who are actively
promoting Green programs for their customers , what some
CSB REPORTING
Wilder , Idaho
1169 DRAKE (X)
Idaho Power Company83676
of the other utilities are able to achieve?
For a penetration of subscribers in the
Green Power Program, one percent is pretty standard among
utilities that are offering Green pricing programs.
There are a couple exceptional higher-tiered programs
that have reached three to five percent, but that I s
pretty unlikely and they're not located in the Pacific
Northwest like we are.
Why do you think that's unlikely to
achieve a target of greater than one percent?
Based on what other utilities have
experienced across the nation, one percent seems to be a
goal of most utilities that they try to attain for
subscribership that I s within reason for people to join
the program.
Have you done an analysis of the
demographics of which types of your customers are most
likely to subscribe to Green Power?
Yes.
Could you briefly tell us what the results
of that was?
Obviously, I don't have those with me
today, but if I can generalize
That would be fine.
- - most people subscribing to the program
CSB REPORTING
Wilder, Idaho
1170 DRAKE (X)
Idaho Power Company83676
are females that are between the ages of 25 to 45 with
children in the household.
And have you personally been to any
specialized training or seminars on how to promote the
Green Power?
Yes , I have.
MR. RICHARDSON:Thank you.That's all I
have, Madam Chairman.
COMMISSIONER SMITH:Thank you
Mr. Richardson.
Mr. Stutzman.
MR. STUTZMAN:Thank you , Madam Chairman
just a few questions.
CROSS-EXAMINATION
BY MR. STUTZMAN
Ms. Drake, at page 11, you talk about
fractional period minimum billings and basically, that I s
just a minimum bill that the customer receives that they
take service for a partial month; right?
Correct.
Is a customer charge included as part of a
fractional month bill?
No, it is not., I'm sorry, could you
CSB REPORTING
Wilder, Idaho
1171 DRAKE (X)
Idaho Power Company83676
repeat the question?
Is the customer charge or service charge
included as part of a fractional month bill?Is it a
prorated amount?
I think that would be a question better
asked of Ms. Brilz.
MR. STUTZMAN:Well , then perhaps you
don't know the answer to the rest of my questions then
ei ther.Tha ti s a 11 I have.
COMMISSIONER SMITH:Thank you,
Mr. S t u t zman .
Do we have questions from the Commission?
It appears not.
Do you have redirect?
MS. MOEN:No redirect , Madam Chair.
COMMISSIONER SMITH:Thank you.
THE WITNESS:Thank you.
(The witness left the stand.
COMMISSIONER SMITH:Would you 1 ike
Ms. Drake to be excused?
MS. MOEN:Yes, please.Thank you.Idaho
Power would like to call Susan Fullen.
CSB REPORTING
Wilder , Idaho
1172 DRAKE (X)
Idaho Power Company83676
SUSAN J. FULLEN
produced as a witness at the instance of the Idaho Power
Company, having been first duly sworn , was examined and
testified as follows:
BY MS. MOEN:
DIRECT EXAMINATION
Ms. Fullen, would you please state your
full name for the record?
CSB REPORTING
Wilder, Idaho
Susan J. Fullen.
And in what position are you employed by
Idaho Power Company?
General manager , customer services and
And have you previously filed written
direct testimony on behalf of Idaho Power in this
I have.
Do you wish to make any corrections to
that direct written testimony?
No.
And if I would ask you the questions that
are included in that testimony, would you respond the
metering.
matter?
same?
1173 FULLEN (Di)
Idaho Power Company83676
Yes, I would.
MS. MOEN:Madam Chair , I request that the
prefiled direct testimony of Susan Fullen consisting of
26 pages, along with Exhibits 51 to 60 be spread on the
record as if read in its entirety and that the exhibits
be marked for identification.
is so ordered.
COMMISSIONER SMITH:Without objection , it
(The following prefiled direct testimony
of Ms. Susan Fullen is spread upon the record.
CSB REPORTING
Wilder , Idaho
1174 FULLEN (D i
Idaho Power Company83676
Please state your name , address, and present
occupation.
My name is Susan J. Fullen.My business
address is 1221 West Idaho Street, Boise , Idaho.I am
General Manager of Customer Services and Metering for
Idaho Power Company.
What is your educational background?
In 1988 I received a Bachelor of Science in
Management Technology from Lewis-Clark State College, and
in 1991 I received a Master of Business Administration
from Portland State University.I am currently enrolled
in the Doctor of Business Administration Program at the
Uni versi ty of Phoenix.
Please outline your experience with Idaho Power
Company.
In July of 1980, I began my career with Idaho
Power as a Collections Clerk in Hailey, Idaho.Shortly
after that I relocated to the Southern Division
headquarters in Twin Falls and became a Customer Service
Representati ve.In 1982 I was promoted to Customer
Service Supervisor in the Boise Customer Service
Department.In 1983 , I relocated back to Twin Falls and
was a Customer Service Representative until 1985 when
was again promoted to Customer Service Supervisor.
1987 I was promoted to Assistant Division Accounting
1175 FULLEN , D
Idaho Power Company
Manager in the Idaho Power Western Division.In 1991 I
was promoted to the Ontario District Manager position
and in 1992 I was promoted to the Southern Division
Accounting Manager.From November of 1994 through August
of 1995 I was assigned to work on the Distribution
Department reorganization.In September of 1995 , I was
promoted to Manager of Energy Services of the Eastern
Region.In 1997 , my title was changed to Area Manager of
the Southern Region.In 1999, I was promoted to Customer
Services Manager.In 2002, I was promoted to my current
position of General Manager of Customer Services and
Metering.In this position , I oversee the customer care
operations , the customer information system , the billing
processes , including metering, the demand-side management
acti vi ties , and the customer relations and research
activities.I have been active in the Edison Electric
Institute Customer Services Organization, serving as the
Chair for this committee in 2002.
What is the purpose of your testimony in this
proceeding?
I will describe customer service and community
relations' developments since Idaho Power's last general
rate case.
How have the Company's customer service
operations changed since the last general rate case?
1176 FULLEN DI
Idaho Power Company
The evolution of technology, improved processes
within the Company, and the change in customer lifestyles
have required Idaho Power to implement a new business
model that better serves customers.That model includes
changes that are identified as:(1) a move to centralized
customer care transactions (2) the installation of a new
customer information system (3) additional payment
options,(4) 24 hours a day, 7 days a week access to
account information (5) improved outage management and
communication systems,(6) improved customer service
systems throughout the Company I s service territory,(7 )
demonstrated performance of our metering and billing
(8) improved facility siting processsystems (9 )
enhancements to community involvement activities (10)
addi tional customer assistance programs ( 11 ) renewed
focus on demand - side management programs,(12) increased
use of benchmarking and performance monitoring, and (13)
continual emphasis on customer satisfaction measurements.
I will elaborate on each of these changes.
Please describe the move to centralized
business transactions.
Prior to the establishment of the Customer
Service Center in 1994, Idaho Power operated with
approximately 31 District Offices.These offices
individually performed customer service functions.
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Idaho Power Company
Those functions included taking and processing cash
payments, work
1178 FULLEN , DI
Idaho Power Company
associated with customer movement, billing, credit and
collections , answering outage and trouble calls, and the
administrative aspects of new construction.Offices
operated Monday through Friday from 8: 00 AM. to 5: 00 PM
with smaller offices closing at noon.The difficulties
with this type of operation at Idaho Power were:(1 )
limited office hours (2) high operating expenses to
maintain the offices (3) difficult and costly deployment
of customer service technology across 31 locations,(4 )
maintaining consistency in operations,(5) multiple phone
contacts for customers needing to conduct business with
more than one Idaho Power district office, and (6)
inability to effectively measure and track performance
because of a lack of technology to capture the data.
In order to address these issues, in 1993 Idaho
Power embarked on a transition to a more centralized
operation beginning with the closing of the Shoshone
district office.This transition continued over several
years and has benefited our customers in a number of
ways.
The benefits our customers experience from the new
approach include:(1) expanded full service business
office hours of 7:30 AM to 6:30 PM , Monday through
Friday,(2) a single phone number for customers in the
Treasure Valley and a toll-free 800 number for customers
1179 FULLEN , DI
Idaho Power Company
outside the Treasure Valley calling area,(3) consistency
in service and
1180 FULLEN, DI
Idaho Power Company
information regarding our policies and procedures, and
(4) prompt service with over 80 percent of our inbound
calls answered within 30 seconds.
The Customer Service Center employs a well-trained
staff with specific customer service skills and uses
state of the art technology.Idaho Power monitors calls
for quality and to provide on-going training support to
personnel.All Customer Service Representatives (CSRs)
have defined standard performance expectations.
performance management system is utilized that provides
feedback to ensure that our customers receive superior
customer service.
Idaho Power employs bi-lingual CSRs that provide
native language service to the Company s Spanish-speaking
customers.Addi tionally, we provide an outside language
line service to help Idaho Power communicate with other
non-English speaking customers.
How has Idaho Power's Customer Information
System changed since the last general rate case?
In November of 2000, the Company installed a
new Customer Information System (CIS) that provides many
enhancements for customers as well as improved access to
customer information for our CSRs, thus increasing our
ability to be responsive.Bill presentation has been
improved for easier customer understanding.The system
1181 FULLEN , DI
Idaho Power Company
is available nearly 24 hours a day, 7 days a week , and
facilitates the use of self-service technologies such as
Interactive Voice Response Units and integration with the
Internet.Single account number and enhanced rate option
capability, integrated trouble orders, and improved
customer relationship management documentation are now
standard.
The new CIS enables the Company to combine service
at multiple locations into one bill for the customer.
Residential and Small General Service accounts can be
combined for Budget Pay purposes.Large General Service
customers can combine all of their commercial services
into one bill.One such customer has over 100 accounts
combined into one bill.
The new system also allows for a summary of all
services to be displayed on the first page of the bill
and for the printing of informative messages to customers
directly on the bill.
Another CIS improvement is the ability to retain
permanent customer records.Now , when a customer is
added to the customer system, his or her information is
not deleted if he or she moves.Should that customer
leave Idaho Power and then subsequently return to our
service territory, his or her previous history can be
retrieved.
1182 FULLEN , DI
Idaho Power Company
The system also has the ability to track all
customers having service at a specific premises over
time, or to track every service any specific customer has
had on
1183 FULLEN, DI
Idaho Power Company
i 1 our system in the past.This increased availability of
information can assist in improving our response time in
communicating with the customer.
Should a customer I s bill need to be revised or
recalculated, the new system automatically calculates and
prints a new bill , thus avoiding the manual calculations
that were performed in the past.
Also , the new CIS provides customers with the
opportunity to have duplicate bills and notices sent to a
third party of their choice.
Please describe additional payment options
provided by the Company.
Idaho Power offers various payment options to
customers including 61 pay stations dispersed throughout
the Idaho service territory, electronic funds transfer
automatic deduction from the customer's bank account,
internet payment options , payment by mail , check by
phone, and credit card payments.
How has Idaho Power improved retail customer
access to account information?
Idaho Power provides customers with account
information through an Interactive Voice Response Unit
(IVRU) that allows customers to access their account
information nearly 24 hours a day, 7 days per week.The
IVRU provides customers with the capability to make
1184 FULLEN , DI
Idaho Power Company
payment arrangements, retrieve billing, payment, and
meter reading information , sign up for Budget Pay, and
access conservation and usage information.Idaho Power I
telephone menu has been recognized by Enterprise
Integration Group as "above average" for both the utility
industry and call center industry for overall quality,
voice quality, information delivery, user friendliness,
and ease of operation.Idaho Power's telephone menu
scores are shown on Exhibit 51 , a one-page exhibit
enti tled "Idaho Power Overall Score"
Has Idaho Power also improved its outage
management and communication systems?
Yes.Ten years ago Idaho Power I s outage
management system was not an integrated system.
consisted of separate dispatch centers with limited
telephone lines and limited use of technology to convey
information.Although 24 hours a day, 7 days a week
coverage was available, it was often staffed by only one
person with multiple urgent activities to respond to
while keeping the electrical distribution system
operational.The ability to provide relevant customer
information was limited until additional help arrived.
Idaho Power had no system to contact customers prior to a
planned outage, and very little technology to identify an
outage location unless customers called to tell us they
1185 FULLEN, D
Idaho Power Company
were out of service.Today, Idaho Power provides 24 hour
a day, 7 days a week coverage for
1186 FULLEN , DI
Idaho Power Company
outage calls.The IVRU provides up to date information
for up to 144 customers simultaneously.In case of
unplanned outages, the Company has at least one customer
service specialist available at all times (along with
dispatch personnel), a monitoring system that notifies
the Company of outages, and a state of the art outage
management system that identifies outages by locations.
Additionally, there is an outbound calling system to
inform customers of planned outages prior to their
occurrence.
Among 75 utilities, Idaho Power was ranked tenth in
the nation in a 2003 national survey conducted by J. D.
Powers and Associates in the outage notification
category.Exhibi t 52, a one-page exhibit entitled
Providing Outage Information - Top Rated Utilities"
shows the ratings for the top-rated utilities in this
category.
How does Idaho Power provide customer service
outside of the Customer Service Center?
Idaho Power has operation centers throughout
the service territory to build , operate, and maintain its
transmission and distribution facilities.These centers
are open Monday through Friday for general business
acti vi ties primarily related to the lines operations.
Idaho Power manages its operations to respond to
1187 FULLEN , DI
Idaho Power Company
emergency situations 24 hours a day, 7 days a week, and
is staffed at designated locations throughout the service
1188 FULLEN, DI
Idaho Power Company
terri tory to ensure quick response, as well as a presence
within the communities it serves.
As stated earlier , Idaho Power provides 61 pay
stations serving 37 communities throughout the Idaho
service territory to receive cash payments.In addition,
each of the operation centers has a drop box available
for check or money order payments.The operation centers
also provide assistance to customers (via a direct
telephone line to our customer service center) for most
customer inquiries, and can direct customers to the
appropriate personnel for other inquiries.
Idaho Power also has representatives staffed locally
within the regions to accommodate customers at their home
or business.Personal assistance is available for
customers in all rate classes regarding billing
inquiries, energy efficiency programs, power quality, and
other inquiries best accommodated through face-to-face
communication.
Collection and service connection activities are
performed out of the regional offices, and personnel are
available 24 hours a day to respond to these requests.
In addition , meter reading acti vi ties allow for personal
interaction at the customer I s premises.Idaho Power
strives to provide information to all its employees in
order to respond to customers' inquiries through any ofthese interactions.
1189 FULLEN, DI
Idaho Power Company
Large industrial and commercial customers have a
dedicated representative who actively manages their
accounts.The representative is charged with ensuring
that these customers are aware of any planned outages and
changes to their service.
How well are your metering and billing systems
performing?
Idaho Power I s systems are performing very well.
Even though our service territory is more rural than
most , the Company cost per meter read is comparable to
the EEI average (see Exhibit 53 entitled "Cost Per Meter
Read"
) .
The Company's meter reading accuracy rate is
99.8 percent.Additionally, Idaho Power'
system-estimated meter reads , corrected meter reads , and
meter reread requests are minimal as indicated by Exhibit
, entitled "Meter Reading Quality"
In addition to the direct customer service
activities previously described, has Idaho Power made
improvements in the way it interacts with the communities
it serves?
Yes.The Company has implemented an improved
facility siting process , it maintains an active community
relations program , and provides substantial corporate and
employee contributions of both time and money.
Please describe Idaho Power I s improved
1190 FULLEN , DI
Idaho Power Company
distribution and transmission facility siting process.
In 2002 , Idaho Power substantially revised its
new distribution and transmission facility siting process
to more actively promote community participation and
gather public input.The primary obj ecti ves of this
process are to develop, publish, and share long range
plans with jurisdictional authorities and customers in
order to foster an understanding of the facilities needed
to meet electricity needs, to purchase substation sites,
and to acquire transmission rights in advance of the need
and before physical development in a given area overtakes
our ability to economically provide necessary
infrastructure.The overall goal is to ensure that we
provide the needed infrastructure in a timely fashion and
in a manner that is compa t ibl e wi th communi t y needs.
How else is Idaho Power involved with the
communities it serves?
Idaho Power continues to work with our
communi ties and to encourage employee participation in
local activities.Idaho Power has five community
relations representatives and five community education
representatives dedicated to working with the communities
and schools to:(1) educate the public on energy usage
electrical safety, hydroelectric relicensing, and
rate-related issues,(2) pl an and manage growth , and (3)
1191 FULLEN, DI
Idaho Power Company
to promote the local economies.
In addition , Idaho Power contributed over $640,000
in 2002 to community, civic, health, educational , and
other non-profit organizations.These contributions are
made on behal f of our shareholders and are not part of
our current rate request.
The Company's employees are among the most giving in
the region in both time and contributions.Idaho Power
employees, families , and friends have a maj or impact in
volunteering with several community projects and they
have set the standard for several events.Idaho Power
employees have consistently raised the most money per
employee for Idaho Public TV and have had the highest
employee participation rate for years.Company employees
have raised the most money for the American Heart
Association Heart Walk for 2002 and 2003.Idaho Powe
established a Boise citywide record in 2002 with Rake Up
Boise, a program of the Neighborhood Housing Services,
Inc., by raking 45 yards of senior citizens.Idaho Power
has also provided energy boxes to the more than 600 homes
of senior citizens whose yards were raked.The energy
boxes contained a florescent light bulb , an energy
calculator and information on efficient use of energy.
Company employees tied the record at four homes in
2003 for most homes painted as part of Paint the Town , a
1192 FULLEN , DI
Idaho Power Company
program of the Neighborhood Housing Services, Inc., which
paints the homes of economically disadvantaged senior
citizens and disabled persons.Idaho Power also
participates in similar paint proj ects in Pocatello and
in Malheur County, Oregon.
In November and December , employees participate in
"Take a Turkey to Work Day" which distributes turkeys,
hams, and other food items to the Idaho Food Bank and
other food distribution agencies throughout Idaho Power'
service area.Idaho Power employees also participate in
numerous civic and community organizations , Chamber of
Commerce events, scouting groups, and fund raisers.
What has Idaho Power Company done to assist
low-income customers?
Idaho Power has actively promoted and managed
the collection of contributions from customers for
Proj ect Share and has made direct corporate contributions
in the amount of $25 000 per year from 1999 through 2003
as well as an extra $100,000 was contributed during the
recent high energy cost years.In addition , for each
dollar that is collected via customer contributions,
Idaho Power adds 10 percent to that amount for Salvation
Army proj ect Share administrative costs.Our regulatory
department has informed me that proj ect Share
contributions are not part of the Company I s rate request.
1193 FULLEN, DI
Idaho Power Company
In addition to Project Share, Idaho Power has spent
approximately $252 000 per year for Idaho's Low Income
Weatherization Assistance (LIWA) program since 1989.
Like the proj ect Share Program, these funds were also
supplemented during the energy crisis.LIWA expenses are
included in existing rates and continue to be included in
the current rate request.Besides its assistance to
low- income famil ies , LIWA activities provide conservation
benefits to all customers and the Company.
Please describe the Company s efforts in the
area of conservation or demand-side management (DSM)
since 1994.
Idaho Power has been engaged in some form of
DSM acti vi ties since the last general rate case, although
the emphasis , delivery mechanisms , and rate recovery have
changed throughout the decade.
In the early 1990s, deferred accounting was used for
conservation programs and they initially appeared on the
utility I s books as regulatory assets.Recovery of DSM
expenditures was deferred until regulatory authorization
to begin amortizing the accumulated balances could be
obtained and appropriate rates could be put into effect.
At first, annual expenditures for energy efficiency
rose steadily from $1.9 million in 1990 to a peak of $6.
million in 1994.Please see Exhibit 55 for a summary of
1194 FULLEN, DI
Idaho Power Company
DSM spending from 1990 to 2002.In the last half of the
decade
1195 FULLEN, DI 15a
Idaho Power Company
when it appeared that deregulation and increased
competi tion might jeopardize the recovery of regulatory
assets, the Company, with Commission approval, began
winding down the traditional Company-administered DSM
programs, and instead joined the Northwest Energy
Efficiency Alliance (NEEA) to promote regional market
transformation.Annual expenditures for energy
efficiency activities declined to $1.6 million by 2000.
However , then came the California energy crisis that
had dramatic ripple effects throughout the west including
extraordinarily high wholesale market prices in 2000 and
2001.One of the reactions to these high energy prices
was a renewed focus on DSM activities.In 2002, the
Company, with Commission approval , established the Energy
Efficiency Advisory Group (EEAG) and implemented the
Energy Efficiency Rider that exists today.The rider is
Schedule 91 of the Company's Idaho Tariffs.
Since 2002, in addition to its continued
participation in the NEEA, the Company has worked closely
with the EEAG in reestablishing a broader portfolio of
DSM acti vi ties at Idaho Power.Material progress has
been made.The Compact Fluorescent Lighting (CFL) and
the Energy Star room air-conditioning pilot program have
been successfully completed.Ongoing energy efficiency
programs for residential customers includes the
1196 FULLEN , DI
Idaho Power Company
air-conditioner cycling pilot program , Bonneville Power
Administration (BPA) CFL packets, BPA Energy Check-ups,
and BPA Super Good Cents/Energy Star manufactured homes
incentives.Idaho Power's ongoing commercial programs
are the school building operator training initiative
conducted in partnership with the Northwest Building
Operators Association and Air Care Plus Program , which is
a Heating, Ventilating, and Air Conditioning Efficiency
Program.We are currently implementing new programs for
irrigation efficiency and for industrial efficiency.
Addi tionally, we have a new residential construction
program , a new commercial program for both existing and
new construction , and a BPA program for multi-family
construction in the planning stages.
What is the purpose of the Northwest Energy
Efficiency Alliance and how does it benefit Idaho Power
customers?
Idaho Power was one of the founders of the NEEA
and has been a funder and an active participant since
it's inception in 1997.NEEA I S mission is to catalyze
the Northwest marketplace to embrace energy efficient
products and services.This mission is accomplished
through a portfolio of projects that works to generate
financial return for consumers in the region by
encouraging the acceptance of energy-efficient products
1197 FULLEN , DI 1 7
Idaho Power Company
and services in the marketplace.This acceptance, in
turn, will transform
1198 FULLEN , DI 17a
Idaho Power Company
markets in the region so that consumers purchase these
products as a normal part of their buying habits.
The primary benefit to Idaho Power customers is
low-cost electricity savings.In 2002 alone, the NEEA
has saved 45 average megawatts (aMW) in the region at a
cost of about a penny per kilowatt-hour.NEEA estimates
that Idaho Power customers have saved about 3 aMW of this
energy.The savings have come about through the
availability of more energy-efficient products in Idaho
stores , through the adoption of newer efficient
technologies and through education of customers on the
ways to be more efficient.
The following are examples of benefits provided to
our customers over the past year facilitated by the
coordination between NEEA-supported proj ects and Idaho
Power.
Compact fluorescent light bulb sales from the
coupon promotion with local retailers totaled 42 642 (as
of February 2003) .We expect approximately 2.8 million
kilowatt-hours saved each year for utility customers.
The year 2002 closed with a market penetration
of ENERGY STAR clothes washers of 27.52 percent in the
state of Idaho, up from 11.47 percent during first
quarter 2001.
In November 2002 , the Northwest Building
1199 FULLEN , DI
Idaho Power Company
Operators Association launched a Level 1 training series
for
1200 FULLEN , DI 18a
Idaho Power Company
Building Operator Certification in partnership with Idaho
Power.As a result , 27 school operators were certified
from 25 school districts within the Idaho Power service
terri tory.The estimated savings from these 25 school
districts is 750,000 kilowatt-hours annually.
One NEEA measure, termed " commissioning", is
the act of providing documented confirmation that
building systems function in compliance with design
cri terion.By incorporating commissioning into the
construction of the Ada County Courthouse proj ect in
downtown Boise, the project is expected to use 20-
percent less energy than if it had moved ahead without
commissioning.The measure is saving about 460,000
kilowatt-hours per year at the 340 000 square-foot
building.
The 2000 International Energy Code, which
includes the International Energy Conservation Code, was
adopted in the state of Idaho in March 2002.NEEA
contributed to this process through funding of liaison
work, city and county education , and training for
archi tects, engineers, and inspectors.Estimated
additional costs to the residential sector will be $12.
million , with a return-on-investment of $20.5 million in
energy savings.On the non-residential side, the
additional cost of $713 000 will result in $4.3 million
1201 FULLEN, DI
Idaho Power Company
in energy savings.
Woodgrain Millwork , with plants in Fruitland
1202 FULLEN, DI 19a
Idaho Power Company
and Nampa , has launched a complete motor inventory of
their more than 500 motors and replaced some with energy
efficient models.The replacement of just one 250
horsepower motor with a higher efficiency model has
resulted in an annual electric savings of $600 a year for
the company.The potential savings of upgrading the
efficiency of the 500 motors as they fail is $300 000 a
year.
Henggeler Packaging in Fruitland , Henningsen in
Twin Falls, and Idacold Storage in Nampa are saving over
a million kilowatt-hours a year because of variable
frequency drive installations in their fruit and cold
storage facilities.That translates to about $50 000
annually for these companies.
The city of Emmett , Idaho is saving over
$37 000 a year in net operations costs at its wastewater
treatment plant because of efficiency improvements
insti tuted there by BacGen.
Idaho also benefits from the NEEA's research into
new innovative products and services.In addition, the
NEEA brings together regional energy efficiency players
in a collaborative effort so that ideas and methods can
be shared.The NEEA provides a background and structure
for Idaho Power to implement local delivery programs so
that Idaho Power can bring DSM programs to customers
1203 FULLEN , DI
Idaho Power Company
faster and largely developed.
Idaho Power continues to actively participate on the
NEEA Board and will be evaluating continued participation
once the present term expires in 2004.
Is Idaho Power participating in other
conservation acti vi ties?
The Company has participated in Bonneville
Power Administration's Conservation and Renewables
Discount since 2001.This program will deploy $525,600
annually for programs targeted to Idaho low-income
residential customers through 2006.
How does DSM fit into the Company I s planning
process?
The Company has submitted its 2002 Integrated
Resource Plan (IRP) that identifies demand-side resources
as a part of the overall resource portfolio.The 2002
IRP viewed demand-side activities as an alternative to
help address future system deficiencies.At the same
time, the document cautioned that conservation and
demand-side measures must be carefully targeted to
cost-effectively address the projected deficits due to
the nature and timing of the proj ected peak deficits and
transmission overloads.
Idaho Power is actively engaged in the development
of its 2004 IRP.It is my understanding, from
1204 FULLEN, DI
Idaho Power Company
discussions with Mr. Gale and Mr. Said, that this 2004
process will place a greater emphasis on a more
collaborati ve approach
1205 FULLEN, DI 21a
Idaho Power Company
than has been the case in recent IRP efforts.The
process change is driven by the changing energy
environment and by Commission direction.It is also my
understanding that DSM activities will be evaluated and
integrated with supply- side acti vi ties in the 2004 IRP.
What is Idaho Power Company s corporate
position with respect to conservation or DSM?
In light of the changes in our industry, and
the political , and regulatory landscape, Idaho Power has
developed a new policy direction for demand-side
This policy focuses on four core values:management.(1 )
customer efficiency and satisfaction,(2) resource
planning and acquisition (3) environmental ethics and
stewardship, and (4) responsibility to all stakeholders.
Idaho Power will pursue a balanced approach to DSM
program selection that reflects these four core values.
Is the Company truly committed to pursuing that
goal?
Yes.I have fully reviewed our DSM activities
and plans with senior management and have the complete
support of Mr. Keen and the rest of the Idaho Power'
executive management team.
Does Idaho Power conduct benchmarking with
other utilities and measure its customer service
performance?
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Idaho Power Company
Yes.Idaho Power actively monitors its
Customer Service Key Performance to ensure that excellent
customer service is provided.One key performance
indicator is "Automated Call Distribution" Service Level.
Exhibit 56 shows Idaho Power's performance in this area.
Exhibit 57 is a "Call Handle Time Comparison" between
Idaho Power and the 2002 average of EEI-surveyed
companies.Exhibit 58, entitled "Call Volume", is a
breakdown of the number of calls handled by the customer
service interactive voice response (CSIVR) unit, the
outage interactive voice response (Outage IVR) unit, and
customer service representatives calls (CSR calls)
The customer care operation also benchmarks with
peer utilities by utilizing the Edison Electric
Insti tute 's DataSource Tool , which provides operating
data from 63 energy companies across the nation.This
data indicates that the Company performs at a level
comparable with or above our peers.A comprehens i ve
breakdown of all of Idaho Power's benchmark statistics,
that indicate how the Company performs in the areas of
customer calls and billing and payment statistics,
incl uded in my workpapers.
Does Idaho Power survey its cus tomers for
levels of customer satisfaction and , if so, what are the
results of those surveys?
1207 FULLEN, DI
Idaho Power Company
Yes , it does.Idaho Power relies primarily on
two studies for customer satisfaction measurement.Idaho
Power has contracted with Burke Customer Satisfaction
Associates (CSA) to conduct quarterly customer
relationship surveys since 1995.In addition to the
Burke CSA surveys , Idaho Power acquires the results of
the annual J.D. Powers and Associates Electric Utility
Residential Customer Satisfaction Study.The J. D. Powers
and Associates study is used primarily as a benchmark to
other electric utilities.
During the 2000-2001 energy crisis, Idaho Power'
satisfaction levels dropped in tandem with those of other
western utilities.Upon implementation of the Company
new business model, Idaho Power began to experience
improved customer satisfaction ratings from all customer
segments.Idaho Power's customer satisfaction has
steadily improved since 2001 and Idaho Power is hoping to
exceed pre-energy crisis satisfaction levels.
Idaho Power's primary measure for customer
satisfaction in the Burke CSA surveys is the Customer
Relationship Index (CRI).The CRI encompasses responses
from all customer segments to five questions related to
overall satisfaction, overall quality, overall value,
likelihood to recommend, and Idaho Power's caring.Bur ke
CSA's most recent survey results show Idaho Power's CRI
1208 FULLEN , DI
Idaho Power Company
at 82 percent which indicates a higher level of
satisfaction than at any other time since Burke CSA has
been conducting
1209 FULLEN , DI 24a
Idaho Power Company
surveys for Idaho Power.According to this report, not
only has Idaho Power improved its customer satisfaction
level in every customer segment, but Idaho Power is also
approaching customer satisfaction levels of what Burke
CSA considers a "Superior Performing Firm"See Exhibi t
59, which includes a "Summary of Overall Measures and
Customer Relationship Index for Idaho Power" and
"Strength of Customer Satisfaction"
In addition to the Burke CSA studies, J. D. Powers
and Associates also surveys Idaho Power customers in its
annual Electric Utility Residential Customer Satisfaction
Study.In 1999, Idaho Power was ranked second in the
nation and tied for first in the western region in the
J. D. Powers and Associates' customer satisfaction study.
In the 2002 study, Idaho Power was reclassified as a
medium-sized utility along with eighteen other utilities
that have between 250,000 and 400,000 residential
customers.The 2003 survey results indicate that Idaho
Power rated eighth in the nation in the medium-sized
utility group and was first among northwest utilities.
(See Exhibit 60).The 2003 J.D. Powers and Associates
study shows Idaho Power providing significantly high
levels of customer satisfaction in the areas of Customer
Service, Billing and Payment Options, Power Quality and
Reliability (especially regarding keeping customers
1210 FULLEN, DI
Idaho Power Company
informed about an outage), Company Image, and Price and
Val ue .Idaho Power is pleased with our current customer
satisfaction performance and remains committed to
providing superior service to our customers.
Does this conclude your direct testimony in
this case?
Yes , it does.
1211 FULLEN , DI
Idaho Power Company
open hearing.
(The following proceedings were had in
MS. MOEN:Ms. Fullen is available for
cross-examination.
COMMISSIONER SMITH:Okay, Mr. Budge, do
you have questions?
CSB REPORTING
Wilder , Idaho
MR. BUDGE:No questions.
Thank you.
COMMISSIONER SMITH:Mr. Eddie.
BY MR. EDDIE:
MR . EDD IE:I do have a few questions.
CROSS - EXAMINATION
Ms. Fullen, could you turn to page 22 of
your testimony, please?
Okay.
You note at about line , it I s line 14 that
the values expressed in the Company I s demand side
management policy include "responsibility to all
Are IDACORP shareholders among those
Yes , they are.
Do you agree - - well, as well as customers
of Idaho Power are stakeholders as well.Would you agree
stakeholders. "
stakeholders?
1212 FULLEN (X)
Idaho Power Company83676
that shareholders of IDACORP generally are interested in
one thing which is demonstration of profitability by the
Company?
Well, while I would say that ownership in
a company that that is a primary goal , but I would also
say that as a personal shareholder , I I m concerned with
the social responsibility that a company also has and
therefore , I would say that it's not entirely based on
profit.
Maybe not entirely, but primarily?
That would be probably a matter of
opinion.
Do you agree that most shareholders would
be primarily interested in or would be concerned, perhaps
not opposed,but definitely concerned about programs that
would tend to reduce sales by Idaho Power?
Well again guess I would have to say
that I think it has to be balanced.
Well , you don't see Bill Gates promoting
conservation programs for the Windows operating system.
That would be true.
Would you agree there's somewhat of an
inherent conflict expressed in the demand side management
policy that you reflected in your testimony at page 22
because there is an interest to serve shareholders and
CSB REPORTING
Wilder, Idaho
1213 FULLEN (X)
Idaho Power Company83676
their profit motive while also serving ratepayers of
Idaho Power?
Well , I don't view that there is a
conflict and the reason for that is because we look at
the DSM programs under a cost-effectiveness premise;
therefore , it is more cost effective to deploy demand
side management; therefore, it's best for the shareholder
in that regard, also.
If a cost-effective program was to reduce
Idaho Power's sales by just, say, five percent, would
that - - that would tend to decrease Idaho Power'
profitability, wouldn't it?
That could.
And therefore , that type of a program
would tend to be not in the interest of shareholders?
I would say that's a possibility.
Okay, thank you.Changing subj ects
briefly, in your view and your experience over the years
dealing with Idaho Power customers, is it your experience
that customers like to have the ability, the control over
their electric bill amount in the sense that if they were
to reduce consumption, they could reduce that bill
amount?
Yes, I would say so.
MR. EDDIE:Thank you.Nothing further.
CSB REPORTING
Wilder , Idaho
1214 FULLEN (X)
Idaho Power Company83676
THE WITNESS:You're welcome.
COMMISSIONER SMITH:Mr. Purdy, do you
have questions?
MR. PURDY:Thank you.Yeah , most of my
questions are probably better asked on rebuttal , but I do
have a few.
CROSS -EXAMINATION
BY MR. PURDY:
Ms. Fullen , am I to understand that your
background with Idaho Power has primarily been in the
areas of customer relations and accounting?
, actually, I think that would be
incorrect.My background of almost 24 years , I started
as a customer service representative.I have worked
across the service territory in several different
capaci ties, again starting as a customer service
representative working in the customer service area
being a district manager , a regional manager , a division
accounting manager , so it's been fairly diverse.
Okay, and in that array of roles and
functions , could you tell us what your involvement
specifically with the low income weatherization
assistance program has been and if we could refer to that
CSB REPORTING
Wilder, Idaho
1215 FULLEN (X)
Idaho Power Company83676
as LIWA , that would help move things along?
Sure.It has been up until the last
couple of years , I would say, on the fringe area of that,
being aware of that , but wi thin the last couple of years,
I have actually been responsible for the management of
that area as a general manager , not as a program
manager.
Okay, and when you use the words that
area," are you specifically referring to LIWA' s
program?
Yes.
All right , and isn't it true that you are
the only Company witness that has offered any testimony
in this case pertaining to LIWA?
I believe that's true.
And for the most part, that was done in
your rebuttal testimony; correct?
That is correct , although it is addressed
in my direct testimony.
Yeah , and if you could let me, I promise
you I'll get to that.
Okay.
But before we do that, I thought it might
be helpful if you could just very briefly explain to
those that might not know already essentially how LIWA
CSB REPORTING
Wilder , Idaho
1216 FULLEN (X)
Idaho Power Company83676
funct ions.
Because my experience has been just wi thin
the last two years under the general management , I
believe that Mr. Gale may actually be better to represent
that part because he has been engaged in it for a longer
period of time.
Okay, is Mr. Gale
- -
I think you used the
words "program manager " a moment ago, is there a program
manager for LIWA?
Yes, there is.
Who is that person?
At this moment we're transi tioning that.
It was John Roholt for the last few years and is now
going to reside within our demand side management team
being overseen by Darlene Nemnich.
All right, when will that transition take
place?
It's in the process right now.
Is it fair to say currently LIWA doesn
have a program manager?
, no, it certainly does.We are
actively overseeing that.
All right; so I guess to backtrack just a
moment , you don I t - - am I to understand that you do not
understand personally how LIWA functions, how it'
CSB REPORTING
Wilder, Idaho
FULLEN (X)
Idaho Power Company
1217
83676
funded, how the monies are spent?
I believe I may be able to answer that
part.As far as the actual program , I I m not deeply
involved in that, but --
Would you please tell us what you do know
about how LIWA functions?
Okay, what I do know is that the LIWA
funding is part of our general rates and that was decided
several years ago in a previous order and that we make
a -- we manage 212 , $250 000 a year of LIWA funds that we
do a - - we match 50 percent as a rule towards other
weatherization programs that are managed by governmental
offices.
So in other words, Idaho Power contributes
a certain amount of funds to weatherization , to LIWA?
Right.
And those funds are matched 50 percent by
other governmental entities; is that what you said?
Yes.
What generally are the types of
weatherization expenditures and measures that LIWA seeks
to incorporate into housing?
I believe that's addressed in my
rebuttal.
MR. PURDY:All right.At this point, may
CSB REPORTING
Wilder, Idaho
1218 FULLEN (X)
Idaho Power Company83676
I approach, Madam Chair?
documents. )
COMMISSIONER SMITH:Certainly.
MR. PURDY:Thank you.
(Mr. Eddie & Mr. Purdy distributing
MR. PURDY:And this will be Community
Action Partnership Association of Idaho I s Exhibit 809, I
bel ieve .
(Community Action Partnership of Idaho
Exhibit 809 was marked for identification.
CSB REPORTING
Wilder, Idaho
BY MR. PURDY:Ms. Fullen, I've handed you
what's been marked as Community Action Partnership
Association of Idaho's Exhibit 809.Do you recogni ze
that document?
Yes, I do.
What does it -- what is it titled on the
Demand-Side Management at Idaho Power , A
Business Plan , 2003 through 2005.
Can you tell us very briefly what this
cover page?
Yes, this lays out our strategy and our
plans for implementation of DSM programs throughout Idaho
Power during this time frame.It puts in place the
structure for managing the programs.
document is?
1219 FULLEN (X)
Idaho Power Company83676
So this is something other than an IRP so
that we understand?
CSB REPORTING
Wilder , Idaho
Yes.
This is DSM specific?
Yes.
All right , given that it's now 2004 , we'
about at the midway point for your time line here, do you
have a new plan that you've issued yet similar to this
We do not have a new business plan.
have recently submitted the DSM report to the
All right, that was not done during the
course of this proceeding; correct?
That was done wi thin the last, about the
last, 15 days , actually.It was due on March 15th or
right around there.
By virtue of a Commission Order stemming
from another proceeding; correct?
Yes.
All right , now , to sidetrack for just a
moment, if you would turn to page 15 of your direct
testimony, please.
Yes.
On line 1 you state that Idaho Power, and
one?
Commission.
1220 FULLEN (X)
Idaho Power Company83676
you have to , I guess , start on the page before , page 14,
you state on line 25, "In addition to Project Share,
Idaho Power has spent approximately $252 000 per year for
LIWA since 1989"; is that right?
m sorry, what page did you say you were
on?
Well , I hope we don't have the pagination
problem, but for my copy, it I S your direct testimony,
pages 14 and 15.
, okay, I'm sorry, that you were
referring to the - - okay, yes.
So you state that the average annual
expenditures since 1989 has been approximately $252 000
for LIWA?
Yes.
All right.Now , if you 'd look at Exhibit
809, and at the back of that document there are two
attachments , I had to have them reduced in size.They
were expanded pages, so it's a little hard to read, but
down near the bot tom under the heading Programs in
Existing Rates, do you see that in the left-hand
column?
Yes.
All right, and beneath that there's a
number of 1 ine items.One includes LIWA , Oregon and
CSB REPORTING
Wilder, Idaho
1221 FULLEN (X)
Idaho Power Company83676
Idaho, do you see that?
Yes.
That shows a budgeted figure - - well , I
guess it's called actual and forecasted
- -
in the amount
of $232,000 for the years 2003 through 2005; right?
That is correct.
So what I'm trying to do is I'm trying to
jive that $232 000 which includes Idaho Power's Oregon
customers with the $259,000 annual expenditure or
investment that you purport the Company makes in LIWA.
I think some of that difference could be
within the administrative cost and what actually happens
is the allowance towards that is not counted within this
amount.We spend money towards the program and then we
also pay for that administration of the program.
How do you pay for the administration of
the program?
Well , again , I believe that's in my
rebuttal testimony.
Okay, you don I t make - - you don I t break
that out between administrative costs and actual program
funding in your direct testimony?
That would be correct.
All right , let me ask you this:Is Idaho
Power proposing a cutback in LIWA funding?
CSB REPORTING
Wilder, Idaho
1222 FULLEN (X)
Idaho Power Company83676
No, they are not.
Okay, the Company is intending to continue
on with the program?
CSB REPORTING
Wilder, Idaho
Yes, we are.
Al though you've not proposed any changes
in terms of funding in this case; is that right?
That's correct.
All right, and even though Mr. Lohol t or
m sorry, Rohol t is no longer in charge of the program,
there will be a staff person assigned to be program
Yes.
If you could just turn briefly to page 27
of Exhibit 809 , that appears to be a listing of Idaho
Power s current DSM staffing resources; correct?
That's correct.
All right, and you ve already indicated
that Mr. Rohol t is no longer an employee of the
No, he is an employee of the Company.
Okay.
He I S reporting into another area at the
He's out of DSM?
Yes, yes.
manager of LIWA?
Company?
moment.
1223 FULLEN (X)
Idaho Power Company83676
Any other changes in this list of
personnel?
Yes, actually, there is.We have recently
hired an engineer , not that that necessarily replaces Mr.
Roholt because his primary responsibility was the PQ
engineer.There is an industrial program manager and his
name is Randy Thorpe.
m sorry, Randy who?
Thorpe.
Thorpe, okay, and again , his role will be
what?
Program manager , DSM program manager.
For all the DSM?
Yes.Because the DSM is rather program
specific, we have program managers that can cross over
into different areas.
Okay.MR. PURDY:Madam Chair, I now have
just a couple of questions about a response to a
production request that Community Action submitted to
Idaho Power and depending on the pleasure of Idaho
Power's counsel , they could either provide their own
response or I've made a copy for the witness to look at.
MR. KLINE:I think we probably brought
along.
MR. PURDY:ve got a copy, Bart , either
CSB REPORTING
Wilder , Idaho
1224 FULLEN (X)
Idaho Power Company83676
way.
MR. KLINE:That's fine.
MR. PURDY:Okay.
(Mr. Purdy approached the witness.
MR. PURDY:And for the time being,
don't think it's necessary to make this an exhibit.I'll
just ask a few questions.
BY MR. PURDY:Do you recognize what I'
just handed to you, Ms. Fullen?
Yes, I do.
And what is that?
This is the response to a production
request from the Community Action Partnership
CSB REPORTING
Wilder, Idaho
Okay, and would you please turn to page 2
of that document?
Okay.
Now , just to jump ahead, down below , you
are listed as somebody who participated in the response
to this production request; is that right?
Yes.
Okay, is it fair to say that in this
Association.
production request, Community Action Partnership asked
you to provide how much funding Idaho Power has made in
LIWA from the years 1989 to present, along with the
1225 FULLEN (X)
Idaho Power Company83676
Company I S gross operating revenues for those same years;
is that right?
That would be correct.
Okay, and in looking at that , in Idaho
Power's response to request No. lA , is it fair to state
CSB REPORTING
Wilder , Idaho
that LIWA funding has over the course of the years since
1989 to present decreased somewhat?
m sorry, would you restate that, please?
You bet.Is it fair to characterize Idaho
Power's annual LIWA funding as having decreased over the
years 1989 to, it looks like last year is 203 , I assume
That would be correct.
Okay.
But the answer to your question is I I m not
sure I would categorize that it has decreased
Well , we have in the years 1990 , we have a
funding level of 328 000, some change;, 92'91, 337,000;
245,000;93, almost 300 000; and in recent years, in
2001, we did have a high of 331 , but then we dropped down
I guess I'm just asking you is the
and now you ve proj ected that annual funding will be more
in the $250,000 range , are we trending down?
MS. MOEN:Susan , before you answer,
that's 2003?
substantially.
to 187 and 278.
1226 FULLEN (X)
Idaho Power Company83676
think we need to clarify, there was a supplemental
response filed on or about March 23rd and, for example,
the year 2002 figure of 187, the supplemental response
indicates should have read 287,000, so there is a
supplemental response that corrected some of these
figures.
And I might have overlookedMR. PURDY:
that.
Then I'll withdraw thatBY MR. PURDY:
question and ask you another one.Is it fair to say that
Idaho Power I s gross operating revenues have substantially
increased from the years 1989 through 2003 as listed in
your response to this production request?
That would be correct.
Okay.Now , I've done the math and I took
the years for LIWA funding 1996 through the year 2002 and
then I took gross operating revenues for that time
period.I stopped at 2002 because revenues for 2003 were
not available and I came up with a relationship of LIWA
funding and the Company gross operating revenues of
Subj ect to check , would you accept that00030 percent.
calculation?
Subj ect to check, yes.
Now, is it true that Idaho Power does not
track its low income customers in terms of the amount and
CSB REPORTING
Wilder , Idaho
FULLEN (X)
Idaho Power Company
1227
83676
the nature of their usage?
That is correct.
And in fact , isn't it true that Idaho
Power doesn't really have an internal independent
definition of the term low income customers?
That is correct.
Don't you rely, at least for purposes of
LIWA, don I t you rely upon the definition adopted by the
Community Action agencies?
Yes.
All right , and is it fair to say that LIWA
is the only Idaho Power Company specific conservation
program that exclusively targets low income customers?
I would have to say I don't totally agree
with that, partly because we also have the BPA funding
that we have programs that are available , as an example,
in mobile home parks and even though that's not
necessarily targeted at low income, there is a
substantial number of those customers who could be
considered within that area; so I would say a little more
broadly that we try to offer programs to a wide variety
of customers, understanding that low income customers
receive those benefits.
The BPA program you mentioned, it only
pertains to mobile home parks?
CSB REPORTING
Wilder, Idaho
1228 FULLEN (X)
Idaho Power Company83676
No, no, we have several different things
going wi thin that area.That was an example.
All right, but my question to you was,
isn t LIWA the only low income exclusive Idaho Power
conservation program?
Yes, that would be the only one that
there s a qualifying factor on.
Okay, if you would just turn briefly to
page 14 of your direct testimony, and generally - - are
you there?
Yes.
-- you provide a number of activities and
efforts that the Company and its employees undertake to
contribute to their communities.Regarding low income
customers, you point out that Idaho Power typically, the
Company typically, contributes on average $25,000 a year
to proj ect Share; is that right?
Yes , that's correct.
And the Company does not seek to recover
that investment from ratepayers; is that true?
That is correct.
But isn't it also true that all of the
Company's investment in LIWA is in fact recovered through
rates from its customers?
That is correct.
CSB REPORTING
Wilder , Idaho
1229 FULLEN (X)
Idaho Power Company83676
So is it then also true that there is no
risk that under the current rate recovery structure that
in the event this Commission were to order an increase in
LIWA funding that the Company would not recover all of
that?
I f the Commission were to order that;
however , that additional funding is not included in this
CSB REPORTING
Wilder , Idaho
Would the Company seek to include that in
rates, though , in the future?
Yes , I believe so.That would better be
rate case.
answered by Mr. Gale.
Now , just my last area of questioning here
relates to page 15 of your direct testimony.
Okay.
And on line 12, you state that Idaho Power
has engaged in some form of DSM activity since the last
general rate case
That's correct.
- -
is that right?And that was the 94-
rate case; right?
I believe that's correct.
About that period of time?
Yes.
Okay, isn't it true that roughly during
1230 FULLEN (X)
Idaho Power Company83676
the mid 1990s , Idaho Power requested and was authorized
by this Commission to reduce, in fact eliminate, its
investment in a number of conservation programs?
I believe that's correct.
And was at least one of the primary
motivations for Idaho Power's request fear of
deregulation within the industry at the time?
As I understand it.
All right.Given that Idaho Power
annual investment in LIWA is 0.0003 percent of its gross
operating revenues, would an increase in LIWA funding
cause the Company any undue concern whether it's based on
fear of possible deregulation or any other reason?
I believe Mr. Gale would be better
equipped to answer that for you.
MR. PURDY:Fair enough.That's all I
have.Thank you.
COMMISSIONER SMITH:Thank you , Mr. Purdy.
Mr. Gollomp, do you have questions?
MR . GOLLOMP:No questions.
COMMISSIONER SMITH:Mr. Ward.
MR. WARD:No questions.
COMMISSIONER SMITH:Mr. Ri chardson .
MR. RICHARDSON:Just one,
Madam Chairman.
CSB REPORTING
Wilder, Idaho
1231 FULLEN (X)
Idaho Power Company83676
CROSS - EXAMINATION
BY MR. RI CHARDSON :
Ms. Fullen , reviewing this document,
Yes.
- - do you know the source of who prepared
Was this in your shop that this was
You are speaking of the demand side
management document?
CSB REPORTING
Wilder, Idaho
Correct, Exhibit 809.
Yes, it was prepared in my area.Darlene
Exhibit 809 --
Nemnich was the lead person on that.
And if you would turn to page 4 of this
document , can you help me, I was just looking at this and
I was wondering if this is a typo or these are actual
goals for the Company, on about the middle , first bottom
half of the middle of the page, there I s a line talking
about incremental peak reduction from programs designed
to reduce summer peak , do you see that?
Yes , I do.
Is it true that your goal for peak
reduction is only 300 kW, not MW?
For 2003?
this document?
prepared?
1232 FULLEN (X)
Idaho Power Company83676
Correct.
That was true , and the reasoning for that
is because that was our first year of utilizing the rider
fundings and we were still ramping up on our programs.
And so for all three years, 2003,I 04 and
05, it should be kW?
Yes,believe so.
That'the extent the Company summer
peak reduction goals?
Yes.
MR. RI CHARDSON :Thank you.That's a 11 I
have , Madam Chairman.
COMMISSIONER SMITH:Thank you,
Mr. Richardson.
Mr. Budge.
MR. BUDGE:No questions.
MR. STUTZMAN:No questions.
COMMISSIONER SMITH:Do we have questions
from the Commission?Commissioner Hansen.
CSB REPORTING
Wilder , Idaho
1233 FULLEN (X)
Idaho Power Company83676
EXAMINATION
BY COMMISSIONER HANSEN:
I was just curious on this Exhibit 809, on
page 28 of the proposed organizational chart
Yes.
- - have you filled any of the four
vacancies there at the bottom of the right-hand side of
the page?
Yes , we have.The the first one,
actually, the program specialist that says industrial
has been filled.That's the one I spoke of just a little
bit earlier.
Is that a permanent job , then?I mean, is
it permanent and it isn't just a temporary job for a year
or two or is it permanent?
It's a two-year position at this time.
Why would you only fill that position for
two years if you're committed to this program?m kind
of curious.
Well , because we are currently still, you
know , kind of ramping up, if you will, of our DSM
programs and those that are funded by the rider monies
this position is part of those rider monies and we would
intend to continue our dedication and commitment to DSM
CSB REPORTING
Wilder , Idaho
1234 FULLEN (Com)
Idaho Power Company83676
as we receive the funding to be able to do that.
I have one other question.On page 18 of
your testimony, lines 4 through 7
Yes.
- -
there you talk about the savings of
NEEA.
Yes.
And you talk about the total savings and
then what amount you estimate that Idaho customers have
saved and at a cost of about a penny per kilowatt, did
you take this at NEEA' s word or has Idaho Power verified
these numbers in savings?
This was information provided by NEEA.
Where you contribute to that organization
and you re putting out money, isn't there an interest
from the Power Company to verify and know that this is
producti ve, that you really are saving this money or how
would we know that somebody just hasn't made some guess
or estimate to make it look good?
You know, while this information was
received by NEEA , I took it at the value considering
NEEA's reputation , but we are currently doing an
assessment of NEEA and participation in NEEA , continuing
on after this year , so that's still under evaluation.
Well , earlier, a few months ago, I read a
CSB REPORTING
Wilder, Idaho
1235 FULLEN (Corn)
Idaho Power Company83676
report out that said the average cost was about a half a
cent a kilowatt and now we see in here it's a cent a
kilowatt, do you know why that's changed?
I do not.
So really, you really haven t verified or
checked these numbers at all?As a company, you don
know whether they're really saving Idaho Power
kilowatt-hours and dollars, you re just taking them at
their word; is that right?
I would say that's true.
COMMISSIONER HANSEN:Thank you.That'
all I have.
COMMISSIONER SMITH:Questions?
COMMISSIONER KJELLANDER:Nothing.
EXAMINATION
BY COMMISSIONER SMITH:
I just have a couple.Commissioner Hansen
hi t most of mine, but looking at your NEEA numbers on
page 18 you were just discussing, do you have any
estimate for the impact that NEEA' s programs have had in
reducing Idaho Power's summer load, summer peak load?
Not that I'm aware of.
And then on page 21 and just in your
CSB REPORTING
Wilder , Idaho
1236 FULLEN (Com)
Idaho Power Company83676
answer to Commissioner Hansen, you stated that you are
reviewing your NEEA participation to decide whether
you re going to continue on, does that mean you haven I
made a decision yet?
Tha t is correct.
When do you anticipate making a
decision?
wi thin the next few months.
And do you have any reason to think that
your participation has not been beneficial to the
CSB REPORTING
Wilder , Idaho
Not at all.The preliminary analysis
looks very positive.
So you're thinking of being in even
greater than you were in the past?
That I can't answer.
COMMISSIONER SMITH:Okay.
Do you have redirect?
MS. MOEN:Yes , I have a few questions,
Company?
Madam Chair.
1237 FULLEN (Com)
Idaho Power Company83676
BY MS. MOEN:
REDIRECT EXAMINATION
First of all , Ms. Fullen, in response to
Mr. Richardson , he pointed you to page 4 of what's been
CSB REPORTING
Wilder , Idaho
identified as Exhibit 809, the demand side management
Yes.
And within that plan on page 4 in the
middle are goals and it indicates the incremental peak
reduction from programs.That does not include, does it
the savings anticipated by the Company s IRP?
No, it does not.
So savings in addition to these are
That would be correct.
With regard to NEEA , does Idaho Power have
a representative on the NEEA board?
Yes, we do.
So any information that is designed by
NEEA has input from Idaho Power?
That is correct.
In response to Mr. Purdy and the
assessment of the number of low and moderate income
families residing in the service territory, when an
business plan.
anticipated?
1238 FULLEN (D i )
Idaho Power Company83676
individual comes to the Company seeking power or applying
for power , do we request information from that applicant
such as that person's annual income?
We do not.
What about the number of persons per
No.
MS. MOEN:All right , I have no further
COMMISSIONER SMITH:Thank you very much.
household?
(The witness left the stand.
MR. KLINE:The next witness for Idaho
Power is Ric Gale.
CSB REPORTING
Wilder , Idaho
questions.
Thank you.
1239 FULLEN (Di)
Idaho Power Company83676
JOHN R. GALE
produced as a witness at the instance of the Idaho Power
Company, having been first duly sworn, was examined and
testified as follows:
BY MR. KLINE:
DIRECT EXAMINATION
Could you please state your full name for
the record, Mr. Gale?
CSB REPORTING
Wilder, Idaho
Yes, John R. Gale, usually known as Ric
And what is your position at Idaho Power
m the vice president of regulatory
affairs for Idaho Power.
At the time the Company filed its
application in this case , did you file direct prefiled
testimony consisting of 17 pages?
Yes , I did.
And did you also prefile one exhibit,
Yes , I did.
And do you have any additions or
corrections that you need to make to your prefiled direct
Gale.
Company?
Exhibi t 61?
1240 GALE (Di)
Idaho Power Company83676
testimony?
I don't believe so.
And as a result of that , if I were to ask
you the questions contained in your direct prefiled
CSB REPORTING
Wilder, Idaho
testimony today, would your answers be the same?
Yes, they would.
MR. KLINE:With that, Madam Chairman , I
would request that Mr. Gale's direct prefiled testimony
be spread on the record as if read in its entirety and
that Exhibit 61 be marked for identification.
COMMISSIONER SMITH:Without objection,
(The following prefiled direct testimony
of Mr. John R. Gale is spread upon the record.
is so ordered.
1241 GALE (Di)
Idaho Power Company83676
Please state your name and business address.
My name is John R. Gale and my business address
is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what capacity?
I am employed by Idaho Power Company (Idaho
Power or the Company) as the Vice President of Regulatory
Affairs.
Please describe your work experience.
In October 1983, I accepted a position as Rate
Analyst with Idaho Power Company.In March 1990 , I was
assigned to the Company's Meridian District Office for
one year where I held the position of Meridian Manager.
In March 1991 , I was promoted to Manager of Rates.
July 1997 , I was named General Manager of Pricing and
Regulatory Services.In March of 2001, I was promoted to
Vice President of Regulatory Affairs.As Vice President
of Regulatory Affairs, I am responsible for the overall
coordination and direction of the Pricing & Regulatory
Department , including development of jurisdictional
revenue requirements and class cost-of-service studies,
preparation of rate design analyses, and administration
of tariffs and customer contracts.In my current
position , I am responsible for policy matters related to
the economic regulation of Idaho Power Company.
1242 GALE , DI
Idaho Power Company
What role did you play in the preparation of
the general rate case?
My role in the preparation of the general rate
case was to oversee , manage, and coordinate the filing
and to make the policy decisions related to regulatory
matters.
What was your interaction with the other
Company witnesses?
I discussed the content and preparation of the
witnesses' testimony and exhibits.I was assisted in
this effort by Ms. Maggie Brilz and Mr. Greg Said, along
with the Company s regulatory attorneys directed by Mr.
Barton Kl ine
Please provide an overview of the Company'
general rate case filing.
The Company leads with Mr. LaMont Keen, our
President and COO.Mr. Keen speaks to the Company'
financial condition and its management performance in
recent years.Mr. Keen is our primary policy witness.
Our next witness is Mr. William Avera, who has been
retained by the Company as our return on equity (ROE)
expert.Mr. Avera also performed this function for Idaho
Power in our last general rate case.Mr. Avera'
recommended ROE range becomes an input to Mr. Dennis
Gribble's considerations.Mr. Gribble selects an ROE
1243 GALE , DI
Idaho Power Company
point estimate and includes that with the test year
capital structure to derive the proposed overall rate of
return.
Ms. Lori Smith then testifies to the financial
inputs, both actual and estimated , that become our
initial starting point for the system data for the 2003
test year.Ms. Smith includes system adjustments for
deductions to certain expenses not allowed in rates,
annualizing adjustments to expenses and rate base, known
and measurable adj ustments to expenses and rate base , and
other adj ustments to revenues, expenses and rate base
related primarily to past Idaho Public Utilities
Commission (IPUC or the Commission) orders.Mr.
Obenchain takes Ms. Smith's data, Mr. Gribble's return
recommendation, Mr. Said's normalized net power supply
expenses , along with other selected inputs and prepares
the jurisdictional separation study (JSS).The JSS, as
its name states, separates system values for rate base,
revenues , and expenses for each state and federal
jurisdiction by an assignment and allocation process.
One result of the JSS is the Idaho retail jurisdictional
revenue requirement.
As stated before, Mr. Said provides the normalized
net power supply expenses for the test year.Mr. Said
also addresses the requisite changes needed to the
1244 GALE, DI
Idaho Power Company
Company's Power Cost Adj ustment as a result of changing
the normalized net power supply expenses in Idaho Power
Base Rates.
1245 GALE, DI
Idaho Power Company
Ms. Brilz takes the Idaho retail jurisdictional
output from Mr. Obenchain and further separates costs by
customer class and special contract through a class cost
of service (CCOS) study.Additionally, Ms. Brilz
proposes price changes to the customer classes that are
consistent with the Company's ratemaking obj ecti ves and
recover the Company's Idaho revenue requirement.Ms.
Theresa Drake addresses additional changes to Idaho
Power's tariffs and non-recurring charges.
Ms. Susan Fullen provides information regarding a
variety of Idaho Power's customer-related activities,
including the results of recent customer satisfaction
surveys.Finally, I finish the direct case addressing
regulatory policy issues.
What was Idaho Power Company s executive
management involvement with the preparation of the
general rate case?
Idaho Power's Office of the Chief Operating
Officer , consisting of the Company I s President , Senior
Vice President of Delivery, Vice President of Power
Supply, Vice President of Corporate Services , and myself
along with the Chief Financial Officer , served as the
oversight group.
What are the policy issues related to the
preparation of the test year financial information?
1246 GALE, DI
Idaho Power Company
The policy decisions related to the preparation
of the general rate case include the selection of the
test year , the decision to use a split year , the
treatment of annualizing adjustments, and the treatment
of known and measurable adj ustments.
What is the Company's test year?
The Company s test year is the 12 months ending
December 31 , 2003.
Why did you choose 2003 as the test year?
Using a test year of 2003 provides the most
recent information available as to the Company s expenses
and investments.The year captures increased levels of
capi tal and O&M spending that are needed to fund our
utili ty infrastructure.The year also provides a clear
break with our past affiliate transactions with IDACORP
Energy (IE).
Why did the Company choose to file with a split
test year that used both actual and estimated data?
The split test year using six months actual and
six months estimated data offers rate recovery closer to
the time that costs are incurred, allows the timing of
general rate changes to be coordinated with and
potentially mitigated by PCA changes, and provides the
Commission an opportunity to see actual information for
the whole year before issuing its final order.
1247 GALE , DI
Idaho Power Company
What was the basis for making annualizing
adjustments to rate base for 2003?
1248 GALE , DI
Idaho Power Company
The annualizing adjustments to rate base for
2003 are related to electric plant in service items
closing to book during the last half of 2003.These
items and their related impacts (such as depreciation and
property tax) were treated as if they were in place for a
full twelve months.
Please describe the annualizing adjustment to
the 2003 operating expense related to payroll.
The annualizing adjustment to the 2003
operating expense related to payroll , changes the payroll
expense to an amount reflective of what it would have
been had the year-end payroll expense been in existence
for the full year in 2003.
What was the Company's basis for including
known and measurable additions to its rate base?
The Company included only assets of a material
size that were planned to close to the books before June
, 2004.These assets are maj or proj ects related to
transmission and transmission substation.The Company
chose June 1 , 2004 as the cutoff for known and measurable
plant adjustments because that is the date that the
proposed rates are expected to become effective if the
Commission uses the full time to issue its order.
Please describe the rationale for including a
known and measurable adjustment to operating expense for
employee incentives.
1249 GALE , DI
Idaho Power Company
Since the last general rate case, Idaho Power
has made a material change in the manner in which it
compensates its employees.Starting in 1995, the Company
modified its existing "cash" compensation to include an
element of "pay at risk"The new plan continues to
provide a fixed base salary, but now includes the
potential for an incentive.Since the incentive can vary
from year to year according to Company and employee
performance, using the actual incentive amount as part of
the test year compensation can be misleading.Because
the range of potential outcomes is large , a normalized
number is more reflective of ongoing compensation than an
actual amount.
Why do you use the term "pay at risk"?
Before the incentive was introduced, the
Company targeted its base pay upon the 60th percentile of
the relevant labor market rate for the specific job
category.After the incentive was added to the
compensation package, the benchmark for the base pay was
reduced to the 50th percentile.The difference between
the two percentile levels became the pay at risk.
What is the difference between the two
percentile levels worth in percentage terms?
Based upon our 2002 wage information, the
difference is approximately 7 percent.Thi s figure can
1250 GALE, DI
Idaho Power Company
vary slightly from one year to the next based on changes
in the
1251 GALE, DI
Idaho Power Company
market place, but in general the market changes are not
large enough to cause significant change.
Why did you make a known and measurable
adjustment related to salary structure?
The known and measurable expense related to
salary structure adjusts payroll expense to account for
an employee general wage adjustment (GWA) at year-end
The adj ustment for the GWA was 3 percent.2003.
What was the basis for the Company known and
measurable for pension costs?
There are three options which reflect the cost
of providing pension benefits to our employees:(1) Pay
(2) Service Cost, and (3) Pension Expense.As You Go,
The Pay As You Go reflects the actual benefits paid to
employees receiving pension benefits during the relevant
time period.The Service Cost benefit amount reflects
the cost to provide a new year of benefits to employees.
The Pension Expense method reflects the cost to provide
the benefits including the volatility of market movements
that impact the pension plan assets and the impact of
interest rate movements.Using the Service Cost method
for ratemaking purposes removes the market volatility and
interest rate volatility, while quantifying the annual
cost of providing a new year of benefits to employees.
The test year information was adjusted to reflect service
1252 GALE , DI
Idaho Power Company
costs for 2003, which the Company believes to be more
representative of our pension costs going forward.
How have the Operating Revenues of the Company
been adjusted?
The Operating Revenues are primarily adjusted
through the normalizing adjustments to the Company I s net
power supply expenses as a result of multiple water
conditions discussed by Mr. Said.Other known changes to
tariffs or contracts were also included either in the
test year revenues or adj ustments to the test year.
Sales revenues for the test year 2003 were based on
weather normalized retail sales for the first six months
and estimated normalized sales for the later six months.
What are the policy issues related to the rate
spread and rate design proposed by the Company?
The policy issues related to rate spread and
rate design are that rates should be primarily
cost-based , adjustments to the rate spread, an emphasis
on fixed cost recovery, and the introduction of
time-of-use pricing (both seasonal and diurnal)
What is the Company s philosophy on setting
rates?
In the last several general rate cases, the
Company's primary approach to ratemaking has been to
reflect costs as accurately as possible in setting its
1253 GALE , DI
Idaho Power Company
tariff rates.Accordingly, the Company's ratemaking
proposals usually advocate movement toward
cost -of - service results which assign costs to those
customers that cause the Company to incur the costs.The
Company realizes that there are other ratemaking
obj ecti ves, such as ability to pay, that the Commission
may consider in making its determination.However, the
Company believes that the best starting point for
Commission deliberations is an economic one.
Nevertheless, some ratemaking situations cause such
abrupt change, the Company has proposed some 1 imi t s
the movement toward cost-of-service.
How did you approach rate spread among the
customer classes and special contracts?
Rate spread is a term that refers to the
division of the jurisdictional revenue requirement into
individual revenue requirements for each customer class
and special contract.Each special contract is
essentially a rate class of one customer.The CCOS
resul ts are one means of performing rate spread.Please
refer to Exhibit No. 61, a four-page exhibit that steps
through the revenue requirement allocation process from
the CCOS results to the Company's ultimate proposal for
each customer class and special contract.Page 1 of
Exhibit No. 61 is the proformed normalized test year
1254 GALE, DI
Idaho Power Company
sales and revenues.Page 2 indicates the adjustments in
terms of percentages and dollars that
1255 GALE, DI lOa
Idaho Power Company
would be made to each customer class to obtain the
resul ts indicated by the CCOS.A pure CCOS rate spread
would mean a 67.1 percent increase to the irrigation
customer class.Page 3 constrains the changes to the
revenue allocations in order to mitigate the magnitude of
the rate increase to the irrigation customer class.A 25
percent limit is placed on the increase to irrigation
while the small unmetered classes are held at zero
instead of the decreases indicated by the CCOS.Page 4
spreads the revenue shortfall created by the mitigation
back to the other customer classes, so that the total
Idaho jurisdictional target revenue can be obtained.
Has the Company's cost-based approach
influenced other rate design proposals?
Yes, the cost -based approach has led to rate
design proposals that better align fixed costs with fixed
prices and variable costs with variable prices.Ideally
an energy rate that corresponds to our energy costs would
help address a number of rate-related issues, including
net metering and customer conservation decisions.The
emphasis on moving fixed and variable prices to be more
reflective of fixed and variable costs led to the
Company's proposals to increase the monthly service
charge for residential and small general service
Since these customers are not demand metered,customers.
1256 GALE , DI
Idaho Power Company
the service charge is the only fixed rate component
available to adj ust and thus becomes more important as a
tool for fixed cost recovery.The increases to the
service charges are a moderate step toward better
alignment of costs and prices.However , as described by
Ms. Bril z , there is still a long way to go.
Did the Company s cost-based approach influence
any other ratemaking proposals?
Yes, the cost-based approach also influenced
our decision to propose seasonal and time-of -use rates
for certain customer groups.Both types of time-based
rates allow for the incorporation of time-based cost
differences into the Company's pricing.
Should the Company s seasonal rate proposals be
adopted , is there a related issue concerning the
Company s Power Cost Adjustment (PCA)?
Yes , because the summer season is proposed to
begin on June 1 and the current PCA is scheduled to
change on May 16, the Company believes it would be best
to consolidate the two rate change dates into one.
Mr. Said states in his testimony, we are proposing to
move the start date for each year's PCA to June
addition, the change would give the Commission the
benefit in the future of an extra two weeks to process
the annual PCA application.
1257 GALE, DI
Idaho Power Company
How has depreciation expense been treated in
the rate filing?
1258 GALE, DI 12a
Idaho Power Company
The depreciation expense in the Company'
general rate request includes the depreciation rates
contained in the Company's application filed with this
Commission on May 6, 2003 in Case No. IPC-E- 03 - 07.Since
that time, a stipulation has been reached among the
parties regarding that case and filed with the IPUC on
October 9, 2003.(Should the IPUC approve that
stipulation, the overall requested revenue requirement
would adjust downward to incorporate the final action).
Have the Company and Commission Staff attempted
to settle other rate issues recently that may have an
impact on the general rate case?
The Company, the Commission Staff, andYes.
the Industrial Customer of Idaho Power have reached
verbal agreement regarding the final settlement of issues
in Case No. IPC-01-16, a case pertaining to the
relationship between IE and Idaho Power , including
appropriate compensation to be paid by IE to Idaho Power
for the use of Idaho Power's transmission and capacity
If approved, the settlement of Case No.resources.
IPC-01-16 will bring past issues between Idaho Power
and IE to closure.
Are you generally familiar with the Company'
recent management efforts in the areas of stewardship of
the system , customer service, demand- side management, and
financing activity?
1259 GALE , DI
Idaho Power Company
As described in detail by Ms. Fullen , theYes.
Company has implemented a new business model that better
That model includes changes thatserves customers.
improved outage management and communication systems,
improved customer service systems throughout the
Company's service territory, demonstrated performance of
our metering and billing systems, renewed focus on
demand-side management programs, and improved customer
satisfaction results.
On the financial side of the business, the Company
has utilized available opportunities to refund various
issues of both long-term debt and preferred stock on a
cost -effective basis.This has resulted in significantly
lower embedded costs.At the time of the Company's last
Idaho general rate case, the Company s overall cost of
debt capital was 8.024 percent.The Company's current
cost of debt capital is 5.983 percent.Mr. Gribble
speaks to the financing efforts in his testimony.
And despite all the stresses on the system both
internal (heightened emphasis on reliability, increased
demand for infrastructure investments, increasing
relicensing costs, poor cash flow , and negative earnings
implications) as well as external (major drought, out of
step inflation in energy markets, market chaos, and the
eventual exodus of credit worthy counterparties and
1260 GALE, DI
Idaho Power Company
investment dollars), in the end, Idaho Power has honored
its obligation to serve our customers and keep the lights
on at a reasonable price.Mr. Keen's testimony describes
these acti vi ties and results in greater detail.
Are there other instances of Company management
decisions that have been helpful to its customers?
Yes.I would like to highlight two other areas
in which the Company has made great strides.The first
is our Green Power Program and the second is Idaho
Power's development of a comprehensive risk management
policy over the last two years.
Because of Idaho Power's hydroelectric resources,
our customers get most of their electricity from a
resource that's virtually emission-free.wi th the
establishment of our Green Power Program , customers have
yet another emission- free alternative -- wind power.
The Green Power Program is a voluntary program that
allows Idaho Power customers to add any dollar amount
they choose to their power bills to purchase resources
from the Stateline Wind Project.The Company has
sponsored multiple campaigns aimed at generating
awareness and encouraging customers to enroll in the
Enrollment in the two-year-old program hasprogram.
grown nearly 20 percent since the last campaign bringing
the number of participating subscribers to almost 2000.
1261 GALE, DI
Idaho Power Company
The second area of Company business that I would
like to highlight is risk management.It became clear to
the Company s Risk Management Committee (RMC) during the
2000-2001 Energy Crisis that our risk management
techniques for dealing with the market and the associated
drought worked well in most cases but not in all.
Learning from this experience, the Company acquired new
energy, made investment to increase capacity and
reliability throughout the system, adopted more
conservative financial policies, and developed and
implemented a state-of -the-art risk management policy.
This collaborative risk management strategy protects
against adverse movements in net power supply costs and
manages the cost of energy supply with respect for the
risk tolerance of stakeholders.Together, these
strategies will lead to more stable rates.
Do you believe it is in the public interest for
the Commission to recognize these management efforts in
setting Idaho Power rates?
Yes.Traditionally, this is done by the
Commission adding basis points to the authorized rate of
return.
In its general rate application, is the Company
requesting additional basis points in its authorized rate
of return on equity to recognize good management
1262 GALE, DI
Idaho Power Company
performance?
No.
How would the Company like to be recognized by
the IPUC for its management performance?
The Company would 1 ike to be recogni zed through
timely and positive consideration of our rate relief
Is it your opinion that the granting of the
rate relief proposed by the Company is in the public
Yes.
Does this conclude your testimony?
Yes.
request.
interest?
1263 GALE , DI
Idaho Power Company
(The following proceedings were had in
open hearing.
MR. KLINE:Madam Chairman , prior to
making Mr. Gale available for cross-examination , I would
like to ask Mr. Gale one question.Commissioner Hansen
had some questions yesterday of Mr. Keen which Mr. Keen
deferred to Mr. Gale and I'd like to get that out of the
way on the front end, if I could, please.
COMMISSIONER SMITH:Certainly.
DIRECT EXAMINATION
BY MR. KLINE:(Continued)
Mr. Gale, yesterday Commissioner Hansen
asked Mr. Keen about executive bonuses and compensation
and the context of the question was that the
Commissioners had received inquiries from customers and
customers had expressed concern that they really didn
want their rates to include big bonuses for Idaho Power
executives.Could you please address that response
please respond to that question for Mr. Hansen?
Well , in two ways:First of all, the
rates in place during this time period do not include
those executive bonuses and the rates we filed in this
case did not include executive bonuses.
CSB REPORTING
Wilder , Idaho
1264 GALE (Di)
Idaho Power Company83676
MR. KLINE:Thank you.With that, I'd
like to make Mr. Gale available for cross.
to go first?
COMMISSIONER SMITH:All right, who wants
BY MS. NORDSTROM:
Ms. Nordstrom.
CROSS-EXAMINATION
Good afternoon , Mr. Gale.
Good afternoon , Ms. Nordstrom.
On page 5 of your testimony, you discuss
the selection of the Company's test year.The Company
CSB REPORTING
Wilder , Idaho
has the discretion to choose the test year to use in a
rate case, does it not?
Yes, it does.
If the Company had chosen a 2002 test year
rather than 2003, would the Company's effective 2002 tax
rate of negative 4.1 percent be included in the rate
If the Company had used 2002, the tax
would have become an issue in that case.
Isn't it true that by choosing a 2003 test
year , the Company effectively excluded the customers from
sharing in the tax benefit?
, I don't believe that's true.I think
case?
1265 GALE (X)
Idaho Power Company83676
that the tax deduction coming from the one-time event
allowed the Company to defer the rate case for one year.
I think the customers benefit from that and I think
there's ongoing benefits from that one-time tax change
that manifests itself in the test year , so I don't think
the customers were excluded from those benefits.
On page 15 of your testimony, you point to
the Company's Green program and its risk management plan
as examples of management efforts that should be
recognized in setting Idaho Power rates.Isn't it true
that all major Idaho electric utilities have Green
programs?
I don't know that.They may.
wi th respect to the Company s risk
management plan discussed on page 16 of your testimony,
isn't it true that this plan was established in a
collaborative process initiated by Commission Order in
Case No. IPC-01-16 to address concerns regarding the
Company's risk management policies?
The risk management policy was established
with a lot of collaboration that did originate with that
Order, that's correct.
Were you present for Lori Smith'
testimony Monday morning?
Yes, I was.
CSB REPORTING
Wilder, Idaho
1266 GALE (X)
Idaho Power Company83676
In fact, I believe you summarized Ms.
Smith I S testimony on page 3 of your testimony and noted
on page 5 that the test year gives the Commission the
opportunity to see actual information before issuing the
final order; is that correct?
Tha t 's correct.
Do you agree with Ms. Smith's statement
that overall actuals are comparable to the Company'
budgeted numbers?
I think the way the actuals came in , they
were very close to the Company's test year numbers.
If the actuals overall validate the
budgeted numbers , isn't it appropriate to use the
actuals?
The Company's intent from the start was to
use the test year numbers and use the actuals as a
validation method or an adjustment if the Commission so
desired , but I think we've been consistent all along,
including our prehearing conference, on how we wanted to
use the test year numbers.
According to your rebut tal testimony, the
Company accepted the use of actuals for the salary
structure adjustment and the payroll operating
adjustment, why not accept actuals for all accounts to
reflect actual 2003 expenses?
CSB REPORTING
Wilder , Idaho
1267 GALE (X)
Idaho Power Company83676
MR. KLINE:m going to obj ect because
Mr. Gale's rebuttal testimony hasn't been spread on the
record , if there's something in his direct testimony.
MS. NORDSTROM:But this relates to the
use of actuals versus budgeted, that he is the policy
witness that is responsible for it.
MR. KLINE:If Mr. Gale feels he's capable
of responding, I'll defer to him.
THE WITNESS:I don't care to go fully
into my rebuttal, but I think I can answer Ms. Nordstrom
at least at this time.
MR. KLINE:Okay.
THE WITNESS:There are some changes that
the Company recommends to the test year and I think those
are significant and I think that the ones that we do
recommend , and we'll explore those more in rebuttal , I
think they have a logic on why they would be changed.
BY MS. NORDSTROM:You said earlier that
the Company's budgeted numbers compare very closely to
the 2003 actual numbers.Would it surprise you that
Staff estimates that the difference between actuals and
budgeted numbers to be approximately $6.7 million?
That would surprise me.
Does the Company have an estimate of what
the difference would be?
CSB REPORTING
Wilder, Idaho
1268 GALE (X)
Idaho Power Company83676
My understanding is that we were within
around $3 million, so I would really like to see that
CSB REPORTING
Wilder , Idaho
MS. NORDSTROM:Thank you.No further
other number.
COMMISSIONER SMITH:Thank you.
questions.
Mr. Budge.
MR. BUDGE:Thank you.
BY MR. BUDGE:
CROSS-EXAMINATION
Mr. Gale, if you would, please, refer to
page 10 of your testimony.
on?
COMMISSIONER SMITH:I s your mi c rophone
MR. BUDGE:m sorry.
BY MR. BUDGE:Refer to page 10 of your
testimony, if you would, Mr. Gale, and beginning on line
4 of that sentence, you make a statement, "The Company
realizes there are other ratemaking obj ecti ves , such as
ability to pay, that the Commission may consider in
making its determination.When you refer to "ability to
pay," do you make that comment from the perspective of an
individual customer or from the customer class as a
1269 GALE (X)
Idaho Power Company83676
whole?
m using that as an example of other
things that the Commission might use to vary from cost of
service.
All right.
There's a laundry list, I think, that
There are other factors, obviously, that
go into the consideration, but does the Company view that
consideration in deciding what is an appropriate cap or
limit for the irrigators from the perspective of a rate
increase to an individual irrigator or to the class as a
whole?
Well , I think the Commission may view that
ei ther way.It's the Company's standpoint on the
irrigation cap was viewing it as a class as a whole, at
least from my perspective.
When you refer to that ratemaking
objective, ability to pay, do you distinguish that from
the objective Ms. Brilz mentioned of rate shock?Would
you consider those synonymous or are those two different
factors?
No, I think they could be two among a list
of it could include rate continuity, rate stability.
There is a list that Professor Bonbright put out a long
time ago that includes multiple considerations.
CSB REPORTING
Wilder, Idaho
1270 GALE (X)
Idaho Power Company83676
You go on in the next page, 11, of your
testimony, starting on line 2 , you indicate that a pure
cost of service rate spread would mean a 67.1 percent
increase to the irrigation customer class, and then go on
further in line 7 and discuss the limit which you stated,
A 25 percent limit is placed on the increase to
irrigation.
I asked Ms. Brilz some questions about
that and she deferred to you an explanation of the
reasoning for the 25 percent limit and what was
considered by the Company in arriving at that number
versus some higher or lower number , for that matter.
I'd be happy to, and in short, Mr. Budge,
it comes down to judgment, but some of the things that we
looked at is our approach in past cases and if you
remember from the 94-5 case, it's a very similar approach
that we used last time in proposing a cap and ultimately
the Commission accepted a cap, although not the same as
ours.
We also want to make some material
movement in the irrigation subsidy, as we see it, so it
needs to be substantial enough so that some progress is
made, and if you remember our original filing was close
to 18 percent, so to make material progress on top of 18,
it pretty much takes you to at least 25.
CSB REPORTING
Wilder , Idaho
1271 GALE (X)
Idaho Power Company83676
A couple other things.Whenever a subsidy
exists for one group, there are the corresponding impacts
to the other groups of customers , and then , lastly, when
we were sorting through this, it was our expectation that
given the nature of the PCA and where it sits and the
particular instance of the irrigation customers that this
would be a mitigated impact as we moved into this
spring.
And moving forward, as the Company
proceeds with its capital expenditure program over the
next several years, which I believe was something in the
range of $675 million beyond this year 2003, and this may
be jumping ahead to your rebuttal a little bit, but
intend to just follow up on this same line, there'
obviously going to be an expectation of more frequent
rate increases in the future than we've had in the past,
would you expect that to be true?
I think that is rebuttal , but my answer is
yes, I do think there will be a period of more frequent
rate increases.
Thank you , and when you made the earlier
statement that the Company s obj ecti ve in this case is to
make material movement of the irrigators towards cost of
service , do you make - - excuse me, strike that.Do you
expect the Company to follow that same objective moving
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Wilder, Idaho
1272 GALE (X)
Idaho Power Company83676
forward as we hit these additional rate cases in the near
future?
Well , I think the beauty of waiting and
seeing what happens in two years is the dynamics will be
different in two years.We'll have new cost information
the customers will adjust to the new rate design and cost
levels and so I think we have a better time to evaluate,
but given that there may be a subsidy existing two years
from now, given that our last two times we've approached
to start to eliminate that subsidy, it would probably be
our position again.
I think Ms. Brilz also deferred to you a
question I posed regarding Exhibit 44 and that on page 6
was the one that discussed the impact of the rate design
on the individual class on a per customer basis.Do you
recall those questions?
I recall the questions.Should I get the
exhibi t ?
Let me just refer to that.In reviewing
that exhibit , the Company essentially listed how many
irrigators would receive a rate increase of a particular
percentage under the Company s proposal , and I think we
confirmed with Ms. Brilz , subject to perhaps checking my
math on it, that there would be 23 percent rounded of the
irrigation class that would receive an increase of 25
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Wilder , Idaho
1273 GALE (X)
Idaho Power Company83676
percent or something less, and as a result of that, there
would be some 77 percent of the class that would receive
an increase of greater than 25 percent and if you look at
some of those by numbers that would get a pretty high
percent, you have 46 percent of the class would have a
rate increase of somewhat greater than 32 , but less than
50, and that seemed to sum up the impact on the class as
a whole if you look at it from the perspective of the
individual farmers that are really impacted, and so if
rate shock is a consideration that the Company had in
mind when they placed the limit or cap, if you will, at
25 percent, would it be accurate to say that any of those
77 percent that get greater than 25 percent impact would
in fact be experiencing unacceptable rate shock and
should be moved to acceptable rate shock?
Wi th the removal of the unacceptable.
You'd have to look at the circumstances, but that would
sound 1 ike rate shock.
So I wonder , some of the expenses that the
Company is going to incur going forward relate to
relicensing on the hydro facilities and I suppose you
generally familiar that one of the cost factors relating
to that is the Endangered Species Act application?
I cannot testify to the Endangered Species
Act.
CSB REPORTING
Wilder , Idaho
1274 GALE (X)
Idaho Power Company83676
Do you have any knowledge of that
generally?
I am not a good witness for that.
You wouldn't be able to give me any loop
holes that we might fit the irrigators within?
You know , I heard you talk about that
earlier.I should have been ready for that question.
Ripley certainly would have obj ected
that.
I think there are others in the room that
might give you better assistance than me, though,
Mr. Budge.
MR. KLINE:I overheard it , too.
BY MR. BUDGE:Just one other area, if I
may, and I just touched it briefly with Ms. Brilz and she
deferred it somewhat to you and then Commissioner Hansen
referred on this area of growing rate gap which is
obviously of concern to the Company as well as concern to
all the other intervenors in this case , and correct me if
m wrong, but if we review history, it appears obvious
that since the last case , the filing in this case depicts
a substantially growing gap between the rates irrigators
pay and what the Company reflects as their desired cost
of service under the selected methodology, would you
agree with that?
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Wilder , Idaho
1275 GALE (X)
Idaho Power Company83676
There is a growing gap from the last rate
case to this one in the cost studies.
If the Company continues to follow the
same methodology in the future and comes forth with an
additional rate case and new cost to serve growth coming
, would you not expect that gap to continue to grow if
all other things are equal in the irrigation class; in
other words , if the class continues in the future as it
has in the last 10 years, to have no growth in the number
of customers, no change in the megawatt-hours of
consumption level , we're still going to have a growing
gap that will get bigger over time?
I don't know that for sure and the reason
I say that is there are a number of things that the
Company is trying to do that is targeted at the peak and
they include the resource decisions, demand side
management , pricing and so forth, so ultimately in a
couple of years from now , I don't know for sure that
you'll see a growing gap.We'll have to see how
everything else plays out.
Would you say that's likely based on your
experience and judgment at this point in time as the
Company's senior rate person?
I don t know that you could say it'
likely that it will grow.m just saying I don'
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Wilder, Idaho
1276 GALE (X)
Idaho Power Company83676
know.
Is it accurate to say that over the last
three rate cases, this Commission has made a substantial
move or a disproportionate move of the irrigators towards
cost of service as compared to other customers?
I am fairly safe in saying that I know the
last two and the third one my memory fails me.
The most recent two and perhaps a third,
your memory doesn't go back that far?
No.
And despite that narrowing of the gap in
the previous case, we seem to have an even bigger gap now
even though the irrigation class has not changed at all
in the last 10 years.Would it be accurate to say that
the only thing that has really changed is the Company
methodology for allocating costs?
I don't think our methodology has changed
in allocating costs.I think it just reflects the
current reality and we are peak constrained and we have a
much more emphasis in our summer peak as opposed to a
dual-peaking utility in the past.
But it'the methodology that the Company
employs for allocating costs that the primary factor
that has caused the widening the gap;correct?
I don't know if I can tell you if it's the
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Wilder, Idaho
1277 GALE (X)
Idaho Power Company83676
methodology that's changed.Underwri ting what is causing
the irrigation revenue requirement magnitude is the fact
that summers are expensive.Irrigation load is on during
the summer , they're not on during the rest of the time
and you started with a subsidy to begin with.
Do you recall during the period of the
irrigation buy-back in 2001 approximately what percentage
of the irrigation customers participated?
I don't recall.
Do you recall during the course of those
proceedings before the Commission when approval of that
buy-back program was being sought that there was some
concern presented that the buy-back of the irrigators who
didn I t farm that particular year , while it may be
profitable to those individual irrigators, it could have
a rather disastrous effect on some of those that rely on
the expenditure of the money that farmers do in a year
and there was some discussion of multipliers?
While I don't remember the number of
participants, I do remember the different bodies we had
to visit and different concerns expressed that spring or
that February.
But those - - the concern over those
economic impacts , I think , were mitigated substantially
by the fact that we only would have a one-year buy-back
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Wilder , Idaho
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Idaho Power Company83676
and then they'd be back farming again.If in fact either
as a result of a move in this case or some other future
case irrigation customers start to go out of business,
would it be appropriate at that point in time for the
Company to view future impacts from the perspective of
economic impacts on the agricultural economy as a whole
or does the Company believe that that's something that'
really not their business to be concerned about?
In a future filing we may consider that.
That is not a consideration in the current filing.
At least up until this point in time the
Company, I believe from other witnesses, has not made any
attempt to do any kind of an economic impact to determine
the effect of the proposed increases in this case , to
address the ability to pay issue , that hasn't been
studied?
No, but for a little perspective, first
all, if the Company's 25 percent cap was implemented,
think that what you'll see is when the effective rates
come in and you include the PCA impact that the
irrigation customers will be operating under rates that
may be less than what they have now, so when you talk
about an economic impact, it's not going to be like it'
going to be 25 more than what they have now.They do
have more than any other group a PCA mitigation coming up
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Wilder , Idaho
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Idaho Power Company83676
thi s year.
MR. BUDGE:No further questions.Thank
you.
COMM IS S IONER SMI TH :Thank you,Mr.Budge.
Mr.Eddie.
MR.EDD IE:Thanks.do have few
questions.
CROSS-EXAMINATION
BY MR. EDDIE:
Mr. Gale, turning to page 11 of your
testimony, you spoke to an approach or perhaps a
philosophy to collect more fixed costs through fixed
prices and variable costs through variable prices.That
is about lines 16 , 17.Isn't the basic point that you'
getting at there that the Company wants more certainty in
how it
- -
more certainty that it will receive back from
its customers fixed costs of service?
That may be a sub point.I think the
basic point from my perspective is the energy rate for
smaller customers is not reflective of our energy costs,
where it is for most of our larger customers, so our
energy rate is not a cost-reflective rate, and then as a
second impact, the capacity piece of it or the facility
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Wilder, Idaho
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Idaho Power Company83676
access piece of it is all loaded on to the energy, and I
guess to the extent that it's loaded on to energy, that
is a concern, but we just as a basic premise think that'
just bad ratemaking to have the energy rate carry all
that extra capacity or access burden.
Is that split something that your
customers are asking for, that their bills accurately
reflect fixed cost of service through one charge and
variable costs through a different charge?
I would not say that our rate design is
something that customers are asking for.It is something
that I think improves a lot of our ratemaking for smaller
customers.
Do you agree with Ms. Fullen generally
that shareholders have a primary interest in seeing to
the profitability of IDACORP and perhaps they have a
secondary interest , but their primary interest is
profitability?
I think that as a general statement that
most investors' primary interest is in their economic
benefit and what they're investing in.
Do you agree that it would be difficult to
sort of sell to shareholders a demand side management
program that would significantly reduce sales under
current rate design, that will be a difficult proposition
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Wilder , Idaho
1281 GALE (X)
Idaho Power Company83676
to explain to your shareholders that this is in their
interests, this DSM program?
I think that rate design , the current rate
design, can be an obstacle for DSM as long as you
recovering fixed costs through your variables, so I would
agree with you that much.
Also, at page 11 of your testimony,
starting at line 17 , you say,"Ideally an energy rate
that corresponds to our energy costs would help address a
number of rate-related issues, including net metering and
customer conservation decisions.I guess I'd ask that
you explain how those two issues, net metering and
customer conservation decisions , are rate-related issues.
Well , net metering is one that we've run
into in the past and it has been a source, I think , of a
little contention maybe in the past, too.If the net
metering is on the energy rate and the energy rate
contains fixed cost recovery, we're right back to the
si tuation that I just described.As far as conservation
or I would say even appliance decisions, I view that the
smaller customers should be shown the same energy price
that the larger ones do and let them make the best
judgments that they can based upon what our costs are.
Am I oversimplifying to say that those
customers are still causing the Company to incur the bulk
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Wilder , Idaho
1282 GALE (X)
Idaho Power Company83676
of fixed costs of service while their consumption of
kilowatt-hours has declined?
m sorry, Mr. Eddie.
I awkwardly phrased it.I was wondering
in reference to that, your answer to the last question,
am I oversimplifying to say that those customers are
still causing the Company to incur the bulk of the costs
of service while their consumption of kilowatt-hours is
declining due to net metering or conservation?
Well, small customers, proportionately,
they have more fixed costs related to them because
they re taking at the lowest service voltages, but bottom
line, if you pull back and look at the cost of providing
a kilowatt-hour of energy, it's really not that much more
expensive to serve a residential customer s kilowatt-hour
of energy than Micron's, speaking of the energy piece.
And then at the bottom of page 11 and
running over to page 12, you note that the service charge
decreases that are proposed by the Company are important
as a tool for fixed cost recovery. I was quot ing there
from line 2 , page 12.I just wondered, you're not
implying or suggesting that increasing the service charge
is the only tool the Commission would have in order to
increase certainty of fixed cost recovery for the
Company?
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Wilder , Idaho
1283 GALE (X)
Idaho Power Company83676
It I S not the only tool the Commission has
in that respect, but it's the only tool that solves all
those other things I've been talking about.
MR . EDD IE:We'll revisit that on
rebuttal , perhaps.Thanks.
THE WITNESS:Very good.
MR . EDD IE:No further questions.
COMMISSIONER SMITH:Thank you.
appears that we're at a good breaking point for an
afternoon break and we'll take a 12 -minute break.
(Recess. )
COMMISSIONER SMITH:Okay, Mr. Purdy.
MR. PURDY:Thank you.I only have about
two questions and I'll save the rest for rebuttal.
CROS S - EXAMINA T I ON
BY MR. PURDY:
Mr. Gale, there was discussion about,
especially relating to Ms. Brilz ' s Exhibit No. 44 about,
the effect that the proposed rate increase would have on
any given irrigation customer and the point was made that
it could be substantial.My question to you is whether
an increase to an irrigator who might be operating at the
financial margin is any more devastating necessarily than
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Wilder , Idaho
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Idaho Power Company83676
the increase to a residential customer who is also
operating at the financial margin , perhaps on the verge
of bankruptcy?
I think your point is well taken.
could be equally devastating for any particular customer
class wherever the unique situation might be.
Now , Idaho Power has proposed in fact a
more than 300 percent increase for the residential class
customer charge, is that right , monthly customer charge,
from 2.51 to $10. OO?
In isolation.I think that's a poor way
to view it , but yes, in isolation , the customer charge
increases dramatically.
All right , and to the extent it's a fixed
charge , the customer being assessed that charge has no
m sorry, let me back up.To the extent that it's a
fixed charge that doesn't include any kilowatt-hour usage
in it , it's a charge that the customer has no ability to
affect one way or the other; is that right?
That's true.
Okay, and just to put a couple of things
into perspective now , the deficiency, some have called it
the irrigation subsidy, over the years , I want to test
your memory a little bit and see if you recall what it
was in the 1985 case or, I'm sorry, the 185 case.
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Wilder , Idaho
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Idaho Power Company83676
only one I have with me is the 94 - 5 case.
You ve tested my memory quite well.The
Okay, I am referring to a production
request that you prepared.Would you accept, subj ect
check , that it was 59.96 percent in the 185 case?
31.percent?
Subj ect to check , yes.
And that it was in the 265A case, it was
Okay.
And in the 94-, it was 26.16 percent?
This is the subsidy as shown by the class
cost of service study?What you're showing me is the
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Wilder, Idaho
subsidy that's shown from the study, not the final rate
Not the final rate result, the deficiency
as shown by the Company s proposed cost of service
methodology results.
Okay, that very well could be.
Okay, and in the current case, it's 67.
percent; is that right?Am I close?
You re close.
That's the highest it's been out of those
four rate cases; is that true?
I believe so.
All right.Now , if we were to take the
resul ts?
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Idaho Power Company83676
revenue deficiency in terms of dollars and add those up,
would you agree with me that it comes to about $92.
million , a little under $100 million?
m sorry, I I m getting a lot of feedback
right now.
I didn't hear you, I'm sorry.
m getting a lot of feedback, so I'm not
hearing you very well.
COMMISSIONER SMITH:Let's go at ease for
a minute.
(Pause in proceedings.
COMMISSIONER SMITH:We'll go back on the
record now.
BY MR. PURDY:Mr. Gale, I had asked you
previously about the percentage of what we'
characterized as the irrigation subsidy over the last
four general rate cases and you agreed subj ect to check
to the figures that I provided you; correct?
That's correct.
Now , if we are to attribute a dollar value
at the time of those rate cases , not taking into account
the time value of money, but the time of those rate
cases , would you agree, also subj ect to check, that that
dollar value totals approximately $92.85 million?
And that is the dollar value from the four
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Wilder , Idaho
1287 GALE (X)
Idaho Power Company83676
cases added together?
Correct.Based on not the ultimate rates
that were set but based on the cost of service study.
Subj ect to check.
MR. PURDY:That's all.
good.
COMMI S S IONER SMITH:Thank you Mr.Purdy.
Mr.Gollomp,do you have questions?
MR.GOLLOMP:No,don't.
COMMI S S IONER SMITH:Mr.Ward.
MR. WARD:I do and I'll try it here.
BY MR. WARD:
COMMISSIONER SMITH:I think it sounds
MR. WARD:All right.
CROSS -EXAMINATION
Mr. Gale, I think we can deal with my
questions just on the basis of your exhibits, so if you'd
turn to your Exhibit No. 61, the first page, please?
I have it, Mr. Ward.
What I want to do is ask you a few
questions that will maybe put a little more concrete
picture in place of the effects of a subsidy as Mr. Purdy
was asking you about.If you'd look at the small general
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Wilder, Idaho
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Idaho Power Company83676
service class, the third column , it appears there'
000 customers in that small general service class, is
there not?
Yes.
And that's almost three times as many as
the irrigation customers?
CSB REPORTING
Wilder , Idaho
Yes.
And would it be fair to say that that
small general service class includes mom and pop stores,
obviously small businesses of all sorts?
Very small businesses because this is a
kilowatt-hour metered only class.
Right, but are you aware in Ms. Bril z ' s
testimony, she shows, at least for rate design purposes,
blocks all the way up to 10 000 kilowatt-hours a month?
Nod, if you would.
Could you direct me?
All right , well , let me ask it another
Okay.
They don't necessarily have to be much
smaller than a small irrigator, do they?
, I suppose some small irrigators could
be in this general size.
Now , if you turn over to the next page,
way.
1289 GALE (X)
Idaho Power Company83676
page 2, those customers, this is your proformed
normalized at cost of service and it shows that those
customers would get a 15.26 percent increase, right,
under cost of service?
Under the Company s filed proposal.
Okay, and in fact, if you turn to the next
page, you see there that there's only - - that there'
various increases for the first 10 classes or for the 10
tariff schedules and again , this is, this is your first
pass, as you put it, based on cost of service; correct?
First pass on the revenue allocation,
yes.
Right.Now , let's turn over to the next
page.In order to defray what we've been calling the
irrigator subsidy, that small general service class,
which is also business people, presumably, some of whom
who are struggling in this economy, instead of getting
the 15 percent increase that they were scheduled for by
cost of service, in order to carry their share of the
irrigation subsidy, now they get a 21 percent increase?
That's a result of the proposal of the
Company, original proposal of the Company.
Which , of course, is only four percent
less than the irrigation class?
Yes, it is.
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Wilder, Idaho
1290 GALE (X)
Idaho Power Company83676
As Milton Friedman famously said, there'
no free lunch , is there?
Not that I'm aware of.
Also, just one other question.Mr. Budge
asked you about the position of an irrigation customer in
a class that in total is not growing significantly and
asked you a series of questions about the anticipated gap
in future years if the summer peak continues to grow.
you recall that generally?
Yes.
Aren't other members of other classes in
exactly the same position as an irrigation customer if
they I ve been customers for a long time and also consume
energy or their greatest portion of their energy on
peak?
Do you mean could there be old-time
long-time customers in other customer classes?
Sure.
Of course.
And in fact, any of us in this room who
have been here a long time, if we're air conditioning
customers and heating customers, the fact that the peak
is growing is going to hurt us notwithstanding that
there's no new consumption on our part , all things being
equal; isn t that true?
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Wilder , Idaho
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Idaho Power Company83676
That's true.
MR. WARD:That's all I have.
COMMISSIONER SMITH:Thank you, Mr. Ward.
Mr. Miller.
MR. MILLER:I do have questions of
Mr. Gale regarding the subsidy and rate shock issues,
Madam Chairman, but I think it might be more efficient if
I just held all of those until we have his rebut tal
available.In the meantime, I guess I'd ask the
Commission to keep an open mind on those issues until my
cross-examination at which time the truth will be
illuminated.
THE WITNESS:From the answers?
COMMISSIONER SMITH:We will anxiously
await your cross-examination , Mr. Miller.
Mr. Richardson , do you have questions?
MR. RI CHARDSON :I do not,
Madam Chairman.
COMMISSIONER SMITH:Okay, Commissioners.
Commissioner Hansen.
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Wilder, Idaho
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Idaho Power Company83676
EXAMINATION
BY COMMISSIONER HANSEN:
I guess I'd just like to clarify from a
question that was asked at the beginning.Yesterday I
certainly was aware that the bonuses were not included in
this rate case; however , the question that I asked
Mr. Keen that I thought he was going to get back with me
on was did any of the bonus money come from Idaho Power'
earnings and what effect do those bonuses have on the
Company's earnings and I don't know, Mr. Gale , if you
want to address those or whether we need to wai t for
those answers from Mr. Keen , but that was what I asked
for and not the other.
m happy to answer from that perspective
and 2001 is typically the year that causes the heartburn.
In 2001, Idaho Power did have positive earnings, positive
earnings in the neighborhood of $0.60 a share and we paid
out a dividend of $1.86 a share, so I guess I would say
to you we had posi ti ve earnings , but no available
earnings to pay executive bonuses.
So you're saying, then , that there was
absolutely - - well , you're saying none of the bonuses
that were given were paid from any of Idaho Power'
earnings?
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Wilder , Idaho
1293 GALE (Com)
Idaho Power Company83676
m saying Idaho Power did not have
sufficient earnings to cover its dividend.
Right, I understand that, but just based
upon - - if I want to look at just the bonuses and I want
to know where that money came from , where did the money
come from?Did it all come from non-Idaho Power Company
earnings or was some of the earnings of Idaho Power
Company in those bonuses?
Well, I'm not trying to answer you in a
riddle.In 2001 , we had multiple subsidiaries that had
positive earnings , so there was a variety of earnings
which could have been sources, but practically speaking,
Idaho Power , the utility, did not have enough earnings to
cover its dividends; therefore , I maintain there was not
sufficient enough to even cover its dividends, so it was
not the source of executive bonuses, but as long as
had positive earnings, kind of like the United Way, you
can paint some of that earnings and say it went there,
but as a practical matter , it could not cover its
dividend.
I guess just one little follow-up question
on that and then I think I'll put it to bed.Because of
the concern that we hear with that, I guess it would come
back to the chart that we looked at, the 60, the 80
percent bonus received, I mean , doesn't that seem kind of
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Wilder , Idaho
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Idaho Power Company83676
a large bonus if that was the Company's earnings
si tuation that you would give out that large of bonuses
to Idaho Power Company employees?
I guess I need more specific on which
people you're talking to, talking about.What I'm trying
to convey is the Idaho Power Company earnings of that
year was not sufficient to cover all its costs , pay its
di vidends and still have some left over to pay bonuses.
I understand, and let's just see if I can
kind of - - okay, but that year it was determined that the
officers , the senior officers, the level one and the
level two managers received a huge , what I would classify
as huge, percentage of a bonus.In the chart that Mr.
Hol m had, it was 60 to 80 percent , in that range.
My question is, that's perceived by the
public , the ratepayers when they see those kind of
bonuses and yet, you say the Company didn't have positive
earnings, then are you telling me , then , that other
subsidiaries then subsidized the bonuses for the Company?
No, what I'm telling you -- well, in 2001
the other subsidiaries could have very well subsidized
the bonuses for the employees.That could very well have
happened in 2001.
COMMISSIONER HANSEN:Thank you.
CSB REPORTING
Wilder, Idaho
1295 GALE (Com)
Idaho Power Company83676
EXAMINATION
BY COMMISSIONER SMITH:
Mr. Gale, with regard to your proposal to
have this seasonal rates in the summer , when the Company
was looking at it , I'm sure, did you look at different
alternatives as to how to structure this rate design?
Ms. Brilz did.I wasn't the one selecting
the alternatives.
Do you know whether it was considered to
have an initial block at a standard or winter rate and
then put a surcharge on top of that?
For the summer?
Uh-huh.
No,did not look at blocked rates.
Do you think a policy matter there'
something flawed about that approach?
We believe that unitized pricing for
energy is the correct way to price it , not of
- -
we are
not advocates of blocked rates.
So you re operating on - - I mean, there'
a couple of different ways to look at trying to get at
shaving the peak and one is that every kilowatt-hour
consumed contributes equally to the peak and therefore,
it ought to pay equally; is that your philosophy?
CSB REPORTING
Wilder , Idaho
1296 GALE ( Com)
Idaho Power Company83676
Well , when we're buying it , when we buy
massive quantities of power , we're buying it at unitized
prices.We're not buying blocks of prices.
Finally, with regard to the customer
charge the service charge or whatever you'calling
it,think that'the single biggest complaint in the
hundreds letters think the Commisslon has received
from customers.They're very upset and offended by that
and I know Ms. Brilz testified , I think it was , that you
used to have a minimum rate where you paid a flat fee
but it included some amount of usage every month and I
think people feel when you do that, at least they get
something for their money.
Rightly or wrongly, the general public,
think , perceives that that customer charge is just a
penalty on them for being your customer and they don'
understand why they cost you money because their meter
has been there for 25 years and it hasn I t changed and it
surely has been depreciated and all those, so do you know
whether the Company has a policy against returning to
kind of a minimum charge so if you wanted to collect
$10.00 a month from every residential meter , you at least
included some minimal amount of energy?
First of all , you get two cracks at me on
this because it's a maj or part of my rebut tal as well.
CSB REPORTING
Wilder, Idaho
1297 GALE (Com)
Idaho Power Company83676
But if I ask this question now , maybe
you'll think on it before you come back for your
rebuttal.
I am ready to answer you now.
Okay.
, we specifically came off the minimum
bill and I agree that customers' perception of this is
not posi ti ve and I think a lot of it is in the
perception.What we're trying to accomplish is moving
along the lines of an access charge , which I think is a
bet ter name than customer charge.Certainly, that has
been met with a lot of disapproval , but access and energy
is what I think is the right model eventually.
And I was wi th you and I think I was an
accomplice in the last case, because I think then we
thought this industry was going to be divided, subdivided
into three maj or sections.You were going to have your
distribution , your transmission and your generation and
it would be important if you saw that the industry was
going that way to be sure you had the rates and costs
aligned so that there wasn't any gross disallocation when
the split happened , but I don't know, I think now in
2004 , we don't think that's going to happen, so why are
we still trudging down this path?
Commissioner Smith, it was , in large part,
CSB REPORTING
Wilder , Idaho
1298 GALE (Com)
Idaho Power Company83676
this last ten years we've gone through and all the
unbundling work that we went through that makes me think
that is the right approach to strive to.Now , since the
last rate case, dereg came upon us quickly and left just
as quickly and I think the seeds are still out there for
it to come again , given the right market circumstances
and enough distance from the last set of memories, so
would like to at least take a partial step towards
preparing for it.
COMMISSIONER SMITH:Well, I guess we'll
see if your answers change on rebuttal.
Mr. Kline, do you have redirect?
MR. KLINE:I had one redirect question.
REDIRECT EXAMINATION
BY MR. KLINE:
Staff attorney Nordstrom asked you a
question about the Green program and she couched
terms we 11 every utility has a Green program why do
you feel ike you should get some kind of special credit
for having a Green program.I s our Green program
different than other people's Green program?
Well, we launched the Green program
ourselves.It's a voluntary program.The timing could
CSB REPORTING
Wilder , Idaho
1299 GALE (Di)
Idaho Power Company83676
have been better because we launched it basically at the
start of the energy crisis, but we believe that there is
a market out there for customer choice to put extra
dollars into Green resources and we feel very good about
our Green program and its results during difficult times
and support it and would like to see it succeed and with
changing PCA rates , we hope it will.
And are Green programs mandatory in a lot
of states?
I believe that's the case in some
states.
MR. KLINE:That's all.
COMMISSIONER SMITH:Thank you, Mr. Kline,
and Mr.Commissioner Kj ellander.-- wait a minute.
EXAMINATION
BY COMMISSIONER KJELLANDER:
Mr. Gale, do you think that perhaps by
voluntarily entering into a Green program Idaho Power may
have dodged a mandatory Green Power program?
Some others in the room may be better
judges of that than me.Our initial and starting policy
on Green was that it was better for Green to be a
customer choice and not a mandate and we have said that
CSB REPORTING
Wilder, Idaho
1300 GALE (Com)
Idaho Power Company83676
for at least four years.
Okay, maybe you re not the best one to
respond to this, but I'll ask the question.The other
CSB REPORTING
Wilder , Idaho
states where it's mandatory was mandated by the
legislatures in that state; correct?
m aware it's been mandated by some
COMMISSIONER KJELLANDER:Okay, thank you.
COMMISSIONER SMITH:Thank you, Mr. Gale.
legislatures.
(The witness left the stand.
MR. KLINE:Madam Chairman , that completes
Idaho Power's presentation of its direct testimony,
direct case.
COMMISSIONER SMITH:Thank you, Mr. Kline.
witnesses?
Mr. Richardson, shall we proceed to your
MR. RICHARDSON:Yes , Madam Chairman , the
Industrial Customers are prepared to call Dr. Reading and
Mr. Teinert for their direct testimony and will reserve
the right to spread the rebuttal testimony at a later
time.
COMMISSIONER SMITH:Let's go off the
record.
(Off the record discussion.
COMMISSIONER SMITH:All right, we'll go
1301 COLLOQUY
83676
back on the record.
MR. RI CHARDSON :The Industrial Customers
of Idaho Power call Dr. Don Reading to the stand.
DR. DON READING,
produced as a witness at the instance of the Industrial
Customers of Idaho Power, having been first duly sworn
was examined and testified as follows:
MR. MILLER:Madam Chairman.
COMMISSIONER SMITH:Mr. Miller.
MR. MILLER:Thank you , Madam Chairman.
was wondering if you could give at least me an indication
of whether you intend to start at 9: 00 0 ' clock tomorrow
morning as well.
COMMISSIONER SMITH:Tha t was my
intention.
MR. MILLER:Thank you for that
clarification.
COMMISSIONER SMITH:Oh, you are leaving.
I get it now.9:00 o'clock.
CSB REPORTING
Wilder , Idaho
1302 READING
ICIP83676
DIRECT EXAMINATION
BY MR. RI CHARDSON :
Dr. Reading, are you the same Dr. Reading
who caused prepared prefiled direct testimony and
CSB REPORTING
Wilder , Idaho
exhibits numbered 201 through 205 to be filed in this
Yes.
Do you have any corrections or additions
mat ter?
to make to your prefiled testimony?
Yes.
Will you make those now , please?
Yes.On page 6, line 19, it says Exhibit
xx.It should say Chart On page 11 , line 3, it says
again Exhibit xx, it should say Exhibit 202.
202?
Yes.
again , please?
COMMISSIONER SMITH:Could you do that one
THE WITNESS:Okay, page 11 , line 3, it
should say Exhibit 202.
COMMISSIONER SMITH:Thank you.
THE WITNESS:And on page 5, lines 18
through 20, there are two numbers that change and then a
The sentence should read, The variablesource for that.
1303 READING (Di)
ICIP83676
costs of power production from Danskin have varied
between $0.1678 --
MR. KLINE:Say again , please.
THE WITNESS:$0.1678 per kilowatt-hour in
2 0 0 1 and $ 0 . 118 5 .I guess the cents should be
eliminated, I'm sorry.If I use the dollar sign , the
cents shouldn't be there, so it should be between $0.1678
and $0.1185 per kilowatt-hour in 2002 , and the source of
that is FERC Form 1 , Idaho Power Company, 2001 , 2002
line 403 - - page 403 , line 34 , and these changes also
were filed with discovery requests from the Company on my
testimony and are the same as in that discovery
request.
COMMISSIONER SMITH:Let's be at ease for
a moment.
(Pause in proceedings.
THE WITNESS:So these corrections can be
found also in ICIP response to Idaho Power's first
production request.I thank the Company for finding
errors.
BY MR. RI CHARDSON :Does that conclude
your corrections and additions to your prefiled testimony
and exhibits?
Yes , it does.
MR. RI CHARD SON :Madam Chairman, I would
CSB REPORTING
Wilder, Idaho
1304 READING (Di)
ICIP83676
move that the prefiled direct testimony of Dr. Reading be
spread upon the record as if it were read in full and
Exhibits No. 201 through 205 be marked for identification
purposes.
COMMISSIONER SMITH:If there is no
objection , it is so ordered.
MR. RICHARDSON:Thank you
Madam Chairman.
(The following prefiled direct testimony
of Dr. Don Reading is spread upon the record.
CSB REPORTING
Wilder , Idaho
1305 READING (Di)
ICIP83676
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3 -13
In troduc tion
Would you please state your name and address?
Don Reading, Ben Johnson Associates, Boise, Idaho
Have you prepared an appendix that describes your
qualifications in regulatory and utility economics?
Yes. Appendix A , attached to my testimony, serves
this purpose.
Does your testimony include any attachments?
Yes. Attached are Exhibit 201: Danskin Station
Costs;Exhibit 202: Danskin Generation Summary; Exhibit
203: Mtn. Home Generation Station; Exhibit 204:
Mid-Columbia Prices; Exhibit 205: Proposed Change in
Fixed and Energy Charges.
What is your purpose in making your appearance at
this hearing?
Our firm has been retained by the Industrial
Customers of Idaho Power (ICIP) to assist in the
evaluation of Idaho Power'(Company, IPCo) rate
application.General rate applications are usually
complex , and that is certainly true of this one.I have
review the Company's testimony and exhibits , as well as
1306
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
the discovery filed by the interveners and responses by
the Company.My testimony will be focus only on several
significant issues. Silence on other issues does not
imply acceptance of the Company s position.
Would you please describe how your testimony is
organized?
Yes. Following this introduction, my testimony has
two maj or sections.The first section deals with the
costs and assumed operating hours of the Company
Danskin Station Generating Facility.The second section
discusses how system loads on Idaho Power's system have
changed dramatically over the past ten years with an
increased focus on peaks on the system.
1307
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
Danskin Station
Let's turn to your first maj or section , which is the
impact on proposed rates from the inclusion of Idaho
Power's Danskin Generating Station located in Mt. Home.
Based on the Company's exhibits did you examine the
contribution of the Danskin Station to generating
resources?
Yes.Company Exhibit 33 estimates power supply
costs and the output of all Idaho Power's current
generation assets given current system demand for each
year for the period 1928 through 2003.The out pu t and
power supply costs are thus normalized over the 75 year
period for the water conditions that existed for that
given year.An average is calculated that would
represent the mean or expected output and power supply
costs under normal water conditions to meet native load.
Danskin Station's normalized average annual output over
this 75 year period is 804.6 Mwh or the equivalent of
just 8.9 hours per year.(Exhibit 33 , page 1 of 77; hours
based on 90 MW)At this output, the fuel costs including
the Fixed Capacity Charge - Gas Transportation , are
$3.267 million.If you add the annual capital costs of
$7.728 million (Idaho Power Company, Application
p.
"The annual revenue requirement associated with the
1308
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
construction of this peaking generating resource is
$7,727 782.This leads to an average normalized
annual cost of $10.995 million.The normalized average
cost per kilowatt hours basis (kWh)(not MWh!) is $13. 65 .
1309
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3-
......\ -..---------
I $140.
I $20.
I $1J0.
$80.
$60.
$40.
Chart 1
'-'
Danskin Station
Cost per kWh
max$130.
----.----.
$20.
$0.
~~$'~~'$$$$"'$"
1 "
\ source: Exhibit 33 1.-
- --- _._
In fact,as shown in the Chart 1 above and in Exhibit 201
over the normalized 75 year period the highest Mwh
production from Danskin Station was found by the Company
to be 2,886.3 in 1960 for a cost of $3.84 per kWh for
that year.The highest is $130.51 in 1995.
Station?
Could you briefly describe the Danskin Generation
1310
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-E-O3-
The generating plant consists of two (2) natural
gas-fired combustion turbines rated at approximately 45
MW each (Uni t #2 and Unit #3) .It is located about two
miles from Mountain Home, Idaho and first produced power
in September 2001.It is supplied by gas from the
Williams Northwest Pipeline located near the plant.Due
to air quality standards the plant is limited in
operations to 5,140 hours per year.
1311
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3-
The Plant has been in operation since the fall of
What has been the actual output of the facility?2001.
The first unit (which is actually called unit #2)
first produced power on September 25, 2001, followed by
an on line date five days later by unit #3.(Idaho Power
Company s Response to 3rd production Request of
Commission Staff, page 34.
) .
For calendar 2002 , the
first full year of operation, output from Danskin was
43,368 Mwh (FERC Form 1, 2002 , page 403) Production
costs that are listed for calendar 2002 are $5.
million , which yields a running cost of 11.85 cents per
kWh.However this does not include the annual capital
costs of $7.7 million. When capital costs are included,
the running costs go up to 29.7 cents per kWh.
It should be remembered
- - -
and an economists ' favorite
saying - - sunk costs are sunk.From the Company'
prospective (and economically rational once the plant is
built) the annual amortized cost of $7.7 million doesn
matter in deciding when to operate the plant. As long as
the variable costs - - primarily natural gas prices for a
unit like this - - are covered by the market value of
power, it will be rational to run the plant.The
variable costs of power production from Danskin have
varied between $0.1678 per kWh in 2001 and $0.1185 per
1312
Direct Testimony of Don Reading Ph. D.
On Behalf of ICIP , Case No. IPC-O3 -13
kWh in 2002.However , ratepayers in this case are being
asked to shoulder the burden of the capital costs in
their rates.From the ratepayers' prospective therefore
the full cost - both variable and fixed - is the relevant
cost.
How do the costs you discussed above compare to what
the Company told the Commission in their application for
a Certificate of Public Convenience and Necessity (CPCN)
about the operation of the plant?
In its CPCN Application the Company described the
expected operating costs of Danskin Station as follows:
1313
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3 -
The preliminary estimate of the levelized cost
per megawatt hour (MWh) would range from an
upper level of $223 per MWh based on a capital
cost for the Station of $55.2 million , 500hours of annual generation, and levelized fuel
costs of $5.05 per MMBtu over the 30 -year life
of the Station, to a lower range cost of $77
per MWh based on a Station cost of $46 million
140 hours of annual dispatch, and average
fuel costs of $5.05 per MMBtu. (Idaho Public
Utilities Commission Order No. 28773, Case No.
IPC-01-12, July 11 , 2001, page 5.
This means that the actual cost of 29.7 cents per kWh for
2002 was 33% higher than the highest estimated cost, and
385% higher than the lowest estimate.It should be
remembered that 2002 was a low water year when output of
the plant would be expected to be high and hence one
would expect the cost per kWh to be on the low end of the
range.
How does the estimated cost range for Danskin output
found in the Company s CPCN compare to the normalized
range presented by the Company in this case?
As shown above and in Chart 1 the normal i zed range
of output and demand over the 75 year period presented
by the Company in this case varies from a low of $3.
per kWh to a high of $130.51 per kWh.This translates
into 1 285% higher than actual on the low end to 43,943%
higher on the high end.So both the actual and expected
1314
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-E-O3 -
costs significantly exceed what the Company told the
Commission they expected would be the costs to ratepayers
for the output of this plant when they applied for their
CPCN.
Based on the information presented to it by the
Company did the Commission authorize the construction of
Danskin Station?
Yes.However in its Order authorizing the plant,
the Commission expressed discomfort about the amount of
information provided by the Company.
The Company needs to provide the Commission
with more information. What other alternatives
were considered? What was
1315
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP Case No. IPC-O3 -
the Company's forecasted need? The Company
expressed concern that we will assess its
decision to build based on hindsight and from a
perspective of changed market conditions. We
assure the Company that the review standard
employed by the Commission will be what Company
knew or should have known at the time it made
its decision to build. (IPUC Order No. 28773,
page 13.
The Company offered and the Commission accepted a
Commitment Estimate" for the capital cost portion of the
plant.Did the final cost of the facility fall at or
below that estimate?
Idaho Power Committed that capital costs would not
exceed $55.2 million.According to the Company'
Application in this case the cost of construction was
approximately $49 million"This construction cost has
led to the Company s request for the annual revenue
requirement of $7 727,782 associated in the investment in
the Danskin Power Plant.(Application, page 7.
If the investment costs for Danskin Station were
lower than the "Commitment Estimate" why are the actual
operating costs and the expected normalized costs so much
higher?
As shown above, Idaho Power based its operating
estimates for running the plant on an assumption that it
would run between 500 and 5,140 hours per year. Even
1316
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-E-O3 -
though the last 2 years have been exceptionally dry, the
plant has only been on line at the low end of the
estimated range.
Unit #2 was first synchronized at 18: 55 on
9/25/01. Between that date/time and the end of
the month of October 2003, unit #2 operated for
a total of 1 268 hours. Unit #3 was first
synchronized at 21: 27 on 9/30/01. Between that
date/time and the end of the month of October
2003 , unit #3 operated for a total of 1 235.hours. Between 18: 55 on 9/25/01 and the end of
October 2003 , at least one unit was on line for
a total of 1,714.58 hours. (Idaho Power
Company's Response to 3rd Production Request ofCommission Staff, Response to Request No. 86
pages 34 35.
1317
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-E-O3-
This means Unit #2 has averaged 634 hours annually over
the last two years, while Unit #3 has averaged 617.
hours annually.For the combined units at least one was
on line for an annual average of 857.29 hours.The
estimate is close to the low range of 500 hours however
is only 1/6th the high range. With capital costs fixed at
$7.7 million per year plus the fixed capacity charge for
gas transport of $3.2 million the annual fixed costs of
the plant are $10.9 million.Therefore the cost of
production on a kWh basis are highly dependent on the
number of hours the facility is in operation.It appears
that even in dry years, like the last two , the plant will
not be run in a range that will produce power at a
reasonable cost.
The Company estimates the cost of output from
Danskin from a low of $3.84 per kWh to a high of $130.
per kWh.Why are these costs so much higher than
predicted by the Company and which were used as the basis
for the Commissions approval?
Based on both actual operations and expected needs,
the hours of operation are significantly less than the
Company claimed in its application.
1318
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3-
For the immediate future, Idaho Power indicates
that it intends to operate the Station 5,140
hours per year, i. e., up to the limit allowedby its air quality permit. Once the Garnet
project comes on line in 2004 , however, the
role of the Mountain Home Station, Staffstates, could change. (IPUC Order No. 28773
page 7.
Therefore, the Company expected the plant to be on line
for over 5,000 hours through 2004.In reality the plant
has operated only 2 686 hours since its only line date
through December 2003.(Idaho Power Company's Response to
the 1st Production Request of ICIP , Response to Request
No. 53,54. see Exhibit 202) This means the plant has
operated just over half the claimed hours in the past
and 1/3 years.Because the hours of operation have been
so limited the cost of output on a kWh basis is very
high.
1319
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
Did Idaho Power intend the Danskin Plant to fill
native load or for off system sales?
In a response to a Staff Production Request in Case
No. IPC-01-12 (the CPCN application) the Company
stated;
Idaho Power is proposing to develop the
Mountain Home Generation proj ect to serve the
needs of Idaho Power's native load customers.
There may be times when all or a portion of the
Station's generation is surplus to the needs of
Idaho Power's native load customers.Idaho
Power Company's Response to the First
Production Request of the Commission Staff,
Case No. IPC-01-, Response to Request No.
8. )
While that may be true, the number of hours from the
facility needed to serve native load is low and thus the
cost is high.In response to an ICIP production request
the Company provided a Mtn. Home Generation Station
Operating Plan dated July 7, 2001 - just before the
Commission issued its CPCN for the plant.(Idaho Power
Company's Response to First Production Request of the
ICIP , Response No. 57; Exhibit 203)This document
1320
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-E-O3-
indicated expected operating hours for the plant to be
673 for the last 5 months of 2000; 4,344 for 2001;
952 for 2002 , 1 682 for 2003 , and just 848 for 2004 and
2005.These are significantly less that the 5,140 hours
in the ' immediate future' that Idaho Power presented to
the Commission.
Do you know why the hours of operations of Danskin
Station have been so limited?
The Company probably assumed it would use the plant
for secondary sales as well as to meet native load needs.
This would mean the plant would be on line sufficient
hours to bring the costs on a kWh basis in line with what
the Company expected would be the costs of power.
1321
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP Case No. IPC-O3 -13
Idaho Power's marketing and trading analysts
have indicated that annual heavy load period
market prices for the next few years will
likely be in the range of $50 to $350 per MWh.
The estimated forward price is approximately
$350 per MWh for April 1 through March 2002.
The five to ten years forward prices currently
are in the range of $55 per MWh. Hourly prices
have historically been several times the annual
average and could be in excess of $1000 per MWh
in the near term. (Idaho Power Application
Case No. IPC-01-12, page 4.
Note this reference is to the Company's marketing and
trading arm.In reality prices in the secondary market
have not been as high as they predicted.What is
irrational about the Company s estimates is that the
upper range could be sustained for an extended period of
time.At prices equal to 35 cents per kWh the market
would be expected to adjust with customer curtailments
and fuel switching.Even if Danskin would have been on
line the full 5 140 hours per year , market prices would
need to be above $77 per MWh for the plant to be cost
effective for secondary sales.
You indicated that Danskin would be used for
secondary sales as well as to meet native load needs.
What has been the experience since the plant came on
line?
The Company does not specifically identify any
generation resource when making off system sales.
1322
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP, Case No. IPC-E-O3-
However the Company, in a good faith effort to respond to
the ICIP' s production request , did provide estimates
based on operating parameters of their system.
However , because Danskin is the highest cost
Company-owned resource and in order to make a
good faith effort to respond to this request,
in the attached information the Company has
assumed that in any hour that the Company was a
net purchaser , generation from Danskin was used
to serve native load; and conversely, in any
hour that the Company was a net seller
generation from Danskin was generated for off
system sales. (IPCo Response the 1st Production
Request of the ICIP , Response 53,54.
1323 10a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
The results of that modeling effort indicate Danskin
Station produced 106,192 MWh from its on line date in the
fall of 2000 through the end of December 2003.(See
Exhibit 202.Of that amount 78 452 MWh or 73.9% were
assumed to serve for native load.It is apparent that
estimates of operating hours for Danskin for off system
sales have not developed.For example for 2003 the
estimate of generating for off system sales was only
655 hours.
Wouldn't it be fair to look at the decision in the
context of the chaos in the energy markets in 2000 and
2001?
Certainly.The turmoil in energy markets during
2000 and the first half of 2001 are well known.In the
fall of 2000 and early 2001 the Company had engaged in
several programs to obtain power, including industrial
and irrigation buy backs in order to obtain power needed
to serve load.As indicated in the Chart 2 (Exhibit 204
page 1.) below prices for electricity on the market
reached unprecedented levels in December 2001 and
remained high through the spring of 2001.
1324
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-03-
Chart 2
-------
Mid~Olumbia On pea ctricpr :~MWhr -
$3,500
----- ----------.--..---'-.--.-----
000
$2,500 n_._-'---'
--.
$2,000
---:!:...
$1,500 Commission
Application Approve On Line
$1,000
$500 . ---
" ....
~f1I ,~f1I ,~f1I ,~f1I
..$.'" "
\1' "\1' ,
~",
..$.f1I ,~f1I
~",
~f1I
~",'"
"J' ~\
"\ \
Q,' ,,
'" '"
"J' ~\
"\ \
Q,' ,,
source: WSJ. Dow Jones ,~uml:lillindex
- ':"":'~ ~'-'----_.._-'
In Chart 2 you have indicated when the application
for Danskin was filed, when the Commission approved the
CPCN, and the on line date.It looks like market prices
had changed dramatically by the time the Commission
issued its Danskin CPCN Order.Could you explain?
Chart 3 (Exhibit 204 , page 2.) below shows for the
year 2001 the Dow Jones Mid-Columbia Index , application
date, Commission approval, and the on line date for
Danskin.
1325
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
Chart 3
-.-----'----.-----____
.....n
-.---,-------...
Mid-Columbia On Peak Electric Price $MWhr
$600
---
Application
$500
$400
...
$300 Commission
Approve
On Line
$200
$100 ____n
':'':'':'':'':'':'
~rp ~rp ~rv
oj.Ao.\
':'
source: WSJ, Dew Jones Mid-Columbia Index
L___
__- ----...---.----'--------
Note that by the time the Commission approved the CPCN
market conditions had changed dramatically and by the
time the plant came on line the price for market power
was back to pre-2000 levels.This meant the ability to
run the plant and make a profit diminished even when
including only the variable expenses and not the fixed
1326
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3-
costs.It also shows that prices were not remaining at
the $350 per Mwh through March 2002 as predicted by
Idaho Power s marketing and trading analysts.This
should have a warning to the Company that they needed to
reassess the economic viability of the plant.
discussed above, the Commission had asked for more
information and documentation about the facility. It
would have been wise for the Company to reassess at the
time of the
1327 13a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
Commissions approval.Even if there had been
expenditures up to that date, the Company could have come
to the Commission for ratemaking treatment.That would
have been a better choice than now asking ratepayers to
assume the costs of a plant that will sit idle most of
time.
What type of ratemaking treatment are you referring
to?
The Company could have ceased construction and
sought recovery of its then sunk costs.
Did the Danskin Generating Station fit within the
Company's Integrated Resource Plan (IRP)?
Idaho Power acknowledged during the application
process that Danskin was not part of their IRP.
Idaho Power acknowledges that the Mountain Home
Station is not identified in the Near-Term
Act ion Plan in the Company s 2000 IRP.
Nevertheless, Idaho Power believes that
construction of the Station is consistent withthe IRP. The Station provides a cost-effective
al ternati ve to planned wholesale marketpurchases. Idaho Power believes that recent
market prices for purchased power create a
unique circumstance to be addressed for the
2001-2004 period. (Idaho Power Application
Case No. IPC-01-12, page 4.
1328
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3 -
The Commission in approving Danskin recognized what it
characterized as 'volatility ' in the electric spot market
that could mean deviation from the IRP would be
justified.However the Commission also firmly stated
there was not sufficient information available to make a
least cost decision.
We are convinced that the volatility of the
electric spot market created a situation that
justified a deviation from the Company's 2000
IRP and its actions in developing plans for the
Mountain Home Station. The information
provided however is insufficient to determine
the reasonableness of the related costs. Asreflected
1329 14a
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP, Case No. IPC-O3-
in Staff comments, it is unknown whether
the Mountain Home Station was the leastcost al ternati ve. Because the Mountain Home
Station was not selected pursuant to a RFP
process, we are unable to conclude based on the
information provided that the commitment
estimate is reasonable. The Company in its
Application, we note, also provides nocomparison of al ternati ves (al ternati ves
available but not chosen). As reflected in its
comments , Power Development Associates believes
it offered the Company a better project.
Communication and timing appear to be factors
in the Company's decision to proceed with its
own proj ect . It also appears that the
Company s choice of equipment may be better
sui ted to later conversion to combined cycle.
There is no record as to whether other
al ternati ves were also considered and rej ected.
We are unconvinced that the best measure of thecost of al ternati ve resources is market price
estimates in effect at the time the decision to
proceed was made. The record supporting such afinding remains to be developed. (IPUC Order
No. 28773, page 12.
It appears the Commission skepticism has been proven by
time.As shown in Chart 3, 2002 market conditions had
already changed by the time the Commission gave its
approval in July of 2001.
How has Idaho Power Company responded the
Commissions skepticism and the lack of an al ternati ve to
Danskin?
Idaho Power apparently rushed the proj ect in
response to then-current market prices and the potential
benefits of generation.
1330
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP Case No. IPC-O3 -13
In summary, given high market prices for power
and the extremely high demand for turbines at
the time, the sooner a combustion turbineproj ect could be constructed, the greater itsvalue. While the Commission's Order No. 28773
tended to minimize high current market prices
as a justification for constructing the Danskin
proj ect, it must be remembered that at the time
no one was sure what market prices would be in
the future. At the time, FERC was continuing
to refuse to impose hard market caps in the
West and its public pronouncements repeated the
market would be permitted to operate to takecare of the energy supply problem. At the
time, the
1331 15a
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP , Case No. IPC-O3-
prospect for continuing high market prices as
very real. Considering the market prices
experienced at the time of the decision to
proceed with Danskin, potential customer cost
savings from a proj ect like Danskin were on theorder of $10 to $20 million per month. (IPCo
Response to 4th Production Request of
Commission Staff, Response 88.
As indicated in the Charts above, at the time the
Commission approved the plant , prices - - while high by
today's standards - - were different than in the
proceeding months of extremely high prices.These
changing market conditions should have given the Company
pause and caused them to take a new look at the plant
before attempting to saddle ratepayers with a fixed cost
of nearly $11 million per year for limited output at
outrageous costs.
The Company has recently received a CPCN for the
Bennett Mountain generating facility. When this peaking
plant becomes part of Idaho Power's system how is it
expected to effect the operation of Danskin Station?
As indicated by the Company above, Danskin is Idaho
Power s highest cost resource.The will not change with
addition of Bennett Mountain to Idaho Power's generating
resource portfolio:
Both plants are intended to meet Idaho Power
1332
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3 -
peak load requirements in the summer and winter
daytime hours. With the Bennett Mountain plant
not yet online, the Danskin plant operated
slightly more than 500 hours during 2002 , and
operated approximately 475 hours through
September of 2003. Both years have been
considered low water years in which above
normal thermal generation and market purchases
have been required. Since first going online in
August 2001 , Danskin has operated in all but
two months. Once Bennett Mountain becomes
available, however , Danskin will likely operate
far less hours. Both plants will need to be
operated at times during the summer daytime
hours, but still , Staff believes Danskin'
operation could easily be cut in half from its
current operational level. (IPUC Staff
Comments, Case No. IPC-E- 03 -12)
1333 16a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
At 500 hours the full cost of output to ratepayers
from Danskin is about $0.25 per kWh. However staff
estimates that it will run ' far less' and the output
easily' cut in half.At 250 hours per year the cost per
kWh is 48.8 cents.Remember this is the estimate for the
driest years, on average -- according to the Company
filing the plant on average produced about 800 MWh.
half this amount or 400 MWh per year the plant costs to
ratepayers on a per kWh (again NOT MWh) will be $27.
after Bennett Mountain comes on line.
What recommendations do you have for the Commission
in dealing with the very high cost the Company is asking
ratepayers to shoulder in relation to the Danskin
Generating Station?
Certainly market conditions have changed, but the
magni tude of the cost difference that the Company is
asking ratepayers to pay and the exceptions presented to
the Commission are huge and it is unreasonable to expect
ratepayers to pay this amount.The Company did have the
al ternati ve of reassessing, but pushed ahead even while
the market prices were declining.
I recommend the Commission not give the Company rate base
treatment for Danskin Station.This recommendation is
1334
Direct Testimony of Don Reading, Ph. D.On Behalf of ICIP , Case No. IPC-O3 -
especially compelling since the Company is going ahead
with the Bennett Mountain plant which will cause Danskin
to run even less.
If the Commission followed your recommendations
would the Company need to write-off the full costs of the
facility?
There certainly would be significant costs.However
the Company has indicated the generators could be sold.
1335 17a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
If the generators were not ratebased and were
not considered operating property, the Company
would be able to sell the generators at a later
date if it so chose.(Idaho Power Company'
Response to the First Production Request of the
Commission Staff , Case No. IPC-01-
Response to Request No.
There could be other aspects of the plant that would
allow for some cost recovery.Not allowing the plant in
ratebase may be expensive for the Company; however , if it
is allowed in ratebase it will be much more expensive for
ratepayers.
Normal zing Peak
Idaho Power s last rate case was ten years ago.How
do the Company s loads compare to those that existed
during the last rate case?
As surprising as it sounds energy consumption from
native load is virtually the same as it was 10 years ago.
The Company's 1993 annual normalized system
load used in the IPC-E- 94 - 5 case was 14.
million megawatt-hours (MWh). The Company'
2003 annual normalized system load used in this
case is 14.1 million MWh. The annual system
1336
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP, Case No. IPC-O3-
load served today is approximately the same as
it was ten years ago. (Idaho Power Direct
Testimony of Greg Said, page 3, lines 8 to 13.
On a normalized basis consumption demand actually
declined by 100,000 kWh annually.The maj or reason for
this change has been the loss of the Astaris (FMC) load
of 1.7 million MWh.In addition the Company has phased
out FERC jurisdictional contract loads.While total load
is flat compared to 10 years ago, there has been
significant shifts in use from various customer classes.
These shifts had led to a substantial change in the load
profile of the Company.
1337 18a
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP, Case No. IPC-O3-
The FMC contract as well as the concluded FERC
contracts that existed ten years ago provided
the Company with relatively consistent monthly
loads that were somewhat flat throughout theyear. The FMC load had an interrupt iblecomponent. Load growth wi thin the various
customer classes has tended to be much more
seasonal and dependent upon weather. As a
resul t of the loss of relatively flat loads and
the addition of non- interruptible seasonal
loads, the Company's Integrated Resource Plan
now shows the need for summer peaking resources
(June, July, and August) and winter peakingresources (November and December). (Idaho
Power Direct Testimony of Greg Said, page 4,
lines 13 to 23 , line 1.
What has been the reaction of the Company to this
dramatically different load profile?
One significant reaction has been the proposed shift
in rate structure for all classes of customers in
reducing kWh charges and increasing customer and demand
(Exhibi t 203.rates.
1338
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
Percent Change in Proposed Fixed, Demand
Energy Charges by Customer Class
I 30.
20.
10.
10.
20.
Chart 4
30.
~ixed . o;""and 0 ~nergy
~ala .ource: F'os P- _I of Energy Coat~on. Res"""."", Reqoosl No,
Idaho Power states the primary approach to ratemaking is
to reflect costs " as accurately as possible Idaho
Power Direct Testimony of John R. Gale, page 11, lines
8. )Along with the proposed increases in fixed and
demand changes, the Company has introduced both seasonal
and diurnal rates.
1339
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-E-O3-
Are there other responses the Company has made to
address the shift in system load profile?
Yes.Historically, the Company has maintained that
its system was 'energy constrained' not 'capacity
constrained' This was due to the fact that it has a
relatively high percent of its generation portfolio in
hydro plants and its largest customer (Astaris/FMC) was
largely interruptible.The Company could follow peak
loads through the manipulation of its dams or through
its ability to curtail its largest customer.
The loss of the Astaris/FMC interruptible load, and
additional operating constraints on its hydro facilities
(primarily for environmental concerns) have changed the
Company supply resources.In addition, a load profile
that is more peak sensitive on the demand side has caused
the Company to invest in peaking gas fired generation
This is a dramatic change.resources.As discussed
above the latest units - - both Danskin Station and the
proposed Bennett Mountain plant - - are gas peaking units.
Addressing peak has now become a priority for the
Company.
Because of these changes to Idaho Power's electric
system can you think of other potential changes?
1340
Direct Testimony of Don Reading, Ph. D.
On Behalf of ICIP , Case No. IPC-O3 -
Due to these significant changes in the systems load
profile, there should be a wholesale change in the way
the Company looks at both its resources and customer
demands.For example , demand side management (DSM)
programs now has a different cost effective measuring
stick.Rather than being focused on primarily on energy
savings, they should also address the cost effectiveness
of shaving peak.Another example may be the viability
of a pump-storage generating units.Fifteen years ago
the Company made a compelling case that this type of unit
would not be cost effective.Wi th the changes the system
has undergone this may no longer be true.
Because peak on the system has taken on such
importance in the Company's resource planning and rate
design, do you think there should be a difference in the
1341 21a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
way Idaho Power looks at peak?
While the Company has a sophisticated weather
normalization model for energy it does not weather
normalize peak demand , either for the system or customer
classes.In 1994 the Company did use weather adjusted
peaks in their Marginal Cost Study.
No, Idaho Power has never developed a method
for weather normalizing peak loads by class for
the purpose of a Cost of Service study.
However , weather-adjusted system peaks were
estimated for the purpose of the Marginal Cost
Study published in January 1994. No studies
had been done since then. (IPCo Response to 1st
Production Request of ICIP , Response 49.
At this time the Company states it is not planning to
develop a method of weather adjusting peak.
Request No. 51: Does the Company anticipate
any future use of weather normalization of peakloads? If not please explain fully why not.Response to Request No. 51: No. At this time
the Company is not developing any
methodology to weather normalize peak loads by
class for the purpose of a Cost of Service
Study.
Why do you feel it is important for the Company to
examine peak demands on a weather normalized basis?
Peak demands are used by the Company in both its
jurisdictional allocation studies and in customer class
allocation factors in its Cost of Service Studies.
1342
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3 -
the extent that different customer classes (or
jurisdictions) react differently to peak under different
weather conditions the allocation factors that are
developed would not be the same as those calculated from
unadjusted data.This could mean a miss assignment of
costs.
The Company uses weather normalized energy for resource
planning and the calculation of revenue requirement.
Now, with the substantial change in the Company s load
profile,
1343 22a
Direct Testimony of Don Reading, Ph.
On Behalf of ICIP , Case No. IPC-O3-
ratepayers are being asked to pay increased fixed charges
and fund peaking generation plant based on peak needs.
The Company needs to investigate how peak loads react to
weather conditions and what impact that it may have on
inter-class allocations.The Commission should require
the Company to undertake a peak weather normalized
investigation.
Does this conclude your testimony on February 20,
2003
Yes.
1344
open hearing.
(The following proceedings were had in
MR. RICHARDSON:Dr. Reading is available
for cross-examination.
Dr. Reading?
COMMISSIONER SMITH:Thank you.
BY MR. EDDIE:
Mr. Budge, do you have questions for
MR. BUDGE:No questions.
COMMISSIONER SMITH:Mr. Eddie.
MR . EDD IE:I have one quick question.
CROSS-EXAMINATION
Dr. Reading, have you had a chance to
review the direct testimony filed by Ralph Cavanagh in
CSB REPORTING
Wilder , Idaho
Yes, I briefly reviewed it.
Would you support the Commission
initiating an investigation into the type of true-
mechanism for fixed cost recovery that Ralph has
The quick answer is yes , and let me
qualify for a second.
Please.
this case?
proposed?
1345 READING (X)
ICIP83676
Dr. Cavanagh, as near as I can understand
he never used the word decoupl ing .I don't know if it'
taken on a prejorative meaning now in hearing rooms , but
basically as I understand what he was proposing, it was a
proposal like that.I would support opening a docket to
investigate it.Personally I'm - - I don't know whether
m confused.m uncertain on where I would be,
think.The devil may lie in the details on something
like that , but given the context of this case and what
see as a new Idaho Power as far as their load profile is
concerned , I think anything that could further peak
shaving, load management, those kinds of things would be
worthwhile.
So you think Mr. Cavanagh's proposal could
get at that issue you're targeting?
Yes, it potentially could, so I think it
along, personal feeling it along, with a lot of other
issues I would support investigation of.
MR . EDD IE:Thank you.Tha t 's it.
COMMISSIONER SMITH:Mr. Purdy.
MR. PURDY:I have no questions.
COMMISSIONER SMITH:Mr. Gollomp.
MR . GOLLOMP:I have no questions.
COMMISSIONER SMITH:Mr. Ward.
MR. WARD:No questions.
CSB REPORTING
Wilder, Idaho
1346 READING (X)
ICIP83676
COMMISSIONER SMITH:How about the
Staff.
MR. STUTZMAN:No questions.
COMMISSIONER SMITH:Mr. Kline or
Ms. Moen.
MR. KLINE:I have some questions.
CROSS-EXAMINATION
BY MR. KLINE:
Dr. Reading
Yes.
- -
in order to - - these first set of
questions I'll talk about your Danskin testimony.
order to kind of put this in context, I would like to
just walk through a little bit of a chronology of
various events as they I re associated with Danskin.Isn'
it correct that Idaho Power applied for the certificate
for public convenience and necessity on April 4th , 01,
does that sound right?
I may have had February in my testimony,
but that time frame.Yes, I would not challenge that.
All right, and would you agree that the
Commission approved and gave the approval to the
Company s application for a certificate on July 11th?
CSB REPORTING
Wilder, Idaho
1347 READING (X)
ICIP83676
Yes.
Okay.
Did I say 19th?I was pulling this stuff
off the web.I would acceptAgain, not significant.
that.
All right, and would you also accept that
the proj ect came on line toward the end of September?
Yes.
All right.Now , in reading your
testimony, you've expressed the opinion that somewhere
between the date when the Commission approved the
certificate for the project, July 11th, and the end of
September when it came on line that the Company should
have canceled the Danskin proj ect; is that correct?
I think the terminology I used was they
should have seriously reassessed it and they had some
potential avenues of cancelling it, delaying it, et
cetera, and that was based on what was going on in the
market and prices around the time that the Commission
approved.As I remember , Mr. Prescott said prices had
come down in June, so in the June , July, August time
frame, given what was going on in the market, I think the
Company should have had a very serious reassessment.
In fact, you said on page 14, beginning on
line 8 , that the Company could have ceased construction
CSB REPORTING
Wilder , Idaho
1348 READING (X)
ICIP83676
and sought recovery of its then sunk costs.That kind of
sounds like cancellation, doesn't it?
Yes, that was an avenue that was open to
the Company that I think they should have taken.
And the reason that you think the Company
should have taken that action in looking at your
testimony --
Madam Chairman.MR. RICHARDSON:
Mr. Richardson.COMMISSIONER SMITH:
Mr. Kl ine hasMR. RI CHARDSON :
mischaracterized Dr. Reading s testimony.At line
page 14, it says , "The Company could have.It doesn't
say " The Company should have.I think there's a
distinction there.
Mr. Kl i ne .COMMISSIONER SMITH:
The correct is "could," yes.MR. KLINE:
Okay.COMMISSIONER SMITH:
The basis for yourBY MR. KLINE:
recommendation that the Company could have canceled the
Danskin plant was based on the fact that market prices
had declined from the levels that had been in effect in
April when they first initiated this proj ect; isn't that
right?
Correct , and let me expand on that a
little., prices had come down; and B, it was obvious
CSB REPORTING
Wilder, Idaho
READING (X)
ICIP
1349
83676
that the economy could not sustain prices at $0.35 a
kilowatt-hour , $0.25 a kilowatt-hour.Prices were going
to come down.How much , and exactly when , a
kilowatt-hour I will state were not completely known, but
the fact that they would not stay at that high of a price
to me was obvious and so once they started down , then
that should have been a real signal to the Company that
they needed to reassess where they were.
Did the ICIP intervene in the Company'
certificate proceeding?
I would have to ask my barrister.I don
know.I was not asked
- -
I was not a participant in that
case.
But if it was so obvious to everyone, why
didn t they intervene and bring this to the attention of
the Commission?
I don t know , and the only thing I can say
is certainly, in my peer group of economists that I talk
to, we all talked about the fact this just couldn
last.
Well , we'll get back to the obviousness of
it in a second.Looking at the market prices that you
use to support your conclusion, those market prices are
in fact Mid-C spot market daily, prices are they not?
Correct, from the Wall Street Journal.
CSB REPORTING
Wilder, Idaho
1350 READING (X)
ICIP83676
And looking at the chart that you
- -
guess it's Chart No.3 on page 13 of your testimony.
Yes.
The data points that are on the line that
goes up and down, those are all daily Mid-C spot prices,
are they not?
Correct.
And you obtained these , as you indicated,
by going back and looking at what was published in the
Wall Street Journal for the various days that would make
up the time stream that you ve got on thi s chart;
correct?
Correct.I was actually during that time
frame pulling the prices off from the Wall Street
Journal.Shortly after this, I can't remember exactly,
pulled it off their website and you had to start paying
for it.At this time you could go on and pull those
prices down.
But all of these prices that you have
incl uded on your chart here are prices that Idaho Power
would not have known at the time it made the decision to
go forward, are they?
It's obvious, Mr. Kline , that if we knew
what electric prices were going to be at some point in
the future and we knew that, we wouldn't be in this
CSB REPORTING
Wilder, Idaho
1351 READING (X)
ICIP83676
Hearing Room.We would be in Biminey or Acapulco or
wherever.The point is that when the Company started its
planning, prices were in chaos.They were very high.
I have stated, in my mind it was obvious they could not
stay that high, so the Company should have been watching
what was going on and when they started to come down,
that should have been a signal to them that there had
been some fundamental changes the market and,
therefore, their assumption that this plant, that the
Danskin plant, could run up to, over 5,000 hours needed
to be reassessed and needed to be relooked at.
But isn't it so obvious today because
we're now looking back at what occurred, it certainly was
not obvious at the time, was it?
I am certainly sympathetic and the
Commission had in its Order, you know, Monday morning
quarterbacking or looking back , I agree with you that
things always look clearer in the rear-vision mirror;
however , as I said, prices, in my mind prices, were so
very high that the Company on a resource that is going
be so expensive , not being run that much should have been
looking at not only that plant but also alternatives.
When you say the prices were so high, do
you mean the market prices?
, I meant if you don't run Danskin at
CSB REPORTING
Wilder, Idaho
1352 READING (X)
ICIP83676
000 hours a year , that if you run Danskin at what the
Company in this case has filed that they expect Danskin
to run , then you re looking at, as I remember , I'd have
to look, $13.65 a kilowatt-hour.If that is the price
per kilowatt-hour , it should have been a signal to the
Company to say maybe there is a better way to get it.
In fact, as I remember Mr. Prescott to
Mr. Richardson's question when he said at these kind
of - - for $50 million , couldn't the Company have done
something else and he said perhaps.It's that perhaps
that I'm honing in on.
But the perhaps depends on what you know
at the time, doesn't it , and not what you look at with
20-20 hindsight as you have said?
Well , sure, and I am not saying it's easy,
but what I didn't see in any of my investigation was the
Company considering anything else or looking at
al ternati ves , and the al ternati ves the Commission asked
in their Order issued in July that it wanted more
information about, that still hasn t occurred and it
should have occurred back in the July time frame.
Oh, in fact , Mr. Prescott and others have
provided this Commission with additional information in
this case that would satisfy that requirement, don't you
agree?
CSB REPORTING
Wilder , Idaho
1353 READING (X)
ICIP83676
, I don't agree.As I said in my
testimony - - maybe it's rebuttal , so I shouldn't say.
No, I do not think either the Staff or Mr. Prescott from
my perspective adequately answered the Commission'
questions.The Commissioners, of course, are the
ul timate deciders in that.
All right, I'd still like to focus a
little bit more on what the Company knew or should have
known at the time it received the certificate from the
Commission.At that point in time, the Company
testified, Mr. Prescott has testified , that the forward
prices for power were substantially higher than the spot
market prices you have presented in your testimony; isn'
that correct?
That's what he testified to, yes.
Isn I t that really the better measure of
what the Company knew at the time it made the decision
that is , the forward prices?
I will answer that as kind of.The
Company should be looking at both forward prices and spot
prices and analyzing what is going on in the market and
what they will need to pay for power , so the answer is
yes, certainly, they should be looking at forward prices
but the fact that the spot prices had come down so
significantly and for a couple of months, if you start
CSB REPORTING
Wilder , Idaho
1354 READING (X)
ICIP83676
when Mr. Prescott says, they started down in June, June
and July, you had a couple of months of relatively low
prices, relatively low and that should have been a signal
to the Company that maybe their analysis on the cost
effectiveness of this resource would no longer be valid
and they needed to reassess those costs.
But a spot price, a daily spot price , is
nothing more than what was paid in the daily market on
the day that price was set; isn t that correct?
Absolutely correct.
And if you take a string of those spot
prices, all you ve really recorded is what was done
historically; isn't that correct?
Yes, and it was a time period when you
were coming out of a very high price and those prices
were so high that you knew there would be both a demand
and a supply response and when you saw a series of
relatively low prices over a couple of months, that
should have been a red flag.That's my point.
Okay, on page 14 of your testimony, line
8, again , this is the one I referred to before, you
mentioned that at that point in time the Company could
have ceased construction and sought recovery of its then
sunk costs.Were you here when Mr. Prescott testified
yesterday?
CSB REPORTING
Wilder, Idaho
1355 READING (X)
ICIP83676
Yes.
And at that time he testified that at the
end of June, Idaho Power had expended approximately $30
million on the Danskin proj ect.Do you recall that
testimony?
Yes, I do.
And that was approximately 65 percent of
the total amount that the Company ultimately spent on the
plant; is that correct?
Yes.
All right, I know you've been around this
business a long time, Dr. Reading, so I'm going to ask
you this question not seeking your legal opinion, but are
you aware of the statute in the State of Idaho in which a
company s construction work in progress
- -
construction
work in progress for electric utilities, that the
Commission is not permitted to allow a utility
construction work in progress, are you familiar with that
statute?
Generally.
And isn t it true that under that statute
that facilities that are not currently used and useful
aren t going to be permitted into rates, do you recall
that?
Yeah.
CSB REPORTING
Wilder , Idaho
1356 READING (X)
ICIP83676
Would you imagine that if the Company at
that point in time had come to this Commission and said
ve spent $30 million , we want to cancel this plant and
we want to accrue those costs in our rates that it would
have met some resistance, perhaps even from the
Industrial Customers?
Very possibly.The point I was attempting
to make was that given your reference and my non-legal
lawyer understanding of the statute that there were
certain parts of the plant and the maj or expenditures
that were fungible; for instance , the turbines
potentially could have been resold, then the Company had
the right to come to the Commission and certainly make an
attempt to say oops , we've reassessed , we think some kind
of load curtailment would be cheaper, some kind of other
ways of deal ing with thi s would be cheaper and I'
uncertain - - I wouldn't want to speculate what the
Commission would do, but some honest dealing coming out
of the chaos may have received some sympathy.
On page 14 , line 3 of your testimony, you
indicate that, and starting on line 2 , talking about the
choice of cancelling the plant, you indicate that you
believe it would have been a better choice than now
asking ratepayers to assume the costs of a plant that
will sit idle most of the time.
CSB REPORTING
Wilder, Idaho
1357 READING (X)
ICIP83676
Correct.
The sitting idle, isn't that really what
peakers do most of the time?
Yeah , by definition , a peaker is a higher
cost plant than a base load plant because it does sit
idle.We're into semantics here, most of the time, some
of the time , yes, because it sits idle at least some of
the time.
Wouldn I t we all agree, I guess, that in
the context of the prices of a base load plant, the
prices of a peaking unit are quite expensive?
(Pause in proceedings.
BY MR. KLINE:I will withdraw that last
question.
I can't remember it anyway.
That's what I figured.You ve now
recommended to the Commission that the Company not
receive any rate base treatment for the Danskin plant;
correct?
Yes, at least until it can provide in my
mind what the Commission asked for, but at this point in
time, that's my recommendation.
Following on that same premise , on
page 17 , lines 26 and 27, you say that if the Commission
and the question is if the Commission followed your
CSB REPORTING
Wilder, Idaho
1358 READING (X)
ICIP83676
recommendation and the Company had to write off the full
cost of the facility, you state the Company has indicated
the generators could be sold.
Yes.
If the Commission agrees and doesn'
include the plant in rate base and the Company sells the
Danskin equipment , then , obviously, that resource is no
longer going to be available for serving loads;
correct?
Yes.
And you indicated that you were here
yesterday when Mr. Prescott testified and he advised that
in his opinion there would be times where even with
Bennett Mountain and all of the Company's other resources
the Danskin unit could run to address transmission
problems and other problems, do you recall that?
Yes.
If you assume that the Danskin is gone and
we do have that kind of transmission problem and as a
result the Company has a difficult time serving loads,
m assuming that the Industrial Customers of Idaho Power
will be satisfied with the service interruptions, with
them receiving those service interruptions to deal with
the problem?
I don't accept your hypothetical.
CSB REPORTING
Wilder, Idaho
1359 READING (X)
ICIP83676
point is that for this amount of money that there are
other ways in which the equivalent of the Danskin output
of a few hours a day could be solved to serve load and
could run through a whole litany of those , some of which
are in my testimony, such as peak shaving, such as
offering interruptibility.Mr. Richardson had a series
of questions that maybe if there is a problem in the
Treasure Valley with transmission that maybe there could
be a kicker for PURPA.My point is that at the very high
cost on a per kilowatt-hour basis of Danskin there would
be a less expensive way to have the system be able to
serve loads at a cheaper price with these other kinds of
programs.
And the Industrial Customers are willing
to take the risk of the implementation of those
programs?
m simply expressing what my opinion
would be a viable al ternati ve.
Looking at page 9 of your testimony,
Dr. Reading, line 24, you talk about or you state that
the Company probably assumed it would use the plant
and I guess that's Danskin?
Yes.
- -
for secondary sales as well as to meet
native loads.That's simply speculation on your part
CSB REPORTING
Wilder , Idaho
1360 READING (X)
ICIP83676
isn't it?
Yes, and it was phrased like that and the
last two years, I think , 25 percent of the output was
off-system; is that what my exhibit shows?Yes, Exhibit
202, it shows for the period in which the Company
provided data that 73.9 percent of the time it was for
native load and 26 percent of the time it was for
secondary load.
What that shows is that during the time
the Company was making surplus sales , Danskin was
running, that's the correlation , isn't it?
Sure , and that does not surprise me and as
I made a point in my testimony that once sunk costs are
sunk , then as long as the gas prices are sufficient
relative to off-system , it makes sense from the Company'
perspective to run the plant.
And that benefits customers as well, does
it not?
Sure.
MR. KLINE:That's all I have.
COMMISSIONER SMITH:All right, it appears
there are no questions from the Commission.
Do you have redirect , Mr. Richardson?
MR. RICHARDSON:Just two,
Madam Chairman.
CSB REPORTING
Wilder, Idaho
1361 READING (X)
ICIP83676
BY MR. RI CHARDSON :
REDIRECT EXAMINATION
Dr. Reading, I'm no economist, but it
strikes me that, and tell me if I'm wrong here, there I s
CSB REPORTING
Wilder , Idaho
got to be a relationship between a daily spot price and a
forward price in global markets, isn't there?
Over time they tend to equilibrate.
Certainly, at the end of -- without having an economics
lesson on arbitrage, when the forward price ends, the
spot price meets it.
So spot prices can be used as a predictor
and that was the point I was trying
Company should have been looking at
Now, did you personally attend a meeting
with the Industrial Customers who were discussing this
issue of peak shaving and did some of those Industrial
Customers express to you that they actually have
interruptible rates in other states that they take
Yes.
And that some of those Industrial
Customers felt that that might be a viable option for
Yes,
to make the
both.
of future prices?
advantage of?
1362 READING (Di)
ICIP83676
Idaho Power and its Industrial Customers?
Yes, and after reading my testimony, a
least cost approach.
MR. RI CHARDSON :Thank you
Madam Chairman.That concludes my redirect.
COMMISSIONER SMITH:Thank you
Mr. Ri chardson
(The witness left the stand.
MR . RI CHARDSON :The Industrial Customers
of Idaho Power now call Mr. Pike Teinert to the stand.
PIKE TEINERT
produced as a witness at the instance of the Industrial
Customers of Idaho Power, having been first duly sworn,
was examined and testified as follows:
DIRECT EXAMINATION
BY MR. RI CHARDSON :
Mr. Teinert , are you the same Mr. Teinert
who caused prefiled testimony and exhibits to be filed in
this matter?
Yes , I am.
Do you have any corrections or additions
to make to your prefiled testimony?
CSB REPORTING
Wilder , Idaho
1363 TEINERT (Di)
ICIP83676
Yes , I do.I have several typos and
actually prepared a handout rather than to go through
them and if the Commission will accept that , we can go
that route versus going through them verbally.I'll be
happy to do that as well if they'd like.
Would you do that verbally on the record
and we'll hand out the handouts so folks can - - you can
get this on the record and we'll get the handouts.
THE WITNESS:I'll wait just a moment
until the handouts received.
(Dr. Reading distributing documents.
THE WITNESS:Okay, beginning on page 7
lines 19 and 21 , remove the quotation marks.
MR. KLINE:Where is that, again?
THE WITNESS:Page 7 , lines 19 and 21,
remove the quotation marks.Page 11 , line 5, Exhibit No.
205 should be Exhibit No. 206.Page 11 , line 9 , Gales
should be Gale.Page 13, line, 23 and page 14 , line
$331.55 should be $365.70.Page 15, lines 8, 10 and 13,
Exhibi t No.2 07 should be Exhibi t No.2 08, and in the
Exhibi t No.2 08, at the bot tom of the page, the
denominator in the fraction should be
- -
that reads
304.371 kW should be 304 371 kW and that's all.
Thank you for your indulgence.
BY MR. RI CHARD SON :, Mr. Teinert, with
CSB REPORTING
Wilder , Idaho
1364 TEINERT (Di)
ICIP83676
those corrections and additions, if I were to ask you the
same questions this afternoon that you were asked in your
prefiled testimony, would your answers the same?
Yes, they would.
MR. RICHARDSON:Madam Chairman , I would
move that the prefiled testimony of Mr. Teinert, direct
testimony of Mr. Teinert, be spread upon the record as if
it were read in full and Exhibits 206 through 208 be
marked for identification purposes.
COMMISSIONER SMITH:If there is no
objection , it is so ordered.
MR. RICHARDSON:Thank you,
Madam Chairman.
(The following prefiled direct testimony
of Mr. Pike Teinert is spread upon the record.
CSB REPORTING
Wilder, Idaho
1365 TEINERT (Di)
ICIP83676
PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
My name is Pike Teinert and my business address
is 834 Harcourt Road Boise, Idaho 83702.
WHAT IS YOUR OCCUPATION?
I am a principal consultant in Energy
Strategies Group LLC, a consulting firm that provides
services to clients in the public utility industry.
ARE YOU SPONSORING ANY EXHIBITS WITH THIS
TESTIMONY?
Yes.I am sponsoring Exhibit Nos. 206 through
208.
QUALIFICATIONS
PLEASE DESCRIBE YOUR QUALIFICATIONS TO TESTIFY
AS AN EXPERT IN THIS PROCEEDING.
I am an electrical engineer and I have
thirty-four years experience in the energy industry in
positions ranging from design engineer to Vice President.
A complete resume, including my educational background
and employment history, is presented as Attachment
HAVE YOU PREVIOUSLY APPEARED AS AN EXPERT
WITNESS BEFORE THIS COMMISSION?
No. I have provided direct testimony in the
Idaho Public Utilities Commission Case No. IPC-E- 00 -
regarding an industrial class customer and Schedule 19.
1366 Teinert,
IPC-E- 03 -
INTRODUCTION AND OVERVIEW OF TESTIMONY
WHY ARE YOU TESTIFYING IN THIS CASE
NO. IPC-E- 03 -13?
I have been retained by the ICIP as an expert
witness to assist in the analysis of Idaho Power's rate
application filed in this case. Idaho Power's filing for
industrial customers, especially the proposed Schedule 19
is new and radically different from its current rate
Schedule 19. I have reviewed the Company's testimony and
its exhibits as well as by intervenorsdiscovery filed
and willthe response by the Company. My testimony
focus primarily on Schedule 19 , but my silence on
other issues does not necessarily imply acceptance
the Company s position.
PLEASE DESCRIBE HOW YOUR TESTIMONY IS
ORGANIZED.
testimony and exhibits will address rate
design issues and components but will also address cost
of service issues related specific rate design
elements and parameters. Specific issues addressed will
be the mandatory time-of -use provisions in Schedule 19,
cost of service for Schedule 19, service charges, line
extension provisions of Schedule 19, and power factor
adjustment provisions of Schedule 19.
1367 Teinert,
IPC-E- 03 -
C. FACTUAL BACKGROUND
Q. YOU SAY THE PROPOSED SCHEDULE 19 IS RADICALLY
DIFFERENT FROM THE CURRENT SCHEDULE 19. CAN YOU GIVE
EXAMPLES?
A. Yes. There have been many proposed changes to
most of the components of the current Schedule 19. An
example of one of the most radical is a proposed increase
in the current Customer Charge of $5.54 to a Service
Charge of $500 per than a 9000% increase.month, more
Another radical difference the complexity and multiple
combinations Demand and Energy Charges the proposed
Schedule required its mandatory time-of -use
component. The current Schedule 19 has one Demand and
Energy Charge for each service level. The proposed
Schedule 19 has as many as three different Demand Charges
and five different Energy Charges. The proposed Demand
and Energy Charges result in eight different combinations
of Demand and Energy Charges. There are other examples
of significant differences that I will discuss in this
testimony, but these two provide a striking contrast
between the current Schedule 19 and the Company
proposed Schedule 19.
Q. HAS THE COMPANY EXPLAINED THE DIFFERENCES AND
COMPLEXITY OF THE PROPOSED SCHEDULE 19 TO ITS SCHEDULE
1368 Teinert,
IPC-E- 03 -
CUSTOMERS?
A. The Company has not provide records of meetings
and discussions they have had with Schedule 19 customers
as requested in ICIP' s Production Request No. 36.
Al though the Company met
1369 Teinert,
IPC-E- 03 -
with the ICIP , some Schedule customers and some
Special Contract Customers regarding rate case proposals
there is no indication that the Company explained in
detail the complexity of the proposed Schedule 19 and no
records of the meeting were provided.
Q. WHY IS IT IMPORTANT FOR THE COMPANY TO MEET WITH
CUSTOMERS AND DISCUSS THE DIFFERENCES BETWEEN THE CURRENT
SCHEDULE 19 AND THE PROPOSED SCHEDULE 19 RATES?
Time-of -use rates are very complex and require
that the customer clearly understand the impacts of the
mul tiple pricing combinations for Demand and Energy
Charges in different seasons and different times of the
day. When the customer clearly understands these and
other differences, then and only then, can he weigh the
increased electricity costs of continuing to operate as
he has in the past under the proposed Schedule 19 rate
against making the required changes in his operation to
reduce summer season on peak demand and energy
consumption.
Q. WHAT TYPES OF CHANGES WILL A CUSTOMER CONSIDER
WHEN ATTEMPTING TO ADJUST TO SEASONAL AND TIME-OF-USE
PRICE SIGNALS
A. Most importantly, customers will analyze the
financial impact of operating electrical equipment in off
peak versus on peak season and hours. Examples of the
1370 Teinert,
IPC-E- 03 -
financial impact of operational changes are; potential
increased labor costs , reduced production , additional
capi tal costs for new more efficient equipment, and
increased O&M costs of changing the operation of
1371 Teinert
IPC-E- 03 -
electrical equipment. There are also employee morale
issues that accompany changes in employee work schedules
necessary for operational modifications. These are a few
of the significant changes customers analyze in
attempting to adj ust to seasonal time-of -use rates and
that is why it is important for the Company to clearly
communicate with the customer the specific changes in the
proposed Schedule 19.
Q. HAS THE COMPANY ANALYZED AND/OR COMMUNICATED TO
THE CUSTOMER THE POTENTIAL BENEFITS OF PROPOSED SCHEDULE
19 TIME-OF-USE RATE TO HELP OFFSET THESE FINANCIAL
IMPACTS?
A. The Company's response to ICIP' s First Production
Request No.2 states,No analyses attempting to
identify any potential benefit or savings associated with
mandatory time-of-use for Schedule 19 customers has been
performed. "
Q. HAS THE COMPANY ANALYZED ITS POTENTIAL BENEFITS,
SAVINGS AND INCREASED REVENUES FROM THE PROPOSED SCHEDULE
19 MANDATORY TIME-OF-USE RATE?
A. The Company states in its response to ICIP' s
First Production Request No.3 that, No other studies
have been prepared of the benefits, savings and increased
revenues for any rate class other than the Residential
rate class.
1372 Teinert,
IPC-E- 03 -
LACK
Q. WHAT IS YOUR CONCLUSION BASED ON THE COMPANY'S
ANALYSES OF THE BENEFITS, SAVINGS AND
INCREASED REVENUES FOR EITHER THE COMPANY OR THE CUSTOMER
FROM THE PROPOSED SCHEDULE 19 MANDATORY TIME-OF-USE RATE?
1373 Teinert,
IPC-03-
A. Based on the responses to ICIP' s Production
Requests, it seems clear that Idaho Power is proposing
the implementation of the mandatory time-of -use rate
without carefully analyzing the impact of the proposed
Schedule 19 rate on either the Company or the Schedule 19
customers. The Company I s lack of analysis indicates that
it is unprepared to implement the proposed Schedule 19.
It also indicates that the Company is insensi ti ve to the
impact of the proposed Schedule 19 on its industrial
customers, their employees and the communi ties in with
they are located.
Q. DOES THE COMPANY PROVIDE ANY REASON FOR PROPOSING
THE MANDATORY TIME-OF-USE FOR ONLY SCHEDULE 19 CUSTOMERS?
The Company states in Ms. Brilz ' testimony on
page 27 beginning at line 11 that Schedule 19 customers
have the metering in place to accommodate the hourly
pricing. Also, Mr. Gale I s testimony beginning on page
at line 22 reasons that the cost based approach to
ratemaking influenced the Company s decision to propose
seasonal and time-of -use rates for certain rate classes.
Q. DOES MR. GALE OFFER ADDITIONAL REASONS FOR THE
COMPANY'S DECISION TO PROPOSE MANDATORY TIME-OF-USE
RATES.
Yes , in his testimony on page 11 beginning at
line 6 Mr. Gale explains that the Company s primary
1374 Teinert,
IPC-E- 03 -
approach to ratemaking during the last several general
rate cases has been to reflect costs as accurately as
possible. Then Mr. Gale states:
1375 Teinert,
IPC-E- 03 -
"Accordingly, the Company's ratemaking proposals
usually advocate movement toward cost-of-service results
which assign costs to those customers that cause the
Company to incur the costs.
DO YOU BELIEVE THAT THE SCHEDULE 19 CUSTOMERS
HAVE CAUSED THE COMPANY TO INCUR THE COSTS ASSOCIATED
WITH THE NEED FOR SUMMER PEAKING RESOURCES?
A. No. Mr. Said in his testimony beginning on page
4 beginning at line 17 states:
"Load growth within the various customer classes has
tended to be much more seasonal and dependent upon
weather.As a result of the loss of relatively flat
loads and the addition of non-interruptible seasonal
loads, the Company s Integrated Resource Plan now shows
the need for summer peaking resources (June, July, and
August) and winter peaking resources (November and
December) . "
The data in the Company s response to the Commission
Staff I S Second Production Request No. 15 and the
Company s 2002 Integrated Resource Plan referenced by Mr.
Said, clearly demonstrate that Schedule 19 customers have
not caused the Company to incur the costs associated with
the need for summer peaking resources. Teinert Exhibit
No. 206 includes the following graph that contrasts the
consumption patterns for the Schedule 19 customer class
1376 Teinert,
IPC-E- 03 -
with the residential customer class.
,----- - --""----'-.-.... ....... ......-......-.-..-...-..-..--..-.......-------...- ...--.-..-.-...--.-------
Total Monthly kWh - Residential & Industrial
class, Jan. 2001 - Sept. 2003
3: 600 000 000
~ 500 000 000
:c 400 000 000
.....
c 300 000 000
~ 200 000 000 .
co 100 000 000'0
C'O
;::.
C\I C\I C")0 0
.!..
c.. c.. ..Q
.-
(1) (1)
........ (j)
Ll...
----...___....--- ----...
Jan. 2001 . Sept. 2003
--+=
Tot-- kWh Residentia'lCustomers
-It- Tot" kWh Industrial
L. !ome ---..J
C")
..!..-.. --.. -... --'-'---
Additionally, Teinert Exhibit No. 207 , which uses
data from MS. Brilz' Exhibit No. 40 page I , also
illustrates the lack of seasonal variance in Schedule
customer loads. The following graph , taken from Teinert
Exhibit No. 207 , summarizes the data in the exhibit.
1377 Teinert,
IPC-03-
--------.....--...----.--.
2003 Monthly Coincident Demand ~ Generation Level
-. - -- -. --- ---. -- .-----
E cIII 0'0
:;:;.-
111
...
III
0 c
I u 111-C) III
I ~(g)j
C C, 0 111:E E
3: III~ C
r~R~~id~~-tial k\"TI i
~ S~hedu ~9~~
200 000
000 000
800 000
600 000
400 000 -
200 000 .
i )~
(;- ~~ ~~
-A ')
~ ~
' ~o
_--_.__---.--...--.---.
2003 by Month
.- -----.--- '. -""'-------'-- -~.. -----.---- .------------"" "
These graphs clearly display the dramatic seasonal
variance of the Residential rate class energy consumption
and demand patterns versus the modest seasonal changes of
the Schedule 19 rate class. The graph and Exhibit No. 206
also illustrate that the Industrial customer class has
not grown. Certainly Schedule 19 customers have not
caused the Company to incur the costs associated wi
th the
need for summer peaking resources. If we are to believe
Mr. Gale when he states, "Accordingly, the Company'
ratemaking proposals usually advocate movement toward
cost-of-service results which assign costs to those
customers that cause the Company to incur the costs.
Then Schedule 19 customers' rates should not include
mandatory time-of use rate design.(Reference Gale , Di.
P. 11 L. 6, emphasis added) .
1378 Teinert,
IPC-E- 03 -
Q. WHAT RATE STRUCTURE FOR SCHEDULE 19 CUSTOMERS IS
APPROPRIATE FOR SCHEDULE 19 CUSTOMERS BASED ON MR. GALE'
TESTIMONY AND WHY?
A. As illustrated in the graph in my Exhibit No.
206 , Schedule 19 customers contribute very little
seasonal variance to the Company s load shape in
comparison to other customer classes and the current rate
structure for Schedule 19 customers, with one Demand
Charge and one Energy Charge that does not vary
seasonally or diurnally,acknowledges the relatively
flat nature of Schedule 19 customer's load. Therefore
believe the current Schedule 19 rate structure is the
most appropriate rate for Schedule 19 customers and
should be the rate proposed in this filing for Schedule
19 customers.
RATE DESIGN & COST OF SERVICE ISSUES
Q. IN THE FACTUAL BACKGROUND OF THIS TESTIMONY, YOU
DISAGREE WITH MANDATORY TIME-OF- USE FOR SCHEDULE 19
CUSTOMERS. ARE THERE OTHER ELEMENTS OF THE PROPOSED
SCHEDULE 19 RATE THAT YOU WILL ADDRESS?
A. Yes. I will address the service charge, line
extension and power factor adjustment provisions in the
proposed Schedule 19.
1379 Teinert,
IPC-03-
Q. WHAT ARE YOUR CONCERNS RELATED TO THE SERVICE
CHARGE IN THE PROPOSED SCHEDULE 19 RATE?
A. The Company proposes , as shown in Ms. Brilz
Exhibi t No.4 8 pages 72 through 76 , to increase the
current Customer Charge (the Customer Charge is proposed
to be renamed Service Charge) to $500 per month , an
increase of more than 9000% for secondary service level
Schedule 19 customers and more than 500% for Primary and
Transmission service level customers. This is an
unexpected and radical increase from the Company I
current Customer Charge.
WHAT IS THE COMPANY'S RATIONALE FOR PROPOSING
THIS DRAMATIC INCREASE IN SERVICE CHARGE?
Ms. Brilz ' direct testimony on page 26 line 1
through line 9 states that "The Company plans to
emphasize increases to both the demand and customer
charges so that these components are more reflective of
costs." The Company's rationale is to recover more of the
fixed cost associated with delivering energy and
providing customer related services by increasing demand
and customer charges. The Company s calculations and data
supporting the increase in Service Charge for Schedule 19
customers is documented in Ms. Brilz' Exhibit No. 42 page
5. The Company, without explanation , includes monthly
meter reading cost per customer of $365.70 in its
1380 Teinert
IPC-E- 03 -
Calculation of the Service Charge for Schedule 19
customer.
1381 Teinert, 13a
IPC-E- 03 -
Q. DO YOU DISAGREE WITH THE COMPANY'S PROPOSED
INCREASE IN THE SERVI CE CHARGE FOR SCHEDULE 19 CUSTOMERS
AND IF SO WHY?
Yes. The Company's increases of from over 500%
to 9000% for Service Charges are not adequately explained
or detailed in it's testimony and the meter reading
charge of $365.70 is an example of an unexplained and
extremely high cost for reading one meter. The Company
should provide a much more detailed breakdown,
explanation and justification of all elements of the
Service Charge for all service levels included in the
Cost of Service Study. They do not provide this
information in their testimony and should therefore be
denied the requested increase in Service Charge for
Schedule 19.
Q. WHY DO YOU DISAGREE WITH THE LINE EXTENSION
PROVISIONS IN THE PROPOSED SCHEDULE 19?
A. Ms. Brilz I Exhibit 48 page 68 under AVAILABILITY
outlines the Company I s procedure for charging Schedule
customers for the construction of additional substation
and transmission facilities required to serve the
customer's load. The Company s administration of this
provision of Schedule 19 has been discriminatory and
capricious and therefore should not be included in the
proposed Schedule 19.
1382 Teinert,
IPC-E- 03 -
Q. ARE THERE OTHER REASONS YOU DISAGREE WITH THE
COMPANY'S PROVISIONS FOR LINE EXTENSION CHARGES FOR
SCHEDULE 19 CUSTOMERS?
Yes. The Company's procedure for estimating new
or added loads for Schedule 19 customers is flawed
because the
1383 Teinert, 14a
IPC-E- 03 -
Company uses the customer's connected load instead of a
diversified load in calculating the customer's contracted
load. Therefore, facilities required to serve the load,
such as service transformers and distribution facilities
from the point of delivery to the substation are
frequently over sized. When these facilities are over
sized the contribution in aid of construction , CIAC, is
inflated and the customer is overcharged. Teinert Exhibit
No. 208 analyzes and calculates excess distribution
transformer capacity for Schedule 19 customers based on
data by the Company. Exhibit No.2 08provided
calculates an installed distribution service transformer
capacity of 596,832 kva using data from the Company'
Response to ICIP' s First Production Request No. 14.
Teinert Exhibit No. 208 also uses a total Schedule 19
customer Coincident Demand ~ Generation Level of 304,371
kW for July in the 2003 test year Company'from the
Exhibit No. 40 page 1 , Large Power Service column.The
ratio of installed service transformer capacity is 96%
greater than the Schedule 19 peak testloadforthe
2003. This large excess distribution serviceyear
transformer capacity far exceeds the capacity needed to
serve the load.Schedule 19 customers are therefore
overcharged for this excessive capacity in CIAC charges
and in an inflated rate base for thedistribution
1384 Teinert,
IPC-E- 03 -
Schedule 19 customer class.
WHAT DO YOU CONCLUDE FROM YOUR FINDING THAT
SERVICE TRANSFORMER CAPACITY IS 96% GREATER THAN SCHEDULE
19 PEAK DEMAND?
1385 Teinert, 15a
IPC-E- 03 -
It certainly raises questions relative to the
appropriate level of rate base assigned to these
customers.It also raises questions relative to the
Company s planning parameters.I know the Commission
does not want to micro manage the Company, however I
believe this finding warrants a thorough investigation in
a separate docket that is opened for just that purpose.
Q. DO YOU DISAGREE WITH THE COMPANY'S INCREASE
THE POWER FACTOR ADJUSTMENT MINIMUM FROM 85% TO 90%?
Yes.Power factor adj ustment clauses provide
the Company with a method of recovering delivery capacity
by reducing reactive power flow. Idaho Power does not
offer evidence or testimony that its delivery system is
capaci ty constrained due to power factor. Therefore, the
increase in the minimum is not warranted.
Q. ARE THERE OTHER CONCERNS YOU HAVE RELATED TO
IDAHO POWER I S PROPOSED RATES AND REGULATIONS FOR SCHEDULE
19 CUSTOMERS?
A. Yes. Each Schedule 19 customer pays a monthly
conservation charge through Idaho Power's Energy
Efficiency Rider , Schedule 91. Until 1997 Idaho Power had
at least one Conservation Program specifically for the
Industrial customer class.Currently Idaho Power does
not administer any Conservation or DSM programs
specifically for the Schedule 19 customer class. It is
1386 Teinert,
IPC-E- 03 -
not appropriate that the Schedule 19 customer class
contributes Energy Efficiency Rider funds but receives no
direct benefit from them.
Q. SHOULD THE COMPANY'S CONSERVATION PLAN INCLUDE
PROGRAMS THAT USE ENERGY EFFICIENCY RIDER FUNDS FOR
CONSERVATION PROGRAMS SPECIFICALLY FOR SCHEDULE 19
CUSTOMERS AND WHAT DO YOU RECOMMEND?
Yes.This is the self-funding concept the ICIP
has promoted in the past.We strongly believe that each
industrial and special contract customer should be
allowed to use the funds it contributes to Idaho Power'
energy efficiency rider for proj ects at their own
industrial sites.We appreciate the Company's efficiency
efforts.Nevertheless, the best conservation programs
for any particular industrial customer can only be
identified by that customer.By allowing self-funding of
conservation proj ects the Company can be assured that the
individual measures are fully embraced by the host
industrial facility.This added benefit makes it more
likely that whatever conservation measure is installed
will be maintained and updated as necessary.
Q. DOES THIS CONCLUDE YOUR TESTIMONY?
A. Yes it does.
1387 Teinert
IPC-E- 03 -
open hearing.
(The following proceedings were had in
MR. RICHARDSON:
available for cross-examination.
Mr. Teinert is now
Thank you.
MR . EDD IE:No questions.Thank you.
1388
83676
Mr. Purdy.
MR. PURDY:I have none.Thanks.
Mr. Gollomp.
MR . GOLLOMP:No questions.
Mr. Budge.
MR. BUDGE:No questions.
How about the Staff.
MR. STUTZMAN:No questions.
Mr. Ward.
MR. WARD:No questions.Thank you.
And Mr. Miller having
Ms. Moen?Mr. Kline?
COMMISSIONER SMITH:
Mr. Eddie.
COMMISSIONER SMITH:
COMMISSIONER SMITH:
COMMISSIONER SMITH:
COMMISSIONER SMITH:
COMMISSIONER SMITH:
COMMISSIONER SMITH:
departed, he has none.
For the Company.
MR. KLINE:Very few questions.
CSB REPORTING
Wilder, Idaho
TEINERT
ICIP
BY MR. KLINE:
CROSS-EXAMINATION
Mr. Teinert, on page 5 of your testimony,
Yes.
- -
do you know what the average rate 19
billing is, the amount?
CSB REPORTING
Wilder, Idaho
No, I do not.
On page 7 , line 1 , there are also employee
It should have been morale.There could
be moral issues, but I suspect most of them would be
I just couldn I t resist.
I'll add that to my list of changes and
COMMISSIONER SMITH:Nobody has given us
line 8 --
authority to regulate that, but we could do it.
MR. KLINE:It would be a lot more fun.
COMMISSIONER KJELLANDER:The research
BY MR. KLINE:Mr. Teinert, do you believe
that there is any potential value from time of use
moral issues?
morale issues.
my apologies.
would be.
pricing?
1389 TEINERT (X)
ICIP83676
Certainly,there on a voluntary
basis.
Where do you think the Company should
start,with voluntary rates?
I do in fact, it would be a good start,
after completing what I would consider to be good,
appropriate, robust research to understand the potential
benefits for both the Company as well as the customer
class.
A lot of your testimony dealt with
concerns that you had with the confusion that you were
concerned that rate Schedule 19 customers would have with
the time of use proposal and with the Company's other
proposals for rate change; is that correct?
I think the rate that's proposed is a very
significant and dramatic change from the existing rate
with a great deal of complexity in the calculation on a
monthly basis of your actual consumption and comparing
that to the operation of whatever the facility may be, if
you then attempt to determine or attempt to determine
when that usage occurred, what part of your bill would be
appropriated to that usage in an attempt to make some
adjustment in your operation to accommodate the new rate,
I think it is an extremely complex calculation and/or
study.
CSB REPORTING
Wilder, Idaho
1390 TEINERT (X)
ICIP83676
And you were also concerned that the
Company hadn't done a good job of explaining all of these
intricacies, as you I ve described them , to its customers
prior to this time; is that correct?
Correct.In response to my production
request, which I believe was No. 36, I believe the
Company indicated that it had done so , but I had never
received any paperwork indicating that that was done or
that there were any records of those meetings kept as
requested in my production request.
Did you talk to the individual Schedule
customers about the meetings they had with the Company or
with the materials they received from the Company?
Not each and every one of them.I talked
to a few of them in small groups.
Today Ms. Brilz in her presentation
offered to have the Company utilize a grace period at
which time some of the things that you criticized as far
as educating the customers, doing some of the things that
we've been doing all along, but doing it for a longer
period of time in order to address this concern that the
Schedule 19 customers don I t understand what's been
proposed, do you believe that grace period proposal would
go a long ways to resolving the concerns that you have
expressed here?
CSB REPORTING
Wilder , Idaho
1391 TEINERT (X)
ICIP83676
The grace period proposal that I think
that I heard and apparently, a positive response to that
is a step forward.It would need to be, again , a very
robust study over 12 consecutive months to make sure we
picked up the whole year, a reasonable test year , if you
will , if you want to look at it that way, and I think
that in that process that both sides of the meter should
be evaluated, both the Company's side , of course , to
evaluate not only the capacity benefits but the delivery
benefits , and there are considerable delivery benefits
that need to be evaluated, because those would impact, if
you will , the Company's operating system as well as their
capital investment in delivery types of capital
investments.
On the customer side, many issues , morale
issues , not moral , but clearly, a lot of issues in my
experience are unknown by the Company unless they have
ample opportunity to sit down with employees , both on the
basis of operating the plant, taking certain equipment
off line during the peak periods , putting it back on.
Much of this equipment is not really designed to go up
and down and up and down, much like some of your base
load plants might not be designed to go up and down , but
clearly, could stay on line for longer periods of time
without interruption; so once those kind of evaluations
CSB REPORTING
Wilder, Idaho
1392 TEINERT (X)
ICIP83676
are made and once the Company and its customers sit down
and review the results and come up with credible, if you
will, final numbers , then I think in fact that kind of
grace period would be beneficial.
MR. KLINE:That's all I have.
COMMISSIONER SMITH:Thank you.Thank
you, Mr. Kline.
Do we have questions from the Commission?
EXAMINATION
BY COMMISSIONER SMITH:
I just had one.Assume that the
Commission approves the Idaho Power time of use proposal
for the Schedule 19 customers, is it your opinion that if
this ultimately resulted in customers shifting usage to
off -peak hours from peak that the cost of service will
eventually reflect that reduction in peak usage and
therefore, this class of customers will have a lower
allocation of costs?
If you can evaluate those benefits
appropriately, and as I mentioned before , Madam Chairman
the benefits are not just in capacity.The benefits are
in delivery capabilities as well, distribution
substation , transmission.If those can be evaluated and
CSB REPORTING
Wilder, Idaho
1393 TEINERT (Com)
ICIP83676
directed to the customer class, then there is a
significant chance that those cost of service studies
would reflect a lower cost of service compared to,
obviously, building peakers as we are today.
COMMISSIONER SMITH:Okay, thank you.
Do you have any redirect, Mr. Richardson?
MR. RICHARDSON:One, Madam Chairman.
REDIRECT EXAMINATION
BY MR. RI CHARDSON :
Mr. Teinert, we appreciated the fact that
the Company offered to change their proposal and allow a
grace period and you suggested that that grace period
should be used to evaluate the potential impacts of
mandatory time of use metering on both sides of the
That study period doesn t necessarily mean thatmeter.
it's a foregone conclusion, does it , that mandatory time
of use rates should be implemented?
Well, no, in most cases, the studies give
you the opportunity to then make a prudent decision.The
decision is not foregone , that once the study is done
whatever the results may be, that we would then in fact
implement mandatory time of use rates.
Thank you,MR. RI CHARD SON :
CSB REPORTING
Wilder, Idaho
1394 TEINERT (Di)
ICIP83676
Madam Chairman.That's all I have and that concludes the
direct case of the Industrial Customers of Idaho Power.
I would note that our out-of-town witness, Mr. Henderson,
the plant manager , will be here tomorrow.His plane gets
in at 11: 00, so he will be available tomorrow afternoon.
Okay, Let's go atCOMMISSIONER SMITH:
ease for a few moments and talk about our game plan.
(Off the record discussion.
We'll go back on theCOMMISSIONER SMITH:
record , then , and thank all the parties for their
participation and attendance today and we'll see you all
tomorrow morning at 9: 00 a. m.
(The Hearing recessed at 4:25 p.
CSB REPORTING
Wilder , Idaho
TEINERT (Di)
ICIP
1395
83676